Famous Dave's Confronts Tough Times

Famous Dave's of America announced July 1 that it will extend an already reduced royalty offer, citing a difficult operating environment for its franchise owners. Famous Dave's has 176 locations in 38 states.

The company is updating its guidance on franchise restaurant openings in fiscal 2009 to a range of 9 to 11 from the original guidance of 8 to 10. The company said it has already opened 8 restaurants during the first six months of fiscal 2009, all of which qualified under the company's growth incentive program for a reduced royalty rate of 4 percent for 12 months from date of opening. The company indicated that any additional openings in 2009, as well as any openings in 2010, will qualify for the reduced royalty rate of 1.5 percent for 12 months from date of opening.

"The operating environment continues to be very difficult," said Christopher O'Donnell, president and CEO of Famous Dave's of America, "as the graduation and summer bar-b-que season to date hasn't delivered the sales improvement that we had hoped for. In spite of these conditions, we have been paying extremely close attention to our cash flow and balance sheet in order to position the company for future growth when economic conditions improve."

Famous Dave’s recently completed the early retirement of roughly $4 million in long-term debt at interest rates from 9% – 11%. The company expects to pay down an additional $3 million, saving roughly $600,000 in interests for fiscal 2010.