Explanation

The audited financial statements for the parent company, Buffalo Wild Wings, Inc. (BWW, Inc.), do not indicate financial instability. For the fiscal year ended December 29, 2024, the company reported over $2.3 billion in revenue and a net income of approximately $129 million. It also maintains a strong balance sheet with positive stockholder's equity of over $2.1 billion. No significant negative financial indicators, such as a going concern note, were found.

Potential Mitigations

• An accountant should still review the complete financial statements, including all notes, to confirm the company's financial health and stability.
• Ask your business advisor to assess whether the franchisor's financial resources are sufficient to support its large system and growth plans.
• It is wise for your attorney to confirm that the provided parent company guarantee of performance is unconditional.

Explanation

The franchisee turnover rates appear to be low. In 2024, only 2 franchised outlets ceased operations for other reasons, with no terminations or non-renewals, out of a base of 532. The turnover rates for 2022 and 2023 were also relatively low (approximately 2.1% and 1.1%, respectively). These figures do not suggest a systemic problem causing franchisees to leave the system at a high rate.

Potential Mitigations

• A discussion with your business advisor can help put these low turnover rates into the context of the broader restaurant industry.
• Contacting a sample of current and former franchisees listed in Item 20 is still a valuable step your attorney can guide you through.
• Your accountant can help you analyze the three-year trend data in Item 20 to confirm system stability.

Explanation

The franchise system is large and mature, not undergoing the kind of explosive growth that often strains a newer franchisor's support resources. Item 20 tables show stable to modestly declining unit counts for company locations and modest growth for franchised locations over the past three years. The financial statements in Item 21 indicate substantial resources are available to support the existing system.

Potential Mitigations

• A conversation with your business advisor can help evaluate if the franchisor's support infrastructure is well-suited for a large, mature system.
• In discussions with current franchisees, which your attorney can help facilitate, inquire about the quality and responsiveness of support services.
• Reviewing the franchisor's financial statements with an accountant can provide insight into their ongoing investment in franchisee support.

Explanation

Buffalo Wild Wings International, Inc. (BWW, Inc.) is a well-established company, not a new or unproven franchisor. It began offering franchises in 1991 and, as of year-end 2024, the system had over 1,180 total units (538 franchised) in the U.S. The brand has significant recognition, and its management team, as detailed in Item 2, has extensive experience in the restaurant industry. The system is mature and has a long operational history.

Potential Mitigations

• Have your business advisor review the experience of the key executives listed in Item 2 to confirm their relevant industry background.
• Engaging with long-term franchisees can provide your attorney with valuable historical perspective on the system's evolution and stability.
• An accountant's review of the historical financial data in Item 21 and FPR data in Item 19 can further confirm the system's established nature.

Explanation

The sports bar concept centered on chicken wings, beer, and sports entertainment has demonstrated long-term consumer demand and is not considered a fad. BWW, Inc. has been operating and franchising for several decades. Item 11 disclosures, combined with the brand's history, suggest an established business model with ongoing menu development and marketing programs designed for long-term relevance rather than reliance on a short-lived trend.

Potential Mitigations

• A business advisor can help you assess the long-term sustainability and competitive landscape of the sports bar industry in your specific market.
• During due diligence calls with current franchisees, ask about the brand's ability to adapt to changing consumer tastes and economic conditions.
• Your accountant can analyze the Financial Performance Representation in Item 19 to gauge the historical consistency of sales.

Explanation

The management team detailed in Item 2 appears to have extensive and relevant experience. Executives hold positions not just within BWW, Inc. but also across the parent company, Inspire Brands, a major multi-brand restaurant operator. Many executives have long tenures with BWW, Inc. or other major restaurant franchise systems like Dunkin' or Arby's. This indicates a deep pool of experience in both the specific industry and in managing large-scale franchise operations.

Potential Mitigations

• Your business advisor should still review the specific backgrounds of the executives listed in Item 2 to fully appreciate their experience.
• During calls with franchisees, which your attorney can help prepare for, you can inquire about their direct experiences with the management team's leadership and support.
• Confirming the stability of the management team over the last few years with your business advisor can add another layer of assurance.

Explanation

The FDD clearly discloses that Buffalo Wild Wings, Inc. is a subsidiary of its parent, also named Buffalo Wild Wings, Inc. (a Minnesota corporation), which is part of Inspire Brands. Crucially, the parent company provides an absolute and unconditional Guarantee of Performance for the franchisor's obligations, and the parent's audited financial statements are included in Exhibit B. This provides transparency into the financial health of the entity backing the franchisor's commitments.

Potential Mitigations

• It is prudent to have your accountant review the parent's financial statements to confirm its ability to back the guarantee.
• Your attorney should verify that the language in the Guarantee of Performance is indeed unconditional and comprehensive.
• Engaging a business advisor can help you understand the full corporate structure and any potential implications of the parent-subsidiary relationship.

Explanation

The franchisor, BWW, Inc., has no predecessors. It was incorporated in 1990 as bw-3 Franchise Systems, Inc. and changed its name in 2001. The document states that the parent company developed the concept. The history appears straightforward and does not involve acquiring the system from a previous, potentially troubled entity. Therefore, the risk of inheriting undisclosed historical problems from a predecessor is not present here.

Potential Mitigations

• Your attorney should confirm the corporate history as disclosed in Item 1 during the due diligence process.
• A business advisor can help you research the brand's history to ensure no other entities were involved that should have been disclosed as predecessors.
• Speaking with long-term franchisees can provide additional comfort regarding the stability and consistency of the brand's ownership and management over time.