First, Chuck, I'd like to say congratulations. I'm glad to see a fellow Fool profiting from smart, well-timed investments. Have any advice for getting my wife interested in picking stocks?
Like Starbucks? Uh, no
I agree that Buffalo Wild Wings
But that's where our agreement ends. It's like Starbucks
Quality growth matters
Indeed, company-store openings are already lagging, probably because of the "inefficiencies" that dragged down cash flow from operations by 33% in the first quarter.
You can bet that Buffalo Wild Wings doesn't want growth to slow. I'm hoping management will do the safe thing and moderate new store construction slightly while improving the fundamentals. But there's a chance that the executives will seek to please the Street and go whole hog on franchising. That's not necessarily bad, but as fellow Fool Bill Mann pointed out in a recent issue of Hidden Gems, it's not great if the core business isn't highly profitable.
I won't repeat all of Bill's calculations here, but it's enough to say that he estimated pre-tax profits for company stores at $5 million. That's a 3% margin, which is OK except that it compares poorly with other specialty food chains like Cheesecake Factory
Buffalo Wild Wings is a great place to eat. But it's entirely unclear whether it's a great way for a franchisor to get rich. If not, look out below.