Famous Dave’s of America, Inc.
12701 Whitewater Drive, Suite 200
Minnetonka, MN 55343
Phone: 952-294-1300 www.famousdaves.com
FINANCIAL HIGHLIGHTS
BOARD OF DIRECTORS, EXECUTIVE TEAM AND SHAREHOLDER INFORMATION
FISCAL YEAR
2012
2011
2010
2009
2008
(1)
($’s in 000’s, except per share data, and average weekly sales)
STATEMENT OF OPERATIONS DATA
BOARD OF DIRECTORS
EXECUTIVE TEAM
SHAREHOLDER INFORMATION
$ 154,988 $ 154,811 $ 148,268 $ 136,018 $ 140,382
Dean A. Riesen
Chairman of the Board
John F. Gilbert III
Chief Executive Officer
Revenue
Asset impairment and estimated lease termination
(2)
and other closing costs
Income from operations
Income tax (expense) benefit
Net income
Basic net income per common share
Diluted net income per common share
Cash and cash equivalents
Total assets
Long-term debt less current maturities
OTHER DATA
Total shareholders’ equity
(4)
Restaurant Sales:
Company-owned
Franchise-operated
Number of restaurants open at year end:
Company-owned restaurants
Franchise-operated restaurants
Total restaurants
Company-owned comparable
(5)
$
(370)
(805)
$ (74)
$
$
(513)
$ 11,983 $
$ 6,213 $ 9,396
$
$ (3,796) $
$ (2,764)
$ 4,360 $ 5,562 $ 7,218 $
$
$ 0.84
$
$ 0.82
$
$
$ 2,654 $
$ 2,074
$ 76,129 $
$ 76,253
$ 23,497
$ 22,105
$
$ 32,904 $
$ 33,767
0.70
0.68
$ 1,148
$ 73,839
$ 20,451
$ 34,094
0.58 $
0.57 $
(3)
(3)
(218)
$
10,514 $
(2,989) $
5,701 $
0.63 $
0.62 $
2,996 $
68,381 $
17,990
$
32,944 $
(6,912)
2,030
119
389
0.04
0.04
1,687
73,401
29,252
26,184
$ 135,730
$ 361,109
$ 136,896
$ 355,338
$ 131,154 $ 117,934 $ 122,016
$ 340,454 $ 358,696 $ 355,946
53
135
188
54
133
187
52
130
182
45
132
177
(6)
47
123
170
(1.8)%
increase
1.5% 0.7% (6.3)%
sales (decrease)
Average weekly sales:
Company-owned restaurants
Franchise-operated restaurants
(1) Fiscal 2009 consisted of 53 weeks. Fiscal 2012, 2011, 2010, and 2008 all consisted of 52 weeks.
(2) Fiscal 2012 primarily reflects closing costs for three company-owned restaurants as well as a lease reserve for one of the closed restaurants. Fiscal 2011 primarily reflects
impairment charges for three company-owned restaurants. Two of these are still operating and one has closed. Fiscal 2009 primarily reflects closing costs for two company-
owned restaurants. Fiscal 2008 reflects impairment charges for eight restaurants. Five of these have closed and three are still operating.
(3) Reflects gain on acquisition of New York and New Jersey restaurants in March 2010, of $0.15 per diluted share.
(4) Long-term debt includes our line of credit.
(5) Our comparable store sales includes company-owned restaurants that are open year round and have been open more than 24 months.
(6) For purposes of computing comparable store sales, this computation assumes fiscal 2009 was a 52-week year.
$ 49,172 $ 50,216 $ 49,187 $ 48,197 $ 50,685
$ 52,714 $ 53,096 $ 52,631 $ 53,016 $ 56,535
(2.0)%
John F. Gilbert III
Chief Executive Officer
and Member of Strategic Planning Committee
Christopher O’Donnell
President and Chief Operations Officer and
Member of Strategic Planning Committee
Wallace B. Doolin
Chairperson of Strategic Planning Committee,
Chairperson of Compensation Committee and
Member of Corporate Governance &
Nominating Committee, and Audit Committee
Lisa A. Kro
Chairperson of Audit Committee,
Member of Compensation Committee,
Member of Corporate Governance &
Nominating Committee
Richard L. Monfort
Chairperson of Corporate Governance &
Nominating Committee, Member of Audit
Committee, and Member of Strategic
Planning Committee
Christopher O’Donnell
President and Chief Operations Officer
Diana Garvis Purcel
Chief Financial Officer and Secretary
Jeff Abramson
Vice President, Purchasing
Jackie Ottoson
Vice President, Human Resources
and Training
Victor Salamone
Vice President, Franchise Development
Ben Welshons
Vice President, Sales
CHAIRMAN EMERITUS
David W. Anderson
Founder and Chairman Emeritus
RESTAURANT LOCATIONS
Investor/Analyst Contact
Diana Garvis Purcel
952-294-1300
Independent Registered Public
Accounting Firm
Grant Thornton LLP
Minneapolis, Minnesota
Legal Counsel
Maslon Edelman Borman and Brand, LLP
Transfer Agent & Registrar
Wells Fargo
Stock Exchange Listing
Common stock is traded on
the NASDAQ Global Select Market
under the symbol DAVE
Annual Meeting
The annual meeting of shareholders is
scheduled to begin at 3:00 PM (CST) on
Tuesday, April 30, 2013 at the
Company’s headquarters
REVENUE
NUMBER OF RESTAURANTS
$154.8
$155.0
$148.3
$140.4
$136.0
$160
$150
$140
$130
$120
$110
$100
$90
187
188
182
177
170
135
133
123
132
130
47
45
52
54
53
190
180
170
160
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
3.0%
2.0%
1.0%
0.0%
(1.0)%
(2.0)%
(3.0)%
(4.0)%
(5.0)%
(6.0)%
(7.0)%
COMPANY-OWNED
COMPARABLE SALES
1.5%
0.7%
(2.0)%
(1.8)%
(6.3)%
• 53 Company RestauRants
• 134 FRanChise RestauRants
2008 2009 2010 2011 2012
2008 2009 2010 2011 2012
2008 2009 2010 2011 2012
Company-Owned Franchise-Operated
As of March 2013, Famous Dave’s had a total of 187 company-owned and
franchise-operated restaurants in 34 states and 1 Canadian province.
Chairman’s Letter
Change is a constant part of business and Famous Dave’s
is no exception. In early September, 2012 I, with unani-
mous support of the Board, decided that we needed to
make a significant addition to the management team, and
we asked fellow board member, John Gilbert, to become
our new Chief Executive Officer.
The key ingredient for this change was to create a laser
focus on GROWTH. Growth of guests, growth of franchi-
sees, and growth of new stores. These growth areas now
report directly to John. Sustainable GROWTH on all three
fronts is the key to increasing shareholder value. And, as a
shareholder, like you, I am passionate about growth.
Why John Gilbert? There are numerous reasons. He has
a 30-year career in marketing, primarily in the restau-
rant business with a track record of innovation that lasts
beyond his tenure. John has held roles as the top market-
ing officer for TGIFriday’s, Dunkin Donuts, Kentucky Fried
Chicken and TJX Companies, and most recently, he was
CEO of e-retailer Vermont Teddy Bear. Additionally, John
is a board member of Ignite Restaurant Group (owner of
Joe’s Crab Shack) and has been a board member of Famous
Dave’s since August of 2011. John has already made a sig-
nificant contribution to our rapidly evolving go-to-market
strategy, which will become very evident in our restaurants
in 2013. We are truly pleased to count John as one of our
newest members to the Famous Dave’s management team.
I would be remiss if I didn’t recognize the dedicated efforts
of small businessmen and women who make up our Famous
Dave’s franchise community. They are the representatives,
and the “heart,” of America’s free enterprise system, who
every day, provide famous food & service to customers all
over America. And of course, we continue to appreciate the
advice and support of our Founder and Chairman Emeritus,
Famous Dave Anderson.
Dean A. Riesen
Dean A. Riesen
Chairman of the Board
BARBEQUE’S LIVING LEGEND
Famous Dave is the most awarded Pitmaster in history –
a true originator blessed with a great sense of taste and
a passion to create only the best of the best. Even among
BBQ champions, Dave is recognized as the authority
on the art of cooking with smoke and flame.
to our sharehoLders,
Fiscal 2012 was a challenging year for Famous Dave’s.
We didn’t meet our internal expectations of financial
performance, and we didn’t meet yours. But at no time
did we stop thinking, planning or investing in the future
and in the potential of what we can be. We continued to
grow with 12 new restaurants, including our first inter-
national location. We brought on board new franchise
partners to accelerate our growth and brand presence.
We continued to evolve the concept, including continuing
to invest in the smaller “quick casual” footprint “Shack”
as a viable and alternative growth vehicle. We invested in
people and systems that will enable us to be more agile,
efficient, focused and profitable for the future. We made
a management change that will allow our CEO and COO
to collaboratively lead the company and bring expertise
through their particular areas of strength. And we con-
tinued to invest in ourselves by buying back more stock
as appropriate, because we believe, as hopefully you do,
that we are a good investment not only for today, but for
the future.
operational, technological and financial orientation. While
we will continue to leverage our size and expertise to de-
fine the category, we will shift our emphasis by going deep-
er into each distinct “line-of-business” and connecting with
consumers on their terms within each occasion. Through
this differentiation, or segmentation, we will be able to
create more immediate relevancy, and thus more sales
opportunity. This approach will be manifest in all market-
ing programs and initiatives, including menu, promotional
outreach, pricing, and new product news. Additionally, we
will be supporting these businesses through an investment
in a new function for the organization, the Digital Services
Group. This new resource will move us from the back of
the ‘digital class’ to best-in-class. With nearly 40% of our
sales coming from To-Go and Catering, Famous Dave’s has a
legitimate, and profoundly differentiating, source of cus-
tomer information, and this new function will help leverage
the many opportunities, and multiple sources, for growth.
This will allow us to climb back into the top same store sale
quartile, permanently.
As we close out the year, it’s worth reviewing who we
are in order to understand what we can be. We are
one of the oldest BBQ brands with a 20 year history,
and a founder, Dave Andersen, who is actively involved
in the business, and who has a deep understanding of
the inherent qualities that make BBQ special. The best
BBQ is hand-rubbed, slow-smoked, flame-kissed, and
then held, readily available for customers to enjoy. BBQ
travels incredibly well, over time and distance, creat-
ing a flexibility to the experience and portability that
most foods don’t enjoy. This establishes BBQ as a logical
choice for a wide range of occasions and also represents
a huge market opportunity for Famous Dave’s. There’s
no doubt about it, BBQ is a special category, and quite
simply, Dave’s is the best! With over 650 local, regional
and national awards, Dave’s does BBQ better than any
other brand in the industry. In fact, Famous Dave’s is the
most recognized restaurant brand in the world. Nobody
even comes close. Guests today have the option to enjoy
Famous Dave’s as a Dine-in, To-Go, or Catering experi-
ence, or by using any number of readily available Famous
Dave’s retail products. These “lines-of-business” are big
businesses in and of themselves, each with a different
growth rate and occasion base, and each represents an
exciting growth opportunity for our future.
Looking ahead, our plan is straightforward, we intend
to approach growth through these distinctly different
occasions, talking to consumers on their terms about
their meal needs, and leveraging the world’s best BBQ to
create a sustainable point-of-difference.
We have already set these plans in motion. Late in 2012
we reorganized the company, particularly the market-
ing function, in a significant way. Our extreme focus on
line-of-business strategy and execution requires a strong
With system-wide sales of nearly half a billion dollars, gen-
erated by nearly 200 restaurants, we are the largest “Better
BBQ” brand in the world. Today, over 70% of our loca-
tions are franchise-operated locations, and we will see that
percentage continue to grow. While we still plan to maintain
a presence through company-owned units and will grow
modestly, we strongly believe in a strategy that accelerates
franchise growth, and we will refranchise company units,
where and when strategically appropriate in order to stimu-
late or seed additional growth.
Famous Dave’s of America is a big brand, but a nimble com-
pany, with an incredibly bright future. Next year we will
convey a very different message, not one of challenges, but
one of successes. We are uniquely positioned to capital-
ize on what Famous Dave’s has always been, the category
defining leader in BBQ. We see an unprecedented amount
of opportunity for 2013 and for the long term, and believe
that the strategy that we have put in place and the invest-
ments we have made will soon translate into a stronger
brand with sales growth, unit growth, and improved profit-
ability, and you, our shareholders, will be rewarded for
your continued trust and patience.
As we move forward, we will continue to make the deci-
sions and investments we believe are necessary to exceed
the needs of our customers, support franchisees, attract
and retain the best people, control costs, manage risks and
create long-term value for our shareholders. Thank you for
your support.
your support.
John Gilbert III
John Gilbert III
CEO
CEO
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 30, 2012
Commission File No. 0-21625
FAMOUS DAVE’S of AMERICA, INC.
(Exact name of registrant as specified in its charter)
Minnesota
(State or other jurisdiction of
incorporation or organization)
41-1782300
(I.R.S. Employer
Identification No.)
12701 Whitewater Drive, Suite 200
Minnetonka, MN 55343
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code (952) 294-1300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, $0.01 par value
The NASDAQ Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-seasoned issuer, as defined in Rule 405 of the Securities Act Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act. (Check one):
Large Accelerated Filer
Accelerated Filer
Non- Accelerated Filer
Smaller reporting company
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of common stock held by non-affiliates of the registrant was approximately $74.9 million as of June 29,
2012 (the last business day of the registrant’s most recently completed second quarter), assuming solely for the purpose of this
calculation that all directors, officers, and more than 10% shareholders of the registrant are affiliates. The determination of affiliate
status for this purpose is not necessarily conclusive for any other purpose.
As of March 11, 2013, 7,522,899 shares of the registrant's Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the definitive Proxy Statement for our 2013 Annual Meeting of Shareholders which is to be filed within 120 days after the
end of the fiscal year ended December 30, 2012, are incorporated by reference into Part III of this Form 10-K, to the extent described
in Part III.
TABLE OF CONTENTS
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Item 9A.
Item 9B.
Controls and Procedures
Other Information
PART III
Item 10.
Item 11.
Item 12.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
Item 13.
Item 14.
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV
Item 15.
Exhibits and Financial Statement Schedules
SIGNATURES
2
Page
3
16
20
21
23
23
23
26
27
42
42
42
42
43
44
44
44
45
45
46
PART I
ITEM 1. BUSINESS
Summary of Business Results and Plans
Famous Dave's of America, Inc. (“Famous Dave’s”, the “Company” or “we”) was incorporated as a Minnesota
corporation in March 1994 and opened its first restaurant in Minneapolis, Minnesota in June 1995. As of December 30,
2012, there were 188 Famous Dave’s restaurants operating in 34 states and 1 Canadian province, including 53
company-owned restaurants and 135 franchise-operated restaurants. An additional 62 franchise restaurants were
committed to be developed through signed area development agreements at December 30, 2012.
In fiscal 2012, total revenue was $155.0 million, a slight increase from $154.8 million in fiscal 2011. This
increase was primarily related to a year over year increase in franchise-related revenue partially offset by a decline in
restaurant sales. The Company realized a comparable sales decrease for company-owned restaurants of 1.8%
compared to a comparable sales increase of 1.5% for fiscal 2011. The franchise-operated restaurants saw a decline in
their comparable sales of 2.0%, compared to 2011’s comparable sales, which were flat. During 2012, the Company
opened two new company-owned restaurants, including one which was a “Current Shack” style counter-service
restaurant and ten new franchise-operated restaurants, including our first international location in Winnipeg Manitoba
as well as a “Current Shack” style counter-service restaurant in Beaverton, Oregon.
Fiscal 2012 earnings per diluted share were $0.57, including $0.04 of closure costs and a lease reserve for
restaurants that closed in 2012. Additionally, there was a $0.07 favorable impact to earnings per share which reflected
the cumulative impact from a favorable tax rate adjustment for employment tax credits, for four open tax years. This
compared to earnings per diluted share of $0.68 in fiscal 2011, which included approximately $0.05 non-cash
impairment charges for specific restaurant assets.
