In this FDD Talk 2016 post, you’ll learn the following:
- Section I – Background information on the Famous Dave’s franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Famous Dave’s franchise, based on Item 7 of the company’s 2016 FDD
- Section III – Presentation and analysis of Famous Dave’s financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
- 2015 average annual net revenues and weekly net revenues for the company-owned and franchised Famous Dave’s Restaurants open all of fiscal year 2015, by three sales ranges: below $2.0 million, $2.0 million to $3.0 million, and above $3.0 million
- 2015 average annual net revenues, weekly net revenues, cost of goods sold, labor and benefit costs, gross profit, operating costs, operating margin before occupancy costs and depreciation, royalty fees, and adjusted operating margin before occupancy costs and depreciation for the company-owned Famous Dave’s Restaurants open all of fiscal year 2015, by three sales ranges: below $2.0 million, $2.0 million to $3.0 million, and above $3.0 million
- 2015 average weekly net revenues for the company-owned and franchised Famous Dave’s Restaurants open for the entire fiscal year 2015, by region: Northeast, Midwest, South, and West
- 2015 average, low, and high net revenues for the franchised Famous Dave’s Restaurants that opened prior to 2004, for each year from 2004 to 2014, and for all franchised Restaurants open all of fiscal year 2015
- 2015 average, low, and high net revenues for the company-owned Famous Dave’s Restaurants that opened prior to 2004, for each year from 2006 to 2013 (except 2009), and for all company-owned Restaurants open all of fiscal year 2015
Section I – Background Information
Namesake Returns to Famous Dave’s; Another New CEO Joins Team
Famous Dave’s is going back to basics to try to lure customers back, including bringing back founder Dave Anderson, who left the company in 2014 but is back and looking to fuel growth again as a creative consultant.
The company also changed its CEO for the fourth time in four years, bringing in Mike Lister in October 2016 to replace Adam Wright, who had only been in the position for a little more than a year.
Lister has 35 years of experience in the restaurant industry, 19 of them with Famous Dave’s. He was senior vice president of operations from 1997 to 2001, when he became a franchisee. He operates one of the company’s most successful franchise groups.
Wright had inherited some backlash from the actions of former CEO Ed Rensi, who had toyed with the menu, reducing portion sizes, cutting the chain’s popular cornbread from the menu, and planning new dishes to target younger diners, along with expensive renovations that did not go over well with franchisees.
Chain Admits Problems With Menu Changes
In August 2015, two months after Rensi abruptly departed, Famous Dave’s reported a sharp drop in second-quarter profit and admitted that the menu changes caused problems.
“The changes included smaller portions, different plateware and changes to iconic items such as cornbread muffins and other poor decisions,” the company said in a press release. “Ultimately, the significant changes made by prior management were not received well by our guests, extended beyond the restaurants and led to this poor second quarter.”
Among other leadership changes, Famous Dave’s in April 2016 hired former Best Buy Co. Inc. financial executive Dexter Newman as chief financial officer, replacing Richard Pawlowski.
Famous Dave’s has about 180 restaurants in 32 states, Puerto Rico, Canada and United Arab Emirates. The chain, which had 200 locations in 2012, dropped off Entrepreneur’s Franchise 500 list after achieving a ranking of No. 187 in 2013, its best ranking since 2007’s No. 177.
Making Things Right
Famous Dave’s in 2015 started reversing some of the unpopular changes, including increasing portion sizes, placing sauces on tables again, bringing back the original tableware, and returning the beloved cornbread muffin to the menu.
In September 2016, Famous Dave’s spiced up its Maple Grove, Minnesota, location with bold changes such as remodeling and a new logo for its mascot, Wilbur the pig. Next up was a Bloomington, Minnesota, location in October.
The two restaurants got new menu items that stemmed from Anderson’s win on “Smoked,” Destination America’s reality show and barbecue competition. New offerings include boar sausage sliders, boar sausage links and a Zesty Pork Loin and Blue Ribbon Broccoli Salad, all of which were created for the competition.
Choose a Favorite or a Feast
Famous Dave’s smokes meats over a smoldering sweet hickory fire for as long as 12 hours, enhanced with the brand’s secret seasonings and slathered with Famous Dave’s sauces.
The chain focuses heavily on barbecued meats and sauces, from ribs to brisket to chicken to fish to sandwiches, along with combos for those who don’t know what to order and feasts for those who love to share a heaping table of barbecued meats and sides. The sides are creative and range from coleslaw with a horseradish kick to barbecued chips and collard greens.
Dave is the Face of Famous Dave’s Again
Anderson is again the face of Famous Dave’s, dressing in black and wearing a fedora in photos for the chain’s Wall of Fame. He told the Star Tribune of Minneapolis that the look is reminiscent of his youth growing up on the south side of Chicago.
“Chicago is where the barbecue and blues in me comes from,” he said.
Also among the changes is a new takeout area designed to be more defined for the on-the-go diners Famous Dave’s is trying to reach. It’s still, of course, putting heavy focus on its sit-down diners as well.
The chain is also trying out humorous slogans on its signs and T-shirts. A sign at the exit reads “Until we meat again,” and T-shirts are adorned with phrases such as “Our pitmasters do it low and slow.”
In addition to serving food, the chain also sells packaged barbecue sauce, pickles, seasonings, corn bread mix, hot sauce, bloody Mary mix and marinades, including variety packs.
First Restaurant Sparked Winning Barbecue Sauce
Famous Dave’s was founded in Hayward, Wis., in 1994, and Anderson won first place in the American Royal Barbecue Contest in Kansas City, Missouri, in 1995 for his Rich & Sassy Sauce. Also that year, he opened a second location in the Linden Hills neighborhood of Minneapolis, Minnesota, with a building designed to look like a roadside stand.
The original location was destroyed by fire on Nov. 3 and had not yet reopened; the second location closed in 2014.
The third location, which remains, opened in 1996 in the Calhoun Square in the Uptown neighborhood of Minneapolis. Designed as a blues club, it was called Famous Dave’s BBQ & Blues. The company started franchising in 1998.
Anderson, who is of Choctaw and Ojibwe heritage, served as the assistant secretary of the Interior for Indian Affairs from 2004 to 2005. He grew up in Chicago and on reservations in Wisconsin and now lives in Edina, Minnesota. Anderson is a busy speaker with dates around the country. He has also written several award-winning books.
Section II – Estimated Costs
- Please click here for detailed estimates of Famous Dave’s franchise costs, based on Item 7 of the company’s 2016 FDD (updated).