Buffalo Wild Wings
BUFFALO WILD WINGS INC (Form: DFAN14A, Received: 05/11/2017 17:23:59)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

SCHEDULE 14A

(Rule 14a-101)

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

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  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting material Pursuant to §240.14a-12

Buffalo Wild Wings, Inc.

(Name of Registrant as Specified In Its Charter)

MARCATO CAPITAL MANAGEMENT LP

MARCATO INTERNATIONAL MASTER FUND LTD.

MARCATO SPECIAL OPPORTUNITIES MASTER FUND LP

SCOTT O. BERGREN

RICHARD T. MCGUIRE III

SAM ROVIT

EMIL LEE SANDERS

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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On May 11, 2017, Marcato Capital Management LP delivered a presentation and supplementary materials to Institutional Shareholder Services, Inc. The presentation is attached hereto as Exhibit 1. The supplementary materials are attached hereto and include an analysis of total shareholder return (Exhibit 2), quotes from research analysts (Exhibit 3) and submissions to http://www.winningatwildwings.com (Exhibit 4).


Exhibit 1
BUFFALO WILD WINGS
MAY 2017


DISCLAIMER
1
The views expressed in this presentation (the “Presentation”) represent the opinions of Marcato Capital Management LP and/or certain affiliates (“Marcato”)
and the investment funds it manages that hold shares in Buffalo Wild Wings, Inc. (the “Company”). This Presentation is for informational purposes only, and it
does not have regard to the specific investment objective, financial situation, suitability or particular need of any specific person who may receive the
Presentation, and should not be taken as advice on the merits of any investment decision. The views expressed in the Presentation represent the opinions of
Marcato, and are based on publicly available information and Marcato analyses. Certain financial information and data used in
the Presentation have
been derived or obtained from filings made with the Securities and Exchange Commission (“SEC”) by the Company or other companies
that Marcato
considers comparable. Marcato has not sought or obtained consent from any third party to use any statements or information indicated in the Presentation
as having been obtained or derived from a third party. Any such statements or information should not be viewed as indicating the
support of such third
party for the views expressed in the Presentation. Information contained in the Presentation has not been independently verified
by Marcato, and Marcato
disclaims any and all liability as to the completeness or accuracy of the information and for any omissions of material facts. Marcato disclaims any obligation
to correct, update or revise the Presentation or to otherwise provide any additional materials. Neither Marcato nor any of its affiliates makes any
representation or warranty, express or implied, as to the accuracy, fairness or completeness of the information contained herein
and the recipient agrees
and acknowledges that it will not rely on any such information. Marcato recognizes that the Company may possess confidential information that could lead
it to disagree with Marcato’s views and/or conclusions.
Funds managed by Marcato currently beneficially own, and/or have an economic interest in, shares of the Company. These funds are in
the business of
trading—
buying and selling—securities. Marcato may buy or sell or otherwise change the form or substance of any of its investments in any manner
permitted by law and expressly disclaims any obligation to notify any recipient of the Presentation of any such changes. There may be developments in the
future that cause funds managed by Marcato to engage in transactions that change the beneficial and/or economic interest in the Company.
The Presentation may contain forward-looking statements which reflect Marcato’s views with respect to, among other things, future events and financial
performance. Forward-looking statements are subject to various risks and uncertainties and assumptions. There can be no assurance that any idea or
assumption herein is, or will be proven, correct. If one or more of the risks or uncertainties materialize, or if Marcato’s underlying assumptions prove to be
incorrect, the actual results may vary materially from outcomes indicated by these statements. Accordingly, forward-looking statements should not be
regarded as a representation by Marcato that the future plans, estimates or expectations contemplated will ever be achieved.
The securities or investment ideas listed are not presented in order to suggest or show profitability of any or all transactions.
There should be no assumption
that any specific portfolio securities identified and described in the Presentation were or will be profitable. Under no circumstances is the Presentation to be
used or considered as an offer to sell or a solicitation of an offer to buy any security, nor does the Presentation constitute either an offer to sell or a solicitation
of an offer to buy any interest in funds managed by Marcato. Any such offer would only be made at the time a qualified offeree receives the Confidential
Explanatory Memorandum of such fund. Any investment in the Marcato Funds is speculative and involves substantial risk, including
the risk of losing all or
substantially all of such investment.


CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
2
Marcato International Master Fund Ltd. (“Marcato International”), together with the other participants in Marcato International’s proxy solicitation, have filed
with the Securities and Exchange Commission (the “SEC”) a definitive proxy statement and accompanying WHITE proxy card to be used to solicit proxies in
connection with the 2017 annual meeting of shareholders (the “Annual Meeting”) of Buffalo Wild Wings, Inc. (the “Company”). Shareholders are advised to
read the proxy statement and any other documents related to the solicitation of shareholders of the Company in connection with the Annual Meeting
because they contain important information, including information relating to the participants in Marcato International’s proxy solicitation. These materials
and other materials filed by Marcato International with the SEC in connection with the solicitation of proxies are available at no charge on the SEC’s website
at http://www.sec.gov. The definitive proxy statement and other relevant documents filed by Marcato International with the SEC are also available, without
charge, by directing a request to Marcato International’s proxy solicitor, Innisfree M&A Incorporated, toll-free at (888) 750-5834 (banks and brokers may call
collect at (212) 750-5833).
The participants in the proxy solicitation are Marcato International, Marcato Capital Management LP, Marcato Special Opportunities Master Fund LP
(“Marcato Special Opportunities Fund”), Emil Lee Sanders, Richard T. McGuire III, Sam Rovit and Scott O. Bergren (collectively, the “Participants”).
As of the date hereof, Marcato International directly owns 950,000 shares of common stock, no par value, of the Company (the “Common Stock”),
representing approximately 5.9% of the outstanding shares of Common Stock and Marcato Special Opportunities Fund directly owns 32,600 shares of
Common Stock, representing approximately 0.2% of the outstanding shares of Common Stock.
In addition, Marcato Capital Management LP, as the investment manager of Marcato International and Marcato Special Opportunities
Fund, may be
deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition of) the
shares of Common Stock
held by Marcato and Marcato Special Opportunities Fund, therefore, may be deemed to be the beneficial owner of such shares. By virtue of Mr. McGuire’s
position as the managing partner of Marcato Capital Management LP, Mr. McGuire may be deemed to have the shared power to vote
or
direct the vote
of (and the shared power to dispose or direct the disposition of) the shares of Common Stock held by Marcato International and Marcato Special
Opportunities Fund and, therefore, Mr. McGuire may be deemed to be the beneficial owner of such shares.


BUFFALO WILD WINGS (“BWLD”): A GROWING, DISTINCTIVE RESTAURANT BRAND
Differentiated concept focused on “wings, beer, 
and sports”
~1,200 units with long-term potential to grow to
1,700 units in US & Canada and 400+ units
internationally (75% future unit growth)
3
Consensus Estimates :
2017E EPS: ~$5.76 per share
2017E EBITDA: ~$305 million
Valuation (’17E):
P / E: 26.8x
EV / EBITDA: 8.8x
Ticker: “BWLD”
Recent Stock Price: $155
Source:
Company filings, CapitalIQ.  Market data as of 4/19/17, the last day before Marcato’s definitive proxy filing.
Capitalization:
Market Cap: $2.5 billion
Enterprise Value: $2.7 billion


WHY WE INVESTED IN BUFFALO WILD WINGS
Differentiated concept with long runway for growth
SSS declines, operational missteps, and poor capital
allocation have hurt shares
Opportunity to create substantial shareholder value by:
1)
Improving “4-wall” profitability and returns
2)
Transitioning to a 90%+ franchised model
3)
Optimizing capital structure
4


Highlights from Marcato’s Campaign
5


Total Shareholder Return
1- Year
3- Year
5- Year
S&P 500 Index
14%
34%
89%
NASDAQ Index
20%
48%
108%
S&P 600 Restaurants Index
13%
53%
167%
Proxy Peer Median
11%
30%
103%
Buffalo Wild Wings
10%
10%
84%
Underperformance vs. S&P 500
(4%)
(23%)
(5%)
Underperformance vs. NASDAQ
(11%)
(38%)
(24%)
Underperformance vs. S&P 600 Restaurants
(3%)
(42%)
(83%)
Underperformance vs. Proxy Peer Median
(2%)
(20%)
(19%)
BWLD’S SHARES HAVE UNDERPERFORMED AGAINST RELEVANT BENCHMARKS
6
SUMMARY OF SHAREHOLDER RETURNS
“We believe the stock performance is compelling evidence of the
effectiveness of the Board and management”
-Buffalo Wild Wings Media Statement, 3/8/17
Source:
Company filings, CapitalIQ. Market data as of 4/19/17, the last day before Marcato’s definitive proxy filing.
Note:
Proxy peers include BJRI, BLMN, BOBE, EAT, CAKE, CMG, CBRL, PLAY, DIN, DPZ, DNKN, FIVE, PNRA, RRGB, RT, TXRH, and ULTA.  Total shareholder
return for proxy peer group uses the median return for applicable peers over each timeframe.


