--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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