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Wings restaurants soar despite economy

A plate of chicken tenders and basket of fries satisfies college student Brad Cunningham's hunger without emptying his wallet.
/ Source: The Associated Press

A plate of chicken tenders and basket of fries satisfies college student Brad Cunningham's hunger without emptying his wallet.

So he's eating more often at Buffalo Wings & Rings and making fewer visits to places like TGI Friday's, which he says saves him about $10 per meal.

"Compared with other sit-down restaurants, this is a good deal," said Cunningham, a University of Cincinnati student who wants to be a high school teacher.

In a belt-tightening economy, less-expensive dining spots like wing joints have become some of the nation's fastest-growing chains, said Pat Cobe, senior editor of Restaurant Business magazine. Restaurant Business magazine lists Cincinnati-based Buffalo Wings & Rings as the nation's fastest-growing chain of franchised restaurants with sales between $25 million and $50 million.

But higher prices charged by suppliers are cutting into profit margins, and industry analysts see problems ahead for wing chains because of high grain prices.

Many restaurant companies have been struggling because of slower consumer spending and higher commodity costs. Some have already filed for bankruptcy and industry experts say more may do so this year.

"Customers seem to be downscaling," Cobe said. "Wing places are where people might go instead of Applebee's."

The "targeted" menus at casual restaurants — wings, burgers and the like — make it easier to control costs than at an upscale place, Cobe says.

However, chicken prices could go up after Labor Day, said Bill Roenigk, vice president of the industry's trade group, the National Chicken Council. He said production cuts in the industry mean there will be fewer chickens on the market, which will boost prices. Pilgrim's Pride Corp. and rival Tyson Foods Inc. both said in July that animal feed costs have gotten much more expensive.

"Chicken companies have really boosted prices because of demand, and there are only so many wings a chicken has," Cobe said. "It's not like chicken fingers, which can be made out of various parts of the chicken. Wings are not the cheapest part of the chicken, but they're very popular now."

Philip Schram, the chemical engineer turned restaurateur who is the driving force behind Buffalo Wings & Rings, shrugged off the increases and said that since all the chains buying wings are in the same situation, the higher cost is not a competitive problem and at least so far it isn't affecting his growth plans.

The chain now has 35 restaurants in 11 states and plans to open another 13 this year, 30 next year, and one a week by 2011.

High fuel costs have made distribution more expensive, so Schram would like to "densify" franchises from the Great Lakes to Florida, up to the East Coast, and in Texas and California-Arizona before moving into all states.

"We can't wait until we see our buffalo head mascot in every major city across the United States," he said.

Buffalo Wings & Rings, because it is privately held, does not report earnings. Chicago-based Technomic Inc., which compiled the Future 50 list for Restaurant Business, estimated that the company more than doubled revenues last year to about $37 million.

Buffalo Wild Wings Inc., an industry leader whose stock is publicly traded, was founded in Columbus in 1982 and has about 500 restaurants in 37 states — about a third of them company-owned — and aims to have more than 1,000 by 2012. According to its Web site, it had revenues of $347 million last year.