General Mills

HOWARD PENNEY ([email protected]) SHAYNE LAIDLAW ([email protected])

IN THE ACTIVIST’S CROSSHAIRS LONG: BUFFALO WILD WINGS (BWLD), A WIN-WIN SCENARIO October 25, 2016

© Hedgeye Risk Management LLC. All Rights Reserved. 1 DISCLAIMER DISCLAIMER Hedgeye Risk Management is a registered investment advisor, registered with the State of Connecticut. Hedgeye Risk Management is not a broker dealer and does not provide investment advice for individuals. This research does not constitute an offer to sell, or a solicitation of an offer to buy any security. This research is presented without regard to individual investment preferences or risk parameters; it is general information and does not constitute specific investment advice. This presentation is based on information from sources believed to be reliable. Hedgeye Risk Management is not responsible for errors, inaccuracies or omissions of information. The opinions and conclusions contained in this report are those of Hedgeye Risk Management, and are intended solely for the use of Hedgeye Risk Management’s clients and subscribers. In reaching these opinions and conclusions, Hedgeye Risk Management and its employees have relied upon research conducted by Hedgeye Risk Management’s employees, which is based upon sources considered credible and reliable within the industry. Hedgeye Risk Management is not responsible for the validity or authenticity of the information upon which it has relied.

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Topics Page(s) Hedgeye Restaurant Best Ideas list…………………………………………………………………………………………………………………………… 5 Industry Overview…..…………………………………………………………………………….……………………………………………………………………… 6-13 Introduction: LONG BWLD.………………………………………………………………………………………………………………………………………….. 14-19 Let’s Start with the Positives.………………………………………………………………………………………………………………………………………. 20-24 But There is Blood in the Water…...…………………………………………………………………………………………………………………………….. 25-31 Misguided Initiatives…..……………………………………………………………………………….………………………………………………………………. 32-40 Misguided Usage of Capital…………..…….…………………………………………..………………………………………………………………………… 41-46 Company Leadership in Disarray…………………………..……………………………………………………………………………….………………….. 47-50 Activist Plan of Attack………………………………………………………………………………………………………..………………………………………… 51-55 A Walk Down Memory Lane: DRI Case Study………………………………………………………………………………………………….……….. 56-60 Both Roads Lead to a Win for Shareholders…………………………………………………………………………………………………………….. 61-62 Margin Analysis…………………………………………………………………………………………………………………………………………………………… 63-68 Commodities………………………………………………………………………………………………………………………………………………………………… 69-70 Sentiment & Timing Considerations…………………………………………………………………………………………………………………………… 71-78

LONG LIST TRADE TREND TAIL SHORT LIST TRADE TREND TAIL 1) PNRA Panera Bread Company    1) CMG Chipotle Mexican Grill X X X 2) DFRG Del Frisco's Rest. Group   - 2) PLAY Dave & Buster's X X X 3) BWLD Buffalo Wild Wings    3) SBUX Starbucks X X - 4) DNKN Dunkin' Brands X X X 5) BLMN Bloomin' Brands X X X 6) JACK Jack In The Box X X - 7) DRI Darden Restaurants X X X

LONG BENCH SHORT BENCH SONC Sonic SHAK Shake Shack YUM Yum! Brands TXRH Texas Roadhouse ARCO Arcos Dorados Holdings QSR Restaurant Brands Int. EAT Brinker International CAKE Cheesecake Factory RRGB Red Robin Gourmet Burger MCD McDonald's

Bench = timing is not right, or research is in progress.

SOMETHING HAS TO GIVE! • We will need to see the industry shake out at some point

QSR GAINING SHARE FROM FAST CASUAL • The best days for the fast casual segment are behind them

PEOPLE ARE LOOKING FOR AN EXCUSE… • Many people perpetuate the FAFH – FAH inflation spread..

• There is more evidence that it is a myth than reality

“There is more growth in the total restaurant sector than in the chain restaurant numbers tracked by Black Box Intelligence, suggesting other players such as independent operators and smaller regional chains may be growing faster and taking away share from the chains.”

- Sarah Atkinson Higgins Senior Director, Marketing & Communications TDn2K

BROAD INDUSTRY SLOWDOWN • Fast casual is having a harder time competing

• Fast Casual could be in a secular decline

• California was the only region with positive same- store sales

BATTLE WITH THE ACTIVIST IS ESCALATING 1 Management has yet to budge in its battle with the activist and the war is heating up. On August 17, 2016, Marcato sent a detailed letter to BWLD’s board of directors, followed by another letter on October 13th, in which they threatened legal action if The Board continued to ignore their requests for pertinent shareholder and Company information. It seems as if BWLD has poked the bear one too many times, and now the bear if forced to show its teeth, and The Board’s initial reluctance could be viewed as them not working for the benefit of the shareholders and the overall business MANAGEMENT’S INABILITY TO LEAD IS APPARENT 2 BWLD’s lack of leadership is evident in the Company’s lack of direction, as it has made irrational investments in other companies that have stalled. Additionally, the debacle that was the Analyst Day was another example of management’s lack of leadership, as they failed to provide shareholders with a level of specificity necessary to maintain confidence in the business. HISTORY WILL LIKELY REPEAT ITSELF | DRI CASE STUDY 3 Like the Darden situation, the evidence against the current BWLD management team is substantial. The road to an activist victory is often not linear, there will be bumps along the way. We are confident we know how this is going to end!

A WIN-WIN SCENARIO ON THE LONG SIDE 4 If the fundamentals turn, you win. If fundamentals get worse, Sally will ultimately lose her job, and the activist/shareholders win. As expressed in our “Dear Sally” note, as the market perceives the activist gaining control, the stock price has traded higher, and the same can be expected if the fundamentals turn back on-course.

Company-Owned / Franchise-Owned Beverage Mix vs. Food

65% 90% 61.0% 79% 80% 80% 76% 78% 78% 60% 57.2% 56.3% 70% 54.6% 55% 60% 50.7% 50.7% 49.3% 49.3% 50% 50%

45.4% 40% 43.7% 45% 42.8% 30% 24% 39.0% 22% 22% 21% 20% 40% 20%

35% 10% 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 % Owned % Franchised Food and Non-alcoholic bev Alcoholic bev

FY2015 Revenue = $1.8 billion Total Units as of 4Q15= 1,175

BWLD HAS UNDERPERFORMED THE MARKET OVER THE LAST YEAR 1 Year Performance vs. S&P 500 3 Year Performance vs. S&P 500 110 190

105 170 100 150 95

90 130

85 110 80 90 75

70 70 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 BWLD - Indexed S&P 500 - Indexed BWLD - Indexed S&P 500 - Indexed

12x

11x

10x

5x Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Average +1 ST DEV -1 ST DEV EV / NTM EBITDA

200 $7.50 • Estimates have stepped down 190 throughout the $7.00 year 180

170

$6.50

160

Share Price Share $6.00

150 FY EPS Estimates

140 $5.50

130

120 $5.00 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Share Price EPS - FY1

Buffalo Wild Wings Market Share 14% Segment Market Share Rank Based on FYE 2015 Sales ($ Billions) 11.9% 12% 11.2% Chain System Sales % Market Share Apple $4.7 15.5% 9.8% Olive Garden $3.8 12.4% 10% 8.9% Buffalo Wild Wings $3.6 11.9% Chili's Grill & Bar $3.5 11.7% 7.7% Outback $2.6 8.5% 8% 6.7% Red Lobster $2.5 8.1% Texas Roadhouse $2.1 6.8% 5.8% 6% Cheesecake Factory $1.9 6.3% 4.7% T.G.I. Friday's $1.5 5.1% 4.0% LongHorn $1.5 5.1% 3.6% 4% 3.0% Red Robin $1.5 5.0% Ruby Tuesday $1.2 3.8% Segment Total $30.4 100% 2%

