CASE STUDY 2: COMPARING COMPANIES- MCDONALD’S V. BUFFALO WILD WINGS
CASE STUDY 2: COMPARING COMPANIES- MCDONALD’S V. BUFFALO WILD WINGS
Lisa Borgese
School of Business, Liberty University
BUSI 532: Advance Financial Statement Analysis
Dr. Debra Touhey
July 9, 2023
CASE STUDY 2: COMPARING COMPANIES- MCDONALD’S V. BUFFALO WILD WINGS
Introduction
It is believed that new franchisees typically benefit from a well-knows brand, parent
company marketing, recognized supply chains, a demonstrated business model, and a
franchisor education courses that improve the franchisees’ social and administrative capital
(Legendre et al., 2021) These benefits have given rise to a believe that new franchisee
businesses are less risky than an unfranchised new business.
The table provided in Case 6.1, McDonald’s, and Buffalo Wild Wings, consists of data
showing the number of stores that are company-owned and franchised at the end of each year
and the respective revenues generated by each company, each year. (Revsine, 2021)
Findings
Buffalo Wild Wing average # of
stores
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Company Owned 179 214.5 245.5 289 350 407.5 462.5 543.5 613.5
Franchise 347.5 391.5 446.5 485.5 504 534.5 575 585 594
McDonald's average # of stores
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Company Owned
6,704
6,382
6,331
6,417
6,517
6,668
6,726
6,579
6,057
Franchise
24,968
25,841
26,277
26,707
27,479
28,287
29,118
29,813
30,656
In the table above, one can see that there is a steady increase in the average number of
Buffalo Wild Wing company-owned and franchise stores, yearly. This is in comparison to
McDonald’s average number of company-owned stores that had a steady decline while the
franchise stores increased yearly.
Buffalo Wild Wings
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Sales Revenue for each
Company
2.12 2.28 2.26 2.48 2.75 2.91 3.08 3.16 3.08
CASE STUDY 2: COMPARING COMPANIES- MCDONALD’S V. BUFFALO WILD WINGS
Owned store ($ millions)
Franchise fee for each
Franchised store ($ millions) 0.12 0.13 0.13 0.14 0.15 0.15 0.16 0.17 0.16
McDonald's
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Sales Revenue for each
Company
Owned store ($ millions)
2.47
2.42
2.56
2.85
2.85
2.83
2.70
2.51
2.53
Franchise fee for each
Franchised store ($ millions)
0.28
0.28
0.30
0.33
0.33
0.33
0.32
0.30
0.30
The table above depicts the sales revenue and the franchise fees for both companies. As
one can see, the sales revenue for each company-owned Buffalo Wild Wings store is showing a
consistent increase in growth, except for 2010 and 2016 where there was a slight decrease.
When calculated the franchise fees per franchise store, one can notice that there were constant
and slow increases from year to year, and then a slight decrease in 2016.
The sales revenue for each company-owned McDonald’s store fluctuated throughout the
years, where the sales revenue highs were in 2011 and 2012 and the lowest revenue was in
2009. McDonald’s franchise fee per franchise store depicts an increase from 2008-2011, then
plateaued from 2011-2012, then consistently decreased 2014-2016.
Buffalo Wild Wings
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Franchise Fee Rate (%) 5.8% 5.6% 5.8% 5.6% 5.5% 5.2% 5.3% 5.3% 5.2%
McDonald's
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Franchise Fee Rate (%) 11.29% 11.64% 11.64% 11.44% 11.43% 11.53% 11.79% 11.95% 12.05%
According to Kasim & Naiimi, “franchisees pay franchise fees and are granted the
authority to use the franchisor’s trademark, type, and business system.” (Kasim & Naiimi, 2020)
To calculate the franchise fee rates for both companies, one must divide the franchise fee for
CASE STUDY 2: COMPARING COMPANIES- MCDONALD’S V. BUFFALO WILD WINGS
each franchise store ($ millions) by the sales revenue for each company owned store ($
millions), assuming that the company sales at the company-owned stores are the same as the
sales for franchised stores). As one can notice, the franchise fee rate for Buffalo Wild Wings
continued to decrease over the years, where in contrast, the franchise fee rate for McDonald’s
increased over the years. This would mean that McDonald’s would be able to acquire more
revenue by opening more franchise stores and charging the franchise fee.
Buffalo Wild Wings
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Growth in avg # of stores open 36 31 44 61 58 55 81 70
Growth in rev. per store ($
millions)
0.16 -0.02 0.22 0.27 0.15 0.17 0.08 -0.07
Rev. growth due to growth in avg.
