--New model is nicer, but slightly more expensive to build for now

--First one opened in a Cincinnati suburb in mid-December

--Analysts say upscale design could give chain more room to raise menu prices

 
   By Annie Gasparro 
 

Buffalo Wild Wings Inc. (BWLD) is upgrading its restaurant design at a time when most chains are looking for ways to cut back on expenses.

The sports bar and grill says its new model, though slightly larger and initially more expensive to build, keeps it feeling trendy--an important factor amid tougher competition from Applebee's and Chili's Grill & Bar.

"Casual dining chains are starting to stay open later, with more drinks and appetizers and late-night menu options," said Buffalo Wild Wings Chief Executive Sally Smith said in an interview. "So, we had to get more aggressive on our remodels."

She said the design for both new and remodeled locations has more high-top tables for mingling, nicer seats, and a big bar in the center with a large-screen television to give it a "stadium feel" and provide a better view of the games from any spot.

"It incorporates those things that allow for gathering, but are still very family friendly," Ms. Smith said.

Other restaurants, given the struggling economy, have been scaling back their designs.

Some, like Red Robin Gourmet Burgers Inc. (RRGB), hope smaller floor areas will allow them to open restaurants in existing vacant retail spaces. Others, such as Pizza Hut, say the lower costs and faster return from their smaller models will encourage more franchise operators to expand.

Will Slabaugh, a restaurant analyst at Stephens, said Buffalo Wild Wings isn't necessarily looking to get a better return on its new restaurants, like other chains are with their remodels. "They are just looking for a margin-neutral way to grow sales," he said.

Buffalo Wild Wings said that as it scales the upgrade to more locations, it will be able to negotiate costs to keep them in line with the current model. It could also save money in that the new kitchen and bar are designed to run more efficiently.

Buffalo Wild Wings opened its first restaurant with the new design near Cincinnati in mid-December, and it expects to open the next in a suburb of San Diego in March.

For years, the chain has outperformed competitors and maintained strong customer traffic growth. But it, too, has been hit by slowing sales trends this year, as the economy curtails consumer spending at restaurants.

Ms. Smith said the modern look and feel of Buffalo Wild Wings is what differentiates it from competitors, making it necessary to upgrade, regardless of the economy, for the sake of its long-term growth potential.

"The way they're looking at it is, if we keep improving our [design], our customers will reward us not only in increased frequency, but in giving us pricing power to raise menu prices," Mr. Slabaugh said.

By his calculations, Buffalo Wild Wings' new models will need to generate a 15% sales boost to make it worth the money.

Adam Werner, the co-leader of food services's restaurant and foodservice practice, said that even though most waiter-service restaurants are cutting back on their building costs, not everyone is going down that path.

BJ's Restaurants Inc. (BJRI) also has made a point of keeping its so-called brewhouses upscale, he noted, and it has done relatively well.

"A lot of folks are trying different formats, and seeing what fits and what sticks with consumers," Mr. Werner said. "As long as they've got a good handle on who their consumers are, and who they could be, it makes sense."

-Write to Annie Gasparro at annie.gasparro@dowjones.com

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