0% 2011 2013 2014 2012 2015 2010 2007 2008 2005 2006 2009

DATA SOURCE: RESTAURANT RESEARCH. © Hedgeye Risk Management LLC. All Rights Reserved. 21 BWLD HAS A COMPETITIVE EDGE… BUT STILL LACKING IN KEY AREAS • The casual dining environment is full of other brands offering customers added conveniences that BWLD has yet to fully take advantage of • Competitors are using added convenience and other incentives to gain market share, despite only being regional players • BWLD holds a competitive advantage, as it is a national brand and can therefore leverage national advertising campaigns to drive sales • However, despite this overall advantage, BWLD is lacking in two key areas: loyalty program and delivery • Many of the company’s direct competitors have already rolled out full-scale loyalty and delivery programs • “We know there is demand for Buffalo Wild Wings in the delivery format. This is a unique opportunity for our brand…We have begun delivery in two restaurants and plan to diligently test and evaluate this opportunity,” (Sally Smith, 2Q16 Earnings Call) • “By the end of the year, Blazin’ Rewards, our loyalty program, will be in one-fourth of U.S. locations,” (Sally Smith, 2Q16 Earnings Call)

Comparable Restaurants

DATA SOURCE: COMPANY WEBSITE, HEDGEYE. © Hedgeye Risk Management LLC. All Rights Reserved. 22 MEDIA PLACEMENT DECENT, BUT THEY CAN DO IT BETTER… 2015 Estimated Total Domestic Marketing Budget Spent on Media – Casual Segment • Community-based hangout positioning built around wings, beer and sports - "nowhere is

sports more alive than at BWW".

$180 $164.4 $160 $139.7 • Ads also periodically promote menu items, $128.6 $140 but without the use of price points. $120

$100 $84.9 $79.0 National TV ad channels (including ESPN

$73.9 • $80

$57.4 and Fox Sports) are used to drive

$51.0 $60 $50.0 $41.9

awareness and consideration; national and $40

$17.0 local radio to drive consideration and trial;

$20 $4.0 $0 and digital to drive all 3. • We believe there is an opportunity for them to better leverage their national presence in Outback LongHorn Red Robin Red

Applebee's order to make sure that their brand reaches Red Lobster Olive Garden Olive T.G.I. Friday's Ruby Tuesday Ruby more eyes Chili's Grill & Bar & Grill Chili's Texas Roadhouse Buffalo Wild Wings Wild Buffalo Cheesecake Factory

Fast Break Lunch Focus on Value Offerings • Fast Break menu launched in 2015 — 15-minute guarantee, otherwise lunch is free • Value days on Tuesday and Wednesday, wings at a discount — Will be more advertising as well as perhaps a different wing offering on Tuesday, with half-price wings

Takeout / Technology Consumer Appeal

• “Takeout sales are probably between 15% to 16% of our restaurant sales and • Looking to win soccer viewership as we see these sales increase, we are well-positioned to capture additional • Partnered with Heineken and Pepsi for Copa America and Euro Cup opportunity.” tournaments • Launched online order and mobile order for take-out system-wide at the end • Olympics is a sales driver, typically not huge of 2015, and that represents about 14% of the take-out sales

EXCESSIVE PRICE HIKES • Price inflation above and beyond their industry 7% Consensus Metrix peers has left consumers with a bad taste in their 6.0% 6% mouth • And there is set to be a 5% 4.7% sequential increase in 4.5% 4.3% 3Q16 to 3.6%, which 4.0% 4.0% management already 3.8% 3.9% 4% 3.6% 3.4% 3.5% communicated 3.1% 2.9% • No concept is able to 3% 2.6% increase prices 2.1% 2.1% consistently above 1.9% 2.0% 2.0% 2% 1.8% 1.8% industry average and get 1.3% away with it, and this has come back to bite BWLD 1%

0% 1Q13 1Q14 1Q12 1Q15 1Q16 3Q13 4Q13 3Q14 4Q14 3Q12 2Q13 4Q12 2Q14 3Q15 4Q15 2Q12 2Q15 2Q16 1Q17E 2Q17E 3Q16E 4Q16E Price Change Two-Year Avg.

PRICE TAKING ITS TOLL • Yes, there is an overpopulation of 10% Consensus Metrix restaurants, and yes industry sales are 8% 7.4% slowing, but not all the charts look this bad 6% 5.1% 4.5% BWLD’s pricing strategy 4.1% • 4% 3.5% has out bid its customers 2.5% 2.7% and they are seeing a 2.2% 1.9% 2.0% 2% sharp deceleration in 0.4% 0.4% 0.0% 0.1% 0.3% traffic 0% -0.2% • Traffic is often viewed as -0.9% -2% the true indicator of -1.7% -2.1% strength in a concept, -4% -3.1% and BWLD has a lot of work to do to correct this -4.7% -6% -5.6% trend

-8% 1Q13 1Q14 1Q12 1Q15 1Q16 3Q13 4Q13 3Q14 4Q14 3Q12 2Q13 4Q12 2Q14 3Q15 4Q15 2Q12 2Q15 2Q16 1Q17E 2Q17E 3Q16E 4Q16E Mix/Traffic Two-Year Avg.

A DARLING THAT HAS LOST ITS WAY • BWLD has long been a loved concept, and stock 10% 9.2% Consensus Metrix for that matter, as we just explained, but they are 8% 7.7% currently faced with a 7.0% 6.6% slowdown in their 6.2% 5.8% 6.0% 5.9% business 6% 5.3% 5.2% 4.8% • SSS have been in a 4.2% 3.8% 3.9% precipitous decline since 4% 1Q15, pressured by both 2.4% 1.9% 2.2% macro trends and 2% 1.4% self-inflicted wounds well 0.2% beyond their typical 0% excuse of a differing number of sporting -1.2% events YoY -2% -1.7% -2.1% -4% 1Q13 1Q14 1Q12 1Q15 1Q16 3Q13 4Q13 3Q14 4Q14 3Q12 2Q13 4Q12 2Q14 3Q15 4Q15 2Q12 2Q15 2Q16 1Q17E 2Q17E 3Q16E 4Q16E

Company Owned SSS Two-Year Avg.

TWO-YEAR HAS GONE NEGATIVE • Franchisees have not faired any better… 9% Consensus Metrix

7.3% 7.4% 7% 6.5% 5.8% 6.0% 5.5% 5.7% 5.0% 5.1% 5% 4.1% 3.9% 3.1% 3% 2.5% 2.2% 2.0% 1.7% 1.2% 1% 0.1%

-0.2% -1%

-1.6%

-3% -2.4%- 2.6% 1Q13 1Q14 1Q12 1Q15 1Q16 3Q13 4Q13 3Q14 4Q14 3Q12 2Q13 4Q12 2Q14 3Q15 4Q15 2Q12 2Q15 2Q16 1Q17E 2Q17E 3Q16E 4Q16E Franchise SSS Two-Year Avg.

