Famous Dave's of America, Inc. reported financial results for the third quarter ending October 2.
Highlights for the third quarter of 2016 as compared to the third quarter of 2015:
Comparable sales for company-owned restaurants open 24 months or more decreased 1 percent compared to a decrease of 9.1 percent for the same period in 2015.
Franchise royalty revenue remained flat at $4.3 million primarily reflecting a net new four franchise-operated restaurants since the end of the third quarter of fiscal 2015, completely offset by a comparable sales decrease of 3.8 percent.
Restaurant-level operating margin at company-owned restaurants increased 40 basis points primarily as a result of a year over year decline in labor and benefit costs partially offset by sales deleverage on operating expenses.
General and administrative expenses increased from approximately $4.1 million to approximately $4.5 million for the third quarter of 2016. This year over year increase was a result of a settlement agreement, costs incurred for franchise related matters, and stock-based compensation expense partially offset by declines in severance and travel costs.
During the third quarter of fiscal 2016 the company incurred approximately $3.6 million of asset impairment, estimated lease termination, and other closing costs. Included were approximately $3.4 million of restaurant impairment charges. This compares to $650,000 of asset impairment, estimated lease termination, and other closing costs recorded in the third quarter of fiscal 2015.
Mike Lister, CEO, says, “The board and management team continues to operate with a strong sense of urgency and focus on improved performance. Having our company-owned restaurants post the best comparable sales performance in 12 quarters helps validate and energize our team’s commitment to the four key priorities of revitalizing sales and traffic, reducing costs, elevating organizational effectiveness, and rebuilding culture. Collectively, the entire brand is very excited at the opportunity to return Famous Dave’s of America to long term Famous performance.”
Famous Dave's ended the quarter with 176 restaurants, including 37 company-owned restaurants and 139 franchise-operated restaurants, located in 32 states, the Commonwealth of Puerto Rico, Canada, and United Arab Emirates.
Restaurant Impairment
During the third quarter of fiscal 2016, the company recorded approximately $3.4 million in asset impairment charges associated with 11 restaurants, which were slow to respond to several initiatives to turnaround operating performance. As a result, the company determined that the estimated fair value of the assets was less than the net book value and recognized an impairment charge to reduce the related assets to the estimated fair value. As they continue to evaluate the restaurant portfolio they anticipate addressing the ongoing operation of the 11 locations impaired over the next 3 years by way of lease restructuring, lease assignment or subsequent closure at the end of their natural lease term.
