Famous Dave's of America Inc. continued to lose money in the first quarter, and comparable sales also declined — something the barbecue chain is hoping to reverse with, among other actions, a new promotional campaign called "Smokin' Deals."
The Minnetonka-based company said Monday it lost $1.2 million in the period ended April 2, compared with earnings of $830,000 in the same period a year ago.
Comparable sales declined 4.8 percent at franchise-operated restaurants and 3.3 percent at corporate-owned locations. Total revenue was $22 million, down from $23.5 million.
Chief Financial Officer Dexter Newman attributed the lower sales decline at corporate-owned restaurants to new features, including pilot tests.
"The franchise restaurants [haven't yet adopted] all the different menu formats and sequences that are seeing positive success," he said.
The quarter's positive note was the operating margin: It was 2.8 percent, compared with 2.1 percent in the same quarter a year ago. Newman attributed the bump to minimizing food waste, better labor scheduling and strong guest satisfaction scores.
Earlier this month, the company announced its plans to refranchise its 33 company-owned restaurants in the next one to two years. The shift allows the company to redirect resources and energy to the franchise system, which it believes is vital to its success.
"It will enable our team to focus our efforts on food and beverage innovation, marketing, franchise operations, training and development," Chief Executive Mike Lister said in a statement.
To increase customer traffic, the company is in week two of a nationwide "Smokin' Deals" launch.
"We have different barbecue options each day," Lister said in a phone interview. "It's the single largest commitment we've gotten from the restaurants doing something together offering one product at the same price."
With the refranchising, Famous Dave's is closing underperforming restaurants and considering new prototypes for future ones. The new concept, still in its beginning stages, will have a simplified menu and half the square footage of a typical 5,000-square-foot Famous Dave's.
"We want to create a compelling model for new franchisees to invest in," Lister said, and also for investment by existing franchisees.
The company has 168 locations in 32 states, as well as Puerto Rico, Canada and the United Arab Emirates, including 135 franchised locations. The total has declined from 184 in 2015. Most recent closures were in New York, Washington and Iowa.
In other news, the company announced that Eric Hirschhorn has joined the board of directors effective Monday. Hirshhorn, who was most recently president of Burger King Canada, replaces Jonathan Lennon.
The earnings were released after the markets closed on Monday. Company stock is trading in the $4 range, compared with $4.90 per share a year ago.