Alcohol Sales as a % of the Total Share of On-Premise Drinks Consumed, 2Q15

26% Cider, 3% 24% FMB, 2% 24% 22% 22% 22% 21% 20% 20% Wine, 21% 18% Beer, 44% 16%

14%

12% Spirits, 31%

10% 2011 2012 2013 2014 2015

Alcoholic bev ALCOHOL AS A % OF SALES IS DECLINING It appears that the growing takeout business, which in 2Q16 was 15.7% of sales and growing at 25%, is dragging on the beverage sales. Although it is great they have a great takeout business, they need to work to reinvigorate beverage sales. The increased pricing BWLD has taken on the menu may also be reducing attachment of a beverage or two. DATA SOURCE: COMPANY PRESENTATION, HEDGEYE. © Hedgeye Risk Management LLC. All Rights Reserved. 30 MISSED OPPORTUNITIES BWLD MANAGEMENT ASLEEP AT THE WHEEL • Late to delivery — In their recent analyst day management stated that delivery is one of the most requested items from BWLD and yet they just began testing it a short while ago in Minneapolis. • Stadia remodel reduces capacity: less capacity = less revenue — Although management spoke about the sales lift they are experiencing from the remodel, per industry sources it actually removes about 10% of seating, which is a head scratcher for us. The Stadia remodel literally turns the restaurant into the format of a stadium, and what they really need to be focused on is food first — For high volume locations during peak times. In general, capacity can be an issue for this concept which is so dependent on a lumpy sports calendar. • Technology is Lacking — Late to the game in some aspects of technology such as table top tablets, as this continues to be more important it will help drive labor efficiencies in the restaurants. • International Growth — Currently just 19 restaurants outside of the United States and Canada.

• “PizzaRev-olution” – movement toward “Craft Your Own” fast casual dining • R Taco is a fast-casual taco concept, primarily located in Texas, Colorado, and Minnesota • Choose your crust and sauce, load up with as many toppings as you like without additional charge, then stove oven baked in less than 3 minutes • Menu offers a variety of fresh street-style tacos during all day parts for an affordable price • BWLD owns and operates 2 locations in Minnesota • In 1Q16, BWLD owned 5 restaurants and franchised 7 locations, with plans to open Locations opened May and August 2014 • six new locations in 2016 • Management expects to continue unit expansion in 2016, with primary development • “Why not give it a try and does it provide us that growth opportunity five to ten in Southern California through franchising years from now?” • “PizzaRev we’re a minority owner and they really have a seasoned management • “Rusty Taco we are a majority owner. And that one is much more as though we team in place. So with PizzaRev we are acting more really in a consulting role. We own it. So really we are very hands-on with Rusty Taco. We are building are on the their Board of Directors and we are in regular consultation with them” processes and systems that that brand needs to really expand rapidly in the future”

• In March 2013, BWLD acquired a minority equity investment in PizzaRev, but has only opened 2 locations to date (both in Minnesota), despite having purchased the rights to operate PizzaRev restaurants in various states — On September, 26, 2016, BWLD reported that Kathy Benning, head of Business Development, was leaving the company • As of June 26, 2016, the Company only owns and operates 2 PizzaRev and 6 Rusty Taco restaurants, with an additional 7 franchised Rusty Taco locations • The lack of unit growth with these two investments shows management’s lack of focus and limited commitment to growing these two businesses • In order to position the company for future success, management needs to focus on their largest earnings driver, as opposed to spending time on irrational minority investments • BWLD is a differentiated restaurant concept that must stick to what it knows best, and that is chicken and beer, with the occasional sports event used to enhance the environment, not the other way around

THESE WILL CONTINUE TO BE A DRAG ON THE BUSINESS Minority investments have been more of a hindrance for management and investors, than a growth engine. It is imperative that they focus on the core business!

DATA SOURCE: COMPANY FILINGS, HEDGEYE. © Hedgeye Risk Management LLC. All Rights Reserved. 34 MISGUIDED REMODEL INITIATIVE STADIA CONVERSION PUSHES FOOD TO THE NOSE-BLEEDS Original Store Design Gen 5 Stadia Design

• The new Gen 5 Stadia store design is meant to enhance social interactions at BWLD through improved viewing angles, a centrally located bar, and increased screen sizes • However, the central bar layout results in an approximate 10% reduction in seating capacity • Average remodel costs run ~$500k and currently generate a mid-single digit sales bump • By FYE 2015, approximately 41% of company and 30% of franchised units were remodeled to have the new Stadia design

DATA SOURCE: RESTAURANT RESEARCH LLC, COMPANY FILINGS, HEDGEYE. © Hedgeye Risk Management LLC. All Rights Reserved. 35 MISGUIDED REMODEL INITIATIVE (CONT’D) STADIA CONVERSION PUSHES FOOD TO THE NOSE-BLEEDS Gen 5 Stadia Design Sports Arena

• The approximate 10% reduction in seating capacity could pose a significant issue for high volume locations during peak times • BWLD’s dependence on the sports calendar causes excessive traffic during big gamedays, and lack of seating will lead to decreased traffic through the doors • At its core, BWLD is a restaurant, that also shows sporting events, not an arena where you can also buy food. The shift to the Stadia design marks a shift in brand identity

BWLD NEEDS TO EVOLVE TO REMAIN COMPETITIVE

• As a national brand, offering a Loyalty Program at only one-fourth of U.S. locations and delivering to only a single market is an embarrassment, and such things can lead to loss of patrons • Competition is heating up, and if BWLD does not evolve, they will get left behind, namely their business as it relates to food quality, technology, and pricing • Competitors are encroaching on their market share, and doing so by offering a similar product, with added conveniences • WING, a direct competitor, has units concentrated in key geographic area (270 units in Texas, 183 units in California, 48 units in Illinois, and 32 units in Florida) creating extra competition in these area, as seen in the map to the right • WING, although primarily a carry-out business, reiterates an aspect of BWLD’s business that is very limited — There is a huge opportunity for BWLD in the delivery business that is currently underdeveloped BWLD Location WING Location

• 3Q12 was the first mention of GUEST EXPERIENCE CAPTAIN YIELDS LITTLE VALUE Guest Experience Captains 200 33% and at the time management

stated the possibility for “one

157 or more” captains in each

150 32.2% 32.2% restaurant. 32.1% 32.0% 31.9% 116 • 4Q14 marks the quarter in 32%

which BWLD company-

95 100 88 owned stores were nearly

31.4% 86

79 31.3%

completely staffed with guest 31.2% 31.1%

31.0% experience captains. 31.0%

30.9%

50 30.8% 31% 33 36 • In 2Q15, Sally stated, “we

25 23

30.5% reduced captains’ hours at 15 15 9

30.4% certain lower-sales-volume 30.2% 30.2% 0 30.2% 30.1% restaurants and are focused

30.0% -10 on minimizing team member -14 -14 -18 -15 30% -28 turnover and overtime -50 -35 costs.” 29.4% -60 • Begs the question, why are Guest Experience Captains -100 29% are even there if it is not vital to the operations, it is clearly 1Q13 1Q14 1Q12 1Q15 1Q16 3Q13 3Q14 4Q13 4Q14 3Q12 4Q12 2Q13 2Q14 3Q15 4Q15 2Q12 2Q15 2Q16 1Q17E 3Q16E 4Q16E an added expense that is yielding little value. Margin Chg YoY Labor Costs Avg. LTM

BWLD OVERWHELM CUSTOMERS WITH MENU OPTIONS • Increased menu options has been part of the reason for decreasing Menu Size Trends SSS 110 6.5% 7% 6.0% 107 107 • 42% of BWLD revenue 106 6% comes from traditional 105 and boneless wings, so 4.5% 102 5% let’s not overcomplicate 101 100 100 100 the menu with irrelevancy 100 3.6%99 4% 3.3% • Fast break has the right 95 3% 95 94 idea allowing customers 2% to choose quickly

90 1% 88 0% 85 -1.5% -1%

80 -2% 2011 2012 2013 2014 2015 2016E Buffalo Wild Wings Casual SSS

60% earnings and get 61.0% higher multiples. 57.2% 55% 56.3% 54.6% Acquiring these 50.7% 50.7% 50% franchisees at 49.3% 49.3% record multiples 45.4% 45% 43.7% does not make 42.8% sense.

