Buffalo Wild Wings hires firm to push ahead on refranchising strategy

Sally Smith, CEO, Buffalo Wild Wings
Scott Mlyn | CNBC

Buffalo Wild Wings appears to be moving forward with its refranchising plan.

The restaurant disclosed on Tuesday that it has hired The Cypress Group, an investment banking firm that has previously worked with franchisors like Wendy's and TGI Fridays.

The chicken wing chain said that the firm will be working on the marketing of about 10 percent of Buffalo Wild Wings company-owned restaurants as part of its "portfolio optimization process."

"We are excited to partner with The Cypress Group, which has a notable breadth of franchise deal experience and an extensive network of valuable relationships," Sally Smith, CEO of Buffalo Wild Wings, said in a statement. "We anticipate engaging with successful, committed franchisees with the desire, experience and financial ability to build our brand and further strengthen the Buffalo Wild Wings system."

Cypress, which has more than 25 years of experience in mergers and acquisitions and refranchising, is slated to help Buffalo Wild Wings "facilitate the strategic sale of certain company-owned restaurants," the investment firm said.

The move by B-Dubs may not be enough to quell concerns posed by investor Marcato Capital Management, however — especially considering Marcato previously hired Cypress to try to persuade the chicken wing chain to franchise more of its restaurants.

"It is ironic that, despite spending the last nine months resisting all of Marcato's suggestions for financial and operational improvements, Buffalo Wild Wings has now chosen to engage the Cypress Group on its so-called 'portfolio optimization' process," the company wrote in a statement Tuesday. "Notably, Marcato retained the Cypress Group last year to study the feasibility of refranchising at Buffalo Wild Wings."

Marcato released Cypress' findings in October of last year which suggested that refranchising 90 percent of Buffalo Wild Wings chains could take 18 to 24 months to complete.

The hedge fund, which holds a 5.6 percent stake in the chicken wing chain, has been pushing since July for Buffalo Wild Wings to franchise more of its restaurants and even nominated four directors to the company's board in February.

"Even with the Cypress Group's support of the feasibility of Marcato's refranchising proposal, we remain concerned that Buffalo Wild Wings will continue to resist this plan," Marcato said.

In early March, McGuire took aim at Buffalo Wild Wings, publishing a presentation for investors that argued the executives' interests were not closely aligned with the wing chain's shareholders. McGuire noted that none of the Buffalo Wild Wings executives currently own shares in the company and only one director has ever executed an open-market purchase of the stock.

He also argued that B-Dubs management team has been using equity incentive plans to purchase shares at a lower price and then sell them on the market to make cash.

Shares of Buffalo Wild Wings were up about 1 percent during intraday trading on Tuesday.