Famous Dave's Finds its Sweet Spot
This past May, Famous Dave’s turned a corner. The Minnetonka, Minnesota-based barbecue brand reported its first quarter of profitability since Q2 of 2016, posting net income of $998,000, or 13 cents per share, compared to net loss of $1.4 million in the year-ago period.
Chief executive officer Jeff Crivello said at the time that Famous Dave’s, “saw many of our previously announced initiatives come to fruition,” which was a welcomed sight and momentum builder heading into the rest of the fiscal calendar. These initiatives are nothing to gloss over, either. The past few months have been nothing short of transformational for Famous Dave’s, which traces its roots back to 1994. Back then, Barbecue Hall of Fame inductee “Famous Dave” Anderson was cooking up a lifelong dream on the shores of Big Round Lake in Hayward, Wisconsin. By the end of his first summer, he was serving as many as 6,000 people per week in a town of only 2,000. He once, as the legend goes, drove overnight to Chicago to personally return boxes of ribs to a supplier because they didn’t measure up to his standards.
But these kinds of tales are hard to write in the multi-unit chapter of Famous Dave’s history. Crivello, the chief financial officer of PW Partners Capital Management, LLC, took over as Famous Dave’s CEO in February. What Crivello recognized immediately was an efficiency gap in the operational structure of Famous Dave’s that spoke to that reality. “Barbecue is difficult as it is,” he says. “Then to be consistent through 150 restaurants—it adds even more layers of complexity.”
Barbecue is simply more sensitive to human error than most cuisines in the chain dynamic. Unlike a burger, where a worker has, say, 5 minutes to make a mistake, employees trying to prepare barbecue could be looking at a 10–12 hour window where something might go wrong. Spread that to triple-digit restaurants in multiple states and it is remarkably difficult for corporate to ensure consistency on the plate. It’s one reason barbecue chains aren’t as common as those that serve up burgers, or chicken. Beyond the operational complexities, barbecue is also regionally tattooed into consumer conscious according to zip code. Mess with that formula and you’re more likely to enrage guests than court them.
Famous Dave’s devised a solution to this roadblock: It called in the barbecue big guns.
In January, the company hired Travis Clark to a newly created role of National Pitmaster. Clark is the most decorated pitmaster in the Kansas City BBQ Society since 2013. Along with his team, Clark Crew BBQ, Clark won the title of 2017 American Royal Invitational World Champion, and has consecutively won the most KCBS awards in the past four years. This includes: KCBS Team of the Year (2017 and 2015), Rib Team of the Year, and Brisket Team of the Year. Clark’s barbecue journey logged over 160,000 miles, 160 contests, 41 Grand Championship awards, 20 Reserve Grand Championships honors, and 130 top 10 finishes.
Geovannie Concepcion, Famous Dave’s chief operating officer, says the hire was, first and foremost, about establishing credibility and making sure Famous Dave’s food was award-worthy. Yet it was also centered on consistency. “In our business we’ve got to satisfy our guests and our franchisees, and that’s always a delicate balance,” he says. “And we’re doing barbecue food. Travis, he’s helping franchisees with consistency, and ultimately it’s a better product for the guest. That’s been a big piece of our focus now.”
With Clark, Famous Dave’s is building training videos and driving those processes home throughout its system. It’s similar in some ways to the partnership Famous Dave’s struck with Bar Rescue’s Jon Taffer to develop drinks.
“What we find is when we bring in someone who has a lot of credibility and experience, people will actually listen even though we’ve been harping on some of the same things for a long time,” Concepcion says. “Travis definitely has the credibility and influence to drive that change.”
The food needed to go back to basics, Crivello says. Over the years, it has traversed from version 1 through 5. They took a look and realized the most consistent and positively received product came at the outset. Clark looked at this, too, and realized it wasn’t so much Famous Dave’s processes that were creating disconnect; It was more about enhancing a “continuing education process,” that could bring Famous Dave’s barbecue back to what worked in the early days.
Famous Dave’s unveiled what it labeled “founder-inspired brand initiatives” in April intended to “elevate its franchise offerings.” This included 23 new menu items curated by “Famous Dave” Anderson himself.
