Buffalo Wild Wings 2009 Annual Report Download - page 40

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with
our consolidated financial statements and related notes. This discussion and analysis contains certain statements that are not historical
facts, including, among others, those relating to our anticipated financial performance for fiscal 2010, cash requirements, and our
expected store openings. Such statements are forward-looking and speak only as of the date on which they are made. There are risks
and uncertainties including those discussed in Item 1A of this 10-K under “Risk Factors.” Information included in this discussion and
analysis includes commentary on company-owned and franchised restaurant units, restaurant sales, same-store sales, and average
weekly sales volumes. Management believes such sales information is an important measure of our performance, and is useful in
assessing consumer acceptance of the Buffalo Wild Wings ® Grill & Bar concept and the overall health of the concept. Franchise
information also provides an understanding of our revenues because franchise royalties and fees are based on the opening of
franchised units and their sales. However, franchise sales and same-store sales information does not represent sales in accordance with
U. S. Generally Accepted Accounting Principles (GAAP), should not be considered in isolation or as a substitute for other measures of
performance prepared in accordance with GAAP and may not be comparable to financial information as defined or used by other
companies.
Overview
As of December 27, 2009, we owned and operated 232 and franchised an additional 420 Buffalo Wild Wings Grill & Bar ®
restaurants in 42 states. The restaurants have elements of both the quick casual and casual dining styles, both of which are part of a
growing industry. Our long-term focus is to grow to a national chain of over 1,000 locations, continuing the strategy of developing
both company-owned and franchised restaurants.
Our growth targets for 2010 are 13 to 15% unit growth and 20% net earnings growth. Our growth and success depend on
several factors and trends. First, we continue to monitor and react to changes in our cost of goods sold. The costs of goods sold is
difficult to predict, as it ranged from 29.3% to 30.5% of restaurant sales per quarter in 2009 and 2008, mostly due to the price
fluctuation in chicken wings. We are working to counteract the volatility of chicken wing prices with the introduction of new menu
items, effective marketing promotions, focused efforts on food costs and waste, and menu price increases. We will continue to monitor
the cost of chicken wings, as it can significantly change our cost of sales and cash flow from company-owned restaurants. We are also
exploring purchasing strategies to lessen the severity of cost increases and fluctuations, and are reviewing menu additions and other
strategies that may decrease the percentage that chicken wings represent in terms of total restaurant sales. The chart below illustrates
the fluctuation in chicken wing prices from quarter to quarter in the last five years.
A second factor is our success developing new markets. There are inherent risks in opening new restaurants, especially in
new markets, including the lack of experience, logistical support, and brand awareness in a new market. These factors may result in
lower than anticipated sales and cash flow for restaurants in new markets. In 2010, we plan to develop company-owned restaurants
Source: BUFFALO WILD WINGS INC, 10-K, February 26, 2010 Powered by Morningstar® Document Research℠