In response to mixed third-quarter Wall Street reports, Buffalo Wild Wings intends to set new pricing for its popular casual dining menu. The featured item for the Minneapolis-based chain, of course, is its chicken wings. Wholesale wing prices have skyrocketed in the recent past, reaching all-time highs during the beginning of 2012.
Company CEO and President Sally Smith said that the chain resisted increasing its prices during the first quarter of the year but later saw menu prices rise about an average of 6%. Now, Buffalo Wild Wings is changing the way it prices its wings, from per wing pricing to pricing by weight or portion size.
New Portion Pricing
Buffalo Wild Wings has been testing its new pricing system at 64 locations, including both company-owned and franchised stores and has already seen profit margins increase at those locations. The company now buys and sells its wings by the pound, and offers diners three wing choices: single-, double-, or triple-sized orders.
In terms of portion size, these three wing orders could equate to snack size, platter, or a full wing meal, according to Smith. Furthermore, she said that this was a necessary step because increasing wing prices had caused a corresponding drop in profitability throughout the chain. In the first quarter of 2013, profit margins fell back 3% to just 17% of total revenues.
Results were both positive and immediate at the test locations, according to company CFO Mary Twinem. Per wing sales costs dropped between .4% and .5% based on the average wing size the chain has seen since the beginning of this year. In the restaurants testing the new pricing model, same store sales figures either remained steady or decreased only slightly.
Smith emphasizes the importance of communicating value to customers, including how many wings they get per serving. With new pricing and portion sizes comes staff training to ensure a positive customer service experience. Customers need to know that they are getting value for their money and not just a few tasty chicken wings. So far, customers have been accepting of the changes at Buffalo Wild Wings.
Strong Financial Outlook
Not all of the recent financial news for the Buffalo Wild Wings chain is negative, however. In the last quarter, total revenues for the 900-store chain increased by 21.2% to $304 million. Company-owned stores saw even stronger increases of 22.4%. Same store sales were higher by 2.2% at franchised outlets and 1.4% at company-owned restaurants. As mentioned above, net earnings decreased by 3% to $18.2 million.
Buffalo Wild Wings was founded in 1982 and presently boasts 911 locations in the U.S. and Canada. The company maintains ownership of 397 stores in the U.S. Another 514 units are operated by franchisees in the United States and Canada.
New Menu Rollout
Buffalo Wild Wings anticipates being ready to roll out its new portion-priced menu companywide in August. Smith maintains that the time spent in researching is worthwhile and will ensure that customers understand exactly what they are getting. It’s important that a customer knows whether they will get five or six wings in a small order and what they can expect to see for larger orders of wings. Additionally, chicken wings are to be flagged as premium products on the new menus.
Buffalo Wild Wings serves fresh wings, never frozen, with its own unique sauces and sides. Customers get really good chicken wings, and even with the new pricing model, customers who come for the restaurant’s wings will know they are getting a great value.
New Service Model
Buffalo Wild Wings serves fast casual food items in a sports bar atmosphere. Company spokespeople are describing a brand-new customer friendly service model that has recently been put into play. The chain’s goal is to enhance its customers’ enjoyment by refining what it calls a guest experience business model.
A guest experience captain assists in seeing to customer needs such as changing a TV channel or playing a trivia game, for example. Adding additional staff members to handle these chores will drive up labor costs initially, but it is hoped those increased costs will not only level off but provide for increased revenues from happier and more satisfied customers.
The new service model is already in place in 100 company-owned stores with another 100 stores scheduled to join soon. Expansion is also in the wings for the Buffalo Wild Wing chain, as 15 new prototype stadium design model stores are scheduled to be built. A number of existing locations will be remodeled in this new design as well.
The chain has successfully focused more on professional sports events in recent years, seeing an 8% increase in business during Super Bowl Sunday. Its March Madness events also played well with basketball fans, driving sales higher across the chain at the end of the quarter.