Marcato Capital Management, an activist investor pushing for big changes at Buffalo Wild Wings, has asked for “fresh talent” on the company’s board of directors. Yet the hedge fund was far from happy Tuesday when Wild Wings announced a major board revamp.
Turns out Wild Wings did so without consulting San Francisco-based Marcato, which has been highly critical of the chicken wing chain’s stewardship since buying a 5.2 percent stake last summer. Tuesday’s developments seem to up the ante in a faceoff between Richard “Mick” McGuire, Marcato’s founder and CEO, and the Wild Wings’ board and longtime CEO Sally Smith.
Buffalo Wild Wings appointed three new independent directors and expanded its board from eight to nine members. Added were: Andre Fernandez, 48, president of CBS Radio; Hal Lawton, 42, senior vice president of North America at eBay Inc.; and Harmit Singh, 53, chief financial officer at Levi Strauss & Co.
“Their appointments underscore our commitment to proactive board refreshment, strong corporate governance and independence and diversity across our board,” Smith said in a statement.
But Marcato said in its own statement that it was “deeply disappointed by the company’s unilateral decision to reconstitute its board without consulting us or other outside shareholders. … Buffalo Wild Wings has opted to exercise poor judgment, taking entrenching actions to create the illusion of change without showing any real openness to new voices and desperately needed new ideas.”
Even with the new directors, Marcato said, Wild Wings’ board still lacks expertise in restaurant operations and franchising.
Singh, before his current post at Levi Strauss, held various leadership roles at Yum Brands, which owns the KFC and Pizza Hut restaurant chains; he was CFO of Pizza Hut. The other new board members don’t have restaurant industry experience.
With the board additions, two longtime Wild Wings directors will exit. Dale Applequist and Warren Mack “have each decided to advance their planned retirements from the board, respectively, such that they are effective immediately,” the company said.
Applequist, who is in his late 60s, and Mack, in his early 70s, have been on the Buffalo Wild Wings board, respectively, since 1997 and 1994. Only Smith herself has a similar board tenure: She has been a director since 1996, when she was named CEO.
Under Smith, Buffalo Wild Wings has been one of the most successful U.S. restaurant chains over the past decade, growing its sales and profits at a steady clip. But the company, which has about 1,200 chicken wing-and-sports themed restaurants worldwide, began to falter over the last year, its sales growth slowing and its stock price weakening.
Wild Wings’ stock closed Tuesday at $138.61 share, up 62 cents. The shares were trading over $180 a year ago.
Marcato bought its stake in Wild Wings in July, and a month later sent a missive to directors calling for major strategic changes, and asking for a “profound increase in urgency, follow-through and accountability.” Wild Wings’ growth objectives had become muddled, the letter said, and “fresh talent was needed at the Board and management levels.”
Last week, McGuire said Wild Wings should move to a more heavily franchised business model. Now, Wild Wings’ restaurants are about 50 percent franchised and half company-owned; McGuire wants a 90-to-10 percent franchised-to-owned ratio.