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Dave & Buster’s trying smaller stores

The company believes a smaller format could expand growth potential by as much as 20%.

Dave & Buster’s Entertainment Inc. believes its future is smaller.

The Dallas-based food and games chain on Tuesday said it is planning to open smaller format locations that it believes could improve its overall growth prospects.

The locations would be 15,000 to 20,000 square feet and would enable the company to grow in smaller markets where it wouldn’t otherwise be able to put a traditional location. That’s about half the size of a typical Dave & Buster’s, which is about 40,000 square feet.

The company said it believes it could open 20 to 40 of these locations, which would improve its growth opportunity by 10% to 20%. The company’s target is 211 locations in the U.S. and Canada. The chain plans to open two of these locations next year.

The company’s announcement came as it reported a same-store sales decline of 1.3% in the third quarter ended Oct. 29. Dave & Buster’s said that hurricanes during the period hurt same-store sales by about 50 basis points while also hurting revenues and profits.

The biggest challenge for the chain is its food. The company said that same-store food and beverage sales declined 4.2% in the quarter.

By comparison, the games are still popular: Amusement same-store sales increased 1.1%.

Net income at the chain increased 13% to $12.2 million, or 29 cents per share, from $10.8 million, or 25 cents. Revenues increased 9.3% to $250 million, from $228.7 million.

The company currently operates 105 locations in North America.

Dave & Buster’s stock price increased nearly 6% in after-hours trading on Tuesday.

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