BWLD’S SHARE PRICE HAS REACTED FAVORABLY TO MARCATO’S CALL FOR CHANGE
7
SHARES JUMPED ~+20% IN THE WEEK WE FILED OUR 13-D
Marcato’s 13D Filing
on 7/25/16:
13-D filed intra-day
Prior close: $141
BWLD reported Q2’16
earnings on 7/26/16:
SSS: -2.1% vs. -0.5% est.
“4-wall” margins
contracted 90bps YoY
EPS: $1.27 vs. $1.25 est.:
Low-quality “beat”
driven by reduced SBC
from decreased bonuses
SHARES UP +6% UPON CALL FOR CEO RESIGNATION
Source:
CapitalIQ, Bloomberg.
Marcato’s DEFC14A Filing
on 4/20/17:
Sent letter to BWLD
shareholders seeking
resignation of CEO Sally
Smith
Released presentation
highlighting validation
from third parties of the
need for change
$170
$130
$135
$140
$145
$150
$155
$160
$165
$170
$175
7/1/16
7/7/16
7/13/16
7/19/16
7/25/16
7/31/16
$163
$150
$152
$154
$156
$158
$160
$162
$164
4/1/17
4/7/17
4/13/17
4/19/17
4/25/17


STOCK PERFORMANCE DECOUPLED FROM FUNDAMENTALS FOLLOWING MARCATO’S 13D
8
Source:
CapitalIQ, Bloomberg. Market data as of 4/19/17, the last day before Marcato’s definitive proxy filing.
Marcato’s
13D
Filing
on
7/25/16:
Shares
have
clearly
been
supported
by
a
floor
following
our
public
involvement…
…Despite a precipitous drop in
estimated future earnings power
$5.50
$6.00
$6.50
$7.00
$7.50
$8.00
$8.50
$9.00
$9.50
$65
$85
$105
$125
$145
$165
$185
$205
Apr-14
Oct-14
Apr-15
Oct-15
Apr-16
Oct-16
Apr-17
BWLD Closing Share Price
Consensus EPS -
FY'17


9
SAME-STORE SALES GROWTH, TRAFFIC, AND MARGINS HAVE ALL DETERIORATED
SSS GROWTH IS AT LOWEST LEVELS IN OVER A DECADE, DUE TO DEEP & ACCELERATING DECLINES IN TRAFFIC AND MIX
MARCATO BELIEVES “4-WALL” MARGINS HAVE SUFFERED DUE TO EXPENSE MISMANAGEMENT
Q1            Q2             Q3             Q4
Q4                  
2016
‘13                   
Q1           Q2            Q3            Q4
2015
2014
Source:
Company filings, Wall Street research.
(1)
Underperformance relative to industry refers to Knapp-Track.
Q1            Q2             Q3             Q4
Q4                  
2016
‘13                   
Q1           Q2            Q3            Q4
2015
2014
-590 bps
since
Q1’14
peak
(5.4%)
(5.2%)
(5.6%)
(4.8%)
(2.1%)
0.0%
0.4%
2.7%
2.5%
4.1%
5.1%
4.5%
3.9%
1.4%
3.4%
3.5%
3.1%
4.0%
3.9%
3.8%
4.3%
3.4%
1.9%
2.6%
2.1%
1.3%
(4.0%)
(1.8%)
(2.
1%)
(1.7%)
1.9%
3.9%
4.2%
7.0%
5.9%
6.0%
7.7%
6.6%
5.2%
Menu Price Adjustments
Traffic, Mix & Other
15.6%
17.6%
17.9%
19.5%
18.6%
18.2%
18.8%
18.9%
17.7%
18.4%
20.3%
21.5%
19.8%
"4-Wall" Margins
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4


WHEN GROWTH SLOWED, BWLD ACQUIRED FRANCHISED STORES FOR HIGH MULTIPLES
10
Total
Acquisition
Expense
$33.7m
$43.6m
$4.3m
$30.5
$205.2m
# Units
Acquired:
Avg. Replacement
Cost: $2,300
Source:
Company filings, Marcato estimates.  Franchise rights for Rusty Taco included in purchase price.  2014 calculation assumes full ownership of
all restaurants acquired.
(1)
2015 acquisition included franchise rights of $99m.
BWLD’s franchisee acquisitions in 2015 valued acquired stores ~80% above prior four-
year average and ~50% above replacement cost
18
18
3
15
59
$1,875
$2,421
$1,432
$2,033
$3,478
(1)
2011
2012
2013
2014
2015
-
Avg.
Purchase
Price
per
Company
-Operated
Restaurant
ESTIMATED ACQUISITION COST PER RESTAURANT | 2011 –
2016


MARCATO’S KEY RECOMMENDATIONS TO BWLD
11
I.
Improve “4-Wall” Profitability and Returns
Transition to a 90% Franchised Model
Optimize Capital Structure
II.
III.
STRATEGIC & FINANCIAL DRIVERS
IMPACT TO VALUE
Improve
Returns on Capital
Reduce
Cost of Capital
Create
Economic Value
+
=


12
INDUSTRY EXPERTS SEE MULTIPLE WAYS TO IMPROVE MARGINS
Source:
Marcato’s presentation to BWLD management from June 2016, external consultants.
A
major
consulting
firm
that
evaluated
BWLD
at
Marcato’s
request
identified
several
areas
for
potential
margin
improvement
equivalent
to
275
600bps
Address Food Costs
Menu design, protein management and
waste mitigation
50 to 100 basis points
Labor and staffing efficiencies
Optimization of staffing between floor and
kitchen
50 to 100 basis points
Procurement
Purchasing leverage, reduce non value
added costs
75 to 125 basis points
Spans & Layers
Operational control bands to manage
company owned and franchised units
25 to 150 basis points
Franchise Management
Domestic vs. international focus and
service level
25 to 50 basis points
Other Concepts
Determine value add of being part of
BWLD
50 to 75 basis points
COST
SG&A


13
WALL STREET ANALYST: “[FRANCHISEES] CURRENTLY GENERATE STORE MARGINS THAT ARE
UP TO 1000BP STRONGER THAN BWLD COMPANY STORES”
[ Franchisees]
generate
much
stronger
store
margins
even
after
paying
royalties
and advertising fees to BWLD corporate”
–Jim Sanderson, Arthur Wood, 3/28/17
Source:
Company filings, Wall Street research.
Note:
“Food, beverage & packaging” refers to “cost of sales” line item for BWLD and “food, beverage and packaging” costs line item for the largest
BWLD
franchisee
(also
referred
to
henceforth
as
“SAUC”).
“Labor”
costs
refer
to
“labor”
line
item
for
BWLD
and
“compensation
costs”
for
SAUC.  Other operating costs for SAUC add back the 5% royalty paid to BWLD for comparability.
BWLD’S LARGEST FRANCHISEE’S “4-WALL” MARGINS ARE MATERIALLY HIGHER THAN BWLD’S
Largest BWLD
Franchisee
The real margin gap is even larger than reported: BWLD’s COGS and rent are “subsidized”
by vendor rebates on franchisee purchases & significant RE ownership
The real margin gap is even larger than reported: BWLD’s COGS and rent are “subsidized”
by vendor rebates on franchisee purchases & significant RE ownership
RESTAURANT OPERATING EXPENSES AS A % OF RESTAURANT SALES
Fiscal Year 2016
Differential
Food, beverage & packaging
28.1%
29.9%
(175 bps)
Labor
24.8%
31.7%
(686 bps)
Occupancy
6.8%
5.8%
107 bps
Other operating costs, adj. for 5% royalty
15.9%
15.1%
85 bps
"4-Wall" Margin
24.3%
17.7%
(669 bps)


14
HIGHLY FRANCHISED COMPANIES TRADE AT HIGHER MULTIPLES
70+% mix = higher
multiples
BWLD is one of few “in
the middle”
BWLD’s growth would
command a premium
multiple if it were more
highly franchised
Source:
(1)
Franchise Mix
=
Margin
=
ROIC
=
Multiple
funded with cash flow, new debt, and the proceeds from refranchising.  Panera cited its engagement in constructive dialogue with Luxor Capital.
(2)
Represents
unaffected
multiples
referring
to
last
days
before
widespread
public
M&A
rumors
(4/2/17
and
2/10/17
for
PNRA
and
PLKI,
respectively).
Company filings, CapitalIQ.  Market data as of 4/19/17.  EBITDA multiples shown on an “NTM” basis, based on Wall Street consensus estimates.
On April 15, 2015, Panera announced progress on its earlier goal of refranchising 50-150 stores in 2015, as well as achieving G&A savings & an increased repurchase program