Fiscal 2012 earnings per diluted share declined year over year due to several factors; first, we entered 2012 on
the heels of an industry-leading finish for the fourth quarter of 2011, a sales performance that resulted in a 3.6%
comparable sales increase for our company-owned restaurants. These sales, however, were driven primarily through
heavy coupon discounting that diminished profits. In 2012, we proactively pulled back on the level of consumer
focused discounting in the fourth quarter in order to preserve our pricing integrity and gross margin. Famous Dave’s is
not a broad-scale discount driven brand; we don’t have the media muscle or the frequency for that strategy to be
effective. Consumers want great value and we believe that there are many other ways to promote value than the broad
distribution of big discounts. As such, in 2013 we will continue to shift our focus to alternative consumer value
propositions and away from these big discounts.
Additionally, in 2012 our gross margins were negatively impacted by a difficult commodity environment.
Anticipating some of these challenges, at the beginning of 2012, we locked in some of our major protein contracts.
Nevertheless, the rising commodity prices still took an undue toll on us. An example of this was pork. Despite the fact
that we were able to secure product at a price that proved favorable throughout the entire year in comparison to the
market, our cost was still over 20% higher than 2011’s pork costs that was secured during more favorable market
conditions. Our margins were also negatively impacted by decisions, made mid-year, to delay a number of strategic
initiatives for further testing. For example, we delayed the roll out of our fresh, house-smoked brisket, which had cost
savings attached to it for 2012, in order to ensure quality and consistency. This delay negatively impacted gross margin
in 2012 but it allowed us to further develop the product, including the creation of Famous Dave’s Burnt Ends, which
will be featured in a national promotion in April 2013. Burnt Ends will allow us to use all of the parts of the brisket; it
will improve yield, and thus the margin contribution for this product, and it will deliver product news to the market.
Additionally, the decline in our margins year over year reflected sales deleverage on fixed cost categories such as
manager labor and rent.
In 2013, the Company has the following key areas of focus and believes that if we do all successfully, we will
generate shareholder value and create a long-term sustainable brand.
3
Sales and Profitability Growth
System Growth
Enhancing core systems, processes and infrastructure
Sales and Profitability Growth
Late in 2012, the Company reorganized the marketing function to connect with consumers on their terms,
whether it is a dine-in, To Go, catering or retail sales occasion. We expect this realignment strategy will create more
sales opportunities through immediate relevancy with our guest. Also, it requires a strong operational, technological
and financial orientation. Additionally, as part of the realignment the Company invested in a new function for the
organization, the Digital Services Group that is specifically tasked with driving sales and traffic growth through the use
of proven digital solutions, such as on-line ordering, and To Go and catering call centers. With approximately 33.4%
of our sales in 2012 coming from To Go and Catering, Famous Dave’s has an additional opportunity to gather customer
information, which this new function should be able to help leverage and provide possible opportunities for growth.
Also, the Company has engaged a pricing strategy consultancy, RMS, that will help us optimize our pricing
strategies and aid the Company in optimizing the menu. The culmination of this work will be the launch of our new
menu in April 2013. The Company also plans on taking advantage of both opportunistic purchasing strategies and the
Company’s agility in our 2013 commodity contracting.
System Growth
We expect to open up approximately 12 to 14 new restaurants in fiscal 2013, including two company-owned
ground-up full-service restaurants and 10 to 12 franchise-operated restaurants, including a restaurant in Puerto Rico.
We are updating our estimate due to delays in lease executions and permitting as well as complexities associated with
international growth. We will also continue to invest in our existing base of restaurants and plan on a significant
remodeling project that will combine both an exterior and interior focus at a restaurant in the Midwest. Finally, we will
continue to pursue the expansion of our geographical footprint by entering into new area development and franchise
agreements, with both new and existing partners.
Enhancing core systems, processes and infrastructure
As part of this initiative, we will continue the implementation of systems that will support our sales building
efforts, such as infrastructure for the Digital Services group, as well as upgraded systems around business analytics that
will support the sales building efforts and system-wide growth. Additionally, the Company will continue its Guest
feedback initiatives and an e-learning pilot for our company-owned and franchise-operated restaurants. We will also
continue to enhance other core systems, such as our Human Resource Information System (HRIS), financial systems,
and labor scheduling tool. These infrastructure systems will help increase efficiency and will allow our team to focus
their efforts on better serving our guests.
Financial Information about Segments
Since our inception, our revenue, operating income and assets have been attributable to the single industry
segment of the foodservice industry. Our revenue and operating income for each of the last three fiscal years, and our
assets for each of the last two fiscal years, are set forth elsewhere in this Form 10-K under Item 8, Financial Statements
and Supplementary Data.
Narrative Description of Business
Famous Dave’s restaurants, a majority of which offer full table service, feature hickory-smoked off-the-grill
entrée favorites. We seek to differentiate ourselves by providing high-quality food in distinctive and comfortable
environments with signature décor and signage. As of December 30, 2012, 46 of our company-owned restaurants were
full-service and 7 were counter-service. Generally, our prototypical design includes the following elements: a
designated bar, a signature exterior smokestack, a separate entrance for our category-leading To Go business and a
patio (where available). This design enables us to capitalize on a consistent trade-dress and readily identifiable look
and feel for our future locations. We have 6,000 and 5,000 square foot packages that can be built as a free standing
building, a 4,000 square foot model that most likely would be constructed as an end cap of a building, and a new 3,000
4
square foot design which would be constructed as a counter-service location in an existing building.
In 2012, we, and several of our franchisees, successfully converted restaurants from existing casual dining
chains. In 2012, two “Current Shack” style counter-service restaurants, utilizing our new 3,000 square foot prototype
were built; a franchise-operated restaurant in Beaverton, Oregon and a company-owned restaurant in Evergreen Park,
Illinois. Additionally, in 2012, a full-service company-owned restaurant was converted from another restaurant
concept in Gainesville, Virginia. In fiscal 2011, we built two company-owned restaurants, one a full-service restaurant
and a “Current Shack” style counter service restaurant, both of these restaurants were conversions from other restaurant
concepts. In fiscal 2010, we opened one full-service restaurant which was a conversion of another restaurant concept
and was approximately 6,000 square feet.
We offer lower cost conversion packages that provide our franchisees with flexibility to build in cost effective
formats, which includes opportunities to convert existing restaurants and other footprints into a Famous Dave’s
restaurant. Due to the flexibility and scalability of our concept, we believe that there are a variety of development
opportunities available now and in the future. Additionally in 2013, we will be working with a restaurant consulting
firm to develop the next evolution in our full-service and counter-service prototypes.
We pride ourselves on the following:
High Quality Food – Each restaurant features a distinctive selection of authentic hickory-smoked off-the-grill
barbecue favorites, such as flame-grilled St. Louis-style and baby back ribs, Texas beef brisket, Georgia chopped pork,
country-roasted chicken, and generous signature sandwiches and salads. Also, enticing side items, such as honey-
buttered corn bread, potato salad, coleslaw, Shack FriesTM and Wilbur BeansTM, accompany the broad entrée selection.
Homemade desserts, including Famous Dave's Bread Pudding, Hot Fudge Kahlua Brownies, and Key Lime Pie, are a
specialty. To complement our entrée and appetizer items and to suit different customer tastes, we offer six regional
tableside barbeque sauces: Rich & Sassy®, Texas PitTM, Georgia MustardTM, Devil’s Spit®, Sweet and ZestyTM and
Wilbur’s RevengeTM. These sauces, in addition to a variety of seasonings, rubs, marinades, and other items are also
distributed in retail grocery stores throughout the country under licensing agreements. Additionally, we often introduce
specialty barbeque sauces with our limited time offerings and popular ones may get added to our menu, such as our
Pineapple Rage and Southside BBQ sauces.
We believe that high quality food, “scratch cooking” and the fact that we smoke our meats daily at each of our
restaurants are principal points of differentiation between us and other casual dining competitors and are a significant
contributing factor to repeat business. We also feel that our focus on barbecue being a noun, a verb and a culture
allows for product innovation without diluting our brand. As a noun, barbeque refers to the art of the smoke and sauce.
As a verb, barbeque refers to the act of grilling. As a culture, barbeque refers to the competitive spirit. As a result, we
see no geographic impediments to scaling our concept and brand.
Distinctive Environment - Décor and Music – Our original décor theme was a nostalgic roadhouse shack
(“Original Shack”), as defined by the abundant use of rustic antiques and items of Americana. This format was used
for both full-service and counter-service restaurant formats. In late 1997, we introduced the “Lodge” format which
featured décor reminiscent of a comfortable “Northwoods” hunting lodge with a full-service dining room and small bar.
In addition, we developed a larger “Blues Club” format that featured authentic Chicago Blues Club décor and live
music seven nights a week. We have evolved our format to that of a full-service concept with several “Prototypical”
designs that incorporate the best attributes of the past restaurants while providing a consistent brand image. In 2011,
we evolved our counter-service “Original Shack” format into a new “Current Shack” counter-service, fast casual format
that included a new layout for the restaurant, as well as new trade dress, music, décor, ambiance, and menu offerings.
Of our 53 restaurants as of December 30, 2012, 46 were full-service restaurants and 7 were counter-service restaurants.
Below is a breakdown of the various styles of full and counter-service restaurants:
Full-service:
23 “Lodge” format
6 “Original Shack” format
1“Blues Club” format, located in Minneapolis market
16 “Prototypical” format
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Counter-service:
5 “Original Shack” format
2 “Current Shack” format
Broad-Based Appeal – We believe that our concept has broad appeal because it attracts customers of all ages,
the menu offers a variety of items, and our distinctive sauces allow our guests to customize their experience, appealing
to many tastes. We believe that our distinctive barbecue concept, combined with our high-quality food, makes Famous
Dave's appeal to families, children, teenagers and adults of all ages and socio-economic backgrounds.
Operating Strategy
We believe that our ability to achieve sustainable profitable growth is dependent upon us delivering high-quality
experiences in terms of both food and hospitality to every guest, every day, and to enhance brand awareness in our
markets. Key elements of our strategy include the following:
Operational Excellence – During fiscal 2012, we continued to focus on operational excellence and integrity, and
on creating a consistently enjoyable guest experience, both in terms of food and hospitality, across our system. We
define operational excellence as an uncompromising attention to the details of our recipes, preparation and cooking
procedures, handling procedures, rotation, sanitation, cleanliness and safety. Operational excellence also means an
unyielding commitment to provide our guests with precision service during every visit. In our restaurants, we strive to
emphasize value and speed of service by employing a streamlined operating system based on a focused menu and
simplified food preparation techniques.
Our menu focuses on a number of popular smoked, barbeque, grilled meat, entrée items and delicious side dishes
which are prepared using easy-to-operate kitchen equipment and processes that use prepared proprietary seasonings,
sauces and mixes. This streamlined food preparation system helps lower the cost of operation by requiring fewer staff;
lower training costs, and eliminates the need for highly compensated chefs. Additionally, barbeque has the ability to be
batch cooked and held, which enables our award winning food to get to our guests quickly, whether in the restaurant, at
their homes, or at a catering event. In order to enhance our appeal, expand our audience, and feature our cravable
products, we have product features which can provide higher margins than our regular menu items. Also, in order to
increase customer frequency, we have assembled a research and development product pipeline designed to generate
annual product news.
During 2012, we offered our guests several promotions and limited time offerings. Early in 2012, and in support
of the Lenten season, we featured our Beer-Battered Cod, and on Fridays we offered an All-You-Can-Eat Cod fish
special. During the spring, we featured brisket-stuffed into our burgers, which offered five different flavor profiles. In
the summer of 2012, we had our “Southern BBQ” which offered our ribs and pork sandwich with a traditional Carolina
red sauce. This promotion featured a delicious banana pudding dessert as well as line-up of “Blue Ribbon drinks”,
including our signature Famous Margarita and Devil’s Spit Bloody Mary. This past fall we featured a “Beer Can
Chicken” platter, as well as a chicken salad sandwich along with a grilled cob of sweet corn.
In 2013, we will discontinue the broad use of limited time offerings that temporarily introduce new products to
the menu. The removal of these limited time offerings should help improve food margins by reducing waste and
operating inefficiencies that are inherent with products that are added to the menu for only a limited time. In 2013, we
will use opportunistic commodity purchases of high margin items that make sense to our guests and can be inserted
quickly into our promotional calendar as well as promote core menu items or new items that will be added to the menu
permanently after their initial launch. In our first feature of 2013, we re-introduced our Sweetwater catfish, which had
been previously removed from our menu due to supply concerns. Additionally, in April we will feature Burnt Ends,
which is a premium product, a ‘treat’ that authentic pitmasters would typically save for themselves and we are serving
as a sandwich or an appetizer.
Human Resources and Training/Development - We know a key ingredient to our success as an employer and of
our concept lies with our ability to hire, train, engage and retain FAMOUS Team Members at all levels of our
organization. We place a great deal of importance on creating an exceptional working environment for all of our Team
Members. Through our Human Resource, Talent Management and Training/Development resources, tools and
programs, we continually enhance and support superior performance within our restaurants and Support Center. Our
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foundational guiding principle is to have Raving Internal Fans which emphasizes our commitment to doing the right
thing for the organization while ensuring we have the right people in the right roles with the right resources and tools.
We are a performance-based organization, committed to recognizing and rewarding performance at all levels of
the organization. Our performance management process includes performance calibration at the organizational level as
a means of providing measureable, comparative Team Member evaluations relative to peer contribution, taking into
account specific core competencies and goals, as well as our core values of Famous PRIDE (Passion, Respect,
Innovation, Diversity, Excellence). It is designed to provide a complete picture of performance that is consistent across
the organization. We offer a total rewards program that is benchmarked closely against the industry and includes
health and welfare coverage, 401(k) and non-qualified deferred compensation with a company match, base pay and
incentive pay programs developed to sustain our market competitive position. For 2013, we expanded our medical
offering to include a high deductible health plan with a health savings account option and continue with the
implementation of a strategy for promoting wellness.
We strive to instill enthusiasm and dedication in our Team Members and continually solicit feedback regarding
our organization. We are in the third year of our Talking PRIDE Team Member Engagement Survey. Through our
Talking PRIDE Engagement Survey results, we have established baseline action plans which are continually
benchmarked to enhance our Team Member experience. We have conducted a full survey to measure our progress with
effectively sharing results, establishing action plans, and implementing actions. We conduct an annual Business
Conduct Survey for all Support Center and Restaurant Management Team Members. The results of this survey allow us
to measure the extent to which “Do the Right Thing” exists in our organization. The results are shared within the
organization and we measure and monitor progress in this area. During fiscal 2013, we will be introducing ethical
workplace training for all Corporate staff and operations managers in our business to allow us to continue to strengthen
our strong base as a value and ethics- based organization. In addition, we have an online employee ethics compliance
tool, which includes a bi-lingual anonymous call center or web-based reporting center and a sophisticated issue
tracking and reporting platform across all Famous Dave’s company locations.
We have numerous programs designed to recognize and reward our Team Members for outstanding performance
and tenure. These programs include the Famous PRIDE Award, Spirit of the Flame Award, Ring of Fire Program, and
service recognition. Service recognition provides acknowledgement and celebration of service milestone
achievements. Our Famous PRIDE Award encourages those within the company to submit nominations for fellow
Team Members who live and breathe Famous PRIDE. Five individuals receive this prestigious honor each year. Our
Spirit of the Flame Award encourages those within the organization to nominate and recognize one winner from our
company operations team or Support Center and one winner from our franchise community. The two individuals
receiving this award are selected based on their demonstration of continuous and exemplary FAMOUS behavior and
outstanding contributions resulting in a significant and positive impact to Famous Dave’s brand and business. Our Ring
of Fire Program recognizes the MOST FAMOUS of the FAMOUS. This program offered to both company and
franchise operations, rewards those operating practices that will help us grow strong as a system. Exceptional
operational performance is defined by consistently adhering to Famous Dave’s programs and systems and also by
having a high regard for guests, Team Members, the community and the Famous Dave’s culture.
