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    126 views48 pages

    Marcato Buffalo Wild Wings Presentation Jun 2016

    Uploaded by

    rwmortell3580
    BWW activist deck

    Copyright:

    © All Rights Reserved
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    BUFFALO WILD WINGS JUNE 2016 MARCATO orote Casta Nanogen! UF (Meal) an SEC agate mont aowEEr Roe n Son Flonckoo, Cana, Maar proves osmentaakeory sons _popteery prucie ema ud cclacy,#i ‘Marcon Re), he uy ered Bi pang fe “Previa repre Soe cpnor ol Matto ont {Satan flint: ena ths ream! free # manages nat hat shaman uli Wis ng, he. (he “Camo. resetoon sor ntamsbara)parnare ony ne #ceee rol nave regard ot spac be muzmon!ebactve Faria sivaon, waif peover raed fa uptic pach who may aca na Rewenlon, oe thous Pe tokens ice on the meh of ary esrnan deco The vw epee nthe Proverioen ferent cps of Mercato. ond ore baxeon pus wale inet ana wersatsenayass Caran franc nla and Goto ied Ihe Pruenicon nave bean darned blainaom ingemede wh the Secures on xchange Camis (520) by he Suet e oto’ compares al Malenle cores conarctia. Macole Nes ot ough of abiahed conser ham oy Ie bay 1 see ieernets or Homolion dead nthe Fsntoton ix hig been CD edie Hem. hed py. Ary cheers ot hlcmaion sh el Be wed Inseatng te wept ct en fr pny for ho vans nsproseg tna Htenetor.Itomeaton contanaa he Merton no no! Spon hsanen sary verte Dy Maer cng Marzo diciams ony ona a lb eri ne competenes o ozeoey a he Nemmaton ond ft any omare of maar fom. Mercato cla on sbigaten Ccoractupte srraisa he setatin art tance poass any caine matnse Nether ata nr any ct ite mast onjrepetantabon er waren ee Ics, or 19 e excuroe mes: or complsenos one Hicmaten coniohes notch erathe sep sete cna acne at wi seray on ar ase ton Fspcsmanaaody Marcato cura benoleaoMn ena have ap scone nih shtes ofthe Company. Theo fund ae he busros ot HoUhg~DUyr onsetng soos Moreta may uy a slr alarse change elm oF asance 3 ny of eases hay manne pete bylaw ond expres delons oy a gti rote eny racer of he Fesararen or fuchenangas. Thre a} BS avelgmens: no hue =} cove Nines menage By Marco Te engage oREectors ay ‘Grange te betel near economie ttt tbe Compan ‘a Peterion may cent orwrscotng #alerers chefs! Macot' vein wih pct. ameng ler ine flrs eves end Fhancts pearance, ferret Isbeng otaet ere nec! ovaren rue ana scenes ans cuumaters. The car ano sayanca hanya eemolenhafom'erilnaaoven eel ena of mete of ra i of cara males. ot acal's undone amotio: Frova oe ceed the Gola Yess may vty META HOM aula! as sea by Tei tolemarts Accor. omerdsocing sala shoud al bape cmp by GAG tel hve pl, inn ene cortempled ‘he ecules or meters tes aero roared iro swap now rood any ar Harsacion ere ould bere onumton et ony space penta secutios Wein’ ene desciba ne Presertaton were of be poflabin. Uncer no cfcurstarces + the Petarifon lobe wedir coisa! or on cher foe or 2 ‘eletasan an alert uy any acu nr does he Pesansian corte ener an ele stl are sajaven ata aa to buy any nls funes menos by Matas ‘hoy sch er woud oly be mado alte tina e quod ofeoe caves ha Conse Eparcty memarandan otzuch und. Ary veranda Macare Rand ‘pecuiotne ond invokes wentatik neuchg hes ol oing oer wbstatoly a af sven enestrent Ise documant heron eatais onamay nate pubahad atte winout ths agrarian consent Mote MARCATO |. Introduction MARCATO WHY WE INVESTED IN BUFFALO WILD WINGS 4 Buffalo Wild Wings’ core restaurant business is a proven, differentiated concept that generates strong cash flow with continued system growth potential 4 Significant share price underperformance driven by declining same-store sales