Featured in the new menu: Hillbilly Hubcaps, Cajun-seasoned fried jalapeño slices served with rémoulade sauce and Burnt Buttz, a smoked pork that is flash-fried and griddled in blackberry barbeque sauce. Famous Dave’s created a new value menu as well, which showcased a mix of barbecue and non-barbecue items served with smaller portion sizes at lower price points.
Also, Famous Dave’s made a visible commitment to allow its operators to customize menus to their region, with the option to select from various menu designs to provide localization in line with Famous Dave’s brand identity.
Concepcion says they asked franchisees to stick to the core tenets—chicken, ribs, brisket, and so forth—but then offered some added space to innovate. In one example, a LA franchisee cooked up tri-tip.
“It works,” he says. “I think it’s a fine balance because we’re a brand and we need that consistency. But we’re also a barbecue chain and people expect it to be regional.”
And Famous Dave’s struck a working model with all this. As Concepcion puts it, “Famous Dave” Anderson is the creative force, the artist behind the menu inspiration. Clark is on the consistency, execution side. Clark will go into markets and help the operators, and make sure they’re on the right path. Communication is always open if they have any questions, from brisket to ribs and everything in between.
These changes are essential if you consider an iron-clad fact: There are a lot more franchisees coming into Famous Dave’s footprint. The brand cut its corporate store number from 35 restaurants as of April 2, 2017 to 16 as of April 1, 2018. In that time period, Famous Dave’s total unit count declined to 152 from 173. The franchise count fell just two stores from 138 to 136. Broken down, this included 12 closures and seven company restaurants sold to franchisees. The brand had 50 corporate locations in 2015. Famous Dave’s franchise-run restaurants saw a 1.6 percent decline in same-store sales, year-over-year, in Q1. Company-owned achieved a 5.2 percent lift. At the same time, Famous Dave’s trimmed its general and administrative expenses significantly. They decreased to $1.9 million from $4.5 million in the quarter. Crivello credited this as a result of the alignment of the chain’s G&A expense structure thanks to becoming a more dedicated franchisor, and lowering overhead as the company continues to reduce its corporate-owned restaurant count.
“It allowed us to streamline our cost,” he says. “There was a lot of G&A associated with our corporate stores. Now we think having 10–15 corporate store level we’re much more streamlined, much more efficient, and able to focus our attention on franchisors.”
Another topic of change, and Famous Dave’s is not on an island with this challenge, is off-premises. But Famous Dave’s does have an advantage here—barbecue travels far better than many cuisines in casual dining, like steak, burgers, and fries for example.
How to best achieve this, though, is where Famous Dave’s is diverting attention. Crivello says they’re looking into the idea of possibly renting kitchen spaces where it could make sense for customers to order from a walk-up menu, a la barbecue shacks of American roadside lore. This way someone who isn’t logged into the third-party delivery world can still access Famous Dave’s on the go.
“It’s that dance trying to figure out what makes the most sense,” he says, noting that as long as customers receive branded Famous Dave’s food, do they need to (or care) where it came from? It could be made in a kitchen dedicated to off-premises or it could be made in-store. What’s the difference exactly?
“Every business model evolves. It took a while for the restaurant business to evolve and now that it’s here, the technology finally caught up to it, it’s moving really fast,” Crivello says.
There are other changes, too.
Famous Dave’s introduced a smaller footprint design January in El Paso, Texas. It showcased a lighter and more efficient back-of-the-house kitchen with a contemporary front-of-house design.
Third-party delivery is scheduled to rollout August at corporate locations, with franchise units following suit. The brand hinted at delivery-only models as well in its last investor call. They could fit in 500- to 800-square-foot spots compared to the typical 5,000-square-foot box. Concepcion adds that catering is a big part of Famous Dave’s future and current plans, especially digitally.
“We are a nimble and active company, and we are prepared to get things to the market as quickly as possible to stay relevant in the space. With the help of our dedicated franchisees, our strong brand and culture, and our commitment to staying true to our roots, we’re excited to see what the future holds. Pairing the delivery and online ordering option with the new menu and store design will allow us to differentiate in the segment and attract new Famous Dave’s fans and franchise partners,” Concepcion said in an earlier statement.