December 6, 2016 / 2:05 PM / 3 years ago

Hedge fund takes Buffalo Wild Wings fight to franchisees

BOSTON (Reuters) - Hedge fund manager Mick McGuire is taking his fight for change at casual restaurant chain Buffalo Wild Wings Inc directly to franchise owners, saying they could have better access to innovations and grow more if his ideas were implemented.

In a letter to the company’s franchisees on Tuesday, McGuire encouraged them to follow the dialogue between his hedge fund and management at a new website,

Turning more of the eatery’s restaurants over to franchisees is a central component of McGuire’s plan for change at Buffalo Wild Wings and instrumental in his statement that the company’s share price could triple if a number of changes were made.

The company’s shares, down 0.5 percent at $169.95 in late afternoon trading on Tuesday, have risen 15 percent since McGuire announced his investment in a public filing in July.

“Buffalo Wild Wings includes perspectives from its franchisees as it develops programs and initiatives,” the company said in a statement, adding that it would assess future growth opportunities.

As of September, Buffalo Wild Wings says it had 589 franchisee-owned and 601 company-owned restaurants.

McGuire’s San Francisco-based hedge fund, Marcato Capital Management, is Buffalo Wild Wing’s fourth-largest shareholder with a 5.2 percent stake. After months of unsuccessfully negotiating in private, he is taking a more public stance.

In the absence of progress, the hedge fund could push for board seats and announce a proxy contest early next year. The company’s nomination deadline for directors runs from Jan. 8 to Feb. 7, according to its proxy statement.

McGuire has also asked for management to overhaul how it allocates capital and has urged it to add people with relevant restaurant and finance experience to its management and board ranks.

“We believe all stakeholders would benefit from seeing the system transition to a 90 percent or higher franchise mix,” McGuire wrote in the letter, seen by Reuters. “To achieve this target approximately 600+ company units would be refranchised, inclusive of expected future system growth,” the letter said.

This would allow more franchisees to have a say about innovations such as tablets to order and pay, loyalty programs and access to new systems and marketing initiatives, the letter said.

Reporting by Svea Herbst-Bayliss; Additional reporting by Michael Flaherty; Editing by Steve Orlofsky and Alan Crosby

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