and recent store repurchases that eam a retum below Buffalo Wild Wings’ cost of capital A Opportunity to create substantial shareholder value by: 1) Transitioning to 0 90% franchised model which we believe will improve retums and valuation multiple 2) Accelerating intemational franchise growth 3} Improving 4-woll mergins with increased focus on unit economics 4) Committing publicly to a disciplined capital allocation plan and optimizing BWLD's capital structure through an appropriate use of leverage 5] Aligning executive compensation with returns on invested capital and total shareholder return MARCATO Il. A Review of Buffalo Wild Wings MARCATO RECENT SHARE PRICE UNDERPERFORMANCE AR TOTAL SHAREHOLDER RETURN AST 9 MONTHS TOTAL SHAREHOLDER RETURN 9% 22% vss, 15% 28 Ker!) duwi2 avd kvl nt da MARCATO SBP 600 Restaurant Index {G31 earrings mis on 95, £5 headwinds dus fo Higher DAA & margin lution fom franchisee Scquions (labor owscles, nina} 1 Gided fo “single cgi” nal ecxnings grow in 19% FY'15 ond 20%. FYI8 Shores ei ca pss co) SepriS Ochi DeclS Janie Mort Aerié dumts S&P 400 Restourants nc GROWTH, PROFITABILITY, AND CAPITAL ALLOCATION DRIVE BWLD’S MULTIPLE Multiple compression driven by growth deceleration, margin compression, and store repurchases that earn a return below BWLD's cost of capital @ wear necent savestore sates GaownH &¥ /EBHDA |NtM) MULTIPLE eaten eee SE woe eae gen ogee gn oh stds Mes ohne— sllens Poe Acutnent @ PING 14862 4 wins Costs = = ws 2 www = sera esata. ASEM roan 20% & latin ami amie ns Domb senchistame, “Sects | Sena, eae @ sro ecee St ermotee ees hae on mera 3p%0 998 GHA ron capes me MARCATO fem Soichectststeotmacron tae _@company-owneo SAME-STORE SALES GROWTH A. Recent some-siore sales growih hos been below BWLD's I0-yecr average of 5.3% A. BYLD's Indexed menu price adjustments have Ineeased 268 over the past 19 years, implying @ 3.1% CAGR JO YEAR SAV TORES ROWTH COMPO! Menu Prices: «369% 01.02 03 O4 G1 G2 Gs a4 Gi G29 96 GI 47.29 G4 GI OP G3 a4 O1 G2.G9 G4 61 a2.02.G¢ GI G2 G2 GF OI GP as a4 ai a2 on ad*B) smtienuice Acetments eeTiotic. NaS Oter etnies Menu paces MARCATO e PRICING “WALL” + HIGHER COSTS = EXPECTED FUTURE MARGIN COMPRESSION “Our pricing in November [2015] really tried to price in some of the labor costs that we anticipate and that are happening...out if you're not going to add some price with, whether it's minimum wage, whether it's overtime...you are going to have to get it somewhere.” = Sally Smith, Buffalo Wild Wings CEO and President, Bernstein Strategic Decisions Conference June 2016 ARCATO @ QUESTIONS SURROUNDING CAPITAL ALLOCATION Purchase Pice neice || a . a zor oa 2012 AUG, Purchase ice per Correcry-Operaled Restaurant MARCATO™ o QUESTIONS SURROUNDING CAPITAL ALLOCATION (CONT'D) 1. Despite remaining relatively stable fram 2009 - 2014, BWLD's returns on average invested capital have declined significantly cover the past fen yeors 4 BWLD's ROIC in 2015 represented the most significant yearover-yeor dectine inten years, reflecting the cllutive impacts of 1) higher capital intensity of company-owned stores and 2) dlutive franchisee acquisitions TURNS ON INVESTED am a ans rs an = Be ies fata a jam Sa. J aasson} eo) _ \ S/S ee ais an01'-udna Copaticien ot Cpering ates, a ROIS -neudng Captain Opeciog Lees re mctise (cox) [umm] (om) (om) (cx) [mx] (oz) [m) (6m) (wx) MARCATO @ QUESTIONS SURROUNDING CAPITAL ALLOCATION (CONT'D) Sell side analysts are also concerned about capital allocation decisions “We'd like to see FCF funneled “[Wle are less enthusiastic about toward buybacks and not future Buffalo