40% 39.0%

35% 2011 2012 2013 2014 2015 2016 % Owned % Franchised

$200 90% • We are calling for a

$180 80% significant slowdown in $160 70% growth capex to

$140 60% occur, because

management $120 50% needs to focus on $100 40% the business at hand. $80 30% YoY Growth CAPEX CAPEX Millionsin

$60 20%

$40 10%

$20 0%

$0 -10% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E CAPEX YoY Growth

4.04

4 3.10 2.83

1.82 1.20 2 1.16 0.81

DATA SOURCE: COMPANY FILINGS, HEDGEYE. © Hedgeye Risk Management LLC. All Rights Reserved. 44 OVERPAYING FOR FRANCHISEES SHOW RR CHART NEXT TO ACQUISITION MATH Historical EBITDA Multiple Recent Purchase Prices

BWLD EBITDA Multiple Trend vs. $1B+ 2015 PURCHASE OF FRANCHISES Casual Chain Average Total Stores Purchased 41 Purchase Price $160,000,000 6.0x Cost Per Store $3,902,439 5.7x (Source: Company Filings) 5.5x 5.5x 5.2x 5.2x 5.2x • This acquisition was announced on June 11, 2015 and closed in 3Q15. At the time, management indicated they 4.9x 5.0x 5.0x 5.0x 5.0x 4.9x do not have a set ratio of company-owned versus 4.7x franchise locations, “but believe company ownership mix could increase over time.” 4.5x • According to industry sources, BWLD paid 7.5x for these stores 4.0x • 2015 marked the most unit acquisitions they have made

Jun-11 Dec-11 Jun-13 Jun-14 Jun-12 Jun-15 Jun-10 Dec-13 Dec-14 Dec-12 Dec-10 BWLD Casual

RETURNS WELL OFF THE PEAK • ROIIC is off significantly since peak in 2014 40% 25%

35% 20% 30%

25% 15%

20% 10% 15% 5% 10%

5% 0%

0% -5% -5%

-10% -10% Oct-11 Apr-11 Jun-11 Feb-11 Dec-11 Oct-13 Oct-14 Apr-13 Apr-14 Aug-11 Jun-13 Jun-14 Oct-12 Oct-15 Apr-12 Apr-15 Apr-16 Jun-12 Oct-10 Jun-15 Jun-16 Apr-10 Jun-10 Feb-13 Feb-14 Feb-12 Feb-15 Feb-16 Feb-10 Dec-13 Dec-14 Aug-13 Aug-14 Dec-12 Dec-15 Dec-10 Aug-12 Aug-15 Aug-10 Dec-09 ROIIC Quarterly Price Return

Sally Smith, Chief Executive Officer and President James Schmidt, Chief Operating Officer Has served as CEO and President since July 1995, as a Has served as Chief Operating Officer since January 2011. He had Director since August 1996, and as CFO from 1994 to 1996. served as Executive VP since December 2006 and as General Prior to joining BWLD, she was the CFO of Dahlberg, Inc. Counsel from April 2002 to January 2011. Prior to joining BWLD, he (1983-1994) was an attorney with the law firm of Robbins, Kelly, Patterson & Tucker, from 1985 to 2002

Alexander H. Ware, Chief Financial Officer Kathleen Benning, Executive VP, Chief Strategy Officer and Formally introduced as CFO on October 24, 2016, Business Development (Will relinquish role December 31, 2016) effective October 31, 2016. Served as CFO of Has served as Executive VP since January 2014. Prior to this role, PepsiAmericas, Inc. from 2005 to 2010, and Executive she served as Executive VP, Global Marketing and Brand VP of strategic development at Pohlad Companies, a Development from October 2011 until January 2014. Originally joined family office with primary holdings in real estate, auto BWLD in March 1997 as Vice President of Marketing insurance, Major League Baseball, among others

Judith Shoulak, Executive VP, President North America Lee R. Patterson, Senior VP, Guest Experience and Innovation Has served as Executive VP, President North America since Has served as Senior VP, Guest Experience and Innovation since January 2014. She also served as Executive VP, North October 2011. He also served as Senior VP, Information Technology America Operations from October 2011 to January 2014 and from January 2011 to October 2011 and VP, Information Technology Executive VP, Global Operations and Human Resources from January 2008 to January 2011 from January 2010 to October 2011

James M. Damian, Chairman Sally Smith, 58, President, Chief Andre J. Fernandez, Director • Average Age: 57 years Served as Senior VP, Chief Design Executive Officer & Director President of CBS Radio, where he is Officer of Best Buy’s Customer Served as CEO and President since July responsible for the overall direction and • Average Tenure: 6 years Experience Design Group from 1998 to 1995, as a director since August 1996 and management of the company, which 2010. Prior to that, he has held various as CFO from 1994 to 1996. Prior to joining includes 117 over-the-radio stations in 26 • On October 6, 2016, the major markets. Prior to CBS Radio, Mr. executive positions throughout the retail BWLD, she was the CFO of Dahlberg, Inc. Board of Directors elected from 1984 to 1994 Fernandez served as president and COO of industry Journal Communications, Inc. Andre J. Fernandez, Hal Age: 64 • Age: 58 • • Age: 48 Lawton and Harmit J. Singh • Tenure: 10 years • Tenure: 5 years • Tenure: <1 year to serve as directors of the company. Hal Lawton, Director Harmit J. Singh, Director Cynthia L. Davis, Independent Director Senior Vice President of North America at Executive VP and chief financial officer of Most recently served as VP of Nike Inc. and • They were elected to fill the eBay, Inc. Responsibilities include Levi Strauss & Company. Role includes President of Nike Golf from 2008 to vacancies created by the merchandising, marketing, operations, managing company’s finances, information December 2014. She also has been a business selling, and global shipping for the technology and global business services member of the Board of Directors for departures of Dale M. Americas business unit. Prior to joining eBay functions globally. Prior to Levi Strauss & Kennametal Inc. since December 2012, Applequist and Warren E. in 2015, Mr. Lawton held a number of Co, MR. Singh served as CFO of Hyatt where she serves on the Audit and Mack, and an additional leadership positions at Home Depot, Inc. Hotels Corporation Governance Committees • Age: 42 • Age: 52 • Age: 54 vacancy created by an • Tenure: <1 year • Tenure: <1 year • Tenure: 1 year increase in the number of authorized directors to nine. Jerry R. Rose, Independent Director Michael Johnson, Independent Director J. Oliver Maggard, Independent Director Served as Corporate Vice President of Has served as President and CEO of J&A Has served as Managing Partner of Caymus Cargill, Inc. from 2004 to September 2012. Group, LLC since 2008. In March 2008, Mr. Partners LLC since 2002, and as a He was a member of the Corporate Center Johnson retired as Senior VP and CAO of Managing Partner of Caymus Equity and a platform leader for Cargill Animal The Williams Companies, having joined The Partners, LLC since 2012. From January Nutrition, Animal Protein & Salt Platform and Williams Companies in 1998. In this role he 1995 to October 2002, Mr. Maggard was a the Cargill BioFuels, BioIndustrial & was responsible for human resources, Managing Director and Partner of Regent Emerging Business Platform information technology, and security Capital Management Corp. • Age: 64 • Age: 68 • Age: 60 • Tenure: 5 years • Tenure: 10 • Tenure: 17