# of stores open ($ millions) 76.3642 70.628 98.3756 151.424 158.371 159.993 249.217 220.883
Rev. growth due to growth in rev.
per store ($ millions) 33.6964 -4.12797 63.8244 95.1765 63.0286 77.6074 42.7827 -44.2832
Total Revenue Growth ($ millions) 110.061 66.5 162.2 246.6 221.4 237.6 292 176.6
McDonald's
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Growth in avg # of stores open -322 -52 87 100 152 58 -147 -523
Growth in rev. per store ($
millions)
-0.05 0.14 0.29 0 -0.02 -0.13 -0.2 0.02
Rev. growth due to growth in avg.
# of stores open ($ millions) -795.437 -124.743 221.812 283.642 432.484 164.173 -397.099 -1309.47
Rev. growth due to growth in rev.
per store ($ millions) -306.963 899.543 1837.69 26.0576 -160.784 -869.073 -1284.2 116.466
Total Revenue Growth ($ millions) -1102.4 774.8 2059.5 309.7 271.7 -704.9 -1681.3 -1193
Throughout the years, Buffalo Wild Wings company-owned stores have experienced
positive revenue growth, however in 2010, based on the data, the company experienced its
lowest growth of $66.5M and its highest growth of $292M, in 2015. In contrast, McDonald’s has
suffered losses in growth from its company-owned stores during 2009, 2014, 2015, and 2016.
CASE STUDY 2: COMPARING COMPANIES- MCDONALD’S V. BUFFALO WILD WINGS
McDonald’s highest loss in revenue growth was in 2015, at $ -1681.30 and the highest revenue
growth was $2059.50 in 2011.
Buffalo Wild Wings
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Growth in avg # of stores open 44 55 39 19 31 41 10 9
Growth in franchise fee per store ($
millions)
0.01 0 0.01 0.01 0 0.01 0 -0.01
Rev. growth due to growth in avg. # of
stores open ($ millions)
5.41 7.05 5.07 2.56 4.64 6.17 1.62 1.5
Rev. growth due to growth in rev.
per store ($ millions)
2.0938 0.84764 3.9252 6.94315 0.16448 5.63218 2.87913 -4.00308
Total Revenue Growth ($ millions) 7.5 7.9 9 4.8 4.8 11.8 4.5 -2.5
McDonald's
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Growth in avg # of stores open 873 437 430 772 808 831 695 843
Growth in franchise fee per store ($
millions)
0 0.02 0.03 0 0 -0.01 -0.02 0
Rev. growth due to growth in avg. # of
stores open ($ millions)
243.27 123.08 128.17 251.87 263.6 271.2 221.314 252.37
Rev. growth due to growth in rev.
per store ($ millions)
81.43 432.02 743.73 -0.57 3.4 -230.7 -568.31 149.63
Total Revenue Growth ($ millions) 324.7 555.1 871.9 251.3 267 40.5 -347 402
Even though McDonald’s suffered negative revenue growth from its company-owned
stores, they experienced more positive revenue growth from their franchise stores. In contrast,
Buffalo Wild Wings franchise stores revenue were not as high compared to their company-
owned stores, and they experienced a loss in 2016.
“A cause-of-change analysis is a useful tool because allows one to understand what
factors most influence the change in any performance metric that one wants to analyze.”
(Revsine, 2020) Through the data obtained by the cause-of-change analysis, one can see that
Buffalo Wild Wings focused more of its energy on gaining their revenues through building
stronger company-owned stores rather than their franchised stores. In contrast, McDonald’s
CASE STUDY 2: COMPARING COMPANIES- MCDONALD’S V. BUFFALO WILD WINGS
focused their energies on increasing their number of franchise stores and strategic pricing, to
increase their revenue. This was also helped through higher franchise fee rates. As we were
taught in Proverbs 23:7, “For as he thinketh in his heart, so is he. If you believe that you will
build a thriving business in your heart, you will.”
References
Legendre, N., Nitani, M., Riding, A. (2021). Are franchises really more viable? Evidence from
loan defaults. https://www.sciencedirect.com/science/article/abs/pii/S0148296321002897
Kasim, M., & Naiimi, N. (2020, September). Free Franchise Fee and Royalty Payment in Islamic
Franchise Via Ta'awun Concept. GBSE. Retrieved from
http://gbse.com.my/V6%20NO.19%20(SEPTEMBER%202020)/Paper-252-.pdf.
Revsine, L. (2020). Structure of the Balance Sheet and Statement of Cash Flows. In Financial
Reporting & Analysis. essay, McGraw-Hill Education.