15
INDUSTRY-LEADING ADVISOR SAYS MAJOR REFRANCHISING IS HIGHLY FEASIBLE
Source:
Marcato’s presentation at Sohn SF in October 2016.
“We are highly confident BWLD could refranchise
their owned stores at a multiple of 6.0x or higher
and estimate a refranchising process to 90%
could take as few as 18-24 months”
Cypress Group


WE BELIEVE BWLD’S STOCK PRICE COULD RISE BY
MORE THAN 2-3x
UNDER MARCATO'S PROPOSAL
POTENTIAL
VALUE
CREATION
FOR
BUFFALO
WILD
WINGS|
2016A
2021E
Source:
Marcato’s June 2016 presentation to BWLD management.  Market data as of 4/19/17.
Note:
Status quo case from June 2016 assumed no refranchising and no impact from leveraged share buyback announced subsequently by
management
49%
63%
72%
81%
90%
90%
~8.5x
13.0x
Franchise
Mix
EV/EBITDA
17.4
13.7
11.8
8.8
7.0
6.6
Basic Share
Count
16
Status Quo
Current / 2016A
2017E
2018E
2019E
2020E
2021E
High: $311 @ 10.0x EBITDA
Mid: $265 @ 8.5x EBITDA
Low: $218 @ 7.0x EBITDA
90% Franchised
High: $458 @ 14.5x EBITDA
Mid: $402 @ 13.0x EBITDA
Low: $346 @ 11.5x EBITDA
+83%
+53%
‘16 -
’21
(62%)
7.3%
9.8%
11.1%
14.5%
21.1%
26.9%
EBIT Margin
+268%
Recent: $155
$100
$175
$250
$325
$400
$475
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Dec-21


Righting the Ship Requires New Leadership
17


LET’S BE CLEAR: BWLD MANAGEMENT HAS PROVEN TO BE INCAPABLE OF EXECUTING
18
“4-Wall” profit margins
well below management’s longstanding
goal of 20%
International development targets have been missed & extended
by 2-5 years
Loyalty and Tablet Order & Pay
still not fully rolled out, despite
three years of planning and millions of dollars spent
Guest Experience Captains
program has wasted money for nearly
five years, having never produced positive ROI through operating
leverage
Sally Smith and her team have failed to hit their own goals for years:
Why should they be given another opportunity to fail?
Management is years behind plan on nearly every strategic priority:


MANAGEMENT’S PLAN REPRESENTS “BUSINESS AS USUAL”
19
Slowing
development
of full-size
units
Takeout and
delivery
Small-footprints
& Urban
locations
In-restaurant
technology
Improve
margins
Stated
Areas of Focus
We doubt that any of management’s goals will be achieved
Abrupt
changes
in
capital
deployment
framework
validate
our
view
that
hundreds
of
millions
of
dollars
had
been
imprudently
deployed
in
low-returning
units
over
the
years
Management
is
unable/unwilling
to
say
whether
these
initiatives
drive
profits,
not
just
sales
Buffalo
Wild
Wings
has
been
unable
to
keep
up
with
Wingstop
in
this
area
Ignoring
the
core
earnings
driver
and
main
brand
engine
(the
~1,230
traditional
units
already
built)
Like
PizzaRev
&
RTaco,
these
are
just
speculative
new
concepts
that
distract
management
from
improving
execution
in
the
core
business
Missed
nearly
every
objective
from
2014
on
technology
rollouts
(mobile
/
tablet
order
&
pay,
POS
rollout, server handhelds, mobile app & rewards program)
No
accountability:
sponsors
of
bungled
tech
(Lee
Patterson
&
Ben
Nelsen)
are
still
in
charge
at
BWLD
Management has been unable to hit its “20% margin target” sustainably for years
Current
bridge
relies
heavily
on
refranchising
&
operating
leverage,
not
improved
execution
CFO
admits
that
targets
were
articulated
to
investors
before
a
credible
plan
was
put
in
place
International
development
Tim
Murphy,
leader
of
int’l
operations,
is
a
company
loyalist
(since
‘88)
with
no
relevant
int’l
experience
Targets
for
400
units
internationally
have
been
perpetually
extended
by
as
much
as
2-5
years
Company
has
extremely
poor
track
record
of
selecting
and
penetrating
new
markets
Source:
Company filings.
Note:
Support for assertions about technology, international, takeout, and diminishing ROIC have been discussed extensively in presentations
available at www.WinningAtWildWings.com.


ARE MANAGEMENT AND SHAREHOLDERS FOCUSED ON THE SAME ISSUES?
20
We
are
surprised
the
Company’s
investor
presentations
continue
to
center
on
tactical
efforts ,
like
FastBreak
Lunch and Wing Tuesday, and secondary strategic
priorities, like international development and new
concepts,
rather
than
full
explanations
for
why
traffic
is
declining,
how
costs
will
be
reduced
or
why
the
business
model
is
appropriate .
It
is
not
clear
to
us
the
issues
and
alternatives
are
fully
understood
Chris O’Cull, Keybanc, 2/7/17
Source:
Wall Street research.


EMPLOYEES AND FRANCHISEES EXPRESS SIMILAR VIEWS
21
EMPLOYEES
“Company retains a ‘small-
company’ mentality that is
lacking…structured corporate
processes”
“Buffalo Wild Wings senior
management is taking the
company down a path of no
return”
FRANCHISEES
“[M]y two supervisors –
a direct, and
a vice president -
had NO
restaurant experience”
“To improve the performance of
BWW, I would clean house and get
operators involved in the
management”
“It is my sincerest hope that [BWW]
will heed your company’s structural
and strategic advice”
“[BWW needs] fresh senior
management which has a real
interest in franchisees[’]
profitability”
Source:
Submissions to www.WinningAtWildWings.com.  Quotes shown were previously published in Marcato’s “Third Party Validation” presentation,
filed on Form DFAN14A on 4/20/17.


Open Mkt. Transactions
Sales
Purchases
Current + Recent
Insiders
667
1
SENIOR MANAGEMENT
Sally Smith
129
James Schmidt
80
Judith Shoulak
65
TENURED DIRECTORS
J. Oliver Maggard
48
James Damian
16
Michael Johnson
Jerry Rose
Cindy Davis
1
RECENTLY-DEPARTED SENIOR MANAGEMENT
Mary Twinem
133
Kathleen Benning
73
RECENTLY-REPLACED DIRECTORS
Warren Mack
71
Dale Applequist
52
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
22
HUNDREDS
OF
OPEN
MARKET
SALES
&
ONLY
ONE
OPEN
MARKET
PURCHASE
IN
13+
YEARS
Source:
Company filings as of 3/6/17.
Note:
Open market transactions include outright sales only and do not include shares gifted, transferred, or delivered or withheld for tax purposes, or
shares
purchased
through
the
ESPP.
Not
all
individual
sale
transactions
included
in
total
count
of
open
market
transactions
are
depicted
on
timeline due to multiple sales and other transactions occurring on the same day.
Open-market
Sale
Open-market
Purchase
Only
once
in
13+
years
has
a
BWLD
insider
(Cindy
Davis) reached into their own pocket and bought
stock at market value
Since 2003, insiders have constantly sold stock


NOMINATIONS SINCE IPO
MEMBERS SINCE IPO
A CULTURE OF COMPLACENCY:
BOARD APPEARS TO HAVE NO OVERSIGHT OR ACCOUNTABILITY OVER MANAGEMENT
July 2016:
Marcato files 13D
-
Longstanding directors appear to concede all strategic decisions to CEO Sally Smith
-
Financial & legal “advisors” hired by the Company have only defended status quo
-
New directors selected by entrenched Board members to embrace and reinforce status quo
23
Since
we
arrived,
the
Board
has
exhibited
dismissive
and
entrenching
behavior…
-
Company has not produced a single analysis of how status quo creates equity value
-
Management
focused
on
the
easiest
and
smallest
actions
to
help
“win”
proxy
contest
Start of Director Tenure
Durtion
of Director Tenure
Source:
Company filings.
Note:
Names in red indicate directors nominated by the Company for election at the 2017 Annual Meeting.
End of Director Tenure


J. Oliver
Maggard
ONLY ONE OF BWLD’S INDEPENDENT DIRECTOR NOMINEES
HAS WORKED AT A RESTAURANT IN THE PAST DECADE
24
Jerry
Rose
Cindy
Davis
Andre
Fernandez
Hal
Lawton
Harmit
Singh
Janice
Fields
Investment
Banking
Agribusiness
Golf
Media
Big-Box
Retail,
eCommerce
Apparel,
Lodging,
Restaurants
Restaurants
Finance
Supply
Chain
Golf
Equipment
& Media
Finance
and
Strategy
Hardlines
Merchan-
dising
Finance
Franchising
&
Operations
We believe that BWLD’s turnaround should be led by a Board with
relevant qualifications in restaurant operations
Directors whose replacement we seek
Directors recently nominated by BWLD
Source:
Company filings.
Note:
Directors
shown
in
order
of
decreasing
tenure,
from
left
to
right.
Directors
shown
exclude
Sally
Smith
(President
&
CEO
of
BWLD)
and
Sam
Rovit,
who was originally nominated by Marcato and whom BWLD has chosen to include on their 2017 nominee slate as well.


