Beleaguered Minnesota-based Famous Dave's blamed its significant drop in profits on poor management under its previous regime – and hopes happy hour menus, cheaper lunches and bigger portions can turn it around.
What was already a turbulent year for the barbecue restaurant chain, based in Minnetonka, got worse Wednesday when it announced restaurant sales fell by 9.8 percent in the third quarter and its net income tumbled to $708,000 – compared to $2 million in 2014.
As a result, the company is in breach of a "key" credit agreement with Wells Fargo, which it is in the process of discussing with the bank.
Much of the blame has been laid at the feet of the "mistakes" made by previous management. This past summer, the chain saw its CEO Ed Rensi step down following just 16 months in the role.
For some context about the company's performance in those months: Nation's Restaurant News says someone who bought $1,000 in Famous Dave's stock in June 2014 would have just $363 now.
Interim CEO Adam Wright said the company is now implementing changes it hopes will bring revived fortunes in future years, but has told shareholders they will need to be patient while they "win back customers" at its 179 restaurants.
Dave's return, more food and happy hours
One of those changes was announced at the end of last month, bringing back the company's founder, (Famous) Dave Anderson, as part of a leadership shakeup. He had left after a falling out with the previous management, also remarking that taking the company public had been "the worst decision of my life."
Since returning, Famous Dave himself has been having an impact, developing beef short rib and fried chicken dishes that will serve as "limited time offers."
Other ongoing changes include increasing portion sizes, bringing back "iconic" menu items such as cornbread muffins and sauces, implementing new uniforms and improving staff training, swapping out its "bar bites" for a happy hour menu, and testing "lunch value" offerings.
"While we are now confident in the direction of the company, the changes will take time to take effect as we undo the mistakes of prior management and attempt to win back customers we disappointed while at the same time acquiring new customers," Wright said in a press release. "We expect to see an improvement in our financial performance in the next few quarters, after we implement our changes."
The company saw a drop in overall revenue to $31.8 million, from $37.7 million in 2014 – which it says was in part down to the closure of four company-owned eateries and five others being re-franchised. Its restaurant in the Mall of America was among those that closed.