These initiatives are crucial to our maintaining turnover levels that are below industry averages which we
measure using several industry data sources. Our restaurant management turnover for fiscal 2012 was approximately
14% and our restaurant hourly turnover was approximately 60%. During fiscal 2012, our Human Resource and
Training organization focused on the selection and retention of talent through programs in overall workforce planning,
performance management, development, safety and risk reduction, and continued enhancements in our organizational
structures for all positions in the business.
In the Training and Development arena, we offer a variety of ongoing on-the-job and classroom training
programs for the operations teams (hourly Team Members, Restaurant Managers, and Multi-Unit Managers) in an
effort to create defined career paths. Our FD101 University provides our newer restaurant managers a foundational
training for restaurant operations, including ServSafe Food and Alcohol Certification; as well as a comprehensive
vignette-based program, Managing with PRIDE, designed to provide managers with an easy-to-remember behavioral
model that defines when and how conduct, behavior, and performance are governed by organizational policy and law.
We also offer a Famous Dave’s Management Certification program which provides a library of workshop offerings for
our operators including the guest experience, orientation to training, leadership, and food focus topics.
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In 2012, we introduced new tools to assist system-wide manager and team development including an orientation
and onboarding tool-kit, FLSA training, and e-learning. We also introduced our Pitmaster program which is focused on
developing the intricate and artful skills of BBQ as well as the Culture Maniac role, a brand ambassador dedicated to
infusing Famous Dave’s culture in the restaurants through cultural tactics and initiatives. We expanded our utilization
and integration of HRIS technology by providing Team Members and Managers with self-service access to manage life
events, status changes, and benefits. We also moved to an electronic pay delivery environment and connected our core
HRIS system electronically to other key business systems to enhance the performance of our financial and operations
systems. We will continue to develop resources and add tools to support our system. In 2013, we will continue to offer
a variety of enhanced and new programs, including: ethics based training, policies, safety, and Leadership
Development. We will continue maximizing the use of technology by introducing mobile access applications for self-
service and expanding our e-learning platform to include compliance and annual certifications that will enable us to
further expand the reach of our programs through electronic-based system capabilities with interactive modules and on-
line testing and administration.
Our system-wide Brand Conference is held annually in March and features a variety of business sessions on
Marketing, Guest Experience, Training, Product Innovation, among others. Participants include all company-owned
restaurant General Managers, Area Directors, and Directors of Operations, as well as many Franchise Partners,
Franchise General Managers and Franchise Multi-Unit Operators.
Restaurant Operations
Our ability to manage multiple restaurants in geographically diverse locations is central to our overall success.
In each market, we place specific emphasis on the positions of Area Director and General Manager, and seek talented
individuals that bring a diverse set of skills, knowledge, and experience to the Company. We strive to maintain quality
and consistency in each of our restaurants through the careful training and supervision of team members and the
establishment of, and adherence to, high standards relating to performance, food and beverage preparation, and
maintenance of facilities.
All General Managers must complete a seven-week training program, during which they are instructed in areas
such as food quality and preparation, customer service, hospitality, and team member relations. We have prepared
operations’ manuals relating to food and beverage quality and service standards. New team members participate in
training under the close supervision of our Management. Each General Manager reports to an Area Director, who
manages from six to seven restaurants, depending on the region. Our Area Directors have all served as General
Managers, either for Famous Dave's or for other restaurants, and are responsible for ensuring that operational standards
are consistently applied in our restaurants, communicating company focus and priorities, and supporting the
development of restaurant management teams. In addition to the training that the General Managers are required to
complete as noted above, our Area Directors receive additional training through Area Director Workshops that focus
specifically on managing multiple locations, planning, time management, staff and management development skills.
We also have two Directors of Operations. Each of these individuals is responsible for approximately half of the
company-owned restaurants, which allows us to have our operations’ leadership closer to the day-in and day-out
business of our restaurants. The Directors of Operations assist in the professional development of our Area Directors
and General Managers. They are also instrumental in driving our vision of operational integrity and contributing to the
improvement of results achieved at our restaurants, including building sales, developing personnel and growing profits.
These Directors report to the President and Chief Operating Officer.
Staffing levels at each restaurant vary according to the time of day and size of the restaurant. However, in
general, each restaurant has approximately 40 to 60 team members.
Off-Premise Occasions - Focus on Convenience – In addition to our lively and entertaining dine-in experience,
we provide our guests with maximum convenience by offering expedient take-out service and catering. We believe that
Famous Dave's entrées and side dishes are viewed by guests as traditional American "picnic foods" that maintain their
quality and travel particularly well, making them an attractive choice to replace a home-cooked meal. Also, the high
quality, reasonable cost and avoidance of preparation time make take-out of our product particularly attractive. Our
off-premise sales provide us with revenue opportunities beyond our in-house seating capacity and we continue to seek
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ways to leverage these segments of our business. During fiscal 2012, our industry-leading off-premise sales for the
casual dining sector were approximately 33.4% of net restaurant sales, compared to 32.0% for fiscal 2011.
Catering, which grew modestly in 2012, accounts for approximately 10.5% of our net sales for fiscal 2012, as
compared to 9.9% in 2011. We see catering as an opportunity for new consumers to sample our product who would
not otherwise have had the opportunity to visit our restaurants, and each restaurant has a dedicated vehicle to support
our catering initiatives.
To Go accounted for approximately 22.9% of net restaurant sales for fiscal 2012 and grew slightly from 22.1%
of net restaurant sales in 2011. Our restaurants have been designed specifically to accommodate a significant level of
To Go sales, including a separate To Go entrance with prominent and distinct signage, and for added convenience, we
separately staff the To Go counter. We believe our focus on To Go enables Famous Dave’s to capture a greater portion
of the “take-out” market and allows consumers to “trade within our brand,” when dining in is not always an option.
We pursue efforts to increase awareness of To Go in all company-owned and franchise-operated restaurants by
featuring signage and merchandising both inside and outside the restaurants.
Customer Satisfaction – We believe that we achieve a significant level of repeat business by providing high-
quality food, efficient friendly service, and warm caring hospitality in an entertaining environment at moderate prices.
We strive to maintain quality and consistency in each of our restaurants through the purposeful hiring, training and
supervision of personnel and the establishment of, and adherence to, high standards of performance, food preparation
and facility maintenance. We have also built family-friendly strategies into each restaurant’s food, service and design
by providing children's menus, smaller-sized entrees at reduced prices and changing tables in restrooms. In 2012, we
diligently monitored the guest experience through the use of an interactive voice response (IVR) guest feedback system
to ensure that our system is producing the desired results. Through this IVR system, we obtained a “Raving Fan”
score, which measured a combination of overall guest satisfaction, the guest’s intent to return in the next 30 days, and
their intent to recommend Famous Dave’s to others. The company rating is based on the number of responses that give
the highest rating of five.
In 2013, we are changing our guest feedback system to a web-based, mobile-optimized guest feedback system.
This system will obtain a new “Raving Fan” score, which measures guest likelihood to recommend Famous Dave’s to
friends, family or coworkers based on a 0-10 rating scale with 10 being highest. The scores are then tallied using a Net
Promoter-style scoring (Promoters-Detractors=Net Promoters), with Promoters scoring 9 and 10 and Detractors scoring
6 through 0. Guests scoring 7 and 8 are considered Passives.
Value Proposition and Guest Frequency – We offer high quality food and a distinctive atmosphere at
competitive prices to encourage frequent patronage. Lunch and dinner entrees range from $6.49 to $24.99, resulting in
a per person average of $15.73 during fiscal 2012. During fiscal 2012, lunch checks averaged $13.84 and dinner
checks averaged $16.89. We believe that value priced offerings and new product features as well as connecting with
consumers on their terms, will help drive new and infrequent guests into our restaurants for additional meal occasions.
Marketing, Promotion and Sales
We believe that Famous Dave’s is the category-defining brand in barbecue. Specializing in a unique and
distinctive brand of grilled, smoked, and southern style food, our menu specialty helps set the brand apart from the rest
of the crowded field in casual dining. To further develop the advertising and promotional materials and programs
designed to create brand awareness and increase the reach of the brand, we have a system-wide marketing fund. All
company-owned restaurants, and those franchise-operated restaurants with agreements signed after December 17, 2003
are generally required to contribute 1% of net sales to this fund. In fiscal 2013, predominately due to the carryover of
funds from fiscal 2012, the Company made the decision to decrease the 2013 Marketing Ad Fund contribution system-
wide to 0.75% of net sales.
The marketing team, working with outside consultants and other resources, is responsible for the advertising,
promotion, creative development, and branding for Famous Dave’s. Franchise-operated restaurants place the
advertising and marketing in their local markets based on contractual requirements, while the Famous Dave’s
marketing team plans and executes the advertising and marketing for company-owned restaurants. In addition to the
traditional marketing and publicity methods, Famous Dave’s uses marketing efforts that include television, internet,
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radio, email Club, direct mail, website marketing promotion and outdoor billboards. During 2012, we reached 1.6
million PIG Club (Pretty Important Guest) members and approximately 339,000 fans on Facebook.
The strategic focus for marketing and promotion for 2012 remained the same – to be the category–defining brand
in BBQ, to create a more competitive distinction, and to continue to strengthen the perception of value in the
consumer’s mind. We featured four limited time offerings in 2012 that introduced our customers to new flavor
profiles, innovative products and provided value and margin opportunity. Additionally, a number of new initiatives
were planned around enhancing the menu, the guest experience, events marketing and social media.
Since its inception, Famous Dave’s has won over 650 awards, including some of the following prestigious
awards won by our system during 2012:
“People’s Choice – Wings” – Tyson’s Best Wings on the Planet – Las Vegas NV
“Best Wing on the Planet” – Sam’s Club National BBQ Tour Championship – Bentonville AR
“1st Place – Sauce” – Best in the West – Reno NV
“3rd Place – Best Ribs – Critic’s Choice” – Best in the West – Reno NV
“Critic’s Choice – 3rd Place” – Great American Cook-Off – Cleveland, OH
“Bride’s Choice – Top Wedding Professional” – The Knot Wedding Network
“Best Non-Traditional BBQ Wings” – Kenosha Wing War – Pleasant Prairie, WI
“People’s Choice - Most Unique Wings – Pineapple Rage” – Pork in the Park – Salisbury MD
“People’s Choice – Best Wings Overall” – Pork in the Park – Salisbury MD
“First Place – Pork” – Pork in the Park – Salisbury MD
“First Place- Whole Hog” – Pork in the Park – Salisbury MD
“First Place – Teriyaki Marinade” – National Barbecue Association Award of Excellence
“Second Place – Wilbur’s Revenge” – National Barbecue Association Award of Excellence
Famous Dave’s is somewhat unique in casual dining having four different occasions to interact with the
consumer, Dine-In, To Go, Catering, and Retail, with each of these occasions being large enough to be treated
differently. The strategies for marketing in 2013 will change significantly. While we will continue to leverage our size
and expertise to define the category, we will shift our emphasis to achieving growth by going deeper in connecting with
consumers on their terms. Each of these dining occasions’ offers unique and often compelling sources of growth, and,
each occasion is growing at a different rate. Through this differentiation, we should be able to create a more immediate
relevancy and sales opportunities by solving the consumer’s daily dinner dilemma and address these differences in our
marketing, including menu, promotional outreach, pricing, and new product news. As such, we added the position of
Vice President of Sales, who is focused on the execution of sales building initiatives around each dining occasion.
Also to further support these sales building initiatives, the Digital Services Group will expand social and digital media
efforts such as the use of email promotions, online ordering, with our new webpage, as well as a catering and To Go
call center.
Location Strategy
We believe that the barbeque segment of the casual dining niche of the restaurant industry continues to offer
strong growth opportunities, and we see no impediments to our growth on a geographical basis. Our geographical
concentration as of December 30, 2012 was 43% Midwest, 19% South, 29% West, 8% Northeast and 1% in Canada.
We were located in 34 states and 1 Canadian province as of December 30, 2012.
We prepare an overall market development strategy for each market. The creation of this market strategy starts
with identifying trade areas that align demographically with the guest profile. The trade areas are then assessed for
viability and vitality and prioritized as initial, second tier, or future development. Since markets are dynamic, the
market strategy includes a continual and ongoing assessment of all existing restaurant locations. If financially feasible,
a restaurant may be relocated as the retail or residential focus in a trade area shifts.
We have a real estate site selection model to assess the site quality and trade area quality of new locations. This
process involves extensive consumer research in our existing restaurants captured in a guest profile, which is updated
on an annual basis. Each location is evaluated based on three primary sales drivers, which include: sales potential from
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the residential base (home quality), employment base (work quality), and retail activity (retail quality). Locations are
also evaluated on their site characteristics which include seven categories of key site attributes, including, but not
limited to, access, visibility, and parking.
As part of our development strategy, we will seek conversion opportunities for future restaurants in order to
streamline the development process and to minimize the up-front investment. We will also evaluate the use of our
6,000, 5,000, 4,000 and 3,000 square foot prototypes where it makes sense. With the reintroduction of the “Current
Shack” style counter-service restaurant, we believe this format will allow us to access new markets or strategically
locate these restaurants in existing markets where a full-service restaurant could not be sustained. We intend to finance
development through the use of cash on hand, cash flow generated from operations, and through availability on our
revolving line of credit.
Company-Owned Restaurant Expansion – We are planning to open two company-owned restaurants in 2013.
In the future, we will continue to build in our existing markets in high profile, heavy traffic retail locations as part of
our future operating strategy to continue to build brand awareness. Our plan is to focus on sustainable, controlled
growth, primarily in markets where multiple restaurants can be opened, thereby expanding consumer awareness, and
creating opportunities for operating, distribution, and marketing efficiencies.
Franchise-Operated Restaurant Expansion – We continue to grow the franchise program and now anticipate 10
to 12 franchise restaurants will open during fiscal 2013, including our first restaurant in Puerto Rico. We are updating
our estimate due to delays in lease executions and permitting as well as complexities associated with international
growth. Our goal is to continue to improve the economics of our current restaurant prototypes, while providing more
cost-effective development options for our franchisees. As of December 30, 2012, we had signed franchise area
development agreements with aggregate commitments for 62 additional units that are expected to open over
approximately the next seven years. However, there can be no assurance that these franchisees will fulfill their
commitments or fulfill them within the anticipated timeframe. Our franchise system is a significant part of our brand’s
success. As such, another one of our goals is to be a valued franchisor; to enhance communication and recognition of
best practices throughout the system and to continue to expand our franchisee network.
Generally, we find franchise candidates with prior franchise casual-dining restaurant experience in the markets
for which they will be granted. In the past, area development agreements generally ranged from 3 to 15 restaurants,
however, due to economic and market conditions, we have been willing to discuss smaller unit agreements as well. We
are also looking at individual franchise restaurants in the right markets where it makes sense. This encompasses an
increased focus on expanding into international markets. Additionally, we believe the “Current Shack” format will
allow us to bring new franchisees, with quick-service experience, into the system.
Purchasing
To provide the freshest ingredients and in order to maximize operational efficiencies for our food products, we
strive to obtain consistent quality items at competitive prices from reliable sources, including identifying secondary
suppliers for many of our key products. Additionally, our secondary suppliers help us assure supply chain integrity and
better logistics. Finally, to reduce freight costs, we continually optimize our distribution networks. The products are
then shipped directly to the restaurants through our foodservice distributors. Each restaurant’s management team
determines the daily quantities of food items needed and orders such quantities to be delivered to their restaurant.
Approximately 85% of our food and non-alcoholic beverage purchases are on contract, with the majority being
proteins. Pork represents approximately 34% of our total purchases, while chicken is approximately 13%, beef, which
includes hamburger and brisket, is approximately 10%, and seafood is approximately 2%. Our purchasing department
contracts, as well as our food and beverage costs and trends associated with each, are discussed under “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.”
Our purchasing team is also responsible for managing the procurement of the non-food items for our
restaurants, including restaurant equipment, small wares and restaurant supplies. Also, they contract many of our
restaurants repair and maintenance services along with strategically managing our utility costs.
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Information Technology
Famous Dave’s recognizes the importance of leveraging information and technology to support and extend our
competitive position in the restaurant industry. We continue to invest in capabilities that provide secure and efficient
operations, maximize the guest experience, and provide the ability to analyze data that describes our operations.