DATA SOURCE: COMPANY FILINGS, HEDGEYE. HEDGEYE 49 COMPENSATION AND OWNERSHIP STRUCTURE

Compensation Misaligned Ownership • Currently, management compensation is disproportionately weighted toward overall growth, with no consideration of relative shareholder value (performance for compensation is based on aggregate growth in dollar • With insider ownership standing at just 1.37%, and terms, as opposed to per-share value creation) cash incentives skewed toward Total Revs and Net • This compensation composition does not appear to reflect what is stated in BWLD’s 14A, which states “Alignment: Ensures that compensation plans Income, it is easy to see why the compensation are appropriately aligned with the interests of shareholders…” structure did not reflect per-share value creation • Historically, leadership has been compensated with regard to overall growth; not taking into account the overall profitability of the business • By realigning management compensation to focus more on return on invested capital, it would incentivize leadership to pursue growth at a per- share level Cash Incentive Program KPIs

Individual Objectives Restaurant Total Revs Openings (All 20% 25% Enterprises) 10% Same Store Sales (Number Net Income of Positive 30% Quarters) 5% Same Store Sales % Increase (Annual) 10% *as of 10/21/16 DATA SOURCE: COMPANY FILINGS, FACTSET. © Hedgeye Risk Management LLC. All Rights Reserved. 50 ACTIVIST PLAN OF ATTACK

© Hedgeye Risk Management LLC. All Rights Reserved. OPERATIONAL IMPROVEMENTS NEEDED WITHOUT IMPROVING THE FUNDAMENTALS ANY “ACTIVIST” STRATEGIES WILL ONLY YIELD SHORT TERM BENEFITS Mainstream Activist Strategies Next Level Work That Needs to Be Done • Franchise units • Improving food quality • Lever up • Improving 4-wall profitability • Pay a dividend/buy back stock • Improving competitive advantages • Cut G&A • Defending against wing to-go concepts

• We believe there is a possibility to unlock ($ in millions) 2015A 2016E 2021E meaningful cash Consolidated Economics of Company-Owned Stores proceeds from the Company-owned sales $ 1,715 $ 1,930 $ 603 refranchising of stores. Cost of Sales 508 567 175 Labor 543 603 187 • In this conservative Operating 251 285 87 example from both a Other restaurant expenses 95 108 33 multiple and performance Company-owned restaurant-level profit $ 319 $ 367 $ 121 enhancement (/) Avg. # of Corporate Stores 544 618 179 perspective we are still Restaurant-level profit per store pre-royalty $ 0.587 $ 0.595 $ 0.674 able to capture just shy of (-) Assumed Royalty 0.158 0.156 0.168 $900mm in after tax Restaurant-level profit per store post-royalty $ 0.429 $ 0.439 $ 0.505 proceeds • In addition to the one- (x) Assumed purchase price multiple 5.65x 5.65x time advantage the shift Avg. Sale proceeds per store $ 2.478 $ 2.854 to a more franchisee Cumulative Refranchising Proceeds $ 84 $ 873 focused model will allow % of Current Market Cap 3.3% 34.2% further cuts in G&A and create a more streamline % Company Owned 50.7% 50.7% 10.5% dependable business % Franchised 49.3% 49.3% 89.5% model

Well Below Peer Set 2017E 2017E Current @ 2.5X Levered Net Debt/EBITDA EBITDA $ 349.0 $ 349.0

5x 4.6x Operating Income 178.0 178.0

4x Interest Expense 7.9 37.1 Pre-tax Income 170.1 140.9 3x Taxes 52.7 43.7

2x Net Income 117.4 97.2 1.3x EPS $ 6.70 $ 5.55 1x 0.3x Equity Valuation 25.0x 167.6 138.8 0x Dividend 0.0 47.1 Total Valuation $ 167.6 $ 185.9 -1x Upside to Current Price 18.7% 31.7% DRI Min DIN EAT Max BJRI PLAY CAKE TXRH RRGB DFRG BLMN BWLD CHUY FOGO Increased Valuation 10.9% Average

BWLD MANAGEMENT MOVING ON THIS POSITION SLIGHTLY • As part of their analyst day BWLD announced their intention to go to 1.5x debt to EBITDA which we believe to be light • Historically, BWLD has not used leverage as part of their strategy. During their analyst day they stated their intention to target a leverage ratio of 1.5x debt to EBITDA. Although this is movement in the right direction, this along with other announcements that day did not satisfy investors. • This is just one potential financial lever to pull that we are showing in isolation to show the magnitude of the opportunity @ BWLD DATA SOURCE: FACTSET, HEDGEYE. © Hedgeye Risk Management LLC. All Rights Reserved. 54 POTENTIAL VALUATION

($ in millions) 2015A 2016E 2021E • In this model we see Company-Owned Sales 1715 $ 1,930 $ 603 BWLD having upside Franchise Revenue $ 98 $ 94 $ 257 potential of roughly 130% Total Revenue 1,813 2,024 860

COGS 508 567 175 • This valuation potential is Labor 543 603 182 backed by significant Occupancy/Store Operating Expenses 251 285 75 value creation by Other Restaurant Expenses 95 108 28 Restaurant Level Expenses $ 1,396 $ 1,563 $ 460 refranchising the Restaurant level Profit $ 319 $ 367 $ 142 business to ~90% franchised G&A 129 129 102 Preopening Expenses 14 14 3 Other Charges 7 6 3 • Additionally, the G&A will EBITDA $ 266 $ 312 $ 291 be a substantial lever for cost savings as they EBIT $ 139 $ 159 $ 246 EBIT Margin 7.6% 7.9% 28.6% would not need as large of a support team Net Income $ 94 $ 107 $ 163

EPS $ 4.92 $ 5.77 $ 19.13

EBITDA $ 312.49 $ 291.10 (x) Assumed Multiple 8.5x 11.5x Enterprise Value $ 2,656 $ 3,348 (-) Financial Liabilities, net of cash 63 571 Market Capitalization $ 2,593.17 $ 2,776.67 Implied Share Price $ 139.87 $ 325.14 DATA SOURCE: FACTSET, HEDGEYE. © Hedgeye Risk Management LLC. All Rights Reserved. 55 A WALK DOWN MEMORY LANE

9/18/14: DRI issues letter to $75 4/5/16: DRI announces shareholders urging them not to resignation of Jeff Smith vote for all Starboard nominees, just allowing them to take four $70 seats 12/19/13: DRI announces plan to 12/23/13: Starboard announced it enhance shareholder value, has taken a 5.6% stake in DRI. $65 includes separation of Red Starboard stated they do not Lobster, reducing unit growth, believe spinning off Red Lobster increase cost savings, returning is enough to benefit $60 more capital to shareholders and shareholders. Starboard wants refining compensation and DRI to create a REIT incentive programs

$55 6/23/15: DRI 3/4/16: 5/16/14: Announces announces plans Starboard trims sale of Red Lobster to to pursue a REIT stake to 6.2% $50 Golden Gate Capital for $2.1bn 11/18/14: DRI announces 1/12/16: Starboard $45 leadership changes trims stake by 11%, and strategic actions to 8.1% of shares

$40

7/28/14: Clarence Otis 10/10/14: Shareholders voted to 10/9/13: Barington Capital Group along with 5/6/14: Solicitation to call As of the latest $35 other investors take a 2.8% stake in DRI. special meeting of steps down, and board replace the board with all The fund is pushing DRI to form two shareholders re: Red separates chairman and Starboard appointed members filings, Starboard still separate companies, among other changes Lobster sale CEO roles owns 3.1% of OS $30

