Buffalo Wild Wings (BWLD) maintains one of the highest unit growth rates among restaurants with more opportunities to expand toward from coast to coast, and BWLD displays a competitive advantage through its higher profitability per square foot, says Nick Setyan, Senior Equity Analyst for Wedbush Securities.
“In terms of Buffalo Wild Wings, the longer-term context there is they have probably the highest unit growth rate on the company side in restaurants,” Setyan said. “Their cash-on-cash returns are increasing, which is always a metric that I look to, as they expand to the West Coast and East Coast. They can maintain 20% unit level EBITDA profitability on just $300 a square foot in sales.”
Because BWLD can maintain profitability at lower prices than its competitors, BWLD is able to penetrate areas that are up to 60% below state median income levels while still performing at or above system averages, Setyan says.
“BJ’s Restaurants (BJRI) needs almost $1,000 a square foot in sales to maintain 18% profitability. Applebee’s and Chili’s need something in the neighborhood of $400 to $600 in sales to maintain those types of profitability metrics. Buffalo Wild Wings can do it with only $300 in sales per square foot,” Setyan said. “So the longer-term growth opportunity because of that, in my opinion, is still quite big as they can get to above 2,000 units.”
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