Buffalo Wild Wings Inc. plans to cut costs and sell more restaurants to franchisees as part of a strategic review of its cost structure as it faces pressure from an activist investor.
The Minneapolis-based chicken wing chain estimated on Wednesday that it can reduce spending by as much as $50 million over the next two years, including $20 million this year.
The reduced spending would come from implementing best practices across the system. Buffalo Wild Wings said it also reviewed the field organization, cost of goods sold, third-party contracts, and general and administrative costs.
In addition, Buffalo Wild Wings said it would sell 13 percent of its 634 company-owned restaurants to franchisees, or 80 locations. The restaurants have average unit volumes of $2.5 million and restaurant-level margins of 9.8 percent.
“We’ve identified areas to streamline work and improve efficiencies,” Buffalo Wild Wings CEO Sally Smith said in a statement. “Our team is focused, on track and making the strategic changes to improve sales and profitability in the long run.”
Buffalo Wild Wings said on Wednesday that same-store sales increased 0.5 percent at company restaurants in the quarter ended March 26. Franchised same-store sales increased 0.6 percent. Franchisees currently operate 616 of the system’s 1,250 locations.
Revenue increased 5.2 percent, to $534.8 million. Adjusted net earnings, however, fell 34.2 percent, to $24.7 million, or $1.44 per share, from $33.7 million, or $1.78 per share the previous year.
Buffalo Wild Wings’ stock fell 3 percent in after-market trading on Wednesday.
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