Buffalo Wild Wings To Take Chipotle Mexican Grill Head On?

Aug.25.14 | About: Buffalo Wild (BWLD)

Summary

Buffalo Wild Wings announced today it is investing in Mexican fast-casual chain Rusty Taco.

This further confirms my bullishness on Buffalo Wild Wings in terms of wild cards.

I focused on its PizzaRev concept, but didn't see this one coming.

As a semi-update article to my previous Buffalo Wild Wings (NASDAQ:BWLD) articles you can find here and here, Buffalo Wild Wings announced today, August 25, its partnership with the nine restaurant chain Rusty Taco. Rusty Taco is described as follows:

"Rusty Taco boasts fast, affordable food served in a friendly and fun atmosphere. As a fast-casual restaurant, Rusty Taco specializes in street-style tacos made fresh and from scratch."

Yes, that's fast-casual Mexican. While it doesn't sound like Chipotle Mexican Grill's (NYSE:CMG) non-GMO, non-antibiotic, grass-fed "Food with Integrity," make no mistake about it: fast-casual Mexican is still a direct competitor to Chipotle. Just nine locations are far from a major threat to Chipotle; if Buffalo Wild Wings has its way, that will change.

VP Kathy Benning of Buffalo Wild Wings stated:

"Buffalo Wild Wings' investment is part of our strategy to partner with emerging restaurant concepts that have the potential for significant growth, can work throughout the country and have a highly engaged management team with a passion to grow the business."

It sounds like the hope and goal there is a national chain. CEO Steve Dunn of Rusty Taco believes Buffalo Wild Wings' involvement will have "an immediate impact in helping accelerate our growth."

As a Buffalo Wild Wings long, I'm excited about the potential. As mentioned in my previous articles, I believe Buffalo Wild Wings the chain is already undervalued, based on the current stock price and earnings picture, and any additional benefits from wild cards such as PizzaRev or Rusty Taco are not priced in.

While we know little about how well either one of these investments will do, there is certainly a chance that they will be a home run or at least a big hit, and Buffalo Wild Wings has the experience and know-how to help roll these chains something big if the demand warrants. Finally, this news also suggests Buffalo Wild Wings is active in scouting out other tiny potential fast-casual chains - who knows what other wild cards the company will stumble on next? Only one needs to be a big hit to significantly return value to shareholders.

Just for a bit of perspective, Buffalo Wild Wings has a market cap under $3 billion, while Chipotle has a market cap well over $20 billion. I'm long Buffalo Wild Wings, but will not short Chipotle at this time.

Disclosure: The author is long BWLD.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.