Wild Wings’ emerging franchisee acquisitions." brand strategy of acquiring and ~ Brian Bittner, Oppenheimer, June 2016 growing other concepts....We are concerned Buffalo Wild Wings is ind to wast th time and capital” - Andrew Charles, Cowen & Co., April 2015 MARCATO Ill. Marcato's Proposal MARCATO A MULTI-LEVEL PLAN TO CREATE VALUE FOR BWLD SHAREHOLDERS @ FRancnisins STRATEGY @ won CORE BUSINESS @ estasusH EXPLICIT CAPITAL ALLOCATION STRATEGY @ reaiicn MANAGEMENT INCENTIVES MARCATO Sell stores to new and existing franchisees to unlock capital curently eaming ‘sub-optimal retums Target 90% mix of tranchised stores by 2020 Invest in resources to accelerate intemational tranchise growth Engage operational consultants to revitalize same-store sales growth and refocus on the company's historically successful core brand and value proposition New restaurant concepts are a distraction for management and for investors: focus.on the core business Arliculate a strategy for fulure capital deployment based on retums and profitability in combination with aggregate dollar growth Considerations include curtent excess capital in the business as well as fulure free cash flow generation Target an appropriate mix of debt and eauity Management compensation should be restructured to incentivize returns on ‘capital and per-share value rather than top-line growth or profit dollars A. Franchising Strategy MARCATO A FRANCHISE MODEL PROVIDES SIGNIFICANT ECONOMIC BENEFITS BWLD's franchise operation = @ high margin royally steam that grows without capital Contrioution Margins Earnings Sensitivity to Changes in SSS Effect of Cost Inflation Maintenance Capex Unit Growth MARCATO Mid-teens High Pressures Margins High Capital intensive Restaurant Operator || Restaurant Franchisor 70%+ Minimal } Franchise Fees None Requires No Capital GROWTH AS A FRANCHISOR IS MORE STABLE, PROFITABLE, AND CAPITAL-EFFICIENT 3 A System growth is significantly less copital intensive 4 Profits are more stable because brand royalty streams are a percentage of revenue as opposed to operating cash flow 4 Corporate overhead is lower for a more scalable operating platform ‘A Allows management to focus exclusively on strategic brand development 4 Partners with local market expertise and “skin in the game" are best equipped to drive expansion in new regions and internationally MARCATO ANCHISING TODAY CAN DE-RISK LABOR COST HEADWINDS A. As@ percentage of soles, labor costs are the only level of SWLD's restaurant-level expenses fo have increased over the lost Gecace 4. We beleve that steeperincreases in future labor costs con be avoided by converting SWLD to 0 predominantiy-franchised company 4 The impact io margins trom cos inflation has historically been offset by consistent menu price adjustments, which may not be sufficient or feasible in the future OF SAU RESTAURANTLEVEL COSTS AS ove magn (49%) (059%) (ur) (757) (Ter) (team) Goze) [te2%) (tear) (ivan) (l0s7) (con) J (208 bps (131 bps) (14 ope) zo om wR wO “m2” ata ais “@risum = Cott of Sater s tabor = operating Occupancy MARCATO SIGNIFICANT OPPORTUNITY TO GROW INTERNATIONALLY THROUGH FRANCHISING A Among peers with ony intemational ‘presence, BWLD has the lowest percentage of is system outsiae of the US. and Conese The broader pser set has an average International system mix olm148, A. Butfolo Wild Wings announced its fist Cevelopment agreements am outside tne United States & Canada in Joby 2012 2am 22 Middle Eas locations over & years 1s ‘4 Puerto Rice locotions over 4 years on on A Nearly 4 years later, BWLD's spencers {colprint includes just 2 stores in