OLLIE MAGGARD’S “RESTAURANT EXPERIENCE” IS QUESTIONABLE
25
Prior to this year, the Company cited the following as Ollie Maggard’s “qualifications” to
serve on the Board, but never asserted that he had direct restaurant experience
:
“Mr. Maggard has significant financial experience and brings strong leadership to [the Board and
the Audit Committee].  He understands the intricacies of restaurant-level financials as well as how
they have an impact on the financials of the overall company”
Definitive Proxies filed 3/25/16, 3/27/15, 3/28/14, 4/5/13, 3/22/12, 4/4/11, 4/7/10
However, after seven years, the Company decided to add that he has investment
experience in “multiple restaurant concepts”:
“Throughout his career, he has advised and invested in numerous consumer oriented businesses,
including multiple restaurant concepts.  While reviewing hundreds of investment opportunities
each year, he has a thorough understanding of the drivers of value in both public and private
companies”
Definitive Proxy filed 4/21/17
Mr. Maggard’s now-defunct prior firm, Regent Capital, made just one documented
restaurant investment other than in BWLD (in Buca di Beppo)— each over 15 years ago
His current firm, Caymus Equity, has never invested in a restaurant company in its history
Source:
Company filings, http://caymusequity.com/portfolio/.


WHICH WOULD YOU PREFER?
26
J. Oliver Maggard
Incumbent Nominee
Mick McGuire
Shareholder Nominee
Co-founder of Caymus Equity, which has never
invested in a single restaurant company in its
history
Mick McGuire’s qualifications for Director far exceed
Ollie Maggard’s in both quality and magnitude
Source:
Company filings, Bloomberg, http://caymusequity.com/portfolio/.
Note:
Ownership information as reported by Bloomberg based on 13-F data as available on 5/3/17.
Investment manager with broad experience
investing in consumer businesses, including
numerous publicly-traded restaurant companies
Genuine ownership mentality: currently BWLD’s
third-largest shareholder
Current ownership: 3,522 shares (0.02% of sh. outst.)
Has never purchased BWLD stock in the open
market
Has personally sold stock 48 times since 2003
Prior employer, Regent Capital, sold its entire stake
in BWLD in 2005
Current ownership: 982,600 shares (6.1% of sh. outst.)
Entire stake purchased in the open market,
alongside current shareholders


JERRY ROSE AND CINDY DAVIS DID NOT DO THEIR JOB ON THE GOVERNANCE COMMITTEE
27
Source:
Company filings.
Note:
Commentary regarding Rose’s and Davis’ time on the Governance Committee refers to events prior to Marcato’s 13-D filings in BWLD.
(1)
Jerry
Rose
was
elected
to
the
Board
in
December
2010
and
the
Governance
Committee
from
August
2011
to
December
2016.
Cindy
Davis
was
elected to the Board in November 2014 and was named as a member of the Governance Committee as of the 2014 proxy.  Board and committee
activity during Rose’s and Davis’ tenures excludes the departure of Robert MacDonald in 2014, whose vacancy Davis filled later that year.
1) BWLD had one of the oldest-tenured Boards in the restaurant industry
2) No
changes
were
made
to
composition
or
chairpersons
of
any
Board
committees
3) Not a single new director other than themselves was appointed to the Board
4)
In response to our initial 13D filing, “circled the wagons” to further entrench the
Board by appointing new directors with no restaurant experience
During Jerry Rose’s and Cindy Davis’ years on the Governance Committee
(1)
:
As reported by
Barclays in
September 2016


IF JERRY ROSE’S SUPPLY CHAIN “EXPERTISE” HAS ADDED VALUE, WE CAN’T SEE IT
28
24%
27%
25%
23%
???
Wings as %
of COGS
27%
25%
19%
Source:
Company filings.
$2.08
$1.91
$1.83
$1.55
$1.76
$1.97
$1.21
$1.58
2017E
2016
2015
2014
2013
2012
2011
2010
AVG. PRICE PER POUND FOR BONE-IN TRADITIONAL CHICKEN WINGS PAID BY BWLD DURING JERRY ROSE’S TENURE


OUR NOMINEES WILL MAKE BUFFALO WILD WINGS A WINNING COMPANY AGAIN
29
Sam Rovit
Scott
Bergren
Lee Sanders
Mick McGuire
Former CEO of Pizza
Hut’s Global Business
Veteran Franchising,
Marketing, &
Operations Expert
20yrs. in Restaurant
Supply Chain, Retail,
Food, & Corporate
Strategy
Turnaround Expert
Former CEO and
Franchising Head at
Several Global
Brands, Including
Buffalo Wild Wings
BWLD’s 3rd Largest
Shareholder,
Committed to
Accountability &
Shareholder
Alignment


SETTING THE RECORD STRAIGHT ON
BUFFALO WILD WINGS’ PEER GROUP
MAY 2017
Exhibit 2


DISCLAIMER
1
The
views
expressed
in
this
presentation
(the
“Presentation”)
represent
the
opinions
of
Marcato
Capital
Management
LP
and/or
certain
affiliates
(“Marcato”)
and
the
investment
funds
it
manages
that
hold
shares
in
Buffalo
Wild
Wings,
Inc.
(the
“Company”).
This
Presentation
is
for
informational
purposes
only,
and
it
does
not
have
regard
to
the
specific
investment
objective,
financial
situation,
suitability
or
particular
need
of
any
specific
person
who
may
receive
the
Presentation,
and
should
not
be
taken
as
advice
on
the
merits
of
any
investment
decision.
The
views
expressed
in
the
Presentation
represent
the
opinions
of
Marcato,
and
are
based
on
publicly
available
information
and
Marcato
analyses.
Certain
financial
information
and
data
used
in
the
Presentation
have
been
derived
or
obtained
from
filings
made
with
the
Securities
and
Exchange
Commission
(“SEC”)
by
the
Company
or
other
companies
that
Marcato
considers
comparable.
Marcato
has
not
sought
or
obtained
consent
from
any
third
party
to
use
any
statements
or
information
indicated
in
the
Presentation
as
having
been
obtained
or
derived
from
a
third
party.
Any
such
statements
or
information
should
not
be
viewed
as
indicating
the
support
of
such
third
party
for
the
views
expressed
in
the
Presentation.
Information
contained
in
the
Presentation
has
not
been
independently
verified
by
Marcato,
and
Marcato
disclaims
any
and
all
liability
as
to
the
completeness
or
accuracy
of
the
information
and
for
any
omissions
of
material
facts.
Marcato
disclaims
any
obligation
to
correct,
update
or
revise
the
Presentation
or
to
otherwise
provide
any
additional
materials.
Neither
Marcato
nor
any
of
its
affiliates
makes
any
representation
or
warranty,
express
or
implied,
as
to
the
accuracy,
fairness
or
completeness
of
the
information
contained
herein
and
the
recipient
agrees
and
acknowledges
that
it
will
not
rely
on
any
such
information.
Marcato
recognizes
that
the
Company
may
possess
confidential
information
that
could
lead
it
to
disagree
with
Marcato’s
views
and/or
conclusions.
Funds
managed
by
Marcato
currently
beneficially
own,
and/or
have
an
economic
interest
in,
shares
of
the
Company.
These
funds
are
in
the
business
of
trading—
buying
and
selling—securities.
Marcato
may
buy
or
sell
or
otherwise
change
the
form
or
substance
of
any
of
its
investments
in
any
manner
permitted
by
law
and
expressly
disclaims
any
obligation
to
notify
any
recipient
of
the
Presentation
of
any
such
changes.
There
may
be
developments
in
the
future
that
cause
funds
managed
by
Marcato
to
engage
in
transactions
that
change
the
beneficial
and/or
economic
interest
in
the
Company.
The
Presentation
may
contain
forward-looking
statements
which
reflect
Marcato’s
views
with
respect
to,
among
other
things,
future
events
and
financial
performance.
Forward-looking
statements
are
subject
to
various
risks
and
uncertainties
and
assumptions.
There
can
be
no
assurance
that
any
idea
or
assumption
herein
is,
or
will
be
proven,
correct.
If
one
or
more
of
the
risks
or
uncertainties
materialize,
or
if
Marcato’s
underlying
assumptions
prove
to
be
incorrect,
the
actual
results
may
vary
materially
from
outcomes
indicated
by
these
statements.
Accordingly,
forward-looking
statements
should
not
be
regarded
as
a
representation
by
Marcato
that
the
future
plans,
estimates
or
expectations
contemplated
will
ever
be
achieved.
The
securities
or
investment
ideas
listed
are
not
presented
in
order
to
suggest
or
show
profitability
of
any
or
all
transactions.
There
should
be
no
assumption
that
any
specific
portfolio
securities
identified
and
described
in
the
Presentation
were
or
will
be
profitable.
Under
no
circumstances
is
the
Presentation
to
be
used
or
considered
as
an
offer
to
sell
or
a
solicitation
of
an
offer
to
buy
any
security,
nor
does
the
Presentation
constitute
either
an
offer
to
sell
or
a
solicitation
of
an
offer
to
buy
any
interest
in
funds
managed
by
Marcato.
Any
such
offer
would
only
be
made
at
the
time
a
qualified
offeree
receives
the
Confidential
Explanatory
Memorandum
of
such
fund.
Any
investment
in
the
Marcato
Funds
is
speculative
and
involves
substantial
risk,
including
the
risk
of
losing
all
or
substantially
all
of
such
investment.


CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
2
Marcato
International
Master
Fund
Ltd.
(“Marcato
International”),
together
with
the
other
participants
in
Marcato
International’s
proxy
solicitation,
have
filed
with
the
Securities
and
Exchange
Commission
(the
“SEC”)
a
definitive
proxy
statement
and
accompanying
WHITE
proxy
card
to
be
used
to
solicit
proxies
in
connection
with
the
2017
annual
meeting
of
shareholders
(the
“Annual
Meeting”)
of
Buffalo
Wild
Wings,
Inc.
(the
“Company”).
Shareholders
are
advised
to
read
the
proxy
statement
and
any
other
documents
related
to
the
solicitation
of
shareholders
of
the
Company
in
connection
with
the
Annual
Meeting
because
they
contain
important
information,
including
information
relating
to
the
participants
in
Marcato
International’s
proxy
solicitation.
These
materials
and
other
materials
filed
by
Marcato
International
with
the
SEC
in
connection
with
the
solicitation
of
proxies
are
available
at
no
charge
on
the
SEC’s
website
at
http://www.sec.gov.
The
definitive
proxy
statement
and
other
relevant
documents
filed
by
Marcato
International
with
the
SEC
are
also
available,
without
charge,
by
directing
a
request
to
Marcato
International’s
proxy
solicitor,
Innisfree
M&A
Incorporated,
toll-free
at
(888)
750-5834
(banks
and
brokers
may
call
collect
at
(212)
750-5833).
The
participants
in
the
proxy
solicitation
are
Marcato
International,
Marcato
Capital
Management
LP,
Marcato
Special
Opportunities
Master
Fund
LP
(“Marcato
Special
Opportunities
Fund”),
Emil
Lee
Sanders,
Richard
T.
McGuire
III,
Sam
Rovit
and
Scott
O.
Bergren
(collectively,
the
“Participants”).
As
of
the
date
hereof,
Marcato
International
directly
owns
950,000
shares
of
common
stock,
no
par
value,
of
the
Company
(the
“Common
Stock”),
representing
approximately
5.9%
of
the
outstanding
shares
of
Common
Stock
and
Marcato
Special
Opportunities
Fund
directly
owns
32,600
shares
of
Common
Stock,
representing
approximately
0.2%
of
the
outstanding
shares
of
Common
Stock.
In
addition,
Marcato
Capital
Management
LP,
as
the
investment
manager
of
Marcato
International
and
Marcato
Special
Opportunities
Fund,
may
be
deemed
to
have
the
shared
power
to
vote
or
direct
the
vote
of
(and
the
shared
power
to
dispose
or
direct
the
disposition
of)
the
shares
of
Common
Stock
held
by
Marcato
and
Marcato
Special
Opportunities
Fund,
therefore,
may
be
deemed
to
be
the
beneficial
owner
of
such
shares.
By
virtue
of
Mr.
McGuire’s
position
as
the
managing
partner
of
Marcato
Capital
Management
LP,
Mr.
McGuire
may
be
deemed
to
have
the
shared
power
to
vote
or
direct
the
vote
of
(and
the
shared
power
to
dispose
or
direct
the
disposition
of)
the
shares
of
Common
Stock
held
by
Marcato
International
and
Marcato
Special
Opportunities
Fund
and,
therefore,
Mr.
McGuire
may
be
deemed
to
be
the
beneficial
owner
of
such
shares.


3
BUFFALO WILD WINGS HAS PLAYED GAMES WITH ITS PEER GROUP
I.
Constant changes to peer group are suspicious
I.
Constant changes to peer group are suspicious
II.
“Casual Dining” distinction is a red herring
II.
“Casual Dining” distinction is a red herring
III.
New “casual” peers include inappropriate comparisons
III.
New “casual” peers include inappropriate comparisons
IV.
Use of broader restaurant peer set is appropriate methodology
IV.
Use of broader restaurant peer set is appropriate methodology
We believe that BWLD’s focus on shareholder returns relative to “Casual Dining” peers alone is
inappropriate, and that a broader, more accurate peer group shows that BWLD has underperformed
Note:
Throughout this presentation, market data has been derived as of 4/19/17, unless otherwise noted.  Unless otherwise noted, TSR is not
calculated for any company that was not public for the entire duration of any 1-year, 3-year, or 5-year trailing period from the corresponding
date.  We believe this methodology is more appropriate than that used by Buffalo Wild Wings in recent shareholder communications.


BUFFALO WILD WINGS CONSTANTLY CHANGES WHO THEY DEFINE AS “PEERS”
4
BWLD USES ONE PEER GROUP FOR PAYING EXECUTIVES…
Source:
Company filings (clockwise from top-left: BWLD’s Definitive Proxy filed 4/21/17, August 2016 Analyst Day presentation, Press Release filed 5/4/17,
Definitive Proxy filed 4/21/17.
…ANOTHER FOR BUSINESS PLANNING…
…A THIRD FOR TOTAL RETURN COMPARISONS…
…AND A FOURTH TO CLAIM TO HAVE OUTPERFORMED
The Board selectively re-
designed BWLD’s peer group,
which makes past performance
look better than it is


PEER GROUP COMPOSITION HAS CHANGED SEVERAL TIMES IN LAST NINE MONTHS
5
Source:
Company filings, CapitalIQ, Marcato press release filed 5/4/17.  Market data as of 4/19/17.
Note:
Median calculations reflect only those peers whose shares were publicly traded for the entire duration of the 5-year period ended 4/19/17.
Reference in other filings to BWLD’s underperformance relative to the S&P 600 Restaurants refers to the index itself, not just current members.
These peers are closer to the
“right” comps for BWLD, and
reveal BWLD’s
underperformance…
…While subsequent iterations
obscure relative underperformance
BWLD has used different
peers for executive
compensation and
operating benchmarking
from those used in recent
proxy-related shareholder
communications
We believe the recent
changes exclude numerous
relevant peer businesses,
particularly those with high
franchise mixes
The peer group that BWLD
selected before the proxy
contest began was more
logical & showed BWLD’s
underperformance, while
subsequent changes create
the illusion of industry
outperformance


DON’T JUST TAKE OUR WORD FOR IT: MANAGEMENT ALSO BELIEVES THAT THE BWW BRAND
COMPETES WITH FAST CASUAL AND QUICK-SERVICE, NOT JUST CASUAL DINING
6
Source:
Company filings.
“I’d say that we were really fast casual long before
there was even the term ‘fast casual ’”
–Sally Smith, President & CEO, 3/6/17
“I’d say that we were really fast casual long before
there was even the term ‘fast casual ’”
–Sally Smith, President & CEO, 3/6/17
“You can get in and out of a Buffalo Wild Wings just
about as fast as you can for fast casual.  And so, if you
want an alternative to the sandwich or something like
that, wings are a great alternative
–Sally Smith, President & CEO, 4/26/16
“You can get in and out of a Buffalo Wild Wings just
about as fast as you can for fast casual.  And so, if you
want an alternative to the sandwich or something like
that, wings are a great alternative
–Sally Smith, President & CEO, 4/26/16
[W]e’re not too focused on a comparison to casual
dining
–James Schmidt, COO, 7/26/16
[W]e’re not too focused on a comparison to casual
dining
–James Schmidt, COO, 7/26/16


BWLD HAS SELECTIVELY REMOVED PROXY PEERS THAT HAVE OUTPERFORMED
7
Source:
Company filings, CapitalIQ.  Market data as of 4/19/17. Companies listed from left to right in descending order of enterprise value.
(1)
Based on disclosures in most recently-filed definitive proxies.
Indicates outperformance relative to BWLD for the corresponding time period.
2012
+37%
+218%
+196%
2008
+5%
(8%)
+11%
2014
+29%
+145%
+434%
2008
+45%
+87%
+108%
2012
+17%
+22%
+98%
2016
+56%
2016
+21%
2012
+42%
+66%
+108%
Despite their use by the Compensation Committee for years, these companies have been suddenly
excluded
from
share
performance
comparisons:
suspiciously,
nearly
all
have
outperformed
BWLD
+10%
+10%
+84%
+14%


