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5 Ways Buffalo Wild Wings Differentiates Itself

By Steve Symington - Sep 16, 2015 at 5:00PM

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How B-Dubs is more than just a purveyor of wings, beer, and sports.

Credit: Buffalo Wild Wings.

For restaurant chains to be successful in today's increasingly crowded market, it's crucial they differentiate themselves from the competition. In the casual dining space, arguably no company does so better than Buffalo Wild Wings (BWLD).

But understanding B-Dubs' appeal to the masses is more complicated than its simple "Wings. Beer. Sports." tagline implies. Here are five ways Buffalo Wild Wings sets itself apart:

1. Technology
Early last year, Buffalo Wild Wings began to roll out its new tabletop tablets. Now, with those tablets in more than 90% of the company's more than 1,100 locations -- including all 517 company-owned restaurants as of last quarter -- Buffalo Wild Wings is using the devices for more than just entertainment.

These tablets have the potential to not only improve a diner's experience by offering games and prizes exclusive to the chain, but also offer Buffalo Wild Wings the chance to earn incremental revenue through premium gaming options. Perhaps most significant, however, are Buffalo Wild Wings' impending plans to drive operating efficiency and incremental sales through the implementation of tablet-based ordering and payment. According to Buffalo Wild Wings CEO Sally Smith during last quarter's conference call, tests for the latest tablet-based ordering and payment functionality will begin in earnest during the second half of this year. 

2. Multi-tiered approach to beer
Next, though alcoholic beverage sales "only" comprise around 20% of total revenue in any given quarter, that still equated to revenue of more than $85 million last quarter alone. Unsurprisingly, the vast majority of that number came from beer.

As Buffalo Wild Wings VP of Food & Beverage Experience Andy Dismore told CNBC in 2013: "We have the advantage of being the largest pourer of draft beer in the country, if not the world. If you're going to put beer as the second [item] in your tag line, then you better know what you're doing."

In Buffalo Wild Wings' case, to "know what you're doing" seems a massive understatement. The company takes painstaking measures to properly train its bartenders to correctly store, pour, and garnish its beers.

And rather than using a simplistic approach of maintaining the same taps at all restaurants, Buffalo Wild Wings has a three-tier system for choosing as many as 30 different draft beers at each location: a national tier for popular brands like Sam Adams Boston Lager and Miller Lite, a regional tier picked on a state-by-state basis, and -- given the ever-increasing presence of craft breweries around the country -- an individual restaurant tier to afford specific locations the ability to choose their own local varieties. So no matter where you go, Buffalo Wild Wings' tap selection is sure to offer sufficient variety to keep your inner hops connoisseur happy. 

3. Guest Experience Captains
Last year, Buffalo Wild Wings added new positions at all company-owned locations called "Guest Experience Captains" -- a move that consequentially raised eyebrows in recent quarters due to the higher labor costs required.

Credit: Buffalo Wild Wings.

Thankfully, though, the stock has held up well, as long-term oriented investors realize the role Guest Experience Captains play. According to recent job postings, it is to "create an authentic and unique experience for each Guest that will build loyalty and help continue to deliver the ultimate social experience for sport fans." 

Specifically, this entails creating "customized guest experiences," introducing new guests to the brand and promotional offerings, supporting local sporting events and activities, and actively participating in marketing and community outreach, fundraising, and event planning. In short, Buffalo Wild Wings' Guest Experience Captains aim to capture the very essence of building brand differentiation and loyalty.

4. (Selective) Focus on sporting events
Buffalo Wild Wings also regularly discusses the impact of notable sporting events on its quarterly results. In its most recent quarter, for example, Buffalo Wild Wings drove comparable-store sales growth of 4.2% and 2.5% at company-owned and franchised locations, respectively, despite having fewer events to support increased foot traffic.

Smith elaborated: "Compared to the second quarter of last year, we had Easter in the final four weekend, 14 fewer NBA and NHL playoff games, two fewer pay-per-view boxing events, and no men's World Cup."

Buffalo Wild Wings is also smart about which events it chooses to show. The company consciously chose not to feature the Mayweather-Pacquiao fight at most company-owned locations, for example, despite the so-called fight-of-the-century's status as one of the largest pay-per-view events in recent years.

Speaking of the decision in several interviews, Smith later confirmed the fight would have coast as much as $6 million to air company wide. That's more than twice the price it had previously paid for any other fight, and would have been equal to more than one quarter of the company's entire net income last quarter. Even putting aside the fact many boxing fans viewed the fight as underwhelming, investors should be thankful for B-Dubs' discretion.

5. The Stadia design
Finally, consider Buffalo Wild Wings' unique Stadia restaurant design, which essentially attempts to mimic the environment sports fans would experience at an actual stadium, complete with enhanced audio-visual systems and strategically arranged seating:

A Buffalo Wild Wings "Stadia" restaurant design, Credit: Buffalo Wild Wings.

By the end of this year, almost 30% of all Buffalo Wild Wings locations will feature the Stadia design, including both new restaurants and the ongoing remodels of 90 existing locations. Most important for investors is that the Stadia model has been shown to generate significant boosts to same-store sales -- and almost certainly to brand loyalty -- more than making up for the temporary incremental cost of remodeling.

In the end, with all these differentiating factors working for it, it's no surprise Buffalo Wild Wings stock has so wildly outperformed the market in recent years. As a longtime investor myself, I have no intention of selling any time soon.

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