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Famous Dave’s may close more restaurants

With soft sales, the operator plans to refranchise and close some underperforming units

Famous Dave’s of America Inc. is getting out of the business of running restaurants, even if it can’t sell them.

The Minneapolis-based barbecue chain said earlier this month that it plans to sell all 33 company-owned units to franchisees over the next year or two. But during an earnings call on Monday, Famous Dave’s CEO Mike Lister suggested that another strategy is on the table, too.

“We may close some underperforming locations,” Lister said.

Famous Dave’s has already closed four company-owned restaurants this year as weak sales sap stores of profits. 

Systemwide same-store sales fell 4.5 percent in the first quarter ended April 2, and have declined 10.8 percent on a two-year basis. Famous Dave’s reported a loss of $1.2 million, or 18 cents per share, during the quarter.

Lister said the company can no longer focus both on running a franchise system and operating its own restaurants, and would be better off concentrating on franchising. 

“We simply cannot sustain the corporate structure required to manage both our company-owned and franchise operations,” Lister said. “We believe it’s time to shift our focus to supporting our talented franchisees.”

“We believe in this strategy,” he added. “It will allow us to redirect our support center resources and greatly enhance our franchise services, which helps franchisees run their businesses.”

Refranchising has become more common in the restaurant industry over the years as companies seek the higher profits associated with franchising.

But closures have also become more common recently as companies struggle to generate consistent sales. Ruby Tuesday, Joe’s Crab Shack and Noodles & Company, among others, have closed locations over the past 12 months. 

Famous Dave’s executives said their most important strategy is to rebuild sales following a long, steep decline. 

“We must halt the softness and ultimately grow comparable restaurant sales performance,” Lister said during the earnings call. 

One way the company hopes to get customers back is by unifying its message across the system with a company-wide weekday deal called “Smoking Deals.” The promotion includes a special offer each day of the week at promotional price points.

“This marks the first nationally coordinated effort and alignment in our brand’s history,” Lister said. 

Lister also suggested that Famous Dave’s is working with employees and experts to develop a new prototype.

“We must create a compelling restaurant model for both existing and new restaurant operators to invest in,” he said.

Contact Jonathan Maze at [email protected]

Follow him on Twitter: @jonathanmaze

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