mi Saudi Arcbia @ UAE OF 0% Of OF OF Om OF FFELP I SOSS PLIES IAS EES ESOP Due fo the efficiencies of scale, management oversight & capital fom international franchising, BWLD ‘should accelerate is efor to grow internationally ‘CATO. INTERNATIONAL OPPORTUNITY CREATES SIGNIFICANT LONG-TERM VALUE 3 400 (nm i ree oyaty__toyaty International Unit Potential 400 400 accelerating is alobal expansion Woolly ANS per Uri (008) wa soe (x) Weeks per Yeor ‘S2 weeks | saseum, | Mebeieeene veteran eerie Fae aoe eae | Totorotze racy over severt veers (9 Asumed Royaly Rate 300% 500% |. Once BWLO'sinten nee achieves Foleo WD Revenve Ben sea) | scolo, wa bekove management couk (0 Suppo Coss asin 70% marc (11999) 18996) | potentoly Beain to cenieve higher morains 1 Fonctior TDA Malo 130 13 | | irigvoue — [vave ointemationa ranch BTOATORWID——SBABITE SOREN ay capa n aves 120206 od Shares a milons 7294 72741 | owranaing shoves Naive per Bw shore sss sau We believe Intemational franchising could add ~$50-80+ per share In value over time, which would ‘acerete significantly from additional capital allocation efficiencies MARCATO™ REFRANCHISING CREATES SHAREHOLDER VALUE: JACK IN THE BOX CASE STUDY A. Following a sustoined period of strotegic refranchising, JACK's shores have outperformed the inclustry JACK IN THE BOX STOCK F 06-2016 aun ern ce a a ee a JACK = —SKP 00 Restaurant index: sso | ak foes i — eo) oe) evan (7%) (8%) (4a) [6a] [5a] (cx) (soe) [2%] (20) [um wet, (sm) (rx) (se) (72%) (39x) (Se) (41) (ron) (122) (ior) na meee eee) CATO ° REFRANCHISING CREATES SHAREHOLDER VALUE: BURGER KING CASE STUDY A. Following its 2006 IPO, Burger King increased is ranchise mbx rom ~B9% to ~100% by 2013, resulting in significant multioie expansion, even during 0 period of neoative comps and low shigle digit net store growth BURGER KING EV / ESIIDA (TRAILING) | 2007-2018, co 1% ai nfowor hon 2 year ander ) Ye 1% sotomene Saperkog ‘oper se ftaton ‘rape expomon 1 mo 08 ‘08 ao iD 2 nu ia pu IS ‘tranches 8% 100% 1008 Nem ‘comparcble . ae a a ee Net Sytem sire mm me ae a vt ts 4x ra: aa Mov. 16 MARCATO ° 8 REFRANCHISING CREATES SHAREHOLDER VALUE: DOMINO'S PIZZA CASE STUDY ‘A Domino's Pizza's dividend- adjusted siock price has increased over 17x since 2004, diven by relranchising and international growth of franchisees PU TOTAL sHai ER RETUR a a a ee eo) +S? 60 Reston! incon abemeste Stores ernatens Tomita) (ae) GE) OS) OS) Gas) SO = m%) (som) (aan) [veax) (rox) [rere] Gm] OF @ @ @ @ @ @& @ &@ & ‘CATO. EVALUATING BWLD'S “CASH-ON-CASH” RETURNS A Buffalo Wild Wings’ store growth isbax€d on the notion that its new stores eam 20*% "coshvon cash" retums A. However, “caston-cash” retums do no! fully cecount for: Incremental corporate-tevel Gaavand Maintenance Gants" for periodic remodels, normalizes Income tox expense We believe the ue “cash-on: ‘cash’ retums to equity holders on naw stores falta cle monogement's 20% return hurdle MARCATO WHAT ARE THE TRU New ans compen) ew nonehace “Gane trnehbed Aecutions “Sore ‘Boe a fe Qpenina boone, a "Alin" Como Open soe en 3 ‘Anco Weakly ANY C40} 1 te SP maak soweeks ‘ese ava tae “gt Repay Rote. A phot eee 5%, ‘Wal ETOR ‘or [Easton oni eta a Rata Velo Ft nes ‘seme Soy lr Reine! Menage franetise Content so ineemen Gta per Aes re = (Wea BDA seor ‘BiDAToBWiD 9 ‘oud Cos! of Remodel so i Poteet Year bawecn Pode Ronee yoo, Nomolved Aastwa Manienonce Coste pe! Yeo "Blor (+) A to Bw ss {IDA Wossenonce Capea AWD ‘a6 Elcom tre csuring 38 ecire Rote FRANCHISING CREATES MORE ECONOMIC VALUE WITH LESS RISK A Company-owned stoves earn higher ‘dollor” profits, bul the