By Solarina Ho
TORONTO (Reuters) - Buffalo Wild Wings, a
U.S. sports bar-and-grill chain, outlined ambitious plans to
enter the Canadian market earlier this month, saying it has
found a "perfect fit" in a country where people like to eat,
drink and watch hockey.
But it's not only American sports bars that feel they will
find a warm welcome north of the border. A maturing U.S. market
and a stronger Canadian economy make the country a logical
growth opportunity for U.S. restaurant chains in general.
"The Canadian economy is in a lot better shape than the
U.S. economy and that likely makes it more attractive in terms
of development," said analyst Destin Tompkins of Morgan, Keegan
"On the whole, most of the mature (U.S.) casual dining
companies and quick service companies have very limited
domestic expansion plans," he said.
Buffalo Wild Wings, which began nearly 30 years ago as a
college bar in Columbus, Ohio, announced plans last week to
open more than 50 company-owned and franchised restaurants
across Canada over the next five years, starting with two next
spring near Toronto.
"I think the economy is going to have a slow recovery, and
I think sometimes when you go in when it's slow, you really can
take advantage of some of the growth opportunities that come
along," said Buffalo Wild Wings Chief Executive Sally Smith,
whose company is approaching the 700-store mark in the United
"Canadians have many of the same attributes as the United
States: love their sports, love beer and love wings. So it
seemed like the perfect fit," Smith said in an interview.
Buffalo Wild Wings said the expansion will create 3,500
jobs in Canada and will use Canadian sources for ingredients
such as its fresh chicken wings.
The company is joining other U.S. chains that have recently
set up shop in Canada and those that have been here for years
and are looking to expand. Five Guys Burgers and Fries, which
operates 655 burger joints in the United States, and Chipotle
Mexican Grill, which operates roughly 1,000
company-owned restaurants south of the border, are two examples
of relative newcomers.
Five Guys, which made headlines in 2009 when President
Barack Obama made a surprise visit, expanded into Canada this
year and has five locations so far. Three more are slated to
open before the end of the year, and at least four more
locations are in the works for 2011. Chipotle opened its second
Canadian restaurant this summer after launching its first in
"There are several companies that are already there. I
wouldn't be surprised if we see more that start to enter Canada
similar to what Buffalo Wild Wings announced this week,"
According to the National Restaurant Association in the
United States, Americans spend $580 billion, or 49 percent of
their food dollar, in restaurants. In contrast, it's a C$60
billion ($57 billion) industry in Canada, which has about a
tenth of the U.S. population, and households spend about 23
percent of their total food dollar away from home, according to
the Canadian Restaurant and Foodservice Association.
"Canada really represents an opportunity to increase the
amount that consumers spend away from the home," said equity
research firm Wisco Research's managing director Greg
Schroeder, noting that restaurant spending in the United States
is flattening in a maturing market.
"There's no market saturation and just given the dynamics
of how consumers buy their food there, it just seems like
there's a lot of opportunity in Canada," he said, adding that
even established chains are still expanding.
Some U.S. chains, McDonald's, Burger King
and Darden Restaurants Inc, the company behind Red
Lobster and Olive Garden, for example, have been operating in
Canada for decades.
But Krispy Kreme Doughnuts Inc and Dunkin Donuts
have all but disappeared, with only a handful of stores left.
Part of their challenge was competing with cultural fixture Tim
Hortons Inc, which dominates 40 percent of Canadian
fast-food traffic, according to NPD Crest, the leading global
provider of consumer market research. Its nearest competitor,
McDonald's, has about 14 percent.
And Canada is not always the natural first choice for
international expansion for U.S. restaurants. The relatively
small market size can be a deterrent.
"If you're not going to have critical mass in the country,
the additional cost of learning how to do business in a foreign
country may be tougher to generate a return," said analyst Bart
Glenn of D.A. Davidson & Co.
It does represent "an easy first step" for companies
looking to expand globally, however, said Tompkins. "It's a
good transition as you evolve your international plans."
Buffalo Wild Wings, which began exploring the Canadian
market two years ago, is already making visits to Europe and
eyeing markets beyond that. It hopes to announce expansion
plans overseas within the next two years.
"A lot of the companies I'm talking to in the last 12
months are announcing deals...outside of the United States,"
"They're really seeking international growth opportunities
and Canada is just a natural, I think, over time."
(Editing by Peter Galloway)