February 24, 2012

Entrepreneurship: Jim Disbrow and Scott Lowery founded Buffalo Wild Wing Grill and Bar in Ohio in 1982 by. Disbrow was originally a native of Kentucky but moved to Cincinnati, Ohio to live with his figure skating coaches David and Rita Lowery. There he developed a sibling relationship with the Lowery’s son Scott. Disbrow remained in Cincinnati training until 1974 when he moved to Buffalo, New York. While at Buffalo Disbrow experienced his first “spicy local version of barbecued chicken wings” at a place called Anchor Bar. Disbrow returned to Ohio in 1981 where he reunited with Lowery while judging a figure skating competition. During this visit they both developed a crazing for “buffalo-style chicken wings” but were not able to locate a place in town that served them. After their failed attempt to satisfy their crazing the two decided to open their own restaurant that sold buffalo style chicken wings. Without any previous experience the two made plans to open their restaurant. The first location that they chose was in Columbus, Ohio, which was the center point of Ohio State University. Picking that location was a very good idea because it provided them with a large market of college students who wanted a nice meal for a moderate price. The first restaurant was called Buffalo Wild Wings and Weck, which was a type of bread that they used to serves their burgers on. Shorty after starting they added on a third partner Mark Lutz. The three men had absolutely no experience in the restaurant business but were doing exceptionally well by providing the college students with what they want. The company had its ups and downs financially during the first couple of years; but as its financial standings improved more restaurants were opened in six different locations. By 1991 the three partners had decided to franchise the business so they reached out to a law firm called Francorp do help them do this. During this time the fee for starting a franchise with Buffalo Wild Wings was between $15,000 and $20,000, a percentage of the sales, and each franchise was required to use BWW’s specialized bottled wings sauce. After doing this BWW incorporated a bar to its restaurants including TV’s mounted to the walls that displayed various sporting events that were on during different times. This added another target market for the company and “sales of alcohol contributed as much as thirty percent of revenues.” With the success of BWW they had to find someone who was qualified enough to take care of the financial aspect of their company so they hired Sally Smith as the Chief Financial Officer (CFO). As CFO Smith was in charge of improving the companies financial problems but in order for her to take this job the main headquarters had to be moved from Cincinnati to the Minneapolis/Saint Paul region. Once the move was completed Smith took on the job and got to work on improving the conditions of the company. During that time period the company was in serious trouble with the Internal Revenue Service (IRS) and its lenders as well which almost led the company to bankruptcy. For almost a year Smith worked on a tax payment agreement with the IRS, improved how vendors were paid, and closed “money-losing restaurants.” All of this work allowed Smith to get millions of dollars in loans to expand the company with a renewed plan. When this was completed the company developed a new look for the restaurants by separating the bar and the dinning area so that it had a different look. After this move they encouraged the franchises to take this approach as well. They also planned on taking their stock public but decided against it due to poor market conditions during the late 1990’s. With all of this expansion BWW came up with catchy slogans such as “Eat, drink, and be messy” to advertise the company. The company also incorporated more TV screens in its restaurants and added more stations for customers to enjoy. By 199 BWW opened its one hundredth restaurant and added an “$8.5 million private placement of stock to fund further expansion.” With each passing year BWW increased its sales, locations, franchises, and came up with more ways to improve the company and broaden its target market. They included various different special sauces, and included a takeout section for those on the go. Though one of the cofounders Jim Disbrow passed in 2002, the company is still in great condition and has since expanded even more. By franchising their company BWW was able to increase the number of store locations, which increased its popularity as well. The franchisors were able to keep their franchises successful so with the increased sales the company as a whole was getting larger revenue in takes. The downside to franchising is that outside of the requirements that were set to create a franchise the franchisors were able to make whatever changes they wanted with their franchises. This meant that they could change items on the menu, the look of the restaurant, and much more which might not be how the company wants to be viewed.
Marketing/Advertising:
The marketing strategy that is used by BWW is a national one. They started off by placing billboard adds with their slogans on them. One of these slogans was “Be on a first-name basis with your dry cleaner.” This would be accompanied by an image of costumers “devouring” their wings at one of their store locations. Images such as this were used to encourage people to go to their restaurants and try out their food. They also played commercials during times that would be most appropriate to reach their target market. Since a large majority of their target market were sports lovers, they would have commercials during sporting events such as football games. They also have contests to boost its popularity such as The Blazin’ Wing Challenge. This challenge is when you order a dozen wings mixed with BWW’s signature Blazin’ sauce and consume them all in under six minutes. In order to win this challenge you must first sign a waiver acknowledging that the company is not responsible for any possible damages, then you must eat the wings without drinking any fluids in between, and you cannot touch your face. Completing this challenge gives you a free Blazin’ Challenge Survivor t-shirt and your picture goes up on the restaurant wall. These advertising techniques work best for BWW because of the type of business that it is. By advertising during sports events the idea of eating wings is now associated with watching sports mainly football. This increases BWW’s customers because more people would be willing to either get their wings via take out or by going to the restaurant and eating in since they will be able to see the games as well. Also by having challenges such as the Blazin’ Wing Challenge they are associating an event with their name. So when people talk about the challenge they would mention BWW as well and that would increase it’s name recognition. These advertising techniques definitely help this particular company to grow its market. The advertising fees for franchises are incorporated with the company advertising fees.
Operations Management: Nancy Kocur is the Purchasing and Logistics Manager for BWW. Her job varies depending on what it is that she has to do each day but one thing that doesn’t change is that she is responsible for securing the products that BWW needs to complete the items on its menu. There are certain companies that are used to produce the items that BWW requires such as their signature sauces, which are made at Wilsey, Inc., of Atlanta. Items such as their signature sauce are used in all of the franchises therefore there is a central location where the product is made. Another product that is used in all of the franchises is BWW’s signature French fries so it is purchased from the same location every time and distributed to all of the franchises. When purchasing other raw materials the purchasing and Logistics Manager bases the decision off which companies would prove BWW with a high quality materials at a reasonable price. By choosing to purchase certain goods from only one particular supplier and the remaining goods from a different supplier greatly benefits BWW. They have now developed a strong relationship with Wilsey, Inc., of Atlanta therefore they are able to get price reductions and are guaranteed to get the great tasting sauces that they have used for decades. Also by purchasing their other materials based off quality and pricing allows them to be more versatile when it comes to purchasing those items. A disadvantage to this is that there won’t be any consistency when it comes to purchasing those items. Having a large company with many different franchises, it is sometimes good to have consistency so that each restaurant is able to remain close to the same level in terms of success.