We have implemented a suite of restaurant and support center systems which support operations by providing
transactional functions (ordering, card processing, etc.) and reporting at both the unit and support center level.
Interfaces between Point-of-Sale (POS), labor management, inventory management, menu management, key suppliers,
and team member screening/hiring and financial systems all contribute to the following operator and corporate
visibility:
Average guest check broken down by location, by server, by day part, and by revenue center;
Daily reports of revenue and labor (both current and forecasted);
Weekly reports of selected controllable restaurant expenses;
Monthly reporting of detailed revenue and expenses; and
Ideal vs. actual usage variance reporting for critical restaurant-level materials;
This visibility enables every level of the Famous Dave’s organization to manage the key controllable costs
within our industry, including food and labor costs.
Below are the significant information technology initiatives completed in fiscal 2012:
Implementation of capabilities for forecasting in the budgeting solution to realize additional efficiencies,
improvements in reporting, and allow better integration with other systems.
Continued expansion of a Human Resource Information System (HRIS) leveraging additional capabilities to
drive further efficiencies and self-service processes.
Expansion of the food cost/supply chain back-office solution to include predictive features for ordering and
product preparation that will enhance the effectiveness of efforts to manage cost.
Evaluation and selection of an enhanced labor management solution providing labor scheduling efficiencies,
self-service processes, and more effective integration with other systems.
In 2013, in addition to working alongside the Digital Services Group, the department will leverage technology to
support the needs of the Company through several initiatives listed below:
Roll-out of a redesigned FamousDaves.com website with clear pathways to ordering channels, enhanced
capabilities for restaurant level customization, and social media integration.
Selection and implementation of a video conferencing solution to increase collaboration and reduce travel
costs.
Selection and installation of a new phone system at corporate headquarters leveraging digital functionality to
decrease communication costs.
Replacement of an in-house integration and reporting platform with a Microsoft Integration and connectivity
server solution.
Upgrade of the existing online ordering application to provide additional functionality with increased ease of
use and enhanced upsell capabilities.
Redesigned reporting application providing increased analytical capability for corporate and field staff.
Research and select a Customer Relationship Management (CRM) application for the Catering group which
will support new sales and marketing initiatives.
Pilot a Wait List application to streamline the customer experience while collecting information for future
marketing efforts. Results of this test will determine whether this application is implemented across the
organization.
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Trademarks
Our Company has registered various trademarks, makes use of various unregistered marks, and intends to
vigorously defend these marks. “Famous Dave’s” and the Famous Dave’s logo are registered trademarks of Famous
Dave's of America, Inc. The Company highly values its trademarks, trade names and service marks and will defend
against any improper use of its marks to the fullest extent allowable by law.
Franchise Program
We have offered franchises of our concept since July 1998 and currently file our franchise disclosure document
in all 50 states. Our growth and success depends in part upon our ability to attract, contract with and retain qualified
franchisees. It also depends upon the ability of those franchisees to successfully operate their restaurants with our
standards of quality and promote and develop Famous Dave’s brand awareness.
Although we have established criteria to evaluate prospective franchisees, and our franchise agreements include
certain operating standards, each franchisee operates his/her restaurants independently. Various laws limit our ability
to influence the day-to-day operation of our franchise restaurants. We cannot assure you that franchisees will be able to
successfully operate Famous Dave’s restaurants in a manner consistent with our standards for operational excellence,
service and food quality.
At December 30, 2012, we had 47 ownership groups operating 135 Famous Dave’s franchise restaurants.
Signed area development agreements, representing commitments to open an additional 62 franchise restaurants, were in
place as of December 30, 2012. There can be no assurance that these franchisees will fulfill their commitments or
fulfill them within the anticipated timeframe. We continue to grow the franchise program and now anticipate 10 to 12
franchise restaurants will open during fiscal 2013. We are updating our estimate due to delays in lease executions and
permitting as well as complexities associated with international growth.
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As of December 30, 2012, we had franchise-operated restaurants in the following locations:
Number of Franchise-Operated
Restaurants
2
6
18
6
2
2
2
3
4
3
6
1
1
8
7
3
4
3
6
1
3
2
3
3
4
2
5
3
3
6
11
1
134
1
1
135
United States
Arkansas
Arizona
California
Colorado
Delaware
Florida
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Maine
Michigan
Minnesota
Missouri
Montana
Nebraska
Nevada
New Jersey
New York
North Dakota
Oregon
Ohio
Pennsylvania
South Dakota
Tennessee
Texas
Utah
Washington
Wisconsin
Wyoming
United States Total
Canada
Manitoba
Canada Province Total
United States and Canada Total
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Our Franchise Operations Department is made up of the President and Chief Operating Officer, who guides the
efforts of two Directors of Franchise Operations, each supported by two Territory Directors. The Directors of Franchise
Operations have responsibility for supporting our franchisees geographically throughout the country and play a critical
role for us as well as for our franchise community. Directors of Franchise Operations manage the relationship between
the franchisee and the franchisor and provide an understanding of the roles, responsibilities, differences, and
accountabilities of that relationship. They are active participants towards enhancing performance, as they partner in
strategic and operational planning sessions with our franchise partners and review the individual strategies and tactics
for obtaining superior performance for the franchisee. The Directors of Franchise Operations share best practices
throughout the system and work to create a one-system mentality that benefits everyone. In addition, they ensure
compliance with obligations under our area development and franchise agreements. Franchisees are encouraged to
utilize all available assistance from the Directors of Franchise Operations and the Support Center but are not required to
do so.
The Company has a comprehensive operations’ scorecard and training tool that we call “FD Powers” that helps
us measure our operational effectiveness of our company-owned and franchise-operated restaurants. This scorecard is
used to evaluate, monitor and improve operations in areas such as guest satisfaction, health and safety standards,
community involvement, and local store marketing effectiveness, among other operating metrics. Also, we generally
provide support as it relates to all aspects of franchise operations including, but not limited to, store openings, operating
performance, and human resource strategic planning. Finally, the Company solicits feedback from our franchise-
system by conducting a Franchise Satisfaction Survey every year. The results of this survey are used to better support
the needs of the franchise system while maintaining a one-system mindset.
Our franchise-related revenue consists 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 a meeting with the Famous Dave’s Executive Team and
performing a 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 is typically $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). In 2013, after our Franchise
Disclosure Document is filed, we will be adjusting our franchise fee to $45,000. During fiscal 2012, to incentivize
growth, we reduced the initial franchise fee by 50% for any partner who signed a franchise agreement and opened a
“Current Shack” style counter service restaurant 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.
Because of the continuing difficult economic environment and scarcity of capital for development, we offered a
reduced royalty rate for twelve months from the date of opening for franchisees that opened restaurants during fiscal
2010. In fiscal 2011, we modified and extended this growth incentive program. The modification offered new and
existing franchisees reduced levels of franchise royalties, based on a sliding scale, for new restaurants opened during
2011. All franchise restaurants opened in the first, second, and third quarters paid a reduced royalty of 2.5%, 3%, and
4%, respectively, from the date of opening through the remainder of 2011. Any openings in the fourth quarter and
beyond were at the 5% royalty rate. In 2012, there were no reduced royalty rate programs, and we do not intend to
offer reduced royalty rate programs in fiscal 2013.
The franchisee’s investment depends primarily upon restaurant size. This investment includes the area
development fee, initial franchise fee, real estate and leasehold improvements, fixtures and equipment, POS systems,
business licenses, deposits, initial food inventory, small wares, décor and training fees as well as working capital. In
2013, franchisees will be required to contribute 0.75% of net sales to a marketing fund dedicated to building system-
wide brand awareness.
15
Seasonality
Our restaurants typically generate higher revenue in the second and third quarters of our fiscal year as a result of
seasonal traffic increases and high catering sales experienced during the summer months, and lower revenue in the first
and fourth quarters of our fiscal year, due to possible adverse weather which can disrupt guest and team member
transportation to our restaurants.
Government Regulation
Our Company is subject to extensive state and local government regulation by various governmental agencies,
including state and local licensing, zoning, land use, construction and environmental regulations and various
regulations relating to the sale of food and alcoholic beverages, sanitation, disposal of refuse and waste products, public
health, safety and fire standards. Our restaurants are subject to periodic inspections by governmental agencies to
ensure conformity with such regulations. Any difficulty or failure to obtain required licensing or other regulatory
approvals could delay or prevent the opening of a new restaurant, and the suspension of, or inability to renew a license,
could interrupt operations at an existing restaurant, any of which would adversely affect our operations. Restaurant
operating costs are also affected by other government actions that are beyond our control, including increases in
minimum hourly wage requirements, workers compensation insurance rates, health care insurance costs, property and
casualty insurance, and unemployment and other taxes. We are also subject to "dram-shop" statutes, which generally
provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully
served alcoholic beverages to the intoxicated person.
As a franchisor, we are subject to federal regulation and certain state laws that govern the offer and sale of
franchises. Many state franchise laws impose substantive requirements on franchise agreements, including limitations
on non-competition provisions and the termination or non-renewal of a franchise. Bills have been introduced in
Congress from time to time that would provide for federal regulation of substantive aspects of the franchisor-franchisee
relationship. As proposed, such legislation would limit, among other things, the duration and scope of non-competition
provisions, the ability of a franchisor to terminate or refuse to renew a franchise, and the ability of a franchisor to
designate sources of supply.
The 1990 Federal Americans with Disabilities Act prohibits discrimination on the basis of disability in public
accommodations and employment. We could be required to incur costs to modify our restaurants in order to provide
service to, or make reasonable accommodations for, disabled persons. Our restaurants are currently designed to be
accessible to the disabled, and we believe we are in substantial compliance with all current applicable regulations
relating to this Act.
Team Members
As of December 30, 2012, we employed approximately 3,165 team members of which approximately 309 were
restaurant managers and Support Center employees. None of our team members are covered by a collective bargaining
agreement. We consider our relationships with our team members to be good.
ITEM 1A. RISK FACTORS
Famous Dave’s makes written and oral statements from time to time, including statements contained in this
Annual Report on Form 10-K regarding its business and prospects, such as projections of future performance,
statements of management’s plans and objectives, forecasts of market trends and other matters that are forward-looking
statements within the meaning of Sections 27A of the Securities Exchange Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Statements containing the words or phrases “will likely result,” “anticipates,” “are
expected to,” “will continue,” “is anticipated,” “estimates,” “projects,” “believes,” “expects,” “intends,” “target,”
“goal,” “plans,” “objective,” “should” or similar expressions identify forward-looking statements which may appear in
documents, reports, filings with the Securities and Exchange Commission, news releases, written or oral presentations
made by our officers or other representatives to analysts, shareholders, investors, news organizations, and others, and
discussions with our management and other Company representatives. For such statements, we claim the protection of
the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
16
Our future results, including results related to forward-looking statements, involve a number of risks and
uncertainties. No assurance can be given that the results reflected in any forward-looking statements will be achieved.
Any forward-looking statements made by us or on our behalf speak only as of the date on which such statement is
made. Our forward-looking statements are based upon our management’s current estimates and projections of future
results or trends. Although we believe that our plans and objectives reflected in or suggested by these forward-looking
statements are reasonable, we may not achieve these plans or objectives. In addition, forward-looking statements may
reflect assumptions that are sometimes based upon estimates, data, communications and other information from
suppliers, government agencies and other sources that may be subject to revision. Except as otherwise required by
applicable law, we do not undertake any obligation to update or keep current either (i) any forward-looking statements
to reflect events or circumstances arising after the date of such statement, or (ii) the important factors that could cause
our future results to differ materially from historical results or trends, results anticipated or planned by us, or which are
reflected from time to time in any forward-looking statement which may be made by us or on our behalf.
In addition to other matters identified or described by us from time to time in filings with the SEC, including the
risks described below and elsewhere in this Annual Report on Form 10-K, there are several important factors that could
cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or
results that are reflected from time to time in any forward-looking statement that may be made by us or on our behalf.
The state of the economy and the volatility of the financial markets may adversely impact our business and
results of operations and may impact our ability to comply with our credit facility’s financial covenants.
The restaurant industry is still affected by macro-economic factors, including changes in national, regional, and
local economic conditions, employment levels and consumer spending patterns. The recent economic recession, and
the slow economic recovery, has kept consumer confidence low, and consequently, has affected the frequency of
consumers’ dining out occasions, which has been harmful to our results of operations, and has negatively impacted our
financial position. Depending on the duration and severity of the continued economic downturn and the pace of
recovery, it may continue to adversely affect our ability to comply with financial covenants under our credit facility on
a continuing basis. These financial covenants include, without limitation, maximum target capital expenditures, cash
flow ratios, adjusted leverage ratios, and in certain circumstances, a maximum aged royalty receivable. There can be
no assurances that government responses to the disruptions in the financial markets and overall economy will restore
consumer confidence, stabilize the markets or increase liquidity and the availability of credit. As of December 30,
2012, we were in compliance with all of our covenants after we obtained an amendment to our credit facility on March
14, 2013.
In the event we fail to comply with these or other financial covenants in the future and are unable to obtain
similar amendments or waivers, our lender will have the right to demand repayment of all principal amounts
outstanding under the credit facility and term loan, which were $13.6 million and $5.4 million, respectively, at
December 30, 2012, and to terminate the existing credit facility and term loan. If we were unable to repay outstanding
amounts, either using current cash reserves, a replacement facility or another source of capital, our lender would have
the right to foreclose on our personal property, which serves as collateral for the credit facility. Replacement financing
may be unavailable to us on similar terms or at all, especially if current credit market conditions persist. Termination of
our existing credit facility without adequate replacement, either through a similar facility or other sources of capital,
would have a material and adverse impact on our ability to continue our business operations.
Our future revenue and operating income are dependent on consumer preference and our ability to
successfully execute our plan.
Our Company’s future revenue and operating income will depend upon various factors, including continued and
additional market acceptance of the Famous Dave's brand, the quality of our restaurant operations, our ability to grow
our brand, our ability to successfully expand into new and existing markets, our ability to successfully execute our
franchise program, our ability to raise additional financing as needed, discretionary consumer spending, the overall
success of the venues where Famous Dave’s restaurants are or will be located, economic conditions affecting
disposable consumer income, general economic conditions and the continued popularity of the Famous Dave’s concept.
An adverse change in any or all of these conditions would have a negative effect on our operations and the market
value of our common stock.
17
It’s our plan to open two new company-owned restaurants in 2013, and we are now anticipating the opening of 10
to 12 new franchise restaurants during the course of the year. We are updating our estimate due to delays in lease
executions and permitting as well as complexities associated with international growth. There is no guarantee that any
of the company-owned or franchise-operated restaurants will open when planned, or at all, due to many factors that
may affect the development and construction of our restaurants, including landlord delays, weather interference,
unforeseen engineering problems, environmental problems, construction or zoning problems, local government
regulations, modifications in design to the size and scope of the project, and other unanticipated increases in costs, any
of which could give rise to delays and cost overruns. There can be no assurance that we will successfully implement
our growth plan for our company-owned and franchise-operated restaurants. In addition, we also face all of the risks,
expenses and difficulties frequently encountered in the development of an expanding business.
Competition may reduce our revenue and operating income.
Competition in the restaurant industry is intense. The restaurant industry is affected by changes in consumer
preferences, as well as by national, regional and local economic conditions, including real estate, and demographic
trends, traffic patterns, the cost and availability of qualified labor, and product availability. Discretionary spending
priorities, traffic patterns, tourist travel, weather conditions, and the type, number and location of competing
restaurants, among other factors, will also directly affect the performance of our restaurants. Changes in any of these
factors in the markets where we currently operate our restaurants could adversely affect the results of our operations.
Increased competition by existing or future competitors may reduce our sales. Our restaurants compete with
moderately-priced restaurants primarily on the basis of quality of food and service, atmosphere, location and value. In
addition to existing barbeque restaurants, we face competition from steakhouses and other restaurants featuring protein-
rich foods. We also compete with other restaurants and retail establishments for quality sites.