1• Streamlined kitchen operations

2• Sold more alcohol

3• Served better tasting food at a compelling value

4• Cost cutting throughout the organization

5• Replaced Board members

6• Made sweeping managerial changes

7• Formed a REIT

• Hard to argue BWLD doesn’t need a majority of these changes

$180 8/16/16: BWLD holds lackluster analyst day that disappoints 8/25/16: Marcato releases investor community presentation regarding their observations of the analyst day $170 10/13/16: Marcato writes a letter to the Board regarding the lack of cooperation from the 7/25/16: Marcato management team $160 announces it has taken a 5.2% stake in BWLD

$150

8/17/16: Marcato sends letter to BWLD in response to the analyst day $140

10/6/16: Marcato presents BWLD thesis at Sohn $130 conference in San Francisco 10/11/16: BWLD announced three new directors added to the board without consulting Marcato $120 4/20/2016 5/20/2016 6/19/2016 7/19/2016 8/18/2016 9/17/2016 10/17/2016

DATA SOURCE: COMPANY FILINGS, FACTSET, HEDGEYE RESEARCH. © Hedgeye Risk Management LLC. All Rights Reserved. 59 BWLD MANAGEMENT HAS NOT COOPERATED TO DATE DESPITE ACTIVIST INTERVENTION, MISSTEPS PERSIST Lackluster Analyst Day New Board Members

• Lack of adequate detail during investor day • On October 6, 2016, the Board of Directors of presentation: BWLD elected Andre J. Fernandez, Hal Lawton, • It seemed as if the management team was ill- and Harmit J. Singh to serve as directors of the prepared for the presentation, as it lacked Company (replacing Dale M. Applequist and substantial detail and reasoning behind Warren E. Mack) actions taken • Despite this being an effort to improve the • With regard to discussing the results of the functionality of the Company, Marcato clearly Guest Experience Captain, management only addressed actions concerning the election of used anecdotal evidence in addressing the new board members in their August 17th letter “success” of the initiative; avoiding any • The Marcato letter read as follows: “We would substantial financial metrics to help buttress also stress that any changes to the Board should their argument, only saying, “And as to the only be made after consultation with interested results, I would say it’s mixed…When I say the shareholders, and we would view any unilateral results are mixed, the financial metrics are action to change the composition of the Board mixed. I would say that the guests love it.” as a hostile act of entrenchment.” (Sally J. Smith)

1 Fundamentals Start to Turn 2 Activist Wins

• We would say that this is the longer road out of the two, • The path of least resistance; end the fight and give into as the fundamentals of the business are unlikely to turn the activist demands. This would be the fastest payoff with the current plans in place, not to mention the macro for shareholders, as shown in the previous case study backdrop when it looks like an activist is going to win it often leads to a higher stock price • Management could just take the activists suggestions and implement the changes, but we doubt these old • The activist will also provide a fresh set of eyes on the dogs will learn new tricks and drastically change the way business taking an objective look at operations and they run their business what needs to be improved • But the BWLD brand stands above the rest, as being one • For starters, it is likely that Sally will lose her job of the few national chains that has a differentiated (frankly this should happen in either scenario) but that concept, providing it a leg up from other casual dining will be top of mind for the activist competitors • Fixing the four walls is a top priority for a sustainable • We are confident that the business will rebound in due turnaround and the activist has plenty of work cut out time from initiatives that are underway, but they have for them but with the right team in place this national been implemented too slowly or ineffectively compared brand should be able to act swiftly and implement to peer group activity, causing them to lag behind sweeping changes across the footprint

Consensus 500 34% 441 Metrix

40% 32.7% 400 33%

311

34.0% 32.0%

35%

267 32.1%

300 31.7% 260

32% 31.2%

203 31.1% 29.2% 29.1%

28.3% 167 200 30% 27.7%

30.6%

26.3%

31% 26.0% 30.4%

30.3% 110 25.4%

81 30.0% 23.6% 29.8%

100 23.1% 29.7% 32 3629.7% 25% 29.5%

29.4% 30% 29.3% 29.3% 29.1% 29.1% 0 29.0% 20% 29% 28.3% -100 28.2% -57 -40 -35 -38 -92 -121 -116 28% 15% -200 -130 -218 -213 10% -300 27%

-400 26% 5%

-500 -447 25% 0% DRI EAT BJRI 1Q13 1Q14 1Q12 1Q15 1Q16 3Q13 4Q13 3Q14 4Q14 3Q12 2Q13 4Q12 2Q14 3Q15 4Q15 2Q12 2Q15 2Q16 CAKE 1Q17E TXRH RRGB DFRG BLMN BWLD CHUY 3Q16E 4Q16E Average

Margin Chg. YoY Cost Of Sales Avg. LTM

• COGS as a percentage of sales had seen a steady decline over the last 4+ years, but seems to have found a home in the 29% to 30% range. With the price of commodities projected to fall in the near term, we should see some margin improvement here

200 33%

Metrix

40%

157

35.1%

34.1% 32.2% 32.2% 33.6% 33.4%

150 33.1% 32.1% 35% 32.0% 32.3% 31.7% 31.7% 31.5% 31.9%

116 29.8%

32% 28.6% 95 30%

88 31.4%

100 86

79 31.3%

31.2% 25% 31.1% 31.0%

31.0% 30.9%

50 36 30.8% 31%

33 20% 25

23 30.5% 15 15 9 30.4%

30.2% 15% 30.2% 30.2%

0 30.1% 30.0% -10 10% -14 -14 -18 -15 30% -28 -50 -35 29.4% 5% -60 0% -100 29% DRI EAT BJRI CAKE TXRH RRGB 1Q13 1Q14 1Q12 1Q15 1Q16 BLMN BWLD CHUY 3Q13 4Q13 3Q14 4Q14 3Q12 2Q13 4Q12 2Q14 3Q15 4Q15 2Q12 2Q15 2Q16 1Q17E 3Q16E 4Q16E Average Margin Chg YoY Labor Costs Avg. LTM • With the addition of the Guest Experience Captain continuing to add to labor costs, this will continue to be a headwind going forward, especially as it appears that the initiative has added little to no significant value. • Although having strong employee presence in the restaurants, this is an area of opportunity for BWLD.

500 452 22%

Consensus 25% 21.5%

Metrix

400

21.9% 20.9% 20.7% 21%

19.5% 19.5%

300 20.3% 19.1% 19.1% 19.0% 19.0%

18.8% 18.8% 18.8% 18.8% 20% 18.7% 213 19.9%

195 19.9% 19.8%

200 20% 16.2% 16.0% 16.0%

19.5%

108 87 100 61 66 15%

18.9%

18.8% 18.8% 31 18.7% 22 19%

18.6% 4

18.4%

0 18.2%

18.2% 18.1% 10%

-25 17.9%

17.8% -29 17.7%

-100 17.6% 18% 17.5% -94 -150 -147 -200 -158 -163 17.0% 5% -205 17% -300 -261 -296 0% -400 -340 16% DRI EAT BJRI CAKE TXRH RRGB 1Q13 1Q14 DFRG 1Q12 1Q15 1Q16 BLMN BWLD CHUY 3Q13 4Q13 3Q14 4Q14 3Q12 2Q13 4Q12 2Q14 3Q15 4Q15 2Q12 2Q15 2Q16 1Q17E 3Q16E 4Q16E Average Margin Chg YoY Restaurant Level Margins Avg. LTM

• Restaurant level margins appear to have some upside from here, projected to return to levels seen earlier this year

