One Day to Go, BWW 'Zees Stand Behind Management

Franchisees of Buffalo Wild Wings are still backing corporate in the fight against activist investor Marcato Capital Management, saying in a statement Tuesday that Marcato’s plan to sell off most of the 634 company-owned restaurants to franchisees is “heavily flawed.” The company’s annual meeting is tomorrow.

“Under this proposal, there would no longer be an appropriate overall alignment of interests between the franchisor and the franchisee community, damaging the value we have worked so hard together to create,” said Wray Hutchinson in a statement issued May 30. He is chairman of Franchise Business Services, which represents franchisees.

“We will not alter a winning formula,” Hutchinson’s statement concluded. “As we have stated previously, our owners will vote in support of Buffalo Wild Wings nine director nominees.”

Marcato owns 10 percent of BWW stock and has nominated four people to the company’s board of directors. Mick McGuire, Marcato’s managing partner, wants Buffalo Wild Wings’ CEO Sally Smith to resign and the sale of 90 percent of corporate-owned stores to commence.

In a letter to franchisees last December, he blasted management, saying Buffalo Wild Wings corporate was keeping “the best opportunities for itself.”  Under his plan, “franchising will be the top priority of the business, and the franchisor will no longer be conflicted by aspirations of company-operated unit expansion.”

Institutional Shareholder Services, a proxy advisory firm, has endorsed three of Marcato’s nominees for the board, while proxy adviser Glass Lewis backs BWW’s slate. BWLD’s annual meeting of shareholders, in Minneapolis June 2, is expected to decide the issue.

One of the proposed directors on Marcato’s slate, Emil Lee Sanders, was said to have a “major conflict of interest” by Buffalo Wild Wings management in a May 22 letter. Sanders, who used to work for BWW, “has expressed a strong desire to buy Buffalo Wild Wings units and become a franchisee. He has been soliciting our franchisees and attempting to scare them into selling their restaurants by suggesting that Marcato’s plans for the company will soon make the restaurant units less valuable.”

Hutchinson’s statement this week also criticized Sanders: “We do not believe making claims about future downside in the value of the brand is an appropriate approach or the way to endear a new owner to other long-time franchise owners, especially when there is so much positive news to share about our business model and recent sales trends.”