In the next 12 to 24 months, company-owned Famous Dave’s will be a thing of the past. But in the meantime, the chain could close additional stores, CEO Mike Lister said in a conference call.
The 173-unit chain reported comparable-restaurant sales declines of 4.8 percent at 138 franchised stores and 3.3 percent at 35 company-owned locations in the first quarter ended April 2. Two of those company owned stores shuttered in the quarter while one franchise restaurant closed. More could be on the way.
“In addition to refranchising we may close some underperforming locations,” Lister said. “… We fully believe in this strategy. It will allow us to redirect our support center resources and capabilities and greatly enhance our franchise services, which helps our franchisees better run their businesses.”
Famous Dave’s announced earlier in May its plan to accelerate the company’s refranchising strategy. In the first quarter of 2016, the chain refranchised seven company-owned stores in the Chicago area. Lister said the company can’t sustain the corporate structure required to effectively manage company and franchised stores and believes shifting focus is the correct path for the brand.
“This will permit the company to shift its resources and energy to the growth and viability of its franchise system, which is paramount to its success,” Famouse Dave’s said in a release.
Lister added that Famous Dave’s will look at existing franchisees as well as new targets to acquire these restaurants, as well as develop additional ones.
“It’s also possible that some of our current corporate employees and general managers could become franchisees of our brand,” he said.
Sales have declined 10.8 percent on a two-year basis for Famous Dave’s. Total revenue for the first quarter was 22 million, a drop of 6.4 percent year-over-year. As of May 15, there were 33 company-owned locations and 135 franchises in 32 states, Puerto Rico, Canada, and United Arab Emirates.
Famous Dave’s also announced that former Burger King Canada president Eric Hirschhorn joined its board of directors.
To turn around sales, in addition to the refranchising strategy, Lister said the company conducted consumer researched studies to understand what drives traffic into the stores, and what’s keeping guests away. Lister said guest satisfaction scores increased around 11 percent since 2015, which was right before the company implemented menu and guest experience changes. “We believe this significant improvement in brand health suggests that we’re on track to restore this brand to grow,” he said.
A lower check average hurt comparable sales, chief financial officer Dexter Newman said. This was driven by Famous Dave’s growing off-premise business, which represents 43 percent of overall sales. The company also hasn’t had a formal price increase since October 2013.