Famous Dave's of America, Inc. reported financial results for the second quarter ending July 2, 2017.
Highlights for the second quarter of 2017:
- Franchise-operated comparable restaurant sales improved to (3.2 percent) from (4.3 percent) in the second quarter of fiscal 2016
- Company-owned comparable restaurant sales improved to (2.2 percent) from (6.4 percent) in the second quarter of fiscal 2016
- General and administrative expenses decreased by approximately $1 million, from the second quarter of fiscal 2016
- Generated cash from continuing operations of $2.2 million, an increase of $1.2 million, from the second quarter of fiscal 2016
- Opened one franchise-operated restaurant and closed one franchise-operated restaurant
- Closed three company-owned restaurants
Total revenue for the second quarter of 2017 was $25.3 million, down 8.8% from the second quarter of 2016. The decrease in Company-owned net restaurant sales revenue was primarily driven by a comparable sales decline of 2.2% and the net closure of five restaurants since the end of the second quarter of fiscal 2016. The declines in franchise royalty and fee revenue were driven by a comparable sales decline of 3.2 percent and the net closure of seven franchise restaurants since the end of the second quarter of fiscal 2016, partially offset by franchise fee revenue earned in the second quarter of 2017 related to one franchise-operated restaurant that opened in the second quarter.
Restaurant-level operating margin for company-owned restaurants was 8.2 percent, a decrease from 9.5 percent in the second quarter of 2016. The decline was primarily driven by sales deleverage on fixed labor and operating costs, partially offset by lower food and beverage costs.
General and administrative expenses decreased to $3.5 million from $4.5 million in the second quarter of 2016. The year over year decline was primarily a result of the continued optimization of our general and administrative structure to be commensurate with that of a dedicated franchisor, a decline in professional fees and reduced costs incurred for franchise-related matters.
Net (loss) income from continuing operations was a loss of $1.3 million, or ($0.18) per share, compared to income of $113,000, or $0.02 per share, in the second quarter of 2016. In the second quarter of 2017, we recorded $3.5 million of asset impairment, estimated lease termination and other closing costs primarily related to our restaurant optimization plan, including seven impaired and three closed Company-owned restaurants.
Adjusted net income from continuing operations, a non-GAAP measure, decreased to $1.1 million, or $0.16 per share, compared to $1.4 million, or $0.19 per share, in the second quarter of 2016. A reconciliation between adjusted net income and its most directly comparable GAAP measure is included in the accompanying financial tables.
Refranchising and Restaurant Optimization Plan
On May 2, the company announced its plans to accelerate the refranchising and optimization of its company-owned restaurants over the next 12 to 24 months. This will permit the company to shift its resources and energy to the growth and support of its franchise system, which are paramount to the company’s success. The company closed three underperforming restaurants during the quarter and an additional three restaurants subsequent to the end of the quarter. As noted above, the company recognized impairment charges during the quarter related to seven restaurants that the company believes will be closed in connection with this plan.
Mike Lister, CEO, says, “While there is clearly still more work to do, I am proud of the progress that we made in the second quarter of 2017. We continue to execute on our refranchising and restaurant optimization plan as well as address our general and administrative expense structure. As a management team, we are committed to this strategic path that allows us to focus our energy on helping our franchisees run their businesses.”
Famous Dave’s develops, owns, operates and franchises barbeque restaurants. Its menu features award-winning barbequed and grilled meats, a selection of salads, sandwiches, side items, and made-from-scratch desserts. As of August 14, 2017, the Company owns 29 locations and franchises an additional 135 restaurants in 32 states, the Commonwealth of Puerto Rico, Canada, and United Arab Emirates.
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