superior mulliples achieved by franchise earnings, coupled with the substantial capital savings, result in ‘grecter valve creation from tyra Fo tacted 1% < Woelevencnehsna vous one Waaeebetier ten tee sre) (aia) (a) ' allow BWLD to reium more copital ‘emenee nner: 1 hays Cope nchaten “ «hve tetharehokion’actiave amore “Aastra seine bom cot = : ie “ Seq peccaneegs 7 tLe cppropicte coptalshucture,ona | iyo 2 of reduce execution icy pornesng | Sm opoere : Doig wih toca), knowiedgeable sour : ef ae femme Specie ten coin ay & mL tee Someta Fi 7 fee { A. Management has created a strong brand, and cen continue to be is custodian while mointeining copital flexiitty MARCATO WE BELIEVE A 90% FRANCHISED SYSTEM WOULD SIGNIFICANTLY IMPROVE OPERATING METRICS WITH SIMILAR NET INCOME EBITDA MARGIN | 2021E NETINCOME | 20% 27% $148.2 suangen OCEEDS | 14E EARNINGS VOLATILITY 31996 $200 Hoh” 7 - | a i | - BE Stolss@uo 90% Franchised In: a a i i ep. nie ARCATO B. Reinvigorate core business MARCATO AREAS OF OPPORTUNITY rr ee ____ne Pricing & Menu Address Food Costs Spors &Loyers Store Development A Adoressing pricing. A. Manu design protein A Operational control bande Optimal structure for bundling. Beverage anc management and waste te manage company ‘deployment, velocty ont relaledmeny reengheering mitigation ownedonditonchiseduiis | retus A 15010250 bese paints A. $Oto 100 basis points A 25to 150 bask paints Marketing Mc Loborendistating etfciencies | franchise Management Store Copia! Realignment of media Optimization of stating Domestic vs. intemational Remodels and technology spend and more focused ‘between oor andictchen focusand servicelevel implicatons deivery $010 100.baxts points A 2510 50 bask points 100 to 200 bast ponte Procurement Other Concepts Retranchisng cRyaitoyaty * Purchsingleverage. A Detemine voluecddot | Uberate copitel and create Talloted promotions and reduce non value added boing port of VLD focuson the brand focuson core consumer costs 4 $010 75 bass points 5010 180.bauls points 1 7510 125 axis points MARCATO. A NUMBER OF VALUE METRICS HAVE DECLINED OVER THE LAST FIVE YEARS 3 Interesinaly, valle petcepiionmainioined perception mai mo mo mao ‘CATO. mos mas A Bulfalo Wild Wings curently ranks near the "batiom ack" in the Nation's Restaurant News consumer However, BWLO's current ‘vera rank against peersis ‘quatly, menu varia, fkelIheod to recommend & retum, and others We believe BWLD has an_ ‘eppertunity to restore the customer valve proposition -HIGH-MARGIN ALCOHOL MIX DECLINING ALCOHOL Mix HAS OECUNED CONCURRENTLY WITH MARGINS A. Aicohol os percentage of restaurant soles deciined to 19% in the most 24% recent quarter versus 24% five years ‘0g ond ~29% at PO 22% 22% 21% 1’ We view this as potentiay conceming 20% ‘given he margin structure of BWLD's 19% business ~ We estimate that typical dratt beer ie very high margin [90% per pou) A. Have consistent menu price ineeases rendered food “expensive”. thereby reducing “attach” of alcohole 2011 2012 2013 2014 pis aris mmAlconolas% of Sales. —"s- Wall" Margin Seace cemeuny thes MARCATO MIX SHIFT TO TAKEOUT RAISES QUESTIONS 3 Sates ‘(tty incremental takeou! can be an ettractive contibutoro soles growin ‘However, itis possble that takeout is connbaring cove solesand could undermine profitably ~ Tends to provide an interior customer experience relative fo food delivered het in he restourent Ades operotional compleslly: does takeout revenue coniibule incremental profit dots whe factoring coals to support? ~ Tokeout fs inconsitent with the “core consumer” of Buifcio Wis Wings: @ social Ive sports viewer