Wings, beer, sports, and now cash. Buffalo Wild Wings Inc., which has become a huge name in the casual dining chain industry, has been bought out by Roark Capital Group, an Atlanta-based private equity firm that owns Arby’s, Jimmy Johns, Cinnabon, and more. The deal is worth $2.9 billion, or $157 per share, which is a 34% premium to Buffalo Wild Wings’ closing price the day before Roark’s opening bid. Shareholders are likely relieved by this deal, as it comes at the end of a difficult year where chicken prices had increased and sales had slumped.
Roark has proven itself as a strong force in the private equity world. In 2011, Roark bought a majority stake in Arby’s, which is still partially owned by Wendy’s Co. Since then, Arby’s has posted strong sales as a result of increased customer targeting and a “focus on protein-heavy sandwiches.” Regarding Buffalo Wild Wings, Michael Halen, a Bloomberg analyst, notes that Roark will likely stick with what they know from their previous restaurant investments and improve food quality and operations. With portfolio companies ranging from Cinnabon to Auntie Anne’s, Roark has experience creating and maintaining large multinational brands, and they will be able to apply this experience to the Buffalo Wild Wings chain.
This acquisition comes just a month after Ruby Tuesday was sold to NRD Capital, and less than a year after Panera was sold to JAB Holdings. This trend of buyouts of public companies in the restaurant industry is likely a result of increased competition and rapidly changing consumer trends. Growth has slowed for many restaurants as consumers are looking for increased convenience, higher quality food, and lower prices. Chipotle’s food scare had an outsized impact in the past few years because of increased consumer sensitivity to food quality. Wendy’s has recently announced a delivery partnership with DoorDash as a means of getting their food to customers even quicker. Buffalo Wild Wings has an advantage in this market because of its brand recognition and personality, but it must catch up with regards to back-end efficiency and food quality.
So what might the future look like for Buffalo Wild Wings and similar casual dining companies with brand recognition? After nearly 12 years of sales struggles and slow growth, casual dining chains are finally beginning to experience progress. The reason for this appears to be twofold. First, people have more money to spend, as the overall economy has been doing well for the past several years. Perhaps more importantly, though, is the fact that restaurants have begun to adapt to the demand for convenience that drove customers away in the first place. As consumers shy away from even leaving the house for food, takeout orders have risen and attractive dining atmospheres have become necessary. Olive Garden, for example, has seen a 70% increase in takeout orders over the past four years. Applebee’s has seen 8% of their sales originate from out-of-restaurant dining. In addition, IHOP is testing delivery and online ordering. For Buffalo Wild Wings, off-premise sales are over 19% of total sales, and it is likely that we will see an increase in investment into online and delivery options in the near future as this trend continues.
Overall, this deal is a win for Buffalo Wild Wings shareholders. It is also a signal to similar brands and the industry as a whole. There is still money to be made in the casual dining industry, but it is increasingly important for businesses to adapt to consumer needs and develop a brand to achieve success.