Famous Dave’s is in the midst of a new growth phase.
Construction has begun on two prototypes. One is a line-service model in Coon Rapids, Minnesota, set to debut in September. The other is a drive-thru scheduled to open in Salt Lake City in July. Five brick-and-mortar stores and 15 ghost kitchens are also in the pipeline.
Those plans have been in the bank for weeks. What’s different now is that Famous Dave’s is operating in a positive sales environment, giving the brand all the more confidence in their overall strategic plan. Compared to 2019, the chain’s same-store sales decreased 1.2 percent in February, but grew 9.5 percent in both March and April. And just to show how far it’s come compared to the pandemic last year, comps lifted 117.4 percent in March year-over-year and 371.2 percent in April.
Granite City, the 18-unit brewery chain purchased by Famous Dave’s parent BBQ Holdings last year, is witnessing a much slower recovery. The brand’s same-store sales decreased 28.4 percent in February compared to 2019, and dropped 16.9 percent in March and 19.6 percent in April.
As of April 4, BBQ Holdings had 100 franchised Famous Dave’s units and 47 company-owned stores (27 Famous Dave’s, 18 Granite City, one Real Urban Barbecue, and one Clark Crew BBQ).
“While we still operate under certain state capacity and distancing restrictions throughout the country, we were pleased to see those restriction begin to ease in mid-late January as business began to return to a more normal environment,” CEO Jeff Crivello said in a statement. “This has been especially helpful to Granite City as a brand that relies on dine-in customers and we have seen their sales quickly move closer to 2019 levels. Famous Dave’s continues to accelerate its overall sales as it has through the pandemic with its strong to-go business.”
BBQ Holdings is following three main corporate initiatives as it heads through the rest of 2021. One of these is proving high return on investment for the new line service prototype, with an objective to increase capital light Famous Dave’s franchised units and raise high margin recurring royalty revenue.
Another is to drive revenue through a dual concept format. To achieve this goal, Famous Dave’s signed a 25-unit agreement to open ghost kitchens and dual concepts with Italian chain Johnny Carino’s. The barbecue chain also has dual concept deals in place with Texas T-Bone Steakhouse in Colorado Springs and Cowboys Jack’s steakhouse in Woodbury, Minnesota. That’s not all either; some Famous Dave’s ghost kitchens inside Granite City stores will transform into dual concepts, as well. Other Granite City locations could combine with a high-end breakfast chain that sells alcohol.
The motivation behind this strategy is that BBQ Holdings feels it can absorb excess capacity at existing large restaurants. For instance, Famous Dave’s 6,500-square-foot boxes are designed to execute higher AUVs than the current $2.7 million, and Granite City’s kitchens were meant for roughly $6 million in AUV, as opposed to the current $3.8 million to $3.9 million.
The third strategy is to be “opportunistic with accretive M&A.” BBQ Holdings said in April that is has a “vision to build a diverse portfolio of established food and beverage concepts” and that it’s “currently analyzing multiple opportunities.” Its parameters include: legacy brands, franchise systems with growth potential, consumer packaged goods sold in retail, expertise in digital marketing, and accretive acquisitions (2-3x EBITDA) that fold into the current infrastructure. In 2020, BBQ Holdings purchased Granite City out of bankruptcy. Not too long after, the company bought a Real Urban barbecue restaurant in Vernon Hills, Illinois.
For BBQ Holdings, adjusted EBITDA was $3.1 million in Q1, which includes $400,000 in COVID-related expenses, versus a loss of $400,000 last year. Net income was $799,000 versus $13.7 million in 2020. The company also earned restaurant level margins of 9.1 percent compared to –1.9 percent last year.
Based on Q1 results, the company is forecasting the following: net revenue from $150 million to $155 million or $155 million to $160 million, net income of $1.7 million to $2.1 million or $2.8 million to $3.2 million, and cash EBITDA from $8.5 million to $9 million or $10 million to $10.5 million.