In this segment of the Motley Fool Money podcast, host Chris Hill, Million Dollar Portfolio's Matt Argersinger, David Kretzmann of Motley Fool Rule Breakers and Supernova, and Total Income's Ron Gross reflect on the recent history of Buffalo Wild Wings (NASDAQ: BWLD), which included a rough patch due partly to business decisions -- and partly to higher wholesale wing prices, over which it has no control; the entrance of Marcato Capital pushing for changes as an activist investor, and the exit of the longtime CEO. Then, they consider the future of the company, and the industry as a whole. Speaking of which, the founder and head of former fast-casual fave Chipotle Mexican Grill (NYSE: CMG) is headed for the door -- sort of. He's staying on as chairman.
A full transcript follows the video.
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This video was recorded on Dec. 1, 2017.
Chris Hill: Another restaurant chain taken private this week. Roark Capital Group, a private equity firm that appears to specialize in restaurants, is buying Buffalo Wild Wings for $2.5 billion. What did you think, Ron?
Ron Gross: Something to give here. Marcato Capital, an activist investor, was really putting the pressure on. They gained some board seats, they wanted them to refranchise the whole business. Sally Smith had been kind of forced out, the longtime CEO of BWLD. So, something had to give, and I think this makes sense. I actually think it's a relatively fair price at $157 in cash. The board has voted unanimously in favor of it. Another mediocre chicken wing bites the dust.
Hill: Let's not give too much credit to Marcato Capital, because they were putting pressure on Sally Smith last summer, when it was $167 a share.
Gross: That's true. They voted in favor of it, so they're not fighting it and trying to get more money out of it, but I'm sure it's not where they wanted it to be.
Hill: Between this and Panera Bread and Ruby Tuesday, Krispy Kreme, these restaurants being taken private, if you're an investor, is this an industry that you maybe just want to put to the side for the foreseeable future? Or are there still opportunities here?
Matt Argersinger: For me, it's also a little bit of a sign that we might be in a little bit of later stages of a bull market. There's still a lot of cheap money sloshing around there, but the returns have been tough to get by. So, you look at restaurant companies where there's obvious franchising opportunities, obvious opportunities to load on some debt, pay out a dividend to private equity investors, things like that, I wouldn't be surprised if it keeps happening. I think, if you're a strong brand in that space and you have a cheaper valuation, you're definitely a target.