TAKEOUT AS % OF GROSS RESTAURANT SALES SINCE |PO a 2008 20052006 «2007-2008 007-2010 20122013, BeOS NTS Seace cemeuny thes MARCATO Cc; Establish explicit capital allocation strategy MARCATO FUNDING GROWTH THROUGH 100% EQUITY IS DILUTIVE TO ROE A The low “excess” retums on new company- owned stores fal fo exceed AWLD's cost of equity ond are alulive to curent retums ‘Over jime, we believe that BWLD's ROEs could converge to is cost of equity—or wore, “Ati Con to Ope betowi sl Uatet Heres feo (Op0 Cot frog ‘Srceu" eau oper [Excont" After Tox Return. post-G&A & maint. Capex ete] ‘\ Anenterprise whose refurns fail to exceed the. ‘cost of equity destroys shareholder valve, Sa cogaudless ofils own wears Neon 154% 15.6% Accretion to ROE ‘creates ave, won ter ad 2sae9 _ ut deploying ‘capa below COE desis. waive arieime ton Tem Roun ong Ely = costotteuiy MARCATO USING THE BALANCE SHEET TO CREATE VALUE: DOMINO’S PIZZA CASE STUDY —— A. Overtime, Domino's has continually EBT / EBITDA (LTH) re-levered fo high multioles one relumned copital to shareholders _ — _ “72. s natin bemtdedisiecitie. | 22/4 [> domesticoly, mostat Domino's system | gy. |” = roth bas come om rtemational | ao LAR mak hte es 46. 70 fronctisees + os Ung an eepropsate mx ef cebt ond i equity as well. as growing cash flow - from ek ranchise operations they. have pold out 210% ol thei eal cumulative Free Cash Flow since IPO. js Detain fo vedo wate oes EP EELLEPSPESS SOS Mt Its growin and capital atocation menor deer sUMERTOR “ hternations| ranches aa 7 ‘move Fine sn a7 Common + Speci rend eu “Comune Dien ce PO sre nie same su sian Srrerensches ay yn Captains boreholes assy sist sass om Cop Retest PO gram snr gram gig sam MARCATO $1.4BN OF EXCESS CAPITAL IS TRAPPED IN COMPANY-OWNED STORE BASE (oreeto proposes that BWLD refranchise is existing stores, targeting ¢ 90% mix of franchised restaurants by 2020 Ato market muttile of & post royalty EBITDA per Company store, we believe BWLD could release over $1.4 billion of ofter= fox proceeds from ils exising store bose, representing ~52% of BWLD's current market value, which couls be redeployed to herreturiing activities & BWLD Would need To articulate an explicit framework fo investors for evaluating is intended uses for deploying this capital including W faxleokoge Corporate Reston se Simsumo Sipuaes ges Siseao siamese sel sera Ct otsaes (soreiy— oamna) sted) fase) ar 99) SG) 7S) {oboe [seem syrans) ures) © waz) rom) uaz) east} peaing (so7ss) eign) es) eh AT} Ure) SO) ZI eovponcy uso) oraes) (HOLS) as] 156315) aati) 6) expect re eiauant evel Biraiz——savarar ——serarea ——Ssivsei ——Savasso Siete Savas UlAeg + of Corpus su 7 556 ss 39 235 i Heawai eve po per re BETSY OOD 37 ar are er mr ore oo Aso pony sa (is) a) eo) 11s) (5) 18) ton evl pot prSr,baOVOY TT 385 03 a7 0 7 3a 35 Fretopay metre ipeesoe-Resouront ve pe pe 0/0) 6 st ss ssi su ss {i Assad Puce Pico Wu es Rokancie 60% ‘oe 60% 40% ‘oe 20g. So Moceeds per Soe (00) wars ost Se ee fe Nertref Ser Reranch Poiod é 1 155 12 Ay lous teamed Caparte ox ® erent Corporate Roe a3 wae wish (ss ara) 498) Acarcocte Reoncing Noceed pe Yeo (sm) srs semis srs [erste raknching roceeds (in) ‘Saat wea S70 Basie 7Siatease MARCATO ‘CAPITAL ALLOCATION BEST PRACTICES. Buffalo Wild Wings needs to be disciplined in how it allocates its capital and focus on risk-adjusted returns relative fo both its cost of capital as well as all other alternatives step 1 Forecast long-term growth and return targets: Establish valuation based on business plan step 2 _{ Establish credit characteristics and liquidity objectives, and ‘adjust