Famous Dave's tries an old approach

  • Article by: MIKE HUGHLETT , Star Tribune
  • Updated: February 25, 2012 - 9:18 PM

The restaurant chain is giving counter service another try after going to full-service more than a decade ago.

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Christopher O'Donnell, CEO of Famous Dave's, photographed at the new Famous Dave's BBQ Shack in Eden Prairie February 15, 2012. New Shacks like this one, while not replacing full-serve restaurants, are intended to capitalize on the fast-casual trend.

Photo: Courtney Perry, Star Tribune

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Famous Dave's new prototype restaurant in Eden Prairie is a blast from its past. But more important, it could be a key to the company's future.

"Famous Dave's BBQ Shack,'' which opened near the Eden Prairie Center mall in December, is a foray into fast-casual dining, the restaurant business' hottest segment. Fast-casual refers to fast-food-style service, but with higher quality and more expensive fare -- think Chipotle or Panera.

It is the only restaurant segment to continue growing during the current rough economic times, according to a recent report by NPD, a market research firm.

Dave's is no stranger to the fast-casual concept. Its first outlets back in the mid-1990s featured counter service. A few of those restaurants still stand in the Twin Cities, but the company moved to a full-service model by 2000.

Dave's focus on full-service isn't changing, but the company is hoping its new shack concept will augment its core business.

Famous Dave's chief executive Christopher O'Donnell spoke recently about growth strategies for the Minnetonka-based company, which has 186 restaurants in 36 states and $155 million in annual sales.

QHas the weak economy cooled your expansion plans?

AWe've grown prudently. Since the Great Recession in 2008, we have opened about 35 restaurants on a net basis. This year we anticipate opening 15 more, including two quick-casual shacks. And we will open a full-service restaurant in Winnipeg in June.

QIs that your first outlet outside the United States?

AYes. We have an area development agreement with a franchisee there and we will try to grow out in Winnipeg. We're excited about the opportunity. Famous Dave's Uptown blues club [in Minneapolis] gets a significant Canadian following.

QTell me about the new fast-casual concept, the BBQ Shack.

AThe Eden Prairie location is kind of freshening up our legacy. It has a drive-through window, state-of-the art electronic menu boards and a simpler, cleaner look in terms of ambience and design.

We narrowed the menu considerably to our core barbecue products. At that restaurant, we will also test different portion sizes, and an a la carte menu. So, you can get a pork sandwich, and if you so desire, that's all -- no sides.

QHow have consumers responded?

APositively. The concept is attracting a younger demographic, so we are getting 16- to 24-year-olds coming in by themselves or in groups. It's a format they are very comfortable with because of the Chipotles of the world. They don't have to be pressured by the service. They don't have to tip, so it can save them money. And younger families' kids love the electronic boards -- they'll just stop and stare at them.

QWhat's your strategy with the shack?

AWe'll get a lot of learning from Eden Prairie and then move into other areas. We anticipate opening a corporate-owned quick-casual restaurant in Chicago. And we have two franchisees with full-service restaurants in Portland [Ore.] interested in rolling out the concept there. We would like to get into the Washington, D.C., market, but the rents there for full-service locations are just too much. So this gives us a tool to get into D.C., since the shack concept costs less to build, and with a smaller footprint, it allows us to pay less rent. Also, with the shack I think we can get into some smaller markets. You don't have the population density in these markets to justify a full-service Dave's, but you do for the quick-causal concept.

QHow much less does it cost to develop a shack versus a full-service Dave's?

AFull-service that seats 150-some guests, you are looking at about a $3.3 million total investment including land. With the shack, and depending on the market, you can get in for significantly less. Generally, we are looking at around $1.4 million in costs for a shack with land.

QA few years out, will the shack make up a significant percentage of your restaurants, or is it a niche?

AI think it has the potential to be a significant player. We have almost 200 total restaurants already, and I anticipate 400 to 500 domestically in 10 to 12 years. So there could be 100 shack restaurants, or maybe 150.

QWhy did Dave's move away from counter service in the first place?

AWe saw at the time that we could differentiate ourselves by being full-service, by being sit-down. We felt we could go national and be really the only successful barbecue chain, and one of our niches would be full-service. Also, we found that as a public company in its early stages, average unit sales volumes were important to investors -- and volumes would be higher with full-service restaurants.

Mike Hughlett • 612-673-7003

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