Famous Dave’s will open a fast-casual prototype that may ultimately boost the chain's domestic build-out by 100 locations, company executives said Thursday.
Christopher O’Donnell, chief executive of Minnetonka, Minn.-based Famous Dave’s of America Inc., during a conference call with analysts and a follow-up interview with Nation’s Restaurant News, talked about the new company-operated counter-service prototype. He said it is a conversion of a 3,000-square-foot shuttered Boston Market restaurant on a mall pad in Eden Prairie, Minn.
“I think it is important,” O’Donnell told NRN of the new development project, which just got the green light about three weeks ago. “I believe you make your best decisions when you have options that apply to today’s environment, and this is a significant opportunity for the brand to get into some second-tier markets and round out some others."
The conversion of the first-generation Boston Market “box” into the new Famous Dave’s counter-service restaurant will cost about $650,000, Diana Garvis Purcel, chief financial officer of the company, told analysts.
O’Donnell added that the prototype has the ability to do $1.5 million to $2.5 million in sales.
In comparison, in 2010, average annual sales per the 183 Famous Dave units were about $2.56 million at company-owned locations and $2.74 million among franchised operations, the company reported.
O’Donnell said that prior to the recession, ground-up construction of a full-service “smokehouse” design restaurant ran close to $3 million. Conversions were and are cheaper, he said, explaining that a company-owned restaurant now being converted from another concept in Falls Church, Va., carries about $1.2 million in development costs.
The counter-service restaurant planned for Eden Prairie was preceded by five “legacy” counter-service Famous Dave’s restaurants in Minnesota that remained true to the chain’s non-table-service beginnings, but may be larger than the 3,000-square-foot, 85-seat prototype that launched the system in 1994, O’Donnell said. He said it follows on the heels of a 2010 opening of a counter-service restaurant by a franchisee in Orange County, Calif.
Because of heightened interest in the fast-casual concept, it was no longer practical for the chain to work one-on-one with franchisees who want to develop such a restaurant, and it was time for the franchisor to create “the package,” O’Donnell said. He noted that three different franchisee groups are in conversations with the chain about moving ahead with counter-service locations.
O’Donnell also said that the fast-casual concept appeals to consumers.
“As we interview many of our guests, the counter-service [concept] does appeal to those who see it as a value because they don’t have to add the 15- to 20-percent tip,” he said. “Also, they can control their dining experience in terms of when they are ready to go, they go.”
The chain has seen recent growth in take-out and catering sales, versus its dine-in business. That was exemplified in the second quarter ended July 3 when same-store dine-in sales fell 1.7 percent at company stores, but off-premise business rose 0.5 percent, to 32.5 percent of total sales, Garvis Purcel said.
O’Donnell said that, initially, at least, the fast-casual variant will be self sufficient, in terms of producing the limited menu of core barbecue items it will sell: ribs, sliced pork, chicken and beef brisket, with a limited number of sides and salads. However, he said that in the future, depending on the market and circumstances, the chain might test an arrangement in which some counter-service locations are supplied, whether fully or partially, from a nearby full-service location.
Additional developments at Famous Dave’s:
• For the full year, fiscal 2011 food costs are expected to rise about 2.5 percent from fiscal 2010.
• In mid August, the chain will unveil new menu items and implement a 2-percent price increase on selected items. Among the new fare will be a Jalapeno Chili Roasted Corn Fritters appetizer served with honey, and hickory-smoked and grilled South Side Rib Tips, with a Memphis-style dry rub, jalapeno pickled red onions, Hellfire pickles and a new South Side barbecue sauce.
• O’Donnell gave a “rough estimate” of new restaurants to be opened during the next five years between 65 and 71. This year, the company said it would open 10 new locations, down from the 12 restaurants it previously expected to open in 2011.
Contact Alan J. Liddle at [email protected].