debl/cash as indicated STEPS Fund maintenance capex step4 {Allocate excess copia fo highest risk-adjusted retun alternative that exceeds cost of capital SS — er Ne New Cee Cree Return Copital |) Reduce Debt to ulld Cash See Coene er fener ed com High Risk Low Risk MARCATO COMPANY SHOULD FOCUS ON RISK-ADJUSTED RETURNS BWLD should cease investing in high risk initiatives that have eared low retums FRETTING [© inherent aiicuty *hendicapping® fulue success given consianily-changing consumer ie tastes 2 CORES |< Restaurant space is highly competitive, especially for untested concepts 3 © | RI | «ek of paying osignitcant premium to replacement cost, which tutes RO! pene © Creates edlttonal operational complexity (GA, regional oversight) FRI | compony-owned sore growth i tigher dk ve to geokercoptotnleraty ond volamty |! EECLSG ti) | Franchise growth yields highest incremental returns and is valved highest by morket : pe Incremental investments behind teams fo accelerae inlerational expansion as wells |! eel Improvements n operations tanchisee relations, customer experience and the brand ; EDM | % Fotential o crive trac, bl must be supported by mets that ack tangible results . ESSIEN | « share repurchases are mos atracve and accretive when shares ade below fa valve |! % betes Dividends provide an alternative when IRR on share repurchases is less compelling : . =e Tae ae ae “| ee Lowes risk, but also lowest-returing option SESE |. \ctreconmanded glen BD's aready ovety.conseratv capa suche MARCATO D. Realign management incentives MARCATO INCENTIVE COMPENSATION STRUCTURE HEAVILY WEIGHTED TOWARDS GROWTH WITHOUT CAPITAL CHARGE OR RETURN METRIC ‘A Management has historcelly been compensated on the basis of overall growth, irespective of returns or profitality A. KPis used to determine corporate performance for compensation give precadance fo agareaate growth in dollar terms, rother than per share vaive creation, profitably. or retums on Investment CASH INCENTIVE PROGRAM PERFORMANCE METRICS EQUITY INCENTIVE PROGRAM COMPOSITION some Store sass Ts Pontve Not income ($y oe Aggregate Growth Wetics Profitabilly/ Per Share Metics MARCATO HOW DO THE BEST-PERFORMING RESTAURANT PEERS INCENTIVIZE EXECUTIVES? nies. Bulfolo Wikd Wings is one of @ ne a Pe comper syeat ioe (eck tek ak ORK EPS, ROIC oF shor ever ‘ Net mca 6 e Seach (1 Cpering sm wor IRE compensated on the ser Gown efficiency, MARCATO IV. Creating Shareholder Value MARCATO A 90% FRANCHISE MODEL COMBINED WITH SHARE REPURCHASES DRIVES EPS ~100% HIGHER THAN THE CURRENT PLAN OMP RING EPS TRAJECTORIES FOR MARCATO'S PLAN VS. STATUS QUO $16.08 31.83 39.09 so $7.88 $8.16 58.02 oem, $6.94 $0.73 sas? 5497 | 20158 20168 20176 20188 20198 2020 zai Status Quo 18908 Fanchied MARCATO WE BELIEVE BWLD’S STOCK PRICE COULD RISE BY MORE THAN 2-3x UNDER MARCATO’S PROPOSAL 1steanauet Mon set 1s camo ye Masse 1S EOTOA gn’ $31 6008 eano a S282 8s eb owe 521887. E810 [21.1%] i i 4 i ‘CURRENT TRAJECTORY VERSUS MARCATO’S PROPOSAL We believe our proposal can create substantially more value for shareholders than management's current plan Restaurant Level Pit (mn) {GEA ie “Fe Reduced GaA rellects simpler operations: affords ‘greater focus on optimizing the business model ‘without managing he asset bose EBIDA ($m) ‘Comparable EBT, acined through lower depreciation expense BIT margins Increase 275% ROI Not debt / ESNDA ‘Shore count reduced after capialeturn Fam tefranchising + recapitalization, etiving adeitionel IPS accretion on comperable net income: Pe Sm. {het Asiomed mails igher

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