Famous Dave’s of America named Joseph Jacobs, the co-founder of hedge fund Wexford Capital, its new chairman amid a board shakeup in which former CEO Ed Rensi resigned as a company director.
Jacobs and Richard Shapiro, a partner at Wexford, were named as directors just weeks after the activist investor announced it had bought 19 percent of company stock and indicated an intent to get involved in the company.
As part of the shakeup, former chairman David Mastrocola, director Brett Heffes and Rensi all resigned from the board. Rensi’s departure came less than a month after he resigned as CEO.
“Famous Dave’s is a company with a great heritage and spectacular products in a growing sector,” Jacobs said in a statement announcing his and Shapiro’s appointment late Tuesday. “We are very enthusiastic about the company’s prospects for growth and I look forward to working with the other members of the board to improve the company’s business.”
Dave’s stock is up 7 percent today on news of the board changes.
“This is an important time for Famous Dave’s, and we are excited to work with the company and the board to help position the company for future growth and success,” Shapiro said in a statement.
The shakeup comes amid a whirlwind 18 months at the Minneapolis-based barbecue chain, which has been beset by several activist investors in recent years, who were given positions on the board.
Rensi, former CEO of McDonald’s USA, was named to Famous Dave’s board in January 2014 and was named CEO of the 184-unit chain in February. His arrival coincided with major changes to the board and company management. The company’s stock skyrocketed as investors bet Rensi’s background would bring a quick turnaround, but profits fell and sales struggled. Entering today, the stock was down 31 percent this year, reverting back to pre-Rensi levels.
Wexford, a hedge fund based in Greenwich, Conn., with $3.5 billion in assets under management, quickly amassed 19 percent of Dave’s stock, making Wexford by far the largest shareholder in a company dominated by large shareholders.
Mark Smith, analyst at Feltl & Company, said that the five largest shareholders at Famous Dave’s own more than 50 percent of the company’s shares available for purchase, and the 10 largest own more than 90 percent.
Wexford filed as an activist investor in June and was quickly given two seats as the other three resigned. Wexford was the fifth activist to take a position at the company in the past three years.
The addition of Jacobs and Shapiro to the board, and the subtraction of Rensi and Heffes in particular, means that all five members of Famous Dave’s board of directors work for hedge funds that have activist positions in the company — at least until the company names a permanent CEO.
Famous Dave’s interim CEO is board member Adam Wright, who founded Blue Clay Capital Management, another activist that took a 6 percent position in Famous Dave’s.
In the same announcement about the board changes, Wright suggested some reversals to moves made in recent months.
“Our focus is on what has made us famous from the start, offering our guests legendary pit barbecue that has won over 700 national awards,” he said. “At company-owned stores, we are improving our guests’ experience by reintroducing iconic items like our corn bread muffins, increasing portion sizes, and adding affordable new menu items for the entire family made from scratch daily.”
Smith said that Rensi had started making changes in the brand that took away from the chain’s barbecue roots, and franchisees didn’t like those changes — items like small plates, flatbreads and tacos. “Things that are not core barbecue items,” he said. “Franchisees didn’t like the ideas.”
Smith said franchisees should feel much better about the ideas Wright suggested because they adhere more to the chain’s strengths.
One challenge the company faces, however, is that the chain has yet to name its new, permanent CEO. Wright is the sixth CEO that has taken over Famous Dave’s since Dave Goronkin left the company in 2007. The permanent CEO could have different ideas.
“They’ve had a revolving door at CEO,” Smith said. “It’s been an issue going back a decade. It’s been tough for them to get somebody good and keep somebody good.”
Contact Jonathan Maze at [email protected]
Follow him on Twitter: @jonathanmaze