Many of our competitors have substantially greater financial, marketing and other resources than we do.
Regional and national restaurant companies continue to expand their operations into our current and anticipated market
areas. We believe our ability to compete effectively depends on our ongoing ability to promote our brand and offer
high quality food and hospitality in a distinctive and comfortable environment. If we are unable to respond to, or unable
to respond in a timely manner, to the various competitive factors affecting the restaurant industry, our revenue and
operating income could be adversely affected.
Our failure to execute our franchise program may negatively impact our revenue and operating income.
Our growth and success depends in part upon increasing the number of our franchised restaurants, through
execution of area development and franchise agreements with new and existing franchisees in new and existing
markets. Our ability to successfully franchise additional restaurants will depend on various factors, including our ability
to attract, contract with and retain quality franchisees, the availability of suitable sites, the negotiation of acceptable
leases or purchase terms for new locations, permitting and regulatory compliance, the ability to meet construction
schedules, the financial and other capabilities of our franchisees, our ability to manage this anticipated expansion, and
general economic and business conditions. Many of the foregoing factors are beyond the control of the Company or
our franchisees.
Our growth and success also depends upon the ability of our franchisees to operate their restaurants successfully
to our standards and promote the Famous Dave’s brand. Although we have established criteria to evaluate prospective
franchisees, and our franchise agreements include certain operating standards, each franchisee operates his/her
restaurant independently. Various laws limit our ability to influence the day-to-day operation of our franchise
restaurants. We cannot assure you that our franchisees will be able to successfully operate Famous Dave’s restaurants
in a manner consistent with our concepts and standards, which could reduce their sales and correspondingly, our
franchise royalties, and could adversely affect our operating income and our ability to leverage the Famous Dave’s
brand. In addition, there can be no assurance that our franchisees will have access to financial resources necessary to
open the restaurants required by their respective area development agreements, which would negatively impact our
growth plans.
18
The restaurant industry is subject to extensive government regulation that could negatively impact our
business.
The restaurant industry is subject to extensive state and local government regulation by various government
agencies, including state and local licensing, zoning, land use, construction and environmental regulations and various
regulations relating to the preparation and sale of food and alcoholic beverages, sanitation, disposal of refuse and waste
products, public health, safety and fire standards, minimum wage requirements, workers’ compensation and citizenship
requirements. Due to the fact that we offer and sell franchises, we are also subject to federal regulation and certain state
laws which govern the offer and sale of franchises. Many state franchise laws impose substantive requirements on
franchise agreements, including limitations on non-competition provisions and termination or non-renewal of a
franchise. We may also be subject in certain states to "dram-shop" statutes, which provide a person injured by an
intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to
the intoxicated person.
Any change in the current status of such regulations, including an increase in team member benefits costs, any
and all insurance rates, or other costs associated with team members, could substantially increase our compliance and
labor costs. Because we pay many of our restaurant-level team members rates based on either the federal or the state
minimum wage, increases in the minimum wage would lead to increased labor costs. In addition, our operating results
would be adversely affected in the event we fail to maintain our food and liquor licenses. Furthermore, restaurant
operating costs are affected by increases in unemployment tax rates and similar costs over which we have no control.
Recent health care legislation enacted by the Federal Government mandates menu labeling of certain nutritional
aspects of restaurant menu items such as caloric, sugar, sodium, and fat content. Altering our recipes in response to
such legislation could increase our costs and/or change the flavor profile of our menu offerings which could have an
adverse impact on our results of operations. Additionally, minimum employee health care coverage mandated by state
or federal legislation could have an adverse effect on our results of operations and financial condition.
Healthcare reform legislation could have a negative impact on our business.
During 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation
Act of 2010 were signed into law in the United States. Certain of the provisions that have increased our healthcare costs
include the removal of annual plan limits and the mandate that health plans provide 100% coverage on expanded
preventative care. In addition, our healthcare costs could increase significantly as the new legislation and
accompanying regulations require us to automatically enroll employees in health coverage, potentially cover more
variable hour employees than we do currently or pay penalty amounts in the event that employees do not elect our
offered coverage. While much of the cost of the recent healthcare legislation enacted will occur on or after 2014 due to
provisions of the legislation being phased in over time, changes to our healthcare cost structure could have an impact
on our business and operating costs.
We are subject to the risks associated with the food services industry, including the risk that incidents of food-
borne illnesses or food tampering could damage our reputation and reduce our restaurant sales.
Our industry is susceptible to the risk of food-borne illnesses. As with any restaurant operation, however, we
cannot guarantee that our internal controls and training will be fully effective in preventing all food-borne illnesses.
Furthermore, our reliance on third-party food suppliers and distributors increases the risk that food-borne illness
incidents could be caused by third-party food suppliers and distributors outside of our control and/or multiple locations
being affected rather than a single restaurant. New illnesses resistant to any precautions may develop in the future, or
diseases with long incubation periods could arise that could give rise to claims or allegations on a retroactive basis.
Reports in the media or on social media of one or more instances of food-borne illness in one of our company-owned
restaurants, one of our franchise-operated restaurants or in one of our competitor’s restaurants could negatively affect
our restaurant sales, force the closure of some of our restaurants and conceivably have a national impact if highly
publicized. This risk exists even if it were later determined that the illness had been wrongly attributed to the restaurant.
Furthermore, other illnesses could adversely affect the supply of some of our food products and significantly increase
our costs. A decrease in guest traffic as a result of these health concerns or negative publicity could materially harm our
business, results of operations and financial condition.
19
Our ability to exploit our brand depends on our ability to protect our intellectual property, and if any third
parties make unauthorized use of our intellectual property, our competitive position and business could suffer.
We believe that our trademarks and other intellectual proprietary rights are important to our success and our
competitive position. Accordingly, we have registered various trademarks and make use of various unregistered marks.
However, the actions we have taken or may take in the future to establish and protect our trademarks and other
intellectual proprietary rights may be inadequate to prevent others from imitating our products and concept or claiming
violations of their trademarks and proprietary rights by us. Although we intend to defend against any improper use of
our marks to the fullest extent allowable by law, litigation related to such defense, regardless of the merit or resolution,
may be costly and time consuming and divert the efforts and attention of our management.
Our financial performance is affected by our ability to contract with reliable suppliers at competitive prices.
In order to maximize operating efficiencies, we have entered into arrangements with food manufacturers and
distributors pursuant to which we obtain approximately 85% of the products used by the Company, including, but not
limited to, pork, poultry, beef, and seafood. We believe that our relationships with our food manufacturers and
distributors are excellent. We anticipate no interruption in the supply of product delivered by these companies;
however, we have arrangements with several secondary suppliers in the case of a supply disruption. Although we may
be able to obtain competitive products and prices from alternative suppliers, an interruption in the supply of products
delivered by our food suppliers could adversely affect our operations in the short term. Due to the rising market price
environment, our food costs may increase without the desire and/or ability to pass that price increase to our customers.
While we do contract for utilities in all available states, the costs of these energy-related items will fluctuate due
to factors that may not be predictable, such as the economy, current political/international relations and weather
conditions. Because we cannot control these types of factors, there is a risk that prices of energy/utility items will
increase beyond our current projections and adversely affect our operations.
We could be adversely impacted if our information technology and computer systems do not perform properly
or if we fail to protect our customers’ credit card information or our employees’ personal data.
We rely heavily on information technology to conduct our business, and any material failure, interruption of
service, or compromised data security could adversely affect our operations. While we take it very seriously and
expend significant resources to ensure that our information technology operates securely and effectively, any security
breaches could result in disruptions to operations or unauthorized disclosure of confidential information. Additionally,
if our guests’ credit card or other personal information or our team members’ personal data are compromised, our
operations could be adversely affected, our reputation could be harmed, and we could be subjected to litigation or the
imposition of penalties.
Pursuant to its authority to designate and issue shares of our stock as it deems appropriate, our board of
directors may assign rights and privileges to currently undesignated shares which could adversely affect the
rights of existing shareholders.
Our authorized capital consists of 100,000,000 shares of capital stock. Our Board of Directors, without any
action by the shareholders, may designate and issue shares in such classes or series (including classes or series of
preferred stock) as it deems appropriate and establish the rights, preferences and privileges of such shares, including
dividends, liquidation and voting rights. As of March 11, 2013, we had 7,522,899 shares of common stock outstanding.
The rights of holders of preferred stock and other classes of common stock that may be issued could be superior
to the rights granted to the current holders of our common stock. Our Board's ability to designate and issue such
undesignated shares could impede or deter an unsolicited tender offer or takeover proposal. Further, the issuance of
additional shares having preferential rights could adversely affect the voting power and other rights of holders of
common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
20
ITEM 2. PROPERTIES
The development cost of our restaurants varies depending primarily on the size and style of the restaurant,
whether the property is purchased or leased, and whether it is a conversion of an existing building or a newly
constructed restaurant. We have 6,000 and 5,000 square foot packages that can be built as a free standing building, a
4,000 square foot model that most likely would be constructed as an end cap of a building and a 3,000 square foot
design which would be constructed as a counter service location in an existing building or as a in-line location in a
shopping center. Additionally, we offer lower cost conversion packages that provide our franchisees with the
flexibility to build in cost effective formats, such as, opportunities to convert existing restaurants into a Famous Dave’s
restaurant.
In fiscal 2012, the company opened a 6,000 square foot full-service restaurant and a 3,600 square foot “Current
Shack” style counter-service restaurant, both of which were conversions of other restaurant concepts. In 2012, several
franchisees successfully converted restaurants from existing casual dining concepts. In 2011, the company opened a
5,400 square foot full-service restaurant and a 3,000 square foot “Current Shack” style counter-service restaurant, both
of which were conversions of other restaurant concepts. In fiscal 2010, the company opened one 6,400 square foot
restaurant that was also a conversion of another restaurant concept. We did not open any restaurants in 2009; however
the restaurants we opened in 2006, 2007, and 2008 were approximately 6,000 square feet, ground up construction and
had approximately 175 seats, with an additional 50 seats in the bar, and 32 additional seats on the patio, where
available. Due to the flexibility and scalability of our concept, there are a variety of development opportunities
available now and in the future. In 2013, we now expect to open 2 company-owned restaurants, and 10 to 12 franchise-
operated restaurants. We are updating our estimate due to delays in lease executions and permitting as well as
complexities associated with international growth.
Our leased restaurant facilities are occupied under agreements with remaining terms ranging from 1 to 35 years,
including renewal options. Such leases generally provide for fixed rental payments plus operating expenses associated
with the properties. Several leases also require the payment of percentage rent based on net sales.
Our executive offices are currently located in approximately 23,900 square feet in Minnetonka, Minnesota. In
2011, we negotiated a lease amendment for our executive offices which extends our lease to November 2018, with two
five-year renewal options. The minimum annual rent commitment remaining over the lease term, including renewal
options is approximately $4.8 million, net of sublease income. In 2010, in an effort to reduce general and
administrative expense, we entered into a sublease for 2,100 square feet, in our executive office building, that will
expire in August of 2013. Additionally, we have leased warehouse space to house our décor and recently executed a
three lease extension for this property.
21
We believe that our properties will be suitable for our needs and adequate for operations for the foreseeable
future. The following table sets forth certain information about our existing company-owned restaurant locations, as of
December 30, 2012, sorted by opening date:
Location
1 Roseville, MN (3)
2 Calhoun Square (Minneapolis, MN)
3 Maple Grove, MN
4 Highland Park (St. Paul, MN)(3)
5 Stillwater, MN
6 Apple Valley, MN(3)
7 Forest Lake, MN(3)
8 Minnetonka, MN
9 Plymouth, MN(3)
10 West Des Moines, IA
11 Des Moines, IA
12 Cedar Falls, IA
13 Bloomington, MN
14 Woodbury, MN
15 Lincoln, NE
16 Columbia, MD
17 Annapolis, MD
18 Frederick, MD
19 Woodbridge, VA
20 Addison, IL
21 North Riverside, IL
22 Sterling, VA
23 Oakton, VA
24 Laurel, MD
25 Richmond I (Richmond, VA)
26 Gaithersburg, MD
27 Richmond II (Richmond, VA)
28 Orland Park, IL
29 Virginia Commons, VA
30 Chantilly, VA
31 Florence, KY
32 Waldorf, MD
33 Coon Rapids, MN
34 Fredericksburg, VA
35 Owings Mills, MD
36 Bolingbrook, IL
37 Oswego, IL
38 Alexandria, VA
39 Algonquin, IL
40 Greenwood, IN
41 Salisbury, MD
42 Brick, NJ
43 May's Landing, NJ
44 Smithtown, NY
45 Westbury, NY
46 New Brunswick, NJ
47 Mountainside, NJ
48 Metuchen, NJ
49 Bel Air, MD
50 Falls Church, VA
51 Eden Prairie, MN(3)
52 Gainesville, VA
53 Evergreen Park, IL(3)
Square
Footage
4,800
10,500
6,100
5,200
5,200
3,800
4,500
5,500
2,100
5,700
5,800
5,400
5,400
5,900
6,200
7,200
6,800
5,600
6,000
5,000
4,700
5,800
4,400
5,200
5,400
5,000
5,200
5,400
5,600
6,400
5,900
6,600
6,300
6,500
6,700
6,600
6,600
6,600
6,000
5,700
5,400
5,200
6,400
6,400
6,400
7,200
8,800
6,200
6,360
5,430
2,980
6,000
3,600
Interior
Seats
105
380
146
125
130
90
100
140
49
150
150
130
140
180
185
270
219
180
219
135
150
200
184
165
180
170
158
158
186
205
217
200
160
219
219
219
219
219
219
184
192
181
237
237
276
255
253
176
199
169
65
215
90
Owned or
Leased
Leased
Leased
Leased(1)
Leased
Leased(1)
Leased(1)
Leased
Owned(2)
Owned(2)
Leased
Leased
Leased
Leased
Owned(2)
Owned(2)
Leased
Leased
Leased
Leased
Owned(2)
Leased
Leased
Leased
Leased
Owned(2)
Leased
Owned(2)
Leased
Owned(2)
Leased
Leased
Leased
Owned(2)
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Date
Opened/Acquired
June 1996
September 1996
April 1997
June 1997
July 1997
July 1997
October 1997
December 1997
December 1997
April 1998
April 1998
September 1998
October 1998
October 1998
December 1999
January 2000
January 2000
January 2000
January 2000
March 2000
August 2000
December 2000
May 2001
August 2001
December 2001
May 2002
June 2002
June 2002
June 2003
January 2006
January 2006
June 2006
December 2006
September 2007
November 2007
November 2007
December 2007
February 2008
September 2008
October 2008
October 2008
March 2010
March 2010
March 2010
March 2010
March 2010
March 2010
March 2010
August 2010
August 2011
December 2011
June 2012
November 2012
All seat count and square footage amounts are approximate.
(1)Restaurant is collateral in a financing lease.
(2)Restaurant land and building are owned by the Company.
(3)Counter service restaurant
22
ITEM 3. LEGAL PROCEEDINGS
From time-to-time, we are involved in various legal actions arising in the ordinary course of business. In the
opinion of our management, the ultimate dispositions of these matters will not have a material adverse effect on our
consolidated financial position and results of operations. Currently, there are no significant legal matters pending.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock has traded on the NASDAQ Stock Market since July 24, 1997 under the symbol DAVE.
Currently, our common stock trades on the NASDAQ Global Market. The following table summarizes the high and
low sale prices per share of our common stock for the periods indicated, as reported on the NASDAQ Global Market.
Period
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
2012
2011
High
Low
High
Low
$
$
$
$
11.75
12.08
10.98
10.00
$
$
$
$
10.15
9.32
8.16
7.75
$
$
$
$
12.20
10.17
11.05
10.45
$
$
$
$
9.15
8.53
8.00
7.76
Holders
As of March 5, 2013, we had approximately 345 shareholders of record and approximately 3,676 beneficial
shareholders.