INCLUDES IRRELEVANT PEERS TO IMPROVE RELATIVE PERFORMANCE
8
Source:
Company filings, CapitalIQ, Bloomberg.  Market data as of 4/19/17.
(1)
Based on disclosures in most recently-filed definitive proxies.  CHUY and BBRG based on competitor disclosures in most recent 10-Ks, as no peer group is
listed in their definitive proxies.  IRGT lists BWLD as a competitor for its Brick House brand (which comprises 25 of its 140 total units ) in its 10-K only, and
does not list BWLD among its proxy peers.
Indicates outperformance relative to BWLD for the corresponding time period.
Names BWLD
as a Peer?
(1)
# of
Stores
140
118
83
1,731
645
Total Shareholder Return
(through 4/19/17)
1-year
(98%)
(40%)
(4%)
+20%
+11%
3-year
(100%)
(69%)
(27%)
+93%
5-year
(77%)
+219%
+244%
Both DENN & CBRL
have outperformed
BWLD…
..So BWLD appears to
have selected three
small & irrelevant
underperformers to
offset the positive
contribution to the
peer median from
including DENN and
CBRL
In order to construct a list of peers in casual dining, BWLD logically included DENN and CBRL
“Casual”
Peers
+87%


ADDITION OF BBRG AND IRGT IS INAPPROPRIATE
& SKEWS THE ANALYSIS TO HIDE BWLD’S UNDERPERFORMANCE
9
Source:
Company filings, CapitalIQ, Bloomberg.  Market data as of 4/19/17.
Note:
TSR rankings shown in relation to current members of the Russell 3000 Restaurants index, per Bloomberg.  Index used as an indicative set
inclusive
of
a
broad
base
of
potentially
usable
restaurant
company
peers.
IRGT
and
BBRG
are
not
members
of
the
index.
Rankings
exclude
companies that were not public for the full duration of the applicable time period.  Franchise mix includes one managed restaurant for BBRG.
140 Stores
~2% Franchised
$1.8 million
$120.4 million
1-yr.:
3-yr.:
5-yr.:
(98%)
(100%)
NA a
TSR
118 Stores
~2% Franchised
$70.4 million
$110.7 million
1-yr.:
3-yr.:
5-yr.:
(40%)
(69%)
(77%)
49
out of 49
41
out of 41
NA
TSR
Rank (Russell 3000 Rest.)
44
out of 49
38
out of 41
31
out of 31
Rank (Russell 3000 Rest.)
~10% the size of BWLD’s
system unit count
~10% the size of BWLD’s
system unit count
Virtually no franchising
vs. ~50% for BWLD
Virtually no franchising
vs. ~50% for BWLD
Micro-cap businesses
& potentially in distress
Micro-cap businesses
& potentially in distress
Highly levered: Debt
equals ~35-100% of TEV
Highly levered: Debt
equals ~35-100% of TEV
These are clearly
inappropriate peers for BWLD
These are clearly
inappropriate peers for BWLD
th
th
th
st
st


Total Shareholder Return
1- Year
3- Year
5- Year
14%
94%
235%
27%
103%
208%
16%
107%
201%
39%
112%
128%
27%
52%
116%
1%
(22%)
98%
17%
6%
80%
(8%)
(10%)
68%
(1%)
(2%)
57%
(32%)
(15%)
39%
2%
57%
0%
(42%)
(67%)
(63%)
"Casual Dining" Peer Median
8%
29%
89%
Buffalo Wild Wings
20%
18%
85%
Total Shareholder Return
1- Year
3- Year
5- Year
14%
94%
235%
27%
103%
208%
16%
107%
201%
39%
112%
128%
27%
52%
116%
1%
(22%)
98%
17%
6%
80%
(8%)
(10%)
68%
(1%)
(2%)
57%
(32%)
(15%)
39%
2%
57%
0%
(42%)
(67%)
(63%)
(35%)
(68%)
(76%)
(98%)
(100%)
(100%)
"Casual Dining" Peer Median
2%
2%
74%
Buffalo Wild Wings
20%
18%
85%
DID BWLD INCLUDE TWO OBVIOUS UNDERPERFORMERS IN ORDER
TO SKEW THE ANALYSIS IN THEIR FAVOR?
10
Source:
Company filings, CapitalIQ.  Market data as of 4/28/17.
Note:
The above tables intend to replicate BWLD’s analysis published on 5/4/17 by including CHUY, BLMN, and IRGT in the 5-year TSR median using the
closing share price on date of their respective IPOs.  Marcato disputes the validity of this methodology, as well as the use of 4/28/17 as the
appropriate period-end date; thus, this methodology differs from that used in other calculations in this presentation.
Removing these
irrelevant peers
changes the
analysis
dramatically:
BWLD in fact
underperformed
its “Casual
Dining Peers”
over the past 3
and 5 years
Including irrelevant peers gives BWLD the
appearance
of outperformance…
…Stripping
out
the
irrelevant
peers,
BWLD
has
actually underperformed its cherry-picked “comps”!


OUR ORIGINAL PRESENTATION TO MANAGEMENT INCLUDED RESTAURANT COMPANIES
THAT WE BELIEVE ARE REPRESENTATIVE PEERS FOR BWLD BENCHMARKING
11
Given BWLD’s ~50%
franchise mix, we
believe it is
appropriate to
balance the different
economic
characteristics that
comprise BWLD’s
earnings, rather than
differentiate between
service styles within a
restaurant
Note that the
substantial majority of
these peers themselves
list BWLD as a
comparable business
in their filings
These peers have
materially
outperformed BWLD
Source:
Company filings, CapitalIQ.  Market data as of 4/19/17.
Note:
PLKI
had
been
included
in
Marcato’s
June
2016
presentation
to
management
but
was
subsequently
purchased
by
QSR
and
is
thus
excluded
above.
Indicates outperformance relative to BWLD for the corresponding time period.


RESEARCH ANALYST SUPPORT FOR
STRATEGIC & LEADERSHIP CHANGE
MAY 2017
Exhibit 3


DISCLAIMER
1
The
views
expressed
in
this
presentation
(the
“Presentation”)
represent
the
opinions
of
Marcato
Capital
Management
LP
and/or
certain
affiliates
(“Marcato”)
and
the
investment
funds
it
manages
that
hold
shares
in
Buffalo
Wild
Wings,
Inc.
(the
“Company”).
This
Presentation
is
for
informational
purposes
only,
and
it
does
not
have
regard
to
the
specific
investment
objective,
financial
situation,
suitability
or
particular
need
of
any
specific
person
who
may
receive
the
Presentation,
and
should
not
be
taken
as
advice
on
the
merits
of
any
investment
decision.
The
views
expressed
in
the
Presentation
represent
the
opinions
of
Marcato,
and
are
based
on
publicly
available
information
and
Marcato
analyses.
Certain
financial
information
and
data
used
in
the
Presentation
have
been
derived
or
obtained
from
filings
made
with
the
Securities
and
Exchange
Commission
(“SEC”)
by
the
Company
or
other
companies
that
Marcato
considers
comparable.
Marcato
has
not
sought
or
obtained
consent
from
any
third
party
to
use
any
statements
or
information
indicated
in
the
Presentation
as
having
been
obtained
or
derived
from
a
third
party.
Any
such
statements
or
information
should
not
be
viewed
as
indicating
the
support
of
such
third
party
for
the
views
expressed
in
the
Presentation.
Information
contained
in
the
Presentation
has
not
been
independently
verified
by
Marcato,
and
Marcato
disclaims
any
and
all
liability
as
to
the
completeness
or
accuracy
of
the
information
and
for
any
omissions
of
material
facts.
Marcato
disclaims
any
obligation
to
correct,
update
or
revise
the
Presentation
or
to
otherwise
provide
any
additional
materials.
Neither
Marcato
nor
any
of
its
affiliates
makes
any
representation
or
warranty,
express
or
implied,
as
to
the
accuracy,
fairness
or
completeness
of
the
information
contained
herein
and
the
recipient
agrees
and
acknowledges
that
it
will
not
rely
on
any
such
information.
Marcato
recognizes
that
the
Company
may
possess
confidential
information
that
could
lead
it
to
disagree
with
Marcato’s
views
and/or
conclusions.
Funds
managed
by
Marcato
currently
beneficially
own,
and/or
have
an
economic
interest
in,
shares
of
the
Company.
These
funds
are
in
the
business
of
trading—
buying
and
selling—securities.
Marcato
may
buy
or
sell
or
otherwise
change
the
form
or
substance
of
any
of
its
investments
in
any
manner
permitted
by
law
and
expressly
disclaims
any
obligation
to
notify
any
recipient
of
the
Presentation
of
any
such
changes.
There
may
be
developments
in
the
future
that
cause
funds
managed
by
Marcato
to
engage
in
transactions
that
change
the
beneficial
and/or
economic
interest
in
the
Company.
The
Presentation
may
contain
forward-looking
statements
which
reflect
Marcato’s
views
with
respect
to,
among
other
things,
future
events
and
financial
performance.
Forward-looking
statements
are
subject
to
various
risks
and
uncertainties
and
assumptions.
There
can
be
no
assurance
that
any
idea
or
assumption
herein
is,
or
will
be
proven,
correct.
If
one
or
more
of
the
risks
or
uncertainties
materialize,
or
if
Marcato’s
underlying
assumptions
prove
to
be
incorrect,
the
actual
results
may
vary
materially
from
outcomes
indicated
by
these
statements.
Accordingly,
forward-looking
statements
should
not
be
regarded
as
a
representation
by
Marcato
that
the
future
plans,
estimates
or
expectations
contemplated
will
ever
be
achieved.
The
securities
or
investment
ideas
listed
are
not
presented
in
order
to
suggest
or
show
profitability
of
any
or
all
transactions.
There
should
be
no
assumption
that
any
specific
portfolio
securities
identified
and
described
in
the
Presentation
were
or
will
be
profitable.
Under
no
circumstances
is
the
Presentation
to
be
used
or
considered
as
an
offer
to
sell
or
a
solicitation
of
an
offer
to
buy
any
security,
nor
does
the
Presentation
constitute
either
an
offer
to
sell
or
a
solicitation
of
an
offer
to
buy
any
interest
in
funds
managed
by
Marcato.
Any
such
offer
would
only
be
made
at
the
time
a
qualified
offeree
receives
the
Confidential
Explanatory
Memorandum
of
such
fund.
Any
investment
in
the
Marcato
Funds
is
speculative
and
involves
substantial
risk,
including
the
risk
of
losing
all
or
substantially
all
of
such
investment.


CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
2
Marcato
International
Master
Fund
Ltd.
(“Marcato
International”),
together
with
the
other
participants
in
Marcato
International’s
proxy
solicitation,
have
filed
with
the
Securities
and
Exchange
Commission
(the
“SEC”)
a
definitive
proxy
statement
and
accompanying
WHITE
proxy
card
to
be
used
to
solicit
proxies
in
connection
with
the
2017
annual
meeting
of
shareholders
(the
“Annual
Meeting”)
of
Buffalo
Wild
Wings,
Inc.
(the
“Company”).
Shareholders
are
advised
to
read
the
proxy
statement
and
any
other
documents
related
to
the
solicitation
of
shareholders
of
the
Company
in
connection
with
the
Annual
Meeting
because
they
contain
important
information,
including
information
relating
to
the
participants
in
Marcato
International’s
proxy
solicitation.
These
materials
and
other
materials
filed
by
Marcato
International
with
the
SEC
in
connection
with
the
solicitation
of
proxies
are
available
at
no
charge
on
the
SEC’s
website
at
http://www.sec.gov.
The
definitive
proxy
statement
and
other
relevant
documents
filed
by
Marcato
International
with
the
SEC
are
also
available,
without
charge,
by
directing
a
request
to
Marcato
International’s
proxy
solicitor,
Innisfree
M&A
Incorporated,
toll-free
at
(888)
750-5834
(banks
and
brokers
may
call
collect
at
(212)
750-5833).
The
participants
in
the
proxy
solicitation
are
Marcato
International,
Marcato
Capital
Management
LP,
Marcato
Special
Opportunities
Master
Fund
LP
(“Marcato
Special
Opportunities
Fund”),
Emil
Lee
Sanders,
Richard
T.
McGuire
III,
Sam
Rovit
and
Scott
O.
Bergren
(collectively,
the
“Participants”).
As
of
the
date
hereof,
Marcato
International
directly
owns
950,000
shares
of
common
stock,
no
par
value,
of
the
Company
(the
“Common
Stock”),
representing
approximately
5.9%
of
the
outstanding
shares
of
Common
Stock
and
Marcato
Special
Opportunities
Fund
directly
owns
32,600
shares
of
Common
Stock,
representing
approximately
0.2%
of
the
outstanding
shares
of
Common
Stock.
In
addition,
Marcato
Capital
Management
LP,
as
the
investment
manager
of
Marcato
International
and
Marcato
Special
Opportunities
Fund,
may
be
deemed
to
have
the
shared
power
to
vote
or
direct
the
vote
of
(and
the
shared
power
to
dispose
or
direct
the
disposition
of)
the
shares
of
Common
Stock
held
by
Marcato
and
Marcato
Special
Opportunities
Fund,
therefore,
may
be
deemed
to
be
the
beneficial
owner
of
such
shares.
By
virtue
of
Mr.
McGuire’s
position
as
the
managing
partner
of
Marcato
Capital
Management
LP,
Mr.
McGuire
may
be
deemed
to
have
the
shared
power
to
vote
or
direct
the
vote
of
(and
the
shared
power
to
dispose
or
direct
the
disposition
of)
the
shares
of
Common
Stock
held
by
Marcato
International
and
Marcato
Special
Opportunities
Fund
and,
therefore,
Mr.
McGuire
may
be
deemed
to
be
the
beneficial
owner
of
such
shares.


ANALYSTS
LACK
CONFIDENCE
IN
BWLD
LEADERSHIP
FOLLOWING
WEAK
Q1’17
EARNINGS
3
“While BWLD’s strategy appears compelling on paper, operational missteps
continue to drive a lack of confidence in BWLD’s outlook …issues seem to
consistently crop up that make it difficult to have confidence in the
strategy laid out by management . We were surprised by the guidance
reduction, particularly the magnitude, but find it challenging to have
confidence in the revised outlook or 20% restaurant margin target given
uncertainty across comps, margins, and execution …Although same store
sales outpaced expectations in the quarter, BWLD effectively ‘bought the
comp’ through heavy promotions at the expense of profitability
–Andrew Strelzik, BMO Capital Markets, 4/26/17
“’Poor execution blocks last-second buzzer beater as shareholder meeting
looms’… We continue to be frustrated by poor execution of sales - building
and cost-savings initiatives
–Chris O’Cull, KeyBanc, 4/27/17
We worry that the current mgmt. team will struggle to navigate the
challenging external backdrop , while also repositioning the company to
focus on leaner operations over store growth…Some might argue that
there’s a silver lining to BWLD’s weakening trends, in that this increases the
likelihood of activist influence and mgmt. change We agree that recent
trends increase the likelihood of leadership change, and getting new
energy and fresh eyes/ideas on the biz are probably a net positive
–Jason West, Credit Suisse, 4/27/17
[R]ecently BWLD has been plagued by complacency and a continued
lack of adequate leadership The lack of managerial direction and vision
can be seen in the Company’s most recent fiscal year projections , which
have been significantly altered since BWLD’s 4Q16 presentation…This is
unsettling, to say the least, and shows management’s lack of adequate
foresight.  It is hard to trust a management team that will drastically
change the outlook and shows a lack of understanding of its business …At
a time when the leaders in the restaurant industry refuse to participate in
the race to the bottom, BWLD continues to offer aggressive promotions as
a way to draw patrons
–Howard Penney, Hedgeye, 4/27/17
Source:
Wall Street research.
We are concerned by the lack of accountability by management for SSS
struggles
as softness is attributed to industry pressures. March Madness
experienced sales declines despite higher TV ratings, which in our view
suggests their marketing message is missing the mark. We view the June 2,
2017 annual shareholder meeting as a potential catalyst for change
as the
activist has nominated 4 new board members along with its slate to
increase the company's franchise skew along with management
changes”
–Matt DiFrisco, Guggenheim, 4/27/17
The Q1 report marked the tenth consecutive quarter of disappointing
revenue/EPS performance for BWLD we are concerned about the
profitability of the top-line performance amid heightened promotional
activity
–David Tarantino, Baird, 4/27/17
It would seem that this quarter will be a test of investor patience as
operating profit will be flat for the third year in a row industry dynamics
and persistent cost pressures don't paint a very attractive picture, at least
right now, for long term company ownership
unless the sales and margin
enhancements prove effective and longer term costs begin to normalize”
–John Glass, Morgan Stanley, 4/27/17


