Famous Dave’s of America Inc. reported Monday that same-store sales fell 0.1 percent at company restaurants in the third quarter ended Oct. 2 — its best performance in 12 quarters.
But franchisee same-store sales fell 3.8 percent, and executives said the environment remains challenging as consumers choose less costly menu items —offsetting strong sales of to-go and catering orders.
“We benefited from strong performance in our to-go and catering lines of business, which accounted for 46 percent of company-owned restaurant sales in the quarter,” Famous Dave’s CEO Mike Lister said during an earnings call on Monday. “But, in totality, we saw continued self-selection of guests into lower-ticket menu items.”
Famous Dave’s recorded a net loss of $2.4 million, or 34 cents per share, a decrease from a profit of $708,000 or 14 cents per share, the previous year. Total revenue fell 8.5 percent in the quarter, to $25.5 million, from $27.9 million the previous year.
Much of Famous Dave’s losses in the quarter came from a $3.6 million asset impairment charge related to 11 struggling locations — meaning that the locations’ market prices are now less than what’s listed on the company’s balance sheet. Famous Dave’s has 176 locations, 37 of which are company operated.
Lister said the company expects to restructure the leases of these locations or to close them within the next three years. Executives didn’t expect to sell the locations to franchisees.
Famous Dave’s defaulted on financial requirements in the company’s credit agreement with Wells Fargo, the second time the company defaulted on its deal in a year. The company said Monday that it expects to refinance its credit deal with a different lender.
Famous Dave’s stock fell more than 4 percent on Tuesday.
“The board and management team continues to operate with the right sense of urgency, and are confident that our focus on the refreshed direction of the company, coupled with the right investments, will enable the rejuvenation of the company’s long-term performance,” Lister said.
Lister said Famous Dave’s top priority is to revitalize sales and traffic. The company has redesigned its lunch menu. Executives said they plan to invest more in marketing after conservative spending over the past year.
Additionally, Famous Dave’s plans to reduce costs by improving labor efficiency. It is also working to reduce complexity and general and administrative spending. And the chain is focusing more on service and strengthening relationships with franchisees.
Famous Dave’s is also collaborating with founder Dave Anderson to improve the menu and culture.
“Our financial results to not reflect all the recently completed and ongoing foundational work,” Lister said. “We are confident in the vitality of the brand that we are making the right and necessary investments to support its long-term sustainable success.”