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Factors Affecting Profit

Chipotle Serves Up Hot Earnings Growth, But Buffalo Wild Wings’ Sales Are Light

Buffalo Wild Wings same-store sales grew 8.1% at company-owned restaurants and 4% at franchised units.

Both companies face some thorny challenges moving forward, including rising food costs. Demand for ethanol has pushed up corn prices, which in turn has fattened the cost of restaurant staples such as chicken, beef and produce.

Cost pressure is not a huge issue for Buffalo Wild Wings this year because it locked in a favorable deal with its chicken-wing supplier in March. Analyst Will Hamilton of SMH Capital estimates the company is paying about 30 cents a pound less than the current market price. But that price is expected to go up when the current contract expires.

“The supplier will likely want a higher price,” said Hamilton, whose employer makes a market in Buffalo Wild Wings. “That’s a risk not quite factored in to the stock price right now.”

Another wild card is how consumer skittishness might impact Buffalo’s same-store sales in the second half of 2007.

“I have a general concern about the consumer as gas and other prices go up,” Hamilton said. “Comps will still be positive, but the growth could be slower.”

About Ryan Knoll

Attorney and advisor with an interest in franchising. Feel free to email me comments and questions on the "Contact Us" page.

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