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Accuracy, the Twin Brother of Honesty

When it comes to barbecue chain Famous Dave's of America Inc. (NASDAQ:DAVE), there is at least one area of confusion within the company: How many franchises does the franchising firm actually have? Update Aug 14: Blue MauMau has just received a response from chief financial officer Richard Pawlowski about how many franchise units Famous Dave's actually has. Click here.

In an August 5th earnings conference to review Famous Dave's second quarter performance with analysts, its chief financial officer, answering an analyst's question, said that the brand had 132 franchises.

accuracy"Did you say that you had 123 or 132 franchises?" asked an analyst.

"132," replied Richard Pawlowski, Famous Dave's chief financial officer.

That is a straightforward enough answer. Famous Dave's has 132 franchised restaurants.

The problem is that Famous Dave's own table in its press release shows that it has 135 franchises as of June 28, 2015 (see table).

To complicate the figure, which should be straightforward, the company's filing with the Securities and Exchange Commission for its second quarter of 2015 declares, "134 franchise-operated restaurants."

134? Huh?

In fairness, these declarations of outlet numbers are pretty close. Who cares if we misplace three or more franchises in the system? It is not as if Famous Dave's is misleading stock investors or franchise buyers into believing it's a huge network of 4,500 franchises when it really just has 134. There is nothing like that going on here.

It is surprising that there is a discrepancy in the reported numbers. For if anyone knows numbers, CFO Pawlowski does. Before joining Famous Dave's 14 months ago, Pawlowski worked in restaurant acquisitions and turnarounds. He worked with consulting firm Bain & Company. Yes, the parent firm that spun off private equity firm Bain Capital. Yes, that's the one that Mitt Romney headed up. Pawlowski earned his Masters in Business Administration from Harvard Business School. Harvard! He has an engineering degree in Metallurgy, Economics and Management from the University of Oxford. Oxford!

How many senior executives of franchising companies have such credentials?

Few.

So, from the public declarations below, how many franchises do you think Famous Dave's has as of June 28, 2015?

  • Analyst: "123?"
  • Famous Dave's CFO's answer: "132"
  • Famous Dave's 10Q SEC filing: 134
  • Famous Dave's table in its press release: 135

Take your pick on the best answer.

In the end, I reported 135, which is the number that was at least broken out in a table by Famous Dave's with rows that add up. I figured if a cell in a row was in error, at least the bump in the total restaurant count at the bottom would tip off the creator that something in the row was too much. In other words, a double tip-off to catch an error. However, a good case could be made to go with the most frequently reported number. That would be "134", which appeared in both the company's SEC filing and its press release.

As American short-story writer Nathaniel Hawthorne is often quoted as saying: "Accuracy is the twin brother of honesty; inaccuracy, of dishonesty." Is Hawthorne right when it comes to financial disclosures? (By the way, Hawthorne didn't really say that, although many misattribute the quote to him.*) Do declared franchise counts have to match exactly, or can they disagree with each other, just slightly?

For the accuracy sticklers out there, accuracy is often very hard to achieve in an imperfect world. But frankly, that is why it is so appreciated.

I have emailed Mr. Pawlowski to see if he can help resolve this quandary with an answer. If there is a definitive count, I'll update the franchise figure here and in my reported news story on Famous Dave's.


*Note: According to WikiQuotes, Charles Simmons actually was the originator of this saying, writing in 1852: "Accuracy is twin brother to honesty, and inaccuracy to dishonesty." — Charles Simmons, Laconic Manual and Brief Remarker, containing over a thousand subjects alphabetically and systematically arranged (1852), p. 20: "Accuracy"

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