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Timing proves to be a curse for Famous Dave's parent

BBQ Holdings closed on two additions to its concept portfolio during Q1--exactly as the pandemic hit.
Photograph courtesy of Famous Dave's

The calendar hasn’t been kind to BBQ Holdings, parent of the Famous Dave’s full-service barbecue chain.  The company’s longstanding turnaround plan called for adding other concepts to its fold, and it found a sweet opportunity in the purchase of 18-unit Granite City Brewery, a brewpub chain, for about $7.5 million. The closing was set for March 10, the eve of what many regard as the start of the COVID-19 crisis in the United States.

“We closed on a Tuesday,” recalls BBQ CEO Jeff Crivello. “The next day we comped down 40%. By Monday, dining rooms were closed all over.”

The curse wasn’t shaken as Famous Dave’s and Granite City adjusted along with the rest of the industry to the limitations of social distancing. For years, the company had been eying a Chicago limited-service concept called Real Urban Barbecue, the brainchild of Lettuce Entertain You alumnus Jeff Shapiro. The operation fit BBQ’s plan to shift further into the quick-service market while staying true to its barbecue roots.

“The time was right for both us and Jeff, so we did a deal,” says Crivello. “We closed on it at the end of March.” The next month, the industry would lose $50 billion in sales because of social distancing’s impact on restaurants, according to the National Restaurant Association.

“Timing is everything in life, and timing was not on our side,” Crivello said during an interview with Restaurant Business. “We were down at the beginning about 90%, more on the Granite City side.”

But the circumstances weren’t all unfavorable. Like virtually every casual-dining brand, Famous Dave’s had to recast itself as a takeout and delivery business. “We’d been working on off-premise for three years,” says Crivello. “Before the pandemic, 52% of our sales came from off-premise. We realized we could operate 100% off off-premise.”

Granite City was altogether different. About 20% of the concept’s sales had been coming from corporate events of 20 or more guests. That was gone. Another 15% had been generated by a Sunday buffet. Bye-bye to that, too.

And delivery and takeout? “Granite City didn’t focus on that,” Crivello says. BBQ had bought the brand out of bankruptcy. “We did have a program where we said, ‘Come and fill your growlers!’”  A full to-go lineup is now touted on the brand’s website.

One of the new initiatives for Famous Dave’s was a franchisee’s fast-casual riff called Real Famous BBQ, a venture closely watched by the home office of BBQ. The “Famous” in the title is written in the same typeface used for its mother brand, but there’s no straightforward reference to Famous Dave’s.

It was the hope of BBQ that the venture would provide a way for Famous Dave’s to move away from cavernous, costly buildings and harness the efficiencies of fast casual. “We really learned the value of the Famous Dave’s name,” says Crivello. “When you’re plugged into a much larger platform, with an infrastructure, you have a lot in place. When you just start a concept, you’ve got to build all of that from scratch.”

But the scaled-down operating model of Real Famous had worked. The payoff in insights will help Famous Dave’s move toward its goal of creating a 1,500 to 2,000 square foot facility that’s virtually a takeout and delivery operation, Crivello says.

Real Urban has provided BBQ with another model promising better costs. The concept has a cafeteria-like serving line where customers select their food, pay for it, and then seat themselves in a dining-room. Famous Dave’s may retrofit at least elements of that model into units whose dining rooms have yet to reopen, “just allowing them to remain not full-service,” Crivello says. “There’s lower labor, fewer steps [for guests and staff], and higher throughput.

BBQ also intends to expand Real Urban as its own brand. “Anywhere we can drop one, we will,” says the CEO.

Much of BBQ’s turnaround effort had to be put on hold because of the pandemic. “It’s hasn’t changed. It might have been put on pause, just to keep our heads above water,” says Crivello.

But the company has preceded with its plan to use ghost kitchens. A virtual Famous Dave’s is now operating out of the kitchen of a Johnny Carino’s restaurant on the West Coast, and the Famous chain is also using a space in a Cloud Kitchen multi-brand facility in Chicago. “We’re very happy with how they’ve performed,” Crivello says.

All in all, he acknowledges, it’s still a tough slog. “There are times when there’s a jolt, and this is one of them,” he continues. “There are going to be a few units that are going to permanently closed.”

Many of the states where Famous Dave’s has a concentration of restaurants have been slow to reopen. Its key market and home state of Minnesota, for instance, just recently okayed a resumption of dine-in service. “And then we had another black swan event with the riots,” Crivello says.

Units will hit the breakeven point when sales climb to about 80% of where they were a year ago, and “we’re not there yet,” says Crivello. He declined to reveal same-store sales for BBQ of any of his brands.

But, he adds, “dining rooms are reopening,” sales are on the climb and his priorities are clear: “Evolving back to the breakeven point; determining the permanent evolutionary shift, which is going to the smaller, counter service model; and growth.”

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