Case Study Buffalo Wild Wings

According to National Chicken Council it is reported that during Super Bowl weekends Americans are expected to chow down on close to 1.25 billion chicken wings. Of this amount, a majority of the wings will be consumed either in or from a restaurant. In Hays, Kansas there is not a predominant wing venue, however, there is one name that frequently comes up: Buffalo Wild Wings. A very popular choice among the college crowd, this establishment has cemented its name with some of the top sports bars in the business since 1982. This analysis will discuss whether or not bringing Buffalo Wild Wings to Hays, Kansas would be a successful economic venture by looking at potential profitability, future clientele base, competing businesses, and employment opportunities.

History

Short History of Buffalo Wild Wings, how it became the national brand name we are all aware of.

In 1982, Jim Disbrow and Scott Lowery had recently moved to Columbus, Ohio after living in Buffalo, New York and found themselves craving the authentic, Buffalo, New York-style chicken wings they’d grown to love. The problem was that they were nowhere to be found in their new city of Columbus. The two friends decided to take matters into their own hands and created their own signature sauce recipe to satisfy their craving. Jim and Scott’s signature wings began drumming p great demand and the pair opened up their first restaurant, “Buffalo Wild Wings & Weck” near the campus of The Ohio State University. The restaurant was a hit with college students and since then has developed a fanatical following across the

country.

Potential Profitability

In order for Buffalo Wild Wings to come to Hays, there must first and foremost be the opportunity to generate a profit. All too many times you see a business come in, stay for a year or two, and then have to get out because of an inability to generate revenue. Buffalo Wild Wings, as a corporation, is only interested in places that it knows it can be successful; so in order for a franchise to be started we must analyze the potential positives and negatives in regards to profit. We will look at whether or not traffic patterns, market area, incentives, and pull factor could create an atmosphere that is conducive to generating a worthwhile profit.

Traffic

The first element that can be analyzed when looking at potential profit is the amount of traffic that finds its way through Hays. Common sense tells us that the more traffic that a city has, the more customers that there will be. This is true, but on a deeper level one can look at the patterns, high intensity and low intensity traffic spots, and even potential building spots to gain a better understanding of where the most money can be generated.

In a graphic prepared by the Kansas Department of Transportation for Ellis County, there are multiple points shown on the picture of where traffic passes through in twenty-four hour periods. The top five points of heavy traffic are in order from greatest to least and are as follows: Just south of Interstate 70 on Vine Street, Just north of Twenty-Seventh Street on Vine Street, Just south of Twenty-Seventh Street on Vine Street, at the Twenty-First Street and Vine Street intersection, and north of Interstate 70 on East Forty-First Street. There is clearly one common denominator in all of these locations, and that is Vine Street. Citation Needed Many of the top restaurant chains in Hays are located within the stretch located between Twenty-First Street and Forty-First Street on Vine Street.

With this considerable amount of traffic, locating a potential franchise within this area could create the extensive exposure needed to feed customers in and keeps the money flowing. The top spot showed an average of 17,800 vehicles passing through during a twenty-four hour time period. Comparing this to Hays’ actual population of 21,038, in 2013, we can see that a vast majority of the hays population passes through this area. With this kind of traffic, the potential for profit is at a high.

Market Area

In regards to market area, the potential profit for Hays includes a vast amount of western Kansas. The market area refers to the geographic region in which people of other areas, not of Hays, would be willing to travel to Hays to get the goods and services that their home town does not offer. In the defined market area as shown in the graphic below Insert Graphic, there are parts of thirteen different counties included as a part of this. These counties include:

· Decatur
· Norton
· Phillips
· Sheridan
· Graham
· Rooks
· Osborne
· Russell
· Ellis
· Trego
· Gove
· Ness
· Rush Citation Needed

Essentially this means that thirteen counties around the Hays area are all consumers of the Hays institutions. These people are willing to come and use Hays as their main source of shopping for anything from food to clothes to services. This is important to Hays and Buffalo Wild Wings because it essentially increases Hays’ population from its near 20,000 to an enormous 75,837. Source Needed With such an influx of people in the Hays shopping area, there is an increase of participants of the economic ventures as well, which would bode well for the Hays economy and Buffalo Wild Wings.

One of the downsides to having such a big market area is the fact that people that live an hour or hour and a half away are not just going to travel that amount of time to eat Buffalo Wild Wings. The time it takes to travel to Hays just does not make sense for the activity being sought after in most cases. So while there is a large market area per say, there is also the percentage of people that will not be willing to travel a distance just to eat at Buffalo Wild Wings.

The possible upside to this involves the people that come to Hays in order to shop, find a service, and or do something that they otherwise wouldn’t be able to do in their own home town. With a lot of people coming to hays to grocery shop or clothes shop or find an auto repair place, the likelihood of them staying for a substantial part of the day is high and this could very well benefit a franchised restaurant. If people stay for most of the day then they will need somewhere to eat for lunch and possibly supper. With a franchise in place, there is an opportunity that the brand name would be recognized and utilized for eating out. The fact that they are there and have a popular brand is incentive enough for most people.

Incentives

The next area that is helpful to Buffalo Wild Wings determining whether or not profitability would be good in Hays is the incentives that come along with establishing a store in Hays. Some of the various incentives that come along with doing business in Kansas include:

· Training grants for workforce development
· Property tax abatements
· Sales tax exemptions
· No inventory tax
· No Kansas franchise tax
· Tax credits for researching and investing in training

Some of the incentives directly associated with Hays are:

· Job bounty program (cash incentives for businesses, based on job creation and wages paid)
· Tax abatements
· Community Improvement districts
· Tax increment financing

The big question with these things is whether or not they apply to a franchise like Buffalo Wild Wings. The main points such as property tax abatements or job bounty program or even no Kansas franchise tax are applicable to an establishment such as Buffalo Wild Wings.

The first one, property tax abatement, is simply the reduction on the amount of taxes owed to the state for owning and building on certain ground. With this incentive, Hays is trying to pull more business into the town and allow them to work under cheaper conditions as long as they have their business here.

The second incentive is the job bounty program. The Ellis County Coalition for Economic Development defines this as being, “cash incentive for businesses, based on job creation and wages paid.”Citation Needed This means that cash will be awarded to them for creating and sustaining jobs, as well as for how much they pay out in wages.

The third, but certainly not the last, incentive that could benefit Buffalo Wild Wings is a no Kansas franchise tax. Essentially this is what it says. Kansas eliminated its taxation on franchises in 2011, thus creating a cheaper and easier place to establish a franchise.

Pull Factor

In regards to pull factor, Hays has a fairly substantial positive number of people coming into the city. Pull factor, as defined by Ellis County Coalition for Economic Development, is, “…a calculation that identifies how much retail business is leaving your community in comparison to the population.” So what this means for us is how many people are leaving verses how many are coming in to do their shopping in the Hays area. A number equal to one is essentially a neutral comparison. A number that is less than one means that people are shopping in places outside of Hays, and a number that is greater than one means that people are coming to Hays for their shopping needs. The city of Hays has a current pull factor of 1.85, which is in fact one of the highest in the state. This means that we are having a good amount of people come in to Hays for their goods and services.

This number could be encouraging for a franchise like Buffalo Wild Wings because it shows that there are plenty of people in this part of the state that already migrate to Hays. With an increase in people coming, there is always an increased opportunity for a profit to be made.