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Famous Dave’s could become a fast-casual chain

The chain is replacing an existing unit with a fast-casual model, and many others could follow if it works, says RB’s The Bottom Line.
Photograph courtesy of Famous Dave's

the bottom line

Famous Dave’s latest effort to try a fast-casual restaurant will open early next week in Tucson, Ariz.

An operator there has closed an existing, full-service version of the barbecue chain and is replacing it with a smaller, fast-casual location with a downsized menu about 2 miles away.

If this effort works, it could pave the way for the Minneapolis-based chain to begin shifting more of its full-service locations to counter-service restaurants in the coming years, and perhaps quickly.

“This will be our best foot forward in one test,” Chief Operating Officer Geovannie Concepcion told Restaurant Business. “If it works, it will be a big deal, and we could fairly rapidly look to do more of these.”

Such a shift recognizes an unfortunate reality for the company: Sales and volumes have fallen so much that the company’s existing restaurants are too big for the demand. Dave’s system sales have fallen 17% over the past two years, according to data from Restaurant Business sister company Technomic.

Average unit volumes for the 144-unit chain are just over $2.4 million—less, for instance, than McDonald’s Corp. Yet many of its restaurants were built for twice that. “We have these 6,000-square-foot boxes, many of them with leases coming up,” Concepcion said. “With half of the business going out the door, it makes a lot more sense to shrink down that box.”

Shifting business models from full service to counter service is not unprecedented. Pizza Hut continues to shift its system toward takeout and delivery and says that shift is partly the reason for the company’s relatively weak same-store sales in the U.S. and internationally.

Such shifts can take many years and be expensive. Yet for Dave’s, it’s a solution that’s probably been a long time coming.

Barbecue-focused chains have long had a mixed history, but it’s been especially true for barbecue chains with waitstaff. The simple fact is, the demands of large boxes often force menu decisions that water down the concept and hurt business over the long term.

Existing management at Dave’s has looked under every conceivable rock in their bid to find a solution that would drive sales growth after years of declines. The company has been aggressive with delivery, for instance, and has considered using existing kitchens to fuel delivery-only concepts.

It is perhaps little surprise to see them making a more concerted run at a fast-casual concept with the long-term goal of basically converting most of the system.

To be sure, Dave’s has long tried to develop a workable fast-casual solution, and Concepcion said the chain has five such locations in its home market of Minnesota. But, for the most part, “We’ve dabbled in the past, and dabbled unsuccessfully.”

Concepcion said that the company has struggled to open counter-serve locations in markets where there are full-service locations, because it confuses the customers. “We know it can work, we’ve seen it work,” he said.

The location in Tucson will be about a third of the size of its preceding location. The menu will be about 30% to 40% smaller. The previous location closed earlier this year, and the new one will open not far away.

In this situation, the previous location’s lease expired. The operator was able to repurpose much of the equipment and fit it in the smaller format of the new, counter-service restaurant.

Concepcion said that the company will spend the next two quarters studying the response to the new location. If it works, he believes other locations could do the same thing, given the number of leases in the system that are nearing expiration.

“With leases coming up for a large number of locations, it’s possible you could see a very rapid conversion,” Concepcion said.

If it does work, though, he doesn’t believe that the full-service Famous Dave’s will fully go away. But Concepcion also said it’s something the company needs to consider as it works to evolve the brand and make it more efficient.

“We’re moving quick,” he said. “We’re willing to test a lot of things, learn from it and constantly adjust our approach.

“We’re a legacy brand that hadn’t really evolved in a lot of ways over an extended period of time. We have a long list of tests and different ways we’re looking at the concept, trying to solve how to get the best possible barbecue to guests in a format that ultimately makes sense.”

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