Costs:
Current start up cost for a BWW franchise-
Total Investment: $1,389,200 - $3,148,200
Franchise Fee: $42,500
Ongoing Royalty Fee: 5%
Term of Franchise Agreement: 20 years, renewable
Financial Requirements- * Net Worth: $1,500,000 * Liquid Cash Available: $750,000 * The minimum Area Development requirement for new franchisee is two restaurants. * Therefore the minimum unencumbered liquid assets required are $1,500,000 and net worth of $3,000,000. * The Operator is an equity partner of at least 5%. * No more than 80% of the start-up costs be leveraged; 20% of any single store's start-up costs must be in liquid assets. In order to finance a franchise the franchisors are expected to do it all on their own. They are able to take out loans, find private funding, but they will not be assisted financially by that parent company. In their annual report they stated, “We do not provide loans, leases, or guarantees to the franchisee or the franchisee’s employees and vendors. If a franchisee becomes financially distressed, we do not provide any financial assistance. If financial distress leads to a franchisee’s noncompliance with the franchise agreement and we elect to terminate the franchise agreement, we have the right but not the obligation to acquire the assets of the franchisee at fair value as determined by an independent appraiser.” In the annual report they also discussed what the franchise payment plan was like: “We have financial exposure for the collection of the royalty payments. Franchisees generally remit royalty payments weekly for the prior week’s sales, which substantially minimizes our financial exposure. Historically, we have experienced insignificant write-offs of franchisee royalties. Franchise and area development fees are paid upon the signing of the related agreements.” Break-even point from sales: Break-even Point= Total fixed cost/ Price of one unit –Variable costs of one unit = $380,357/Price unit cannot be determined- $556,915 Since the price unit cannot be determined it would be difficult to calculate the break-even point for this franchise.

Human Resource Management: BWW does provide its franchises with training in different areas their success. A list of training services that BWW provides includes: * Preparation of all Buffalo Wild Wings menu items * Quality and food portion control * Effective food service operations * Beverage and inventory management * Hiring and personnel management * Marketing, promotions, and public relations * Management tools, systems, and routines * Wing Certified Trainer program * Cleanliness, organization, and sanitation standards * Execution of opening and closing management functions There are definitely advantages to providing corporate training to the franchises and some disadvantages as well. The advantages to providing training are that the company would be able to demonstrate to the franchises how it expects it to be run. The franchises would be taught based off of the rules and regulations of the company so then there won’t be any conflicting principles between the two. The training would also help ensure consistency between all of the franchises. A major disadvantage of providing corporate training for all of the franchises is that it would be costly. The amount of money that would be used to train each individual franchise would be great and if there are a lot of franchises that require training, the numbers would add up. Another disadvantage would be that the franchises might see the company as a dictator that is dictating then how to run their business. But it would still be good to provide franchises with corporate training because if the franchisors don’t have much experience in the business it will help them gain that experience.

References:
"Buffalo Wild Wings, Inc." -- Company History. Web. 18 Feb. 2012.
<http://www.fundinguniverse.com/company-histories/buffalo-wild-wings-inc-company-history.html>.
"Buffalo Wild Wings." Web. 20 Feb. 2012.
<http://franchiseinfo.buffalowildwings.com/www/index.php?page=requirements>
"Buffalo Wild Wings." Web. 18 Feb. 2012.
<http://franchiseinfo.buffalowildwings.com/www/index.php?page=franchise_support>.
"BUFFALO WILD WINGS INC - Annual Report." Buffalo Wild Wings. Web. 20 Feb. 2012.
<http://ir.buffalowildwings.com/secfiling.cfm?filingID=1104659-11-10383>.
"The Blazin’ Wing Challenge at Buffalo Wild Wings: A Photostory." The Blazin’ Wing Challenge at Buffalo Wild Wings: A Photostory. Web. 18 Feb. 2012.
<http://www.fromaway.com/observations/the-blazin-wing-challenge-at-buffalo-wild-wings-a-photostory>.
"Purchasing Managers: Minding Everyone's Business." - Inbound Logistics. Web. 18 Feb. 2012.
<http://www.inboundlogistics.com/cms/article/purchasing-managers-minding-everyones-business/>.