Q3 2011 Conference Call
October 27, 2011, 11:00 AM ET
Diana Purcel - Chief Financial Officer
Christopher O’Donnell - Chief Executive Officer
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Good morning everyone and thank you for joining us for the Famous Dave’s fiscal 2011 third quarter conference call. I’m Diana Purcel, Chief Financial Officer. With me today is Christopher O’Donnell, our Chief Executive Officer.
Before we begin, we’d like to remind those listening that certain matters discussed within are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Famous Dave’s believes that the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from Famous Dave’s expectations include financial performance, restaurant industry conditions, execution of our restaurant development and construction programs, franchisee performance, ability of our franchisees to meet their development commitments, changes in local or national economic conditions, availability of financing, and other risks detailed from time to time in the company’s SEC reports.
Our earnings release, which contains the financial and other statistical information being discussed this morning, was issued yesterday afternoon after market close and can be accessed by clicking on the Investor Relations link on our website at www.famousdaves.com.
As a reminder, this call is being recorded and will be available for replay for seven days.
Now, I will turn the call over to Christopher O’Donnell, Famous Dave’s President and CEO. Christopher?
Thank you, Diana.
Good morning everyone, and thank you for joining us for today’s call.
Yesterday after market close, Famous Dave’s reported third quarter revenue of $38.9 million and earnings per share of $0.19.
Our comparable restaurant sales for the third quarter were down 0.1 percent for company-owned restaurants, and were down 1.0 percent for franchise-operated restaurants. For the year to date timeframe, company-owned restaurant comparable sales remained in positive territory, at 0.8 percent, while franchise stores were down 0.7 percent.
Extraordinary weather related issues experienced on the east coast, combined with an economy that hasn’t fully recovered, presented challenges for our top-line this quarter.
Typically, we don’t comment on the weather, however, the combination of an earthquake, followed by Hurricane Irene, which plagued the east coast for the better part of a week, negatively affected our restaurants in that region. As a reminder, almost half of our restaurants are on the eastern seaboard, which also happen to be some of our highest volume locations. Our restaurants didn’t sustain significant physical damage as a result of the storms, however, the psychological effects that caused people to effectively ‘hunker down’, had a dramatic impact. The weather-related impact on sales was over 70 basis points for the quarter due to the closure of three of our high volume restaurants for a full day, and the early closing of multiple other locations.
The economy in general continues to present a challenging operating environment. With consumer confidence under pressure, continued high unemployment and news headlines warning of a double-dip recession, consumers in general are seeking value and our guest base remains cautious. Despite this, while dine-in numbers weren’t where we would have liked them to be, our to-go and catering segments continue to make strong contributions to sales, up 0.8 and 1.0 percent year-over-year, respectively.
Despite some challenges, we have had success in a variety of areas—the opening of our Falls Church, Virginia company-owned restaurant in late August, the signing of a multi-unit franchisee agreement in Canada, our first international locations, and the start of construction on our Eden Prairie company-owned counter-service restaurant set to open in early December. Additionally, we added to our awards, the most notable being another Chinet People’s Choice award at the BBQ Battle, in Washington DC.
Turning to marketing, we recently completed a significant restaurant and guest segmentation and modeling project to give us a clearer understanding as to which segment of guests hold the most value for the Famous Dave’s brand. This research will be instrumental in helping us create more cost effective and efficient targeted marking efforts, and frankly real estate choices going forward.
We plan to utilize this knowledge in the fourth quarter and beyond to reach out to our more significant individual guest segments as well as businesses in the areas closest to our restaurants.
For the fourth quarter, our outreach efforts will include targeted direct mail to businesses and consumers that feature promotions for dine-in, to-go, and catering, as well as a “bounce-back” program that will offer free entrees, appetizers and other items for guests who return during the promotional timeframe.
Admittedly, the direct mail and bounce-back programs can be viewed as a discounting tactic; however they also provide us with a unique opportunity to build on our “Guest Experience” focus and strengthen the level of engagement between our guests and our team members.
In this environment, and given the widespread promotional activities taking place, it’s vitally important that we be part of the consideration set for consumers when they chose to dine out, and what better way to stay top of mind, than a warm, engaging, personal “Thank You” and an enticing reward to return for another Famous experience.
Speaking of Famous, Famous Dave Anderson continues to help carry the message of authenticity and bold flavors. Going forward, there will be an increased emphasis on messaging around “quality and authentic legendary BBQ” with Dave sharing the story of his journey.