ANALYSTS HAVE CONSISTENTLY QUESTIONED MANAGEMENT’S ABILITIES & STRATEGY
4
We are surprised the Company’s investor presentations continue to center
on tactical efforts , like FastBreak Lunch and Wing Tuesday, and secondary
strategic priorities , like international development and new concepts,
rather than full explanations for why traffic is declining, how costs will be
reduced or why the business model is appropriate It is not clear to us the
issues and alternatives are fully understood
–Chris O’Cull, KeyBanc, 2/7/17
“[T]here remains a sense that the company retains a “small - company”
mentality that is lacking the structured corporate processes often found in
larger companies Frustration regarding the lack of communication
and
strategic direction could be a reason for a high level of turnover in
corporate staff .  While improvements have been made in recent years,
better tools and formalized structure more akin to a ~$3B market cap
company could help
–Nick Setyan, Wedbush, 2/7/17
“We believe a deep dive into the right asset design makes strategic sense
on the back of meaningful build cost inflation; however, we question if a
focus on more urban areas is the right approach
–Karen Holthouse, Goldman Sachs, 2/13/17
“We believe the appointment of a CFO…enables BWLD to further evaluate
its long-term strategic direction and engage with outside investors. 
However, we also imagine that a CFO with deeper experience in
restaurants and franchising in particular would have indicated a level of
preparation and willingness to change the current course of action
–John Zolidis, Buckingham, 10/25/16
[Investors canvassed agree] that there are numerous things [that] can be
done including management changes , operational fixes (cost cutting,
labor) or on the financial side (including, but not limited to
refranchising)… Many believed some level of managerial changes is
likely/needed
–Brett Levy, Deutsche Bank, 10/11/16
“We believe BWLD’s sales issues are fixable… but the turnaround could take
time as current initiatives highlighted do not go far enough …[V]alue
enhancements to Wing Tuesday leave much to be desired
for the
remaining six days of the week.  We note Fast Break lunch features value
but we do not view this as a durable sales driver
–Andrew Charles, Cowen, 8/12/16
We believe mgmt. will be slow to implement meaningful change
–Jason West, Credit Suisse, 8/9/16
“We look forward to hearing from new CFO Alex Ware on the topics of cost
mgmt.
and optimizing the business and financial structure .  However, our
concern is that BWLD needs a deeper reset in the areas of value, food
quality and service to truly turn around the business
–Jason West, Credit Suisse, 1/25/17
“ [T]he investor day came and went and…it was clear that there was
minimal preparation for the meeting.  Overall, your management team
came across as nervous, clueless and weak Lastly, did I see that you
actually sold stock the day before the analyst meeting?
–Howard Penney, Hedgeye, 10/17/16
Source:
Wall Street research.


RESEARCH ANALYSTS RECOGNIZE MARGIN DEFICIENCIES
5
[ W]e
believe
BWLD
company-owned
stores
could
improve
margins
substantially , by up to 500
[basis points] based on our analysis, by
adopting
labor
practices
currently
deployed
by
[franchisees]
–Jim Sanderson, Arthur Wood, 3/28/17
Source:
Wall Street research.
“Our advisor believes there is an opportunity
to bring lower performers more in line with
the rest of the system, with store - level labor
perhaps the largest opportunity The
example of Guest Experience Captains was
cited …In his experience, BWLD
franchisees
are as or more qualified to run a large
number of restaurants than corporate
personnel
–Nick Setyan, Wedbush, 2/7/17
[Margin opportunities] exist across labor,
operating expenses, and COGS …Diversified
Restaurant Holdings, Buffalo Wild Wing’s
largest franchisee, highlights opportunity for
greater margin efficiency.  While there are
notable differences, including geographic
and overall exposure, SAUC has exhibited
favorable food & labor margins relative to
BWLD
–Dennis Geiger, UBS, 1/5/17


THE
STREET
RECOGNIZES
THAT
FRANCHISEE
ACQUISITIONS
WERE
POOR
USE
OF
CAPITAL
6
“[T]he last minute exercise of the first right of
refusal to buy a big block of franchise stores in
2015 …is a perfect example of how misguided
your
incentive
compensation
structure
is
and
how poor strategic planning can lead to poor
capital allocation decisions
–Howard Penney, Hedgeye, 10/17/16
“[T]he most recent acquisition (38 units in the
3Q15) has
weighed
on
earnings
and
came
with
a rich multiple, adjusting for the foregone
royalties
–John Glass, Morgan Stanley, 7/25/16
[R]eturn metrics suffered from the company’s
FY15 decision to acquire a large number of
franchisees …[which] resulted in lower
operating margins and financial returns as
incremental capital was deployed to eliminate
a high margin royalty revenue stream
–John Zolidis, Buckingham, 7/26/16
Acquiring franchise stores increases business
risk …Why in a slowing sales[,] lower return
environment would the parent company want
even greater exposure to the volatility in the
business?
–Howard Penney, Hedgeye, 6/13/16
Source:
Wall Street research.
Indicates a quote taken from a report published before Marcato publicly disclosed its suggestions to management, indicating an “unaided”
observation.
Observers agree: the large franchisee acquisitions of 2015 destroyed value by diluting ROIC and
eliminating a highly valuable, high-margin royalty stream


ANALYSTS AGREE WITH MARCATO’S RECOMMENDATIONS
7
Our patience on BWLD is running thin after another disappointing
report …that said, with comps showing signs of stabilization in Q1 and with
management focused on financial strategies that could enhance
shareholder value amid the presence of an activist investor, we are
cautiously optimistic
–David Tarantino, Baird, 2/7/17
“Our advisor stood by his opinion that Marcato’s initial board letter , while
perhaps not being 100% correct in its assessment, may not have been off
the mark on many points A refocus on operations in particular, especially
when done by or in conjunction with franchisees, was something that rang
true
with
most
employees
internally , our advisor believes.  Increased
franchisee ownership could also allow management to focus more closely
on
strategy,
initiative
implementation,
and
operational
improvement
–Nick Setyan, Wedbush, 2/7/17
BWLD’s
recent
upward
re-rating
(against
weak
sales
results)
partly
anticipates
potential
restructuring
and
activist
pressure …We see a
bull/bear case on the stock… with the bear case assuming no major
restructuring and continued deterioration in SSS and unit growth, and the
bull case assuming improvement in SSS and material financial engineering
moves
–Jason West, Credit Suisse, 8/9/16
“4Q suggests BWLD still has a long ways to go to regain stability and visibility
in the business… [T]he very weak 4Q result may bolster the case for activist
involvement .  However, with the Board vote still ~3 mos. away, it will be a
while before this potential change will begin to impact strategy and
results
–Jason West, Credit Suisse, 2/8/17
“[Q4’16 earnings were] so Bad it could be Good …While the reliability in
guidance is highly questionable, we are encouraged that management is
now giving consideration to some of the activist’s requests”
–Matt DiFrisco, Guggenheim, 2/8/17
“Looking out to 2018-19, we agree with the vast majority of activist
Marcato’s restructuring recommendations …We are also uncomfortable
with BWLD’s announced (1/24/17) year-end 2017 target leverage ratio of
1.5x EBITDA”
–Paul Westra, Stifel, 1/31/17
“We recognize that the activist presence at BWLD provides a sense of
urgency for mgmt. to address recent market share loss and margin
erosion
–Jason West, Credit Suisse, 1/25/17
Source:
Wall Street research.
“Given the recent events, the biggest mistake you [CEO Sally Smith] are
currently making is not taking Marcato
(or your investor day)
seriously ... Marcato has put forth compelling arguments and substantial
evidence
that you have ignored the basic principles of corporate finance
–Howard Penney, Hedgeye, 10/17/16


SEVERAL
ANALYSTS
AGREE
THAT
MARCATO’S
INVOLVEMENT
HAS
HELPED
THE
STOCK
8
We
think
that
the
substance
of
Marcato’s
investment
thesis
goes
much
deeper
than
a
simple
‘lever
up
and
buyback
stock’
and
will
require
a
material
change
in
business
strategy,
something
best
done
with
influence
in
the
boardroom
–UBS US Special Situations, 8/18/16
The
emergence
of
an
activist
shareholder
could
provide
a
“floor”
for
the
stock
and
a
potential
win-win
for
shareholders , i.e.,
either fundamentals improve and/or restructuring comes into play… O ur
analysis
of
potential
strategies,
such
as
leveraged-
buybacks,
cost-cutting
and
refranchising
points
to
significant
EPS
accretion,
should
mgmt.
pursue
these
measures [We
see]
significant
upside
from
the
activist
case
[and] we also believe a change to mgmt.’s incentive compensation structure (heavily
weighted to growth over returns) would be well received by investors”
–Jason West, Credit Suisse, 8/9/16
Recent
news
of
an
activist
investor
is
a
positive
for
BWLD,
in
our
view , as the brand is strong and uniquely positioned in casual
dining, but likely needs strategy tweaks as it enters its ‘maturing’ phase… B WLD
does
have
untapped
levers
to
create
shareholder value.  Among them: Refranchising
–John Glass, Morgan Stanley, 7/25/16
We
agree
with
the
spirit
of
[Marcato’s]
filing
as
we
cite
recent
company
actions
which
lowered
ROIC
among
the
rationale
for
our NEUTRAL rating
–John Zolidis, Buckingham, 7/26/16
Source:
Wall Street research.
[W]e
believe
the
presence
of
an
activist
investor
(Marcato
Capital) ,
who
might
push
BWLD
to
pursue
value-enhancing
financial
strategies , can help to support
investor
sentiment
while
we
await
signs
of
better
top-line
momentum
–David Tarantino, Baird, 10/24/16


“‘LOGIC’
SUPPORTS
THE
PREMISE”
THAT
FRANCHISE
BUSINESSES
DESERVE
HIGHER
MULTIPLES
9
Source:
Wall Street research.