“If you want to watch it, we’ll put it on.” This is what the popular sports bar Buffalo Wild Wings Inc. BWLD claims. However this time, cost concerns have forced Buffalo Wild Wings to refrain from screening the huge Floyd Mayweather-Manny Pacquiao fight this Saturday.
Chief operating officer James Schmidt said the cost to screen the Mayweather- Pacquiao fight was about $5,100 per restaurant. “It was enormously expensive,” said chief executive officer Sally Smith. This comes close on the heels of the dismal first quarter results, hurt by high chicken and labor costs.
With about 1,080 restaurants, Buffalo Wild Wings would have had to incur costs worth of $6 million to screen the fight at every Buffalo Wild Wings location, said Smith. Bars also need to pay licensing fees based on the legal occupancy. This can too soar to thousands of dollars.
Pay to Watch the Action at Handful Restaurants
However, to catch the much-hyped championship bout while grabbing a beer and eating wings, one will need to visit only the “handful” of company-owned restaurants. Just 70 Wild Wings franchises out of the 1,080 have decided to screen the Mayweather-Pacquiao fight.
That comes at a cost though. The handful restaurants will charge a $20 admission fee. Reportedly, a company spokesperson said that Pasig City Buffalo Wild Wings will charge roughly "$45 — a seat charge of $33 and a $12 minimum for food and beverages." This cover charge was "due to the significantly increased cost of the fight," said Smith.
Is $20 Too High?
This fight is reportedly selling the most expensive sports ticket ever. The face value of the tickets carries price tags of $7,500, $5,000, $3,500, $2,500 and $1,500.
According to CNN Money, “Price tracker SeatGeek says the median price of tickets sold so far online has been $10,500, with sales ranging from $4,650 to $17,850. There are floor seats listed for $50,000, while cheapest ticket on the secondary market is about $5,000.” Separately, the pay-per-view for fans at home will need to spend a record $99.99 for HD broadcast.
Will Buffalo Wild Wings Lose Business on Saturday?
On that note, fans may have loved to sit at their favorite bars or visit any of the Buffalo Wild Wings location to enjoy the event rather than pay $100 for watching at home. This may hurt Buffalo Wild Wings’ business on Saturday. Live sporting events are crucial for this popular sports bar, and this particular event was a huge opportunity to attract customers.
Thus, it is logical for investors to be jittery about how not screening the Mayweather- Pacquiao fight in all locations would hurt sales. During the college football bowl games, NFL playoffs and March Madness games, sales were “exceptionally strong,” according to Smith.
Buffalo Wild Wings keeps its guests engaged during major sporting events like March Madness, NFL playoffs and others through promotional activities. This year too, restaurateurs including Buffalo Wild Wings, Domino's Pizza, Inc. DPZ and Papa John's International Inc. PZZA had left no stone unturned to capitalize on the frenzy.
Over the last 10 years, Buffalo Wild Wings has outperformed the S&P 500 consistently by an average of 5.8% during this time of the year, per Bloomberg. In fact, the company has done a phenomenal job of capitalizing on big sports events.
High Sales Fail to Boost Earnings
At the other end of the spectrum though, high sales could little help the company’s first quarter earnings. Cost of sales and labor expenses took a toll on the bottom line and first quarter adjusted earnings of $1.52 per share increased only 1.9% annually. It missed the Zacks Consensus Estimate of $1.66.
Buffalo Wild Wings' cost of sales, as a percentage of revenues, increased 200 basis points (bps) to 30.3%, due to a 41% year-over-year increase in chicken wing costs. The company’s cost of labor, as a percentage of revenues, increased 90 bps to 31.4% due to expansion in states with higher wage rates and staffing of all company-owned restaurants with Guest Experience Captains. Bonus and payroll tax expense was higher than expected.
Shares of Buffalo Wild Wings have been moving south since the earnings release. On Apr 29, it was among the largest Nasdaq losers after ending 12.8% lower.
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