Buffalo Wild Wings 2010 Annual Report Download - page 24

24
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 2011, cash
requirements, and our expected restaurant 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 26, 2010, we owned and operated 259 and franchised an additional 473 Buffalo Wild Wings Grill &
Bar
®
restaurants in 44 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 about 1,400 locations in the United
States, continuing the strategy of developing both company-owned and franchised restaurants. In 2011 we plan to open our
first international location in Toronto, Canada and anticipate opening a total of 50 units in Canada over the next 5 years.
Our growth targets for 2011 are 13% unit growth and over 18% 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 27.9% to 30.6% of restaurant sales per quarter in 2010 and 2009, 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.