Famous Dave's of America Inc. Reports Operating Results (10-Q)
Famous Dave's Of America, Inc. has a market cap of $58.3 million; its shares were traded at around $7.96 with a P/E ratio of 13 and P/S ratio of 0.4. Famous Dave's Of America, Inc. had an annual average earning growth of 8.4% over the past 10 years. GuruFocus rated Famous Dave's Of America, Inc. the business predictability rank of 4-star.
Highlight of Business Operations:Our revenue consists of restaurant sales, franchise-related revenue, and licensing and other revenue. Our franchise-related revenue is comprised of area development fees, initial franchise fees, and continuing royalty payments. Our area development fee consists of a one-time, non-refundable payment equal to $10,000 per restaurant in consideration for the services we perform in preparation of executing each area development agreement. Substantially all of these services, which include but are not limited to conducting market and trade area analysis, a meeting with Famous Daves Executive Team, and performing potential franchise background investigation, are completed prior to our execution of the area development agreement and receipt of the corresponding area development fee. As a result, we recognize this fee in full upon receipt. Our initial, non-refundable, franchise fee typically ranges from $30,000 to $40,000 per restaurant, of which $5,000 is recognized immediately when a franchise agreement is signed, reflecting the commission earned and expenses incurred related to the sale. The remaining non-refundable fee of $25,000 to $35,000 is included in deferred franchise fees and is recognized as revenue when we have performed substantially all of our obligations, which generally occurs upon the franchise entering into a lease agreement for the restaurant(s). During fiscal 2012, to incentivize growth, any partner who signs a franchise agreement and opens a Shack style counter service restaurant in fiscal 2012 will have their initial franchise fees reduced by 50% for that restaurant. The franchise agreement represents a separate and distinct earnings process from the area development agreements. Franchisees are also required to pay us a monthly royalty equal to a percentage of their net sales, which has historically varied from 4% to 5%. In general, new franchisees pay us a monthly royalty of 5% of their net sales.
Total revenue of approximately $39.9 million for the third quarter of fiscal 2012 increased $994,000 or 2.6%, from $38.9 million in the comparable quarter in fiscal 2011. For the nine months ended September 30, 2012, total revenue of approximately $118.7 million increased approximately $1.4 million or 1.2% over revenue of approximately $117.3 million, for the nine months ended October 2, 2011.
These increases were partially offset by the closure of the Vernon Hills, Illinois and Tulsa, Oklahoma restaurants. On a weighted basis, To-Go represented 0.9% of the comparable sales increase, and was partially offset by a 0.6% decline in dine-in sales and a 0.1% decline in catering sales. For the third quarter of fiscal 2012, off-premise sales were 35.2% of total sales, with To-Go representing 21.9% and catering representing 13.3%. This compares to off-premise sales of 34.1% for the prior year. As a percentage of dine-in sales, our adult beverage sales at our company-owned restaurants were 9.1% and 9.0% for the third quarter of fiscal 2012 and 2011, respectively.
Labor and benefits costs for the third quarter ended September 30, 2012 were approximately $11.5 million or 32.8% of net restaurant sales, compared to approximately $10.8 million or 31.6% of net restaurant sales for the three months ended October 2, 2011. This increase was primarily due to higher direct labor costs as well as higher medical claims and workers compensation premiums year over year. Labor and benefits for the nine months ended September 30, 2012 were approximately $33.7 million or 32.4% of net restaurant sales, compared to approximately $32.4 million or 31.3% of net restaurant sales for the nine months ended October 2, 2011.
Operating expenses for the third quarter of fiscal 2012 were approximately $10.8 million or 30.9% of net restaurant sales, compared to operating expenses of approximately $9.5 million or 27.8% of net restaurant sales for the third quarter of fiscal 2011. This increase was primarily due to the shift in timing of the fourth quarter media and direct-mail marketing initiatives of approximately 280 basis points from the fourth quarter of 2011 to the third quarter of 2012, as well as increased other restaurant operating costs year over year due to price inflation. Operating expenses for the nine months ended September 30, 2012 were approximately $29.6 million or 28.5% of net restaurant sales, compared to approximately $28.6 million or 27.6% of net restaurant sales for the nine months ended October 2, 2011.
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