The Basics of Buffalo Wild Wings (BWLD)’s Success

Aren’t you glad that last year — or the year before, or maybe even the one before — you listened to everyone and bought some shares of Buffalo Wild Wings (NASDAQ:BWLD)? Yeah, I missed that boat, too. The restaurant’s stock is up 52% year to date, easily beating out the S&P 500. With all the jumps, the stock is now riding at an all-time high. Is there still room left to run or has it hit the ceiling?

The basics of Buffalo’s success
In its last quarter, Buffalo Wild Wings (NASDAQ:BWLD) earned $0.08 per share and net income increased 41.4% year over year. That bottom-line growth was driven by good gains at the top, where comparable sales grew for both company-owned and franchised locations — 3.8% and 4.1%, respectively. The company has done well to keep its costs down as revenue has risen. In the second quarter, restaurant operating expenses fell to just 14.4% of sales.

Buffalo Wild Wings (NASDAQ:BWLD)’ growth has been chugging along at breakneck speed, as have many other fast-casual chains. Across the board, companies are finding new ways to engage customers and increase sales by working outside of the bounds that limit traditional fast food. At Buffalo Wild Wings, that has taken the form of a renewed guest experience business model, which focuses on creating a welcoming environment at the restaurants.

That model has driven up labor costs, but the company is seeing an increase in sales as well. The basic premise is that each location should have a dedicated team to make sure that customers are seated correctly, given the right options for in-store entertainment, and presented with promotions and events on a regular basis.

Not rocket science
The idea that you can make customers more likely to spend money by treating them well isn’t a life changer, but it is the new normal for fast-casual chains. Panera Bread Co (NASDAQ:PNRA) and Chipotle Mexican Grill, Inc. (NYSE:CMG) are both seeing growth from new campaigns designed to make customers happier. Panera is running a marketing campaign aimed at conscientious eaters, hoping to capitalize on the freshness of the company’s ingredients.

Meanwhile, Chipotle Mexican Grill, Inc. (NYSE:CMG) is rolling out a wider range of products — including new vegetarian options — to bring in a bigger set of consumers. The focus on health at both chains may explain the success that Buffalo Wild Wings (NASDAQ:BWLD) is having from its focus on fun. By making itself the place to go for food, beer, and sports, it differentiates itself from the healthy pack.