B-Dubs Express Opens as Buffalo Wild Wings Attempts to ‘Stabilize’
The small-format Buffalo Wild Wings (NASDAQ: BWLD) known as B-Dubs Express is open and operating.
The opening came days before the brand announced second-quarter results that sent shares down 10% after the closing bell. Cost of sales in the second quarter rose to 32.1% of restaurant sales, and comps sank 1.2% at company-owned restaurants. Net earnings decreased 62.9% from $23.7 million to $8.8 million. G&A jumped 31.3% “due to increased advisory fees and consulting services as well as stock-based compensation” according to a company press release.
In the release, CEO Sally Smith said it was another quarter of stabilization efforts.
“During the second quarter, we continued to work on stabilizing the business in the challenging restaurant environment. Our profitability was pressured this quarter driven by historically high wing costs, a mix shift to our promotional days, lower than expected same-store sales, and higher operating expenses,” said Smith.
While it’s not going to be an elixir for investors, Smith said B-Dubs Express is an effort to meet the consumer where they want to be.
“This takes us back 35 years when we opened our first location—it wasn’t much bigger than this and the menu was four wing sauces and a few other items,” said CEO Sally Smith. “We think this fits a growing trend in what the consumer wants speed, convenience, delivery and takeout—that’s exactly what we’re going to do here.”
Todd Kronebusch, the leader of the project and vice president of market development for Buffalo Wild Wings said the new model fills the market gaps between traditional locations. He said in the general area around the suburban Minneapolis location there are three traditional locations that each do about $4 million in sales, of which $800,000 to $1 million (or about 25%) is takeout.
“If you think about that radius, it’s really a three- to five-mile radius, Hopkins has that ring but it doesn’t have a restaurant,” said Kronebusch. "So we’re wondering if we can do $800,000 just in takeout for that five-mile radius.”
He said the brand projected a 60% off-premise at the new location, and Smith said, “If we could get in that typical fast-casual range of $1.5 million, we'd be very happy with that.”
The new location further bets on off-premise with deeper DoorDash integration, and the new locations will be the foundation of Buffalo Wild Wings’ own internal delivery experiments.
The new locations also feature a novel off-premise solution that seems to take aim at the growing semi-prepared food market that grocery stores typically fill.
“We have a product today that we can only do in the B-Dubs Express because we have the proper equipment. We can cook, blast chill and package wings. Then it's just take, bake and shake,” said Kronebusch. “You can take them home if you don’t need them tonight, you can swing by on the way home and reheat on the weekend.”
The new format also uses a new point of sale for the system that talks front to back and to the customer.
“With this being the first restaurant and our proof of concept, we’ve made some decisions on things we have not done before. We’re still using Aloha, but we’re using a different version that allows us to integrate into the Aloha kitchen display, which creates a seamless vision of the customer journey,” said Kronebusch, directing attention to a screen in the waiting area that streams order information. “We can also let the customer know when the order is ready for takeout.”
At the second location, there will also be two parking spots dedicated to curbside pickup orders that will be surrounded by other technology innovations. He said that might expand to six spots to provide room for internal delivery drivers. Off-premise focused packaging will also get a closer look at the new locations.
Apart from the many off-premise tests, the new locations are a hotbed for many other initiatives that put consumer choice and convenience front and center. That includes the Sauce Wall, a huge sauce display where customers can mix and match their sauces; it includes a Pepsi Spire machine for customers to craft their own soda preference. Kronebusch said he and the team were exploring the option of a self-serve beer wall—something seen at other emerging fast-casual brands where customers are reticent to get back in line for another pint.
To keep everything efficient, the kitchen was slimmed down, as was the menu. It shrank from 70 items found at traditional locations to about 30.
“Wings drive 80% of our sales for takeout and delivery. It represents about 50% for dine in. Obviously we left wings, the sauces and seasoning is the same. But we did look at the menu and looked to keep the sharable items like queso, onion rings, then signature items like the buffalo mac and cheese, the burger and salads,” said Kronebusch.
He said the second location is nearly complete, and a third location has already been found in an urban area of Minneapolis. He’s also done site surveys in Los Angeles, Atlanta and Dallas. He expects build-out costs for the roughly 2,500 square-foot design to be in the $500,000 to $600,000 range once they iterate the format to an ideal design.
He said the No. 1 metric will be customer acceptance. About 70% of loyal Buffalo Wild Wings fans said they would use the location depending on their dining occasion, but the numbers will prove it out.
“We want to see the sales maintain and not have a tremendous drop off, that will tell us that the guest is accepting the concept,” said Kronebusch “It think the proof of concept is to get these two up and running operationally and see if the customer likes it.”