Dividends
Our Board of Directors has not declared any dividends on our common stock since our inception, and does not
intend to pay out any cash dividends on our common stock in the foreseeable future. We presently intend to retain all
earnings, if any, to provide for our growth, reduce our debt levels, and repurchase our common stock. The payment of
cash dividends in the future, if any, will be at the discretion of the Board of Directors and will depend upon such factors
as earnings levels, capital requirements, loan agreement restrictions, our financial condition and other factors deemed
relevant by our Board of Directors.
Stock Performance Graph
Below is a line-graph presentation that compares the cumulative, five-year return to the Company’s shareholders
(based on appreciation of the market price of the Company’s common stock) on an indexed basis with (i) a broad
equity market index and (ii) an appropriate published industry or line-of-business index, or Peer Group Index
constructed by the Company. The following presentation compares the Company’s common stock price for the period
from December 30, 2007 through December 30, 2012, to the S&P 500 Stock Index and to the S&P Small Cap
Restaurant Index.
The Company has elected to use the S&P Small Cap Restaurant Index in compiling its stock performance graph
because it believes the S&P Small Cap Restaurant Index represents a comparison to competitors with similar market
capitalization to the Company.
23
The presentation assumes that the value of an investment in each of the Company's common stock, the S&P 500
Index and S&P Small Cap Restaurants was $100 on December 30, 2007, and that any dividends paid were reinvested in
the same security.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Famous Dave's of America, Inc., the S&P 500 Index, and S&P Small Cap
Restaurants
$160
$140
$120
$100
$80
$60
$40
$20
$0
12/30/07
12/28/08
1/3/10
1/2/11
1/1/12
12/30/12
Famous Dave's of America, Inc.
S&P 500
S&P Small Cap Restaurants
*$100 invested on 12/30/07 in stock or index, including reinvestment of dividends.
Fiscal year ending 12/30/12 with previous specific fiscal year ends at December 28, 2008; January
3, 2010, January 2, 2011 and January 1, 2012.
Copyright© 2013 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.
Purchases of Equity Securities by the Issuer
On November 4, 2010, our Board of Directors approved a stock repurchase program that authorized the
repurchase of up to 1.0 million shares of our common stock in both the open market or through privately negotiated
transactions. On May 1, 2012 we completed the repurchase of all shares under this program for approximately $9.9
million at an average market price per share of $9.91, excluding commissions.
On May 1, 2012, our Board of Directors approved a stock repurchase program that authorized the repurchase of
up to 1.0 million shares of our common stock in both the open market or through privately negotiated transactions. As
of December 30, 2012, we had repurchased 323,862 shares under this program for approximately $3.4 million at an
average market price per share of $10.49, excluding commissions.
24
The following table includes information about our share repurchases for the fiscal year ended December 30,
2012:
Total
Number
of Shares
Purchased
Average
Price
Paid per
Share(1)
45,513 (2)
29,972 (2)
72,234 (2)
40,508 (2)
10.56
10.82
11.29
11.46
Total Number
of Shares
Purchased as
Part of Publically
Announced Plans
or Programs
45,513 (2)
29,972 (2)
72,234 (2)
40,508 (2)
226,553 (2)(3) 10.21
226,553 (2)(3)
124,816 (3)
10.94
124,816 (3)
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
Maximum
Number
(or
Approximate
Dollar Value) of
Shares
that May Yet be
Purchased
Under the Plans
or Programs
170,221(4)
140,249(4)
68,015(4)
27,507(4)
800,954(5)
676,138(5)
676,138(5)
676,138(5)
676,138(5)
676,138(5)
676,138(5)
676,138(5)
Period
Month #1 (January 2, 2012 – January 29, 2012)
Month #2 (January 30, 2012 – February 26, 2012)
Month #3 (February 27, 2012 – April 1, 2012)
Month #4 (April 2, 2012 – April 29, 2012)
Month #5 (April 30, 2012 – May 27, 2012)
Month #6 (May 28, 2012 – July 1, 2012)
Month #7 (July 2, 2012 – July 29, 2012)
Month #8 (July 30, 2012 – August 26, 2012)
Month #9 (August 27, 2012 – September 30, 2012)
Month #10 (October 1, 2012 – October 28, 2012)
Month #11 (October 29, 2012 – November 25, 2012)
Month #12 (November 26, 2012 – December 30, 2012)
(1)Excluding commissions.
(2)Shares purchased under the 1.0 million share publically announced repurchase plan adopted November 4, 2010.
(3)Shares purchased under the 1.0 million share publically announced repurchase plan adopted May1, 2012.
(4)Reflects the maximum number of shares that may be purchased in the future under the publicly announced share repurchase plan adopted November 4, 2010.
(5)Reflects the maximum number of shares that may be purchased in the future under the publicly announced share repurchase plan adopted May 1, 2012.
25
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below should be read in conjunction with the consolidated financial
statements and notes included elsewhere in this Form 10-K, and in conjunction with “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-K.
The selected financial data as of and for the fiscal years ended December 30, 2012 (fiscal 2012), January 1, 2012
(fiscal 2011), January 2, 2011, (fiscal 2010), January 3, 2010 (fiscal 2009), and December 28, 2008 (fiscal 2008) have
been derived from our consolidated financial statements as audited by Grant Thornton LLP, independent registered
public accounting firm.
FINANCIAL HIGHLIGHTS
FISCAL YEAR
($’s in 000’s, except per share data and average weekly sales)
STATEMENTS OF OPERATIONS DATA
Revenue
Asset impairment and estimated lease termination
and other closing costs(2)
Income from operations
Income tax (expense) benefit
Net income
Basic net income per common share
Diluted net income per common share
BALANCE SHEET DATA (at year end)
Cash and cash equivalents
Total assets
Long-term debt less current maturities(4)
Total shareholders’ equity
OTHER DATA
Restaurant Sales:
Company-owned
Franchise-operated
Number of restaurants open at year end:
Company-owned restaurants
Franchise-operated restaurants
Total restaurants
Company-owned comparable store
Sales (decrease) increase (5)
Average weekly sales:
Company-owned restaurants
Franchise-operated restaurants
2012
2011
2010
2009(1)
2008
$154,988
$154,811
$148,268
$136,018
$140,382
($370)
$6,213
($805)
$4,360
$0.58
$0.57
$2,074
$76,253
$22,105
$33,767
($513)
$9,396
($2,764)
$5,562
$0.70
$0.68
$1,148
$73,839
$20,451
$34,094
($74)
$11,983
($3,796)
$7,218
$0.84 (3)
$0.82 (3)
$2,654
$76,129
$23,497
$32,904
($218)
$10,514
($2,989)
$5,701
$0.63
$0.62
$2,996
$68,381
$17,990
$32,994
($6,912)
$2,030
$119
$389
$0.04
$0.04
$1,687
$73,401
$29,252
$26,184
$135,730
$361,109
$136,896
$355,338
$131,154
$340,454
$117,934
$358,696
$122,016
$355,946
53
135
188
54
133
187
52
130
182
45
132
177
47
123
170
(1.8)%
1.5%
0.7%
(6.3)%(6)
(2.0)%
$49,172
$52,714
$50,216
$53,096
$49,187
$52,631
$48,197
$53,016
$50,685
$56,535
(1)Fiscal 2009 consisted of 53 weeks. Fiscal 2012, 2011, 2010 and 2008 all consisted of 52 weeks.
(2)Fiscal 2012 primarily reflects closing costs for three company-owned restaurants. Fiscal 2011 primarily reflects impairment charges for three company-owned
restaurants. Two of these are still operating and one has been closed. Fiscal 2009 primarily reflects closing costs for two company-owned restaurants. Fiscal 2008
reflects impairment charges for eight restaurants. Five of these have closed and three are still operating.
(3)Reflects gain on acquisition of New York and New Jersey restaurants in March of 2010, of $0.15 per diluted share.
(4)Long-term debt includes our line of credit.
(5)Our comparable store sales includes company-owned restaurants that are open year round and have been open more than 24 months.
(6)For purposes of computing comparable store sales, this computation assumes fiscal 2009 was a 52-week year.
26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements contained in this Annual Report on Form 10-K include “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are based on
information currently available to us as of the date of this Annual Report, and we assume no obligation to update any
forward-looking statements except as otherwise required by applicable law. Forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any
future results, performance or achievements expressed or implied by such forward-looking statements. Such factors
may include, among others, those factors listed in Item 1A of and elsewhere in this Annual Report and our other filings
with the Securities and Exchange Commission. The following discussion should be read in conjunction with “Selected
Financial Data” above (Item 6 of this Annual Report) and our financial statements and related footnotes appearing
elsewhere in this Annual Report.
OVERVIEW
Famous Dave's of America, Inc. was incorporated as a Minnesota corporation in March 1994 and opened its first
restaurant in Minneapolis in June 1995. As of December 30, 2012, there were 188 Famous Dave’s restaurants
operating in 34 states and 1 Canadian province, including 53 company-owned restaurants and 135 franchise-operated
restaurants. An additional 62 franchise restaurants were committed to be developed through signed area development
agreements as of December 30, 2012.
Fiscal Year
Our fiscal year ends on the Sunday nearest December 31st of each year. Our fiscal year is generally 52 weeks;
however it periodically consists of 53 weeks. The fiscal years ended December 30, 2012 (fiscal 2012), January 1, 2012
(fiscal 2011), and January 2, 2011 (fiscal 2010) all consisted of 52 weeks. Fiscal 2013, which ends on December 29,
2013, will consist of 52 weeks.
Basis of Presentation – The financial results presented and discussed herein reflect our results and the results of
our wholly-owned and majority-owned consolidated subsidiaries. All intercompany balances and transactions have
been eliminated in consolidation.
Application of Critical Accounting Policies and Estimates – The following discussion and analysis of the
Company’s financial condition and results of operations is based upon its financial statements, which have been
prepared in accordance with accounting principles generally accepted in the United States. The preparation of these
financial statements requires management to make estimates and judgments that affect the reported amount of assets,
liabilities and expenses, and related disclosures. On an on-going basis, management evaluates its estimates and
judgments. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty.
Management bases its estimates and judgments on historical experience, observance of trends in the industry,
information provided by customers and other outside sources and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions. Management believes the following critical accounting policies reflect its
more significant judgments and estimates used in the preparation of the Company’s consolidated financial statements.
Our Company’s significant accounting policies are described in Note 1 to the consolidated financial statements
included herein.
We have discussed the development and selection of the following critical accounting estimates with the Audit
Committee of our Board of Directors and the Audit Committee has reviewed our disclosures relating to such estimates
in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Recognition of Franchise-Related Revenue – Initial franchise fee revenue is recognized when we have
performed substantially all of our obligations as franchisor. Franchise royalties are recognized when earned.
27
Our franchise-related revenue consists 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 a meeting with the Famous Dave’s Executive Team and
performing a 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 is typically $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). In 2013, after our Franchise
Disclosure Document is filed, we will be adjusting our franchise fee to $45,000. During fiscal 2012, to incentivize
growth, we reduced the initial franchise fee by 50% for any partner who signed a franchise agreement and opened a
“Current Shack” style counter service restaurant 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
franchises pay us a monthly royalty of 5% of their net sales.
Because of the continuing difficult economic environment and scarcity of capital for development, we offered a
reduced royalty rate for twelve months from date of opening for franchisees that opened restaurants during fiscal 2010.
In fiscal 2011, we modified and extended this growth incentive program. The modification offered new and existing
franchisees reduced levels of franchise royalties, based on a sliding scale, for new restaurants opened during 2011. All
franchise restaurants opened in the first, second, and third quarters paid a reduced royalty of 2.5%, 3%, and 4%,
respectively, from the date of opening through the remainder of 2011. Any openings in the fourth quarter and beyond
were at the 5% royalty rate. In 2012, there were no reduced royalty rate programs, and there will be no reduced royalty
rate programs in fiscal 2013.
Asset Impairment and Estimated Lease Termination and Other Closing Costs – We evaluate restaurant sites
and long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of restaurant sites to be held and used is measured by a comparison of
the carrying amount of the restaurant site to the undiscounted future net cash flows expected to be generated on a
restaurant-by-restaurant basis. If a restaurant is determined to be impaired, the loss is measured by the amount by
which the carrying amount of the restaurant site exceeds its fair value. Fair value is estimated based on the best
information available including estimated future cash flows, expected growth rates in comparable restaurant sales,
remaining lease terms and other factors. If these assumptions change in the future, we may be required to take
additional impairment charges for the related assets. Considerable management judgment is necessary to estimate
future cash flows. Accordingly, actual results could vary significantly from such estimates. Restaurant sites that are
operating, but have been previously impaired, are reported at the lower of their carrying amount or fair value less
estimated costs to sell.
Lease Accounting – We recognize lease expense for our operating leases over the entire lease term including
lease renewal options where the renewal is reasonably assured and the build-out period takes place prior to the
restaurant opening or lease commencement date. We account for construction allowances by recording a receivable
when its collectability is considered probable, depreciating the leasehold improvements over the lesser of their useful
lives or the full term of the lease, including renewal options and build-out periods, amortizing the construction
allowance as a credit to rent expense over the full term of the lease, including renewal options and build-out periods,
and relieving the receivable once the cash is obtained from the landlord for the construction allowance. We record rent
expense during the build-out period and classify this expense as pre-opening expenses in our consolidated statements of
operations.
Liquor licenses - The Company owns transferable liquor licenses in jurisdictions with a limited number of
authorized liquor licenses. These licenses were capitalized as indefinite-lived intangible assets and are included in
intangible assets, net in our consolidated Balance Sheets (see note 5 to our financial statements) at December 30, 2012
and January 1, 2012. We annually review the liquor licenses for impairment and in fiscal 2012 and 2011, no
impairment charges were required to be recorded. Additionally, the costs of obtaining non-transferable liquor licenses
28
that are directly issued by local government agencies for nominal fees are expensed as incurred. Annual liquor license
renewal fees are expensed over the renewal term.
Accounts Receivable, Net – We provide an allowance for uncollectible accounts on accounts receivable based on
historical losses and existing economic conditions, when relevant. We provide for a general bad debt reserve for
franchise receivables due to increases in days’ sales outstanding and deterioration in general economic market
conditions. This general reserve is based on the aging of receivables meeting specified criteria and is adjusted each
quarter based on past due receivable balances. Additionally, we have periodically established a specific reserve on
certain receivables as necessary. Any changes to the reserve are recorded in general and administrative expenses. The
allowance for uncollectible accounts was approximately $236,000 and $18,000, at December 30, 2012 and January 1,
2012, respectively. In 2012, the increase in the allowance for doubtful accounts was primarily due to the receivable
aging for two franchise partners. Accounts receivable are written off when they become uncollectible, and payments
subsequently received on such receivables are credited to the allowance for doubtful accounts. Accounts receivable
balances written off have not exceeded allowances provided. We believe all accounts receivable in excess of the
allowance are fully collectible. If accounts receivable in excess of provided allowances are determined uncollectible,
they are charged to expense in the period that determination is made. Outstanding past due accounts receivable are
subject to a monthly interest charge on unpaid balances which is recorded as interest income in our consolidated
statements of operations. In assessing recoverability of these receivables, we make judgments regarding the financial
condition of the franchisees based primarily on past and current payment trends, as well as other variables, including
annual financial information, which the franchisees are required to submit to us.
Stock-based compensation – We recognize compensation cost for share-based awards granted to team members
based on their fair values at the time of grant over the requisite service period. Our pre-tax compensation cost for stock
options and other incentive awards is included in general and administrative expenses in our consolidated statements of
operations (see Note 10 to our financial statements).
Income Taxes – We provide for income taxes based on our estimate of federal and state income tax liabilities.
These estimates include, among other items, effective rates for state and local income taxes, allowable tax credits for
items such as taxes paid on reported tip income, estimates related to depreciation and amortization expense allowable
for tax purposes, and the tax deductibility of certain other items. Our estimates are based on the information available
to us at the time that we prepare the income tax provision. We generally file our annual income tax returns several
months after our fiscal year-end. Income tax returns are subject to audit by federal, state, and local governments,
generally years after the tax returns are filed. These returns could be subject to material adjustments or differing
interpretations of the tax laws. Accounting for uncertain tax positions requires significant judgment including
estimating the amount, timing, and likelihood of ultimate settlement. Although the Company believes that its estimates
are reasonable, actual results could differ from these estimates. Additionally, uncertain positions may be re-measured
as warranted by changes in facts or law. During 2012, we realized the benefit from the cumulative impact of tax credits
for employee reported tips for the current year as well as four previous tax years that were amended, or in the case of
fiscal 2011, initially filed. This resulted from a more precise calculation methodology for this tax credit, and will
continue to benefit us in the future.
