Famous Dave’s, the constantly evolving Minneapolis-based barbecue chain, is getting back in the business of operating locations.
Less than two years after declaring plans to sell all of its company stores to franchisees, Famous Dave’s has acquired 10 locations from operators in recent months. Dave’s acquired four locations in Colorado in the first quarter for $4.2 million. It has since acquired another six locations in Wisconsin, Michigan, and Ohio for $132,000.
“Our commitment to reevaluate and prudently invest in our restaurant portfolio and branding value remained a top priority during the first quarter of 2019,” said Jeff Crivello, Famous Dave’s CEO, in a statement. “We intend to strategically refresh the stores in these markets and believe that higher efficiencies at these locations will result in higher cash flows from previous levels while under franchise ownership.”
The price on the six locations, Dave’s said on Monday, represented a multiple of 0.4 times earnings before interest, taxes, depreciation, and amortization. The multiple for the Colorado locations was 3 times EBITDA. Franchisee units traditionally sell for multiples of 3-6 times EBITDA.
The 10-store acquisition represents a significant increase in company operations: A year ago at this time, Dave’s operated just 16 of its 152 restaurants.
But Famous Dave’s has been shrinking over the past year. The brand has closed 14 locations in that period, or about 10% of its restaurants.
The company itself appears to be taking some aggressive steps to regain sales under Crivello, who took over as CEO in November 2017. At 19 months, he has already bested the tenure of each of his previous four predecessors after a five-year period in which the company went through five CEO changes.
Famous Dave’s has been getting increasingly creative in its bid to regain customers and use its space more efficiently following steep declines in same-store sales in recent years that have cut the chain’s unit volumes in half.
The brand recently replaced one of its locations with a fast-casual unit and suggested other locations could do the same. It is also remodeling restaurants and refreshing the menu while toying with strategies such as virtual restaurants in a bid to put unused kitchen space to use.
The company reported a net income of $82,000, or 1 cent per share, down from nearly $1 million, or 13 cents, a year ago.
Same-store sales declined 0.7% systemwide, as a 1% decline at franchise locations offset a 1.3% growth at the chain’s company-operated restaurants.
The chain’s company-operated same-store sales point to where the brand is headed: More takeout and less dine-in business. To-go sales rose 10.2% in the quarter ended March 31, the company said Monday, while catering rose 12.6%.
To-go represented 39% of the chain’s business in the quarter, while catering was 8%. But dine-in business, which accounted for 53% of the chain’s sales, declined 5.6% in the quarter, Famous Dave’s said.
The company said its restaurant-level operating margin was -1.7%, worse than a 0.5% loss in the same period a year ago. The company said the decline was due to new initiatives at company stores, including a new menu rolled out in the fall. The company said that it expects the changes will ultimately improve food and labor costs this year.