Firstly, why is Famous Dave’s getting skin in the game again? The eight stores it just purchased are slated for upgrades and relaunches. In Q1, the brand spent $4.2 million to reacquire four restaurants in Colorado. It then added six more, including shops in Wisconsin, Michigan, and Ohio, for $132,000.
Famous Dave’s has spent $5.7 million during the first half of 2019 on repurchasing franchises, as well as updating corporate locations.
In each case, the deals are innovation accelerators for recent changes, from décor to menu. Also, and this can’t be understated, once refreshed, Famous Dave’s has direct and tangible examples to showcase to franchisees. Success stories to inspire investment back into the business.
When Famous Dave’s first pushed its remodel effort in 2018, it was slow to gain traction. Previous reports said operators would need to fork up between $100,000–$300,00 to update stores, and it could take about two years to recover investment. According to Maxim Group research analyst Stephen Anderson at the time, some franchisees were hesitant to make changes given the revolving door of CEOs and past management missteps. But Famous Dave’s head Jeff Crivello, formerly CFO of PW Partners Capital Management, instilled stability at the top. Crivello took the helm in November 2017 and has now directed Famous Dave’s longer than the four executives who came before him—the brand cycled through five CEO changes in five years.
Consistent direction is always a positive, but running profitable stores from the trenches is hard to rival.
Crivello recently told The Star Tribune that a franchisee with five stores in Seattle and Utah saw a 20 percent lift after updating.
In Q2, Famous Dave’s same-store sales increased 0.4 percent. Notably, comps lifted 0.7 percent at domestic franchises, marking only the second time in eight years they’ve moved in a positive direction.
“In 18 months, we’ve done a 180,” Crivello says. “It’s really exciting to be the owner/operator of these restaurants and prove out the evolutionary vision that I have for the company.”
In certain cases, Famous Dave’s is buying back stores because franchisees don’t have the resources to make changes. Not at the level of the company at least. Attrition came into play, too.
“The restaurant business is extremely difficult,” Crivello says. “Extremely tiresome. It’s a seven day a week thing. So, after 10–15 years, some restaurateurs don’t have energy to go to that next evolutionary cycle. We’re excited to take the reins from them and put the resources necessary into the restaurants, and the effort necessary, to make them successful for the next 10–15 years.”
This tightening of Famous Dave’s footprint has progressed over the last couple of years. It’s down to 136 restaurants from 150 on July 1, 2018. There were 176 restaurants in October 2016.
Q2 revenue increased to $21.1 million from $14.5 million in the comparable period. Famous Dave’s earned $1.44 million, adjusted for ongoing profits—a 15 percent drop from $1.7 million, year-over-year. Adjusted per-share profit was 16 cents, which sailed analyst forecasts of 7 cents.