Results of Operations
Revenue – Our revenue consists of four components: company-owned restaurant sales, franchise-related revenue
from royalties and franchise fees, licensing revenue from the retail sale of our sauces and rubs, and other revenue from
the opening assistance we provide to franchise partners. We record restaurant sales at the time food and beverages are
served. Our revenue recognition policies for franchising are discussed under “Recognition of Franchise-Related
Revenue” above. Our franchise-related revenue consists of area development fees, initial franchise fees and continuing
royalty payments. We record sales of merchandise items at the time items are delivered to the customer.
We have a licensing agreement for our retail products, with renewal options of five years, subject to the
licensee’s attainment of identified minimum product sales levels. Based on achievement of the required minimum
product sales, the agreement will be in force until April 2015 at which time these levels will be re-evaluated.
Periodically, we provide additional services, beyond the general franchise agreement, to our franchise
operations, such as new restaurant training and décor installation services. The cost of these services is billed to the
29
respective franchisee, is recorded as other income when the service is provided, and is generally payable on net 30-day
terms. Since 2010, the franchise agreements require a 50% deposit be paid in advance for these services.
Costs and Expenses – Restaurant costs and expenses include food and beverage costs, operating payroll, team
member benefits, restaurant level supervision, occupancy costs, repair and maintenance costs, supplies, advertising and
promotion, and restaurant depreciation and amortization. Certain of these costs and expenses are variable and will
increase or decrease with sales volume. The primary fixed costs are corporate and restaurant management salaries and
occupancy costs. Our experience is that when a new restaurant opens, it incurs higher than normal levels of labor and
food costs until operations stabilize, usually during the first 12-14 weeks of operation. As restaurant management and
team members gain experience following a restaurant’s opening, labor scheduling, food cost management and
operating expense control are improved to levels similar to those at our more established restaurants.
General and Administrative Expenses – General and administrative expenses include all corporate and
administrative functions that provide an infrastructure to support existing operations and support future growth.
Salaries, bonuses, team member benefits, legal fees, accounting fees, consulting fees, travel, rent, and general insurance
are major items in this category. We record expenses for Managers in Training (“MITs”) in this category for
approximately six weeks prior to a restaurant opening. We also provide franchise services, the revenue of which are
included in other revenue and the expenses of which are included in general and administrative expenses.
The following table presents items in our consolidated statements of operations as a percentage of total revenue
or net restaurant sales, as indicated, for the following fiscal years:
Food and beverage costs(1)
Labor and benefits(1)
Operating expenses(1)
Depreciation & amortization (restaurant level)(1)
Depreciation & amortization (corporate level)(2)
General and administrative(2)
Asset impairment and estimated lease
termination and other closing costs(1)
Pre-opening expenses and net loss
on disposal of property(1)
Gain on acquisition, net of acquisition costs(1)
Total costs and expenses(2)
Income from operations(2)
2012
31.3%
32.6%
28.3%
4.0%
0.4%
10.9%
0.3%
0.4%
---
96.0%
4.0%
2011
2010
29.8%
31.5%
28.0%
3.7%
0.4%
10.6%
0.4%
0.3%
---
93.9%
6.1%
29.5%
31.5%
27.5%
3.8%
0.4%
10.9%
0.1%
0.2%
(1.6)%
91.9%
8.1%
*Data regarding our restaurant operations as presented in the table includes sales, costs and expenses associated with our Rib Team, which had a net loss
of $69,000, $26,000 and $6,000, respectively, in fiscal years 2012, 2011 and 2010. Our Rib Team travels around the country introducing people to our
brand of barbeque and building brand awareness.
(1)As a percentage of restaurant sales, net
(2)As a percentage of total revenue
Fiscal Year 2012 Compared to Fiscal Year 2011
Total Revenue
Total revenue of approximately $155.0 million for fiscal 2012 increased approximately $200,000, or 0.1%, from
total revenue of $154.8 in fiscal 2011. Fiscal 2012 and 2011 both consisted of 52 weeks.
30
Restaurant Sales, net
Restaurant sales for fiscal 2012 were approximately $135.7 million, compared to approximately $136.9 million
for fiscal 2011 reflecting a 0.9% decrease. Total restaurant sales reflected a 1.8% comparable sales decrease and the
closure of three company-owned restaurants. This was partially offset by the full year impact of two company-owned
restaurants that opened in fiscal 2011, and the partial year impact of two company-owned restaurants that opened in
fiscal 2012, as well as a weighted average price increase of approximately 2.85%. The overall 1.8% comparable sales
decrease was, on a weighted basis, comprised of a 2.1% comparable sales decrease for dine-in sales which was partially
offset by a comparable sales increase for catering of 0.3%, while To Go comparable sales remained flat. For fiscal
2012, off-premise sales were 33.4% of total sales, with catering at 10.5% and To Go at 22.9%. This compares to
2011’s off-premise sales of 32.0 % with catering at 9.9% and To Go at 22.1%. Finally, as a percentage of dine-in sales,
our adult beverage sales at our company-owned restaurants were approximately 9.5% and 9.4% for fiscal 2012 and
2011, respectively.
Franchise-Related Revenue
Franchise-related revenue consists of royalty revenue and franchise fees, which includes initial franchise fees
and area development fees. Franchise-related revenue was approximately $18.1 million for fiscal 2012, compared to
$16.9 million for 2011. The increase in franchise-related revenue is primarily related to an increase in franchise fees
which reflects a net increase of two franchise restaurants year over year partially offset by a comparable sales decrease
of 2.0%. Ten new franchise restaurants opened in fiscal 2012 at higher sales volumes than the eight restaurants that
closed. Additionally, while our committed units to be developed decreased by one unit year over year; it did reflect the
execution of two significant area development agreements as well as several smaller agreements. Fiscal 2012 included
6,848 franchise operating weeks, compared to 6,691 franchise operating weeks in fiscal 2011. There were 135
franchise-operated restaurants open at December 30, 2012, compared to 133 at January 1, 2012.
Licensing and Other Revenue
Licensing revenue includes royalties from a retail line of business, including sauces, rubs, marinades and
seasonings. Other revenue includes opening assistance and training we provide to our franchise partners. Licensing
royalty revenue was approximately $731,000 for fiscal 2012 as compared to $702,000 for fiscal 2011. During fiscal
2013, as a result of continued growth in our restaurant base and expanded markets, we expect to see licensing revenue
continue to increase beyond fiscal 2012 levels.
Other revenue for fiscal 2012 was approximately $443,000 compared to approximately $282,000 for the
comparable period of fiscal 2011. The increase was primarily due to an increase in the number of franchise openings
and an increase in the opening assistance required.
Same Store Net Sales
It is our policy to include in our same store net sales base, restaurants that are open year round and have been
open at least 24 months. Same store net sales for company-owned restaurants open at least 24 months ended December
30, 2012 decreased 1.8%, compared to fiscal 2011’s increase of 1.5%. For fiscal 2012 and fiscal 2011, there were 49
and 44 restaurants, respectively, included in the company-owned 24 month comparable sales base.
Same store net sales on a 24 month basis for franchise-operated restaurants for fiscal 2012 decreased 2.0%,
compared to fiscal 2011’s comparable sales which were flat to 2010’s sales. For fiscal 2012 and fiscal 2011, there
were 107 and 102 restaurants, respectively, included in the franchise-operated 24 month comparable sales base.
31
Average Weekly Net Sales and Operating Weeks
The following table shows company-owned and franchise-operated average weekly net sales for fiscal 2012 and
fiscal 2011:
Fiscal Years Ended
December 30,
2012
January 1,
2012
Average Weekly Net Sales (AWS):
Company-Owned
Full-Service
Counter-Service
Franchise-Operated
Food and Beverage Costs
$
$
$
$
49,172
50,963
35,454
52,714
$
$
$
$
50,216
51,695
36,213
53,096
Food and beverage costs for fiscal 2012 were approximately $42.4 million or 31.3% of net restaurant sales
compared to approximately $40.8 million or 29.8% of net restaurant sales for fiscal 2011. This increase is primarily
due to expected commodity cost increases combined with a shift in higher sales of lower-priced, lower-margin items
compared to fiscal 2011. Additionally, we strategically slowed the progress of certain initiatives for further testing.
These initiatives were intended to positively impact food costs in 2012; however, to ensure their long-term success,
both in terms of dollar savings, as well as delivering a value proposition to our guests, they were delayed until fiscal
2013.
For 2013, we currently anticipate a 2.0% year over year decline in dollars in our contracted food and beverage
costs for comparable restaurants, based on what we have contracted to date and based on a projection of the remainder
of the year. Late in 2012, we locked in a majority of our pork contracts for all of fiscal 2013 which positions us to
capitalize on future savings should we see further opportunities in 2013 to blend and extend our contract into fiscal
2014. Additionally, we anticipate a decrease in the cost of our brisket and other items, such as hamburger, seafood, and
French fries, which we expect will be partially offset by higher chicken prices year over year. Certain of our key
proteins, such as chicken and brisket, have been contracted through the first quarter of 2013; and although our guidance
reflects a projection of these, we are still negotiating final pricing for the remainder of 2013 on these items. With all
indications pointing to a continuation of rising commodity prices across the industry, we plan on mitigating these price
increases with a number of strategies. First, we anticipate taking a menu price increase of approximately 1.5% on
selected menu items in April 2013, concurrent with our menu redesign. As we move through 2013, we will determine
whether or not we will take an additional price increase later in the year based on greater insight obtained from our
work with RMS, our menu pricing consultant.
During 2013, we will also continue our strategy of growing our supplier network, particularly in the West.
These new suppliers will allow us to optimize our freight costs because our restaurants will be closer to the distribution
centers, thereby lowering freight costs across the rest of the system. Additionally, in 2013, we will transition to selling
some of our key proteins in the same unit of measure we receive them, protecting us from the variability of size and
weight for these key items. An example of this is selling wings “by weight” as opposed to “by the piece”. Although,
this will not change portion sizes or the value delivered to our guest, it will allow us to standardize food costs by
reducing the weight variations of the products we sell, and will open us up to bringing additional vendors into our
system. Lastly, we will strategically manage menu mix and margin through key core-item promotions as well as
through opportunistic commodity purchases of high margin items that make sense to our guests and can be inserted
quickly into our promotional calendar. As a result of our contracts and initiatives, we anticipate food and beverage
costs for fiscal 2013, as a percentage of net sales, to be approximately 120 to 125 basis points lower than fiscal 2012’s
percentage.
Labor and Benefits Costs
Labor and benefits costs for fiscal 2012 were approximately $44.3 million or 32.6% of net restaurant sales,
compared to approximately $43.2 million or 31.5% of net restaurant sales for fiscal 2011. This increase was primarily
due to higher direct labor costs, as well as higher medical claims, payroll taxes, and workers’ compensation premiums
32
year over year in addition to sales deleverage. For 2013, we expect labor and benefits costs as a percentage of sales, to
be 30 to 35 basis points lower than fiscal 2012’s percentage, primarily due to a lower level of discounts year over year.
Operating Expenses
Operating expenses for fiscal 2012 were approximately $38.4 million or 28.3% of net restaurant sales, compared
to approximately $38.4 million or 28.0% of net restaurant sales for fiscal 2011. This increase was primarily due to
sales deleverage partially offset by lower utility and repair and maintenance costs year over year. In fiscal 2012,
advertising, as a percentage of sales, was approximately 3.4% which was flat to fiscal 2011.
For fiscal 2013, due to a carryover of funds, the Company has decreased the Marketing Fund contribution
system-wide, to 0.75% from 1.0% for fiscal 2012. We expect that advertising expense for 2013 will remain at
approximately 3.4% of net sales, including the contribution to the Marketing Fund, with amounts saved from a lower
ad fund contribution redeployed to support sales building efforts.
We are projecting operating expenses as a percentage of net sales for fiscal 2013 to be approximately 50 to 55
basis points lower than 2012’s percentage. The majority of this decline relates to decreased supply costs from a
packaging initiative and an expected decline in other direct operating costs.
Depreciation and Amortization
Depreciation and amortization expense for fiscal 2012 and 2011 was approximately $6.0 million and $5.6
million, respectively, and was 3.9% and 3.6%, respectively, of total revenue due to a year over year increase in capital
expenditures. For 2013, we expect depreciation and amortization expense as a percentage of total revenue, to be 10 to
15 basis points lower than fiscal 2012’s percentage, primarily due to a lower level of discounts year over year.
General and Administrative Expenses
General and administrative expenses for fiscal 2012 were approximately $16.8 million or 10.9% of total revenue
compared to approximately $16.5 million or 10.6% of total revenue for fiscal 2011. The increase is primarily due to
additions and changes to our corporate infrastructure to support our lines of business strategy as well as a year over
year increase in required franchise opening assistance. Additionally, 2012 did not contain a bonus accrual compared to
fiscal 2011, which contained a bonus accrual of approximately $1.3 million.
For fiscal 2012 and 2011, stock-based compensation and board of director cash compensation expense was
approximately $1.7 million. Due to a higher average share price for the performance share programs vesting in fiscal
2013, and due to equity grants associated with hiring our new CEO, we anticipate stock-based compensation and board
of director cash compensation to be approximately $2.3 million for fiscal 2013, as follows (in thousands):
Performance
Shares and
Performance
Stock Units
$1,427
Restricted
Stock and
Restricted
Stock Units
$405
Board of
Directors
Shares and
Cash
Compensation
$476
Total
$2,308
For 2013, we expect general and administrative expenses as a percentage of revenue, to be approximately 150 to
155 basis points unfavorable to 2012’s percentage, primarily due to a 145 basis point increase for the full accrual for
bonus achievement, and the previously mentioned personnel investments, particularly in areas that support growth.
Asset Impairment and Estimated Lease Termination and Other Closing Costs
We evaluate restaurant sites and long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of restaurant sites to be held and
used is measured by a comparison of the carrying amount of the restaurant site to the undiscounted future net cash
flows expected to be generated on a restaurant-by-restaurant basis. If a restaurant is determined to be impaired, the loss
33
is measured by the amount by which the carrying amount of the restaurant site exceeds its fair value. Fair value is
estimated based on the best information available including estimated future cash flows, expected growth rates in
comparable restaurant sales, remaining lease terms and other factors. If these assumptions change in the future, we
may be required to take additional impairment charges for the related assets. Considerable management judgment is
necessary to estimate future cash flows. Accordingly, actual results could vary significantly from such estimates.
Restaurant sites that are operating, but have been previously impaired, are reported at the lower of their carrying
amount or fair value less estimated costs to sell. Here is a summary of these events and situations for fiscal 2012 and
fiscal 2011:
2012 Asset Impairment and Estimated Lease Termination and Other Closing Costs (in thousands):
Restaurants
Various
Vernon Hills, IL
Various
Total for 2012
Reason
Costs for closed restaurants(1)
Lease reserve(2)
Other
Amount
$
$
289
77
4
370
(1)The Company incurred various costs for closed restaurants primarily related to its Tulsa, OK, Vernon Hills, IL, and Yorktown, IL restaurants
which closed in 2012.
(2)The lease reserve equals the net present value of the remaining lease obligations for the Vernon Hills, IL restaurant, net of expected sublease
income, equal to zero.
2011 Asset Impairment and Estimated Lease Termination and Other Closing Costs (in thousands):
Restaurants
Various
Gaithersburg, MD
Calhoun, MN
Tulsa, OK
Various
Total for 2011
Reason
Costs for closed restaurants(1)
Asset impairment(2)
Asset impairment(3)
Asset impairment(4)
Other
Amount
17
148
144
198
6
513
$
$
(1)The Company incurred various costs for previously closed restaurants, net of a recapture of accrued expenses for approximately $30,000, in
Palatine, IL and Carpentersville, IL.