100 Consensus 10%

Metrix 65 12% 57 52

50 10.3%

8.8% 10% 8.8% 7 9% 1

0 8.2%

8.3%

-1 -4 8%

7.2%

6.5% 6.5% 7.9% 6.5% 6.5% 6.5% 6.5% 6.5% 6.5%

7.8% 7.8% 7.8%

7.7% -50 7.7% -37 -36 8%

-43 7.7%

5.5% 5.5%

6% 5.4% 7.4% -58 5.1% 7.4%

-73 -72 -70 7.2%

-100 4.4% 7.0% -103 6.9% 4% -105 6.8%

-121

-150 6.4% -140 6.4%

-144 6.3% -153 6.2% 2% 6.1% -200 -182 6% 0% 1Q13 1Q14 1Q12 1Q15 1Q16 3Q13 4Q13 3Q14 4Q14 3Q12 2Q13 4Q12 2Q14 3Q15 4Q15 2Q12 2Q15 2Q16 DRI 1Q17E EAT 3Q16E 4Q16E BJRI CAKE TXRH RRGB DFRG BLMN BWLD CHUY

Margin Chg YoY G&A Avg. LTM Average

• G&A as a percent of sales is projected to be down, having BWLD fall in place with the majority of its direct competitors

Consensus 500 12% 439 Metrix 40% 11.6%

400 35.0% 10.7%

11% 35%

300 9.9% 30% 203 9.6% 10% 9.4% 200 169 9.2% 25%

97 8.7% 100 54 9% 49 46 22

8.0% 8.0% 2

20%

7.9%

0 7.7% 7.6% 8%

7.4% 7.4%

7.2% 7.2%

-20

7.0% 15%

-100 6.9%

-73 -70 6.8%

7% 9.9% 9.3% 9.2%

6.3% -133 8.6%

-146 10% 7.8% 7.6% 7.5%

-200 7.2%

6.0% -173 -170

-182 6.1% -213 -214 5.9% 6% 4.5% -300 5%

-400 -347 5% 0% DRI DIN EAT 1Q13 1Q14 1Q12 1Q15 1Q16 BJRI 3Q13 4Q13 3Q14 4Q14 3Q12 2Q13 4Q12 2Q14 3Q15 4Q15 2Q12 2Q15 2Q16 1Q17E CAKE TXRH RRGB DFRG BLMN 3Q16E 4Q16E BWLD CHUY Average Margin Chg YoY Operating Margin Avg. LTM

• Operating margin is flattening out and projected to increase slightly • Looking at DIN’s operating margin that definitely serves as a high water mark for where BWLD could go if they go down the path of franchising restaurants

7% Consensus Metrix $2.20 • Commodities have $2.10 $2.07 been a headwind for 6.0% the past year 6% $1.97 $1.97 $1.94 $2.00 $1.92 $1.92 $1.90 $1.88 • Margins should $1.81 $1.82 5% 4.7% $1.79 $1.79 improve in the near $1.77 $1.77 4.5% $1.80 $1.71 4.3% term $1.68 4.0% 3.9% 4.0% 4% $1.63 3.8% $1.61 3.6% 3.4% 3.5% • Will the limited price $1.60 3.1% consensus is 2.9% $1.50 3% $1.422.6% projecting in 2017 be $1.362.1% 2.1% $1.40 enough to counter 1.9% 2.0% 2.0% 2% 1.8% 1.8% the wing pricing? 1.3% $1.20 1%

0% $1.00 1Q13 1Q14 1Q12 1Q15 1Q16 3Q13 4Q13 3Q14 4Q14 3Q12 2Q13 4Q12 2Q14 3Q15 4Q15 2Q12 2Q15 2Q16 1Q17E 2Q17E 3Q16E 4Q16E

Price Change Wing Cost Per Pound

Sentiment Earnings EBITDA Shares Equity Net Enterprise Short Dividend Ana lyst % Change NTM % Change EV/ NTM Net Debt/ Name Ticker Price Out Value Debt Value Interest Yield Rating FY1 FY2 YoY P/E FY1 FY2 YoY EBITDA EBITDA Quick Service Restaurants Restaurant Brands International Inc QSR $ 44.83 234 $ 10,481 $ 7,734 $ 23,195 2.2% 1.4 1.7 $ 1.53 $ 1.77 15.2% 26.1x $ 1,850 $ 2,016 9.0% 11.8x 4.2x Wendy's Company WEN $ 10.87 261 $ 2,840 $ 2,116 $ 4,956 10.2% 2.2 1.6 $ 0.40 $ 0.44 10.6% 25.2x (1) $ 396 $ 392 (1) -1.2% 12.6x 5.3x Arcos Dorados Holdings, Inc. Class A ARCO $ 6.20 131 $ 810 $ 509 $ 1,320 0.2% 0.0 2.0 $ 0.31 $ 0.26 -16.9% 22.8x $ 194 $ 234 20.8% 8.0x 2.6x Popeyes Louisiana Kitchen, Inc. PLKI $ 51.71 21 $ 1,100 $ 106 $ 1,206 6.8% 0.0 1.6 $ 2.09 $ 2.48 18.6% 21.5x $ 87 $ 96 10.7% 12.7x 1.2x Carrols Restaurant Group, Inc. TAST $ 12.77 36 $ 458 $ 195 $ 652 4.7% 0.0 1.0 $ 0.61 $ 0.60 -2.6% 21.2x $ 93 $ 100 6.8% 6.6x 2.1x Yum! Brands, Inc. YUM $ 86.16 367 $ 31,621 $ 4,415 $ 36,098 1.5% 2.4 1.7 $ 3.71 $ 4.20 13.4% 21.0x $ 3,041 $ 3,241 6.6% 11.3x 1.5x Jack in the Box Inc. JACK $ 97.15 33 $ 3,175 $ 890 $ 4,064 6.0% 1.2 1.4 $ 3.73 $ 4.71 26.3% 20.4x $ 325 $ 365 12.2% 11.1x 2.7x Fiesta Restaurant Group, Inc. FRGI $ 27.30 27 $ 735 $ 66 $ 801 8.6% 0.0 1.5 $ 1.32 $ 1.44 9.8% 19.2x $ 96 $ 107 11.3% 7.6x 0.7x McDonald's Corporation MCD $ 111.25 853 $ 94,937 $ 22,882 $ 117,819 1.3% 3.4 1.5 $ 5.55 $ 6.13 10.6% 18.5x $ 9,326 $ 9,643 3.4% 12.3x 2.5x Sonic Corp. SONC $ 25.52 48 $ 1,213 $ 492 $ 1,705 11.7% 1.7 1.5 $ 1.29 $ 1.44 11.7% 17.4x $ 170 $ 171 0.3% 10.0x 2.9x Bojangles, Inc. BOJA $ 16.05 36 $ 583 $ 193 $ 777 1.4% 0.0 1.4 $ 0.90 $ 0.98 8.9% 16.6x $ 79 $ 86 8.4% 9.2x 2.4x

Average 5.0% 1.1 1.5 20.9x 10.3x 2.6x Casual Dining Wingstop, Inc. WING $ 28.89 29 $ 830 $ 73 $ 903 11.0% 0.0 1.2 $ 0.56 $ 0.63 11.8% 46.9x $ 34 $ 39 15.0% 23.9x 2.2x Bravo Brio Restaurant Group, Inc. BBRG $ 4.80 15 $ 70 $ 42 $ 112 1.7% 0.0 2.0 $ 0.16 $ 0.17 5.3% 29.4x $ 26 $ 27 1.7% 4.2x 1.6x Chuy's Holdings, Inc. CHUY $ 26.37 17 $ 443 $ (14) $ 429 14.0% 0.0 1.7 $ 1.08 $ 1.20 11.4% 22.4x $ 43 $ 49 14.6% 9.0x -0.3x Buffalo Wild Wings, Inc. BWLD $ 138.90 18 $ 2,542 $ 63 $ 2,605 11.2% 0.0 1.6 $ 5.71 $ 6.82 19.5% 21.0x $ 310 $ 351 13.5% 7.6x 0.2x Texas Roadhouse, Inc. TXRH $ 38.29 70 $ 2,697 $ (45) $ 2,661 8.0% 2.0 1.9 $ 1.77 $ 2.02 14.1% 19.4x $ 268 $ 301 12.6% 9.0x -0.2x Dave & Buster's Entertainment, Inc. PLAY $ 40.51 42 $ 1,704 $ 267 $ 1,971 11.4% 0.0 1.2 $ 1.94 $ 2.24 15.6% 18.8x $ 236 $ 269 13.8% 7.6x 1.1x Cheesecake Factory Incorporated CAKE $ 50.93 48 $ 2,449 $ 12 $ 2,461 14.7% 1.9 1.9 $ 2.75 $ 2.97 8.2% 17.4x $ 284 $ 294 3.6% 8.4x 0.0x BJ's Restaurants, Inc. BJRI $ 35.42 24 $ 856 $ 68 $ 924 6.6% 0.0 1.9 $ 1.84 $ 2.11 14.8% 17.2x $ 132 $ 144 9.3% 6.5x 0.5x Del Frisco's Restaurant Group, Inc. DFRG $ 13.90 24 $ 327 $ (1) $ 326 3.0% 0.0 1.7 $ 0.80 $ 0.88 9.7% 16.1x $ 46 $ 50 8.6% 6.6x 0.0x Darden Restaurants, Inc. DRI $ 63.03 123 $ 7,758 $ 326 $ 8,083 8.7% 3.6 1.7 $ 3.93 $ 4.30 9.4% 15.5x $ 987 $ 1,038 5.1% 8.0x 0.3x Brinker International, Inc. EAT $ 50.25 55 $ 2,760 $ 1,086 $ 3,846 10.6% 2.7 1.8 $ 3.47 $ 3.84 10.7% 14.0x $ 462 $ 470 1.8% 8.3x 2.4x Red Robin Gourmet Burgers, Inc. RRGB $ 42.65 13 $ 567 $ 279 $ 845 9.3% 0.0 1.8 $ 3.16 $ 3.45 9.3% 12.6x $ 148 $ 158 6.4% 5.4x 1.9x DineEquity, Inc. DIN $ 78.38 18 $ 1,428 $ 1,254 $ 2,681 2.8% 4.7 1.4 $ 5.99 $ 6.40 6.9% 12.4x $ 266 $ 273 2.6% 9.9x 4.7x Fogo de Chao, Inc. FOGO $ 11.40 28 $ 321 $ 129 $ 452 1.7% 0.0 1.6 $ 0.86 $ 0.94 10.0% 12.3x $ 55 $ 62 11.3% 7.5x 2.3x Bloomin' Brands, Inc. BLMN $ 17.18 112 $ 1,923 $ 1,136 $ 3,073 3.8% 1.6 1.4 $ 1.34 $ 1.54 14.9% 11.5x $ 453 $ 457 1.1% 6.8x 2.5x Ruby Tuesday, Inc. RT $ 3.10 60 $ 187 $ 155 $ 341 6.2% 0.0 0.0 $ - $ - 0.0% 0.0x $ - $ - 0.0% 0.0x 0.0x Average 7.8% 1.0 1.5 17.9x 8.0x 1.2x

225 17

215 16

205 15

195 14

185 13 175 12

Share Price Share 165 11

155 Short Interestof Float %

10 145

135 9

125 8 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Share Price % Short Interest

100% 0% $250 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 8% 7% 7% 7% 7% 7% 7% 7% 8% 7% 7% 90%

80% $200 35% 35% 36% 33% 36% 39% 45% 40% 38% 43% 43% 44% 44% 41% 41% 41% 38% 70% 42% 44% 44% 44% 52% 48% 50% 50%

60% $150

50%

40% $100

63% 30% 61% 61% 60% 58% 60% 57% 55% 56% 54% 52% 52% 52% 52% 50% 52% 52% 52% 48% 48% 44% 48% 44% 20% 43% 43% $50

10%

0% $0

Buy+Overweight Hold Sell+Underweight Target Price Actual Price

DATA SOURCE: FACTSET. UPDATED ON 10.17.16. © Hedgeye Risk Management LLC. All Rights Reserved. 74 ACTIVIST TIMING CONSIDERATIONS BULLET PROOF RATING OF 1.25/10 VS. S&P500 AVG. OF 3.33 According to data tracked by FactSet, activist investors are showing no signs of slowing down in 2016. So far this year (through August 4th), 207 activist campaigns were launched against companies incorporated in the United States, which is only slightly off the pace set last year through the same time period (214 campaigns). Overall, 82% of targeted stocks increased in value one day prior to activist arrival to one day after; average return of target through campaign length exceeded that of S&P 500 and industry peer

PROXY TIMING • Last annual Meeting Date: 05-12-2016 (next annual meeting date yet to be disclosed) • Proposals in Company's Proxy (SEC Rule 14a-8) - Must be received by: 12-02-2016 • Proxy Fight Proposals or Nominations - Must be received by: Between January 12th -Feb 11th 2017 • No current shareholder votes to amend the charter or bylaws are pending

BOARD DETAILS • Annually elected directors • Plurality vote standard to elect directors with resignation policy • Board is authorized to increase or decrease the size of the board without shareholder approval • Directors may be removed with or without cause by a majority of the shares entitled to vote (default Minnesota state statute) • All vacancies on board are filled by remaining directors, including vacancies as a result of removal or an enlargement of the board

VOTING DETAILS • Cumulative voting is prohibited in the election of directors • Unanimous written consent • Special meetings can only be called by shareholders holding not less than 10% of the voting power • Advance Notice Text: For proposals and nominations to be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the corporation no earlier than the close of business on the 120th day and no later than the close of business on the 90th day prior to the first anniversary of the preceding year's annual meeting

OTHER DETAILS • Blank check preferred stock • Board is authorized to adopt, amend or repeal bylaws without shareholder approval. However, the board shall not make or alter any bylaws fixing a quorum for meetings of shareholders, prescribing procedures for removing directors or filling vacancies on the board, or fixing the number of directors or their classifications, qualifications or terms of office, but the board may adopt or amend a bylaw to increase the number of directors • No shareholder rights plan in place

•1 The company formally announces it has hired a firm to look at potential strategic alternatives including franchising company owned stores

2• The company recognizes the importance of Marcato and invites them to join the Board of BWLD (They have already begun doing some of the things they Marcato requested!)

3• The company announces they are going to sell the non-core brands

4• Company announces they will focus on cutting corporate G&A

5• Company announces they are going to cut growth capital spending in 2017- 2018 and use the incremental free cash flow to start paying a dividend

6• The Board approves a bigger stock repurchase program

Key Points Risks To The Short

The macro backdrop gets progressively •1 Two-ways to win: as the game continues •1 to be played, the stock will react worse according to which side is winning • Activist loses interest and goes away, 2 alleviating the pressure on the 2• BWLD remains a strong brand with national presence and a differentiated management team to make meaningful concept change

3• Misguided initiatives have been a core reason for the stocks underperformance in the LTM period, but these issues can be corrected