(2)Based on the Company’s assessment of expected cash flows, an asset impairment charge was recorded for this restaurant which we expect to
relocate within its existing market in the third quarter of 2013.
(3)Based on the Company’s assessment of expected cash flows for this restaurant over the remainder of its respective lease term, an asset
impairment charge was recorded.
(4)In fiscal 2011, the Company entered into a purchase agreement for the sale of its Tulsa, OK restaurant for approximately $1.2 million. These
assets had a net book value of approximately $1.4 million and were accounted for as held for sale and an impairment charge was recorded since the
net book value of the assets exceeded the sale price. On March 2, 2012, these assets were sold.
Pre-opening Expenses
Pre-opening expenses consist of labor, food, utilities, training and rent costs incurred prior to the opening of a
restaurant. Included in pre-opening costs is pre-opening rent for approximately 16 weeks prior to opening but this will
vary based on lease terms. During fiscal 2012 and 2011, we had $474,000 and $412,000, respectively, of pre-opening
expenses which included pre-opening rent and other pre-opening expenses. Pre-opening costs for 2013 are estimated to
be approximately $523,000 for the opening of two company-owned restaurants.
34
Interest Expense
Interest expense was approximately $1.1 million or 0.7% of total revenue for fiscal 2012 and 2011. Interest
expense was flat compared to 2011 primarily due to lower balances on our term loan and financing lease obligations
along with a lower weighted average interest rate on our term loan partially offset by a higher average balance and a
higher weighted average interest rate on our line of credit.
Interest Income
Interest income was approximately $7,000 and $22,000 for fiscal 2012 and fiscal 2011, respectively. Interest
income reflects interest received on short-term cash and cash equivalent balances as well as on outstanding notes
receivable and accounts receivable balances. The year over year decrease is due to the full recovery of outstanding
notes receivable in fiscal 2012.
Provision for Income Taxes
For fiscal 2012, our tax provision was approximately $805,000, or 15.6% of income before income taxes,
compared to the prior year comparable period of approximately $2.8 million, or 33.2% of income before income taxes.
During 2012, we realized the benefit from the cumulative impact of tax credits for employee reported tips for the
current year as well as four previous tax years that were amended. This resulted from a more precise calculation
methodology for this tax credit, and will continue to benefit us in the future. We estimate an effective tax rate of
approximately 29.0% for fiscal 2013.
Basic and Diluted Net Income Per Common Share
Net income for fiscal 2012 was approximately $4.4 million, or $0.58 per basic share and $0.57 per diluted share,
on approximately 7,455,000 weighted average basic shares outstanding and approximately 7,650,000 weighted average
diluted shares outstanding, respectively. Net income for fiscal 2011 was approximately $5.6 million, or $0.70 per basic
share and $0.68 per diluted share, on approximately 7,972,000 weighted average basic shares outstanding and
approximately 8,149,000 weighted average diluted shares outstanding, respectively.
Fiscal Year 2011 Compared to Fiscal Year 2010
Total Revenue
Total revenue of approximately $154.8 million for fiscal 2011 increased approximately $6.5 million, or 4.4%,
from total revenue of $148.3 in fiscal 2010. Fiscal 2011 and 2010 both consisted of 52 weeks.
Restaurant Sales, net
Restaurant sales for fiscal 2011 were approximately $136.9 million, compared to approximately $131.2 million
for fiscal 2010 reflecting a 4.4% increase. Total restaurant sales growth reflected the full year impact of the seven New
York and New Jersey restaurants acquired March 3, 2010, two new company-owned restaurants opened during the third
quarter and fourth quarter, respectively, and a comparable sales increase of 1.5%, which included a weighted average
pricing impact of 2.6%. The 1.5% overall comparable sales increase was, on a weighted basis, comprised of a 0.3%
comparable sales decrease for dine-in sales, which was completely offset by comparable sales increases of 1.1% and
0.7% for To Go and catering, respectively. For fiscal 2011, off-premise sales were 32.0% of total sales, with catering at
9.9% and To Go at 22.1%. This compares to 2010’s off-premise sales of 31.0%, with catering at 9.5% and To Go at
21.5%. Finally, as a percentage of dine-in sales, our adult beverage sales at our company-owned restaurants were
approximately 9.4% and 9.0%, for fiscal 2011 and 2010, respectively.
Franchise-Related Revenue
Franchise-related revenue consists of royalty revenue and franchise fees, which includes initial franchise fees
and area development fees. Franchise-related revenue was approximately $16.9 million for fiscal 2011, compared to
$16.2 million for 2010. The increase in franchise related revenue was primarily related to an increase in franchise fees
35
which reflects a net increase of three franchise restaurants year over year and comparable sales results that were flat.
Eight new franchise restaurants opened in fiscal 2011 and five restaurants closed. Fiscal 2011 included 6,691 franchise
operating weeks, compared to 6,458 franchise operating weeks in fiscal 2010. There were 133 franchise-operated
restaurants open at January 1, 2012, compared to 130 at January 2, 2011.
Licensing and Other Revenue
Licensing revenue includes royalties from a retail line of business, including sauces, rubs, marinades and
seasonings. Licensing royalty revenue was approximately $702,000 for fiscal 2011 as compared to $595,000 for fiscal
2010.
Other revenue includes opening assistance and training we provide to our franchise partners. Other revenue for
fiscal 2011 was approximately $282,000 compared to approximately $272,000 for the comparable period of fiscal 2010
which remained essentially flat due to a similar number of franchise-operated restaurants that opened during fiscal 2011
compared to fiscal 2010.
Same Store Net Sales
It is our policy to include in our same store net sales base, restaurants that are open year round and have been
open at least 24 months. Same store net sales for company-owned restaurants open at least 24 months ended January 1,
2012 increased 1.5%, compared to fiscal 2010’s increase of 0.7%. For fiscal 2011 and fiscal 2010, there were 44 and
40 restaurants, respectively, included in the company-owned 24 month comparable sales base.
Same store net sales on a 24 month basis for franchise-operated restaurants for fiscal 2011 were flat to the prior
year. In fiscal 2010, comparable sales declined 0.8%. For fiscal 2011 and fiscal 2010, there were 102 and 94
restaurants, respectively, included in the franchise-operated 24 month comparable sales base. Neither franchise-
operated comparable sales nor company-owned comparable sales included the results of the seven franchise restaurants
acquired in March of 2010. These restaurants entered the full year company-owned comparable sales base in 2012.
Average Weekly Net Sales and Operating Weeks
The following table shows company-owned and franchise-operated average weekly net sales for fiscal 2011 and
fiscal 2010:
Average Weekly Net Sales (AWS):
Company-Owned
Full-Service
Counter-Service
Franchise-Operated
Food and Beverage Costs
Fiscal Years Ended
January 1,
2012
January 2,
2011
$
$
$
$
50,216
51,695
36,213
53,096
$
$
$
$
49,187
50,760
34,697
52,631
Food and beverage costs for fiscal 2011 were approximately $40.8 million or 29.8% of net restaurant sales
compared to approximately $38.8 million or 29.5% of net restaurant sales for fiscal 2010. This increase was primarily
due to expected commodity cost increases and higher levels of discounting during the fourth quarter of 2011 as
compared to prior year.
Labor and Benefits Costs
Labor and benefits for fiscal 2011 were approximately $43.2 million or 31.5% of net restaurant sales, compared
to approximately $41.4 million or 31.5% of net restaurant sales for fiscal 2010. Labor and benefits, as a percentage of
restaurant sales, were flat year over year due to additional staffing required to support the fourth quarter programs.
36
This increase was completely offset by savings from operating below our full manager matrix and favorable healthcare
claims experience.
Operating Expenses
Operating expenses for fiscal 2011 were approximately $38.4 million or 28.0% of net restaurant sales,
compared to approximately $36.1 million or 27.5% of net restaurant sales for fiscal 2010. This year over year increase
was primarily related to increased occupancy costs related to the full year impact of the New York and New Jersey
restaurants, as well as higher supply and advertising costs. These increases were partially offset by lower utility costs.
In fiscal 2011, advertising, as a percentage of sales, was approximately 3.4% compared to 3.2% for the prior year,
primarily due to the increase in the Marketing Fund contribution from 0.5% for 2010 to 0.75% for 2011 and the
resulting deployment of the additional funds.
Depreciation and Amortization
Depreciation and amortization expense for fiscal 2011 and 2010 was approximately $5.6 million and $5.5
million, respectively, and was 3.6% and 3.7%, respectively, of total revenue.
General and Administrative Expenses
General and administrative expenses for fiscal 2011 were approximately $16.5 million or 10.6% of total revenue
compared to approximately $16.2 million or 10.9% of total revenue for fiscal 2010. This percentage decrease was
primarily due to revenue leverage and a reduction in our bonus accrual. General and administrative expenses as a
percent of total revenue, excluding stock-based compensation and board of directors’ cash compensation, were 9.6%
for fiscal 2011 and 10.0% for fiscal 2010.
Asset Impairment and Estimated Lease Termination and Other Closing Costs
We evaluate restaurant sites and long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of restaurant sites to be held and
used is measured by a comparison of the carrying amount of the restaurant site to the undiscounted future net cash
flows expected to be generated on a restaurant-by-restaurant basis. If a restaurant is determined to be impaired, the loss
is measured by the amount by which the carrying amount of the restaurant site exceeds its fair value. Fair value is
estimated based on the best information available including estimated future cash flows, expected growth rates in
comparable restaurant sales, remaining lease terms and other factors. If these assumptions change in the future, we
may be required to take additional impairment charges for the related assets. Considerable management judgment is
necessary to estimate future cash flows. Accordingly, actual results could vary significantly from such estimates.
Restaurant sites that are operating, but have been previously impaired, are reported at the lower of their carrying
amount or fair value less estimated costs to sell.
37
Here is a summary of these events and situations for fiscal 2011 and fiscal 2010:
2011 Asset Impairment and Estimated Lease Termination and Other Closing Costs (in thousands):
Restaurants
Various
Gaithersburg, MD
Calhoun, MN
Tulsa, OK
Various
Total for 2011
Reason
Costs for closed restaurants(1)
Asset impairment(2)
Asset impairment(3)
Asset impairment(4)
Other
Amount
17
148
144
198
6
513
$
$
(1)The Company incurred various costs for previously closed restaurants, net of a recapture of accrued expenses for approximately $30,000, in
Palatine, IL and Carpentersville, IL.
(2)Based on the Company’s assessment of expected cash flows, an asset impairment charge was recorded for this restaurant which we expect to
relocate within its existing market in the third quarter of 2013.
(3)Based on the Company’s assessment of expected cash flows for this restaurant over the remainder of its respective lease term, an asset
impairment charge was recorded.
(4)In fiscal 2011, the Company entered into a purchase agreement for the sale of its Tulsa, OK restaurant for approximately $1.2 million. These
assets had a net book value of approximately $1.4 million and were accounted for as held for sale and an impairment charge was recorded since the
net book value of the assets exceeded the sale price. On March 2, 2012, these assets were sold.
2010 Asset Impairment and Estimated Lease Termination and Other Closing Costs (in thousands):
Restaurants
Various
Palatine, IL
Atlanta, GA
Various
Total for 2010
Reason
Costs for closed restaurants(1)
Lease reserve(2)
Gain on lease terminations(3)
Other
Amount
68
88
(84)
2
74
$
$
(1)The Company incurred costs for closed restaurants which primarily related to its Palatine, IL restaurant which was closed in 2010.
(2)The lease reserve equals the net present value of the remaining lease obligations for the Palatine, IL restaurant at its closure date, net
of expected sublease income, equal to zero.
(3)During 2010, the Company negotiated lease buyouts for its Marietta, GA location. Total termination fees were approximately
$506,000 less lease reserve of approximately $590,000 for a net gain of approximately $84,000.
Pre-opening Expenses
Pre-opening expenses consist of labor, food, utilities, training and rent costs incurred prior to the opening of a
restaurant. Included in pre-opening costs is pre-opening rent for approximately 16 weeks prior to opening but this will
vary based on lease terms. During fiscal 2011 and 2010, we had $412,000 and $300,000, respectively, of pre-opening
expenses which included pre-opening rent and other pre-opening expenses.
Interest Expense
Interest expense was approximately $1.1 million or 0.7% of total revenue for fiscal 2011 and approximately $1.1
million or 0.8% of total revenue for fiscal 2010. For fiscal 2011, interest expense decreased year over year due to lower
average debt balances.
38
Interest Income
Interest income was approximately $22,000 and $171,000 for fiscal 2011 and fiscal 2010, respectively. Interest
income reflects interest received on short-term cash and cash equivalent balances and on outstanding notes and
accounts receivable balances. This decrease was due to several notes receivable primarily being fully paid in fiscal
2010.
Provision for Income Taxes
For fiscal 2011, our tax provision was approximately $2.8 million, or 33.2% of income before income taxes,
compared to the prior year comparable period of approximately $3.8 million, or 34.5% of income before income taxes.
The decrease in the effective tax rate for fiscal 2011 was primarily due to the settlement of certain tax adjustments
proposed during the federal audit of the 2008 and 2009 tax years and the increased impact that employee-related tax
credits.
Basic and Diluted Net Income Per Common Share
Net income for fiscal 2011 was approximately $5.6 million, or $0.70 per basic share and $0.68 per diluted share,
on approximately 7,972,000 weighted average basic shares outstanding and approximately 8,149,000 weighted average
diluted shares outstanding, respectively. Net income for fiscal 2010 was approximately $7.2 million, or $0.84 per basic
share and $0.82 per diluted share, on approximately 8,620,000 weighted average basic shares outstanding and
approximately 8,784,000 weighted average diluted shares outstanding, respectively.
Financial Condition, Liquidity and Capital Resources
As of December 30, 2012, our Company held unrestricted cash and cash equivalents of approximately $2.1
million compared to approximately $1.1 million as of January 1, 2012. Our cash balance reflects net borrowings of
$2.6 million on our line of credit, the use of approximately $5.9 million for the repurchase of common stock, including
commissions, and the purchases of property, equipment, and leasehold improvements for approximately $6.7 million.
The cash expenditures were partially offset by net cash flows from operations and proceeds from the sale of restaurant
assets of $1.2 million.
Our current ratio, which measures our immediate short-term liquidity, was 1.02 at December 30, 2012, compared
to 0.81 at January 1, 2012. The current ratio is computed by dividing total current assets by total current liabilities.
The change in our current ratio was primarily due to an increase in cash and cash equivalents and prepaid expenses
predominately due to an increase in prepaid taxes as a result of previously amended tax returns. Additionally, accrued
compensation and benefits decreased year over year due to no corporate bonus accrual in 2012 and partially offset by
an increase in accounts payable. As is true with most restaurant companies, we often operate in a negative working
capital environment due to the fact that we receive cash up front from customers and then pay our vendors on a delayed
basis.
Net cash provided by operations for each of the last three fiscal years was approximately $9.6 million in fiscal
2012, $11.9 million in fiscal 2011, and $13.9 million in fiscal 2010. Cash generated in fiscal 2012 was primarily from
net income of approximately $4.4 million, depreciation and amortization of approximately $6.0 million, an increase in
accounts payable of approximately $1.6 million, stock-based compensation of $1.3 million, an increase in tax benefit
for equity awards issued of approximately $990,000, and an increase in deferred rent of approximately $912,000. These
net increases were partially offset by a decrease in accrued compensation and benefits of approximately $2.4 million, a
decrease in other liabilities of $1.4 million, and a decrease in prepaid expenses and other current assets of
approximately $1.0 million.
Cash generated in fiscal 2011 was primarily from net income of approximately $5.6 million, depreciation and
amortization of approximately $5.6 million, stock-based compensation of $1.3 million, an increase in deferred rent of
approximately $911,000, an increase in deferred taxes of approximately $659,000, a decrease in prepaid expenses of
approximately $604,000 and asset impairment and estimated lease termination and other closing costs of $513,000.
These net increases were partially offset by an approximate $2.0 million decrease in accounts payable and a decrease of
$740,000 in other current liabilities.
39
Cash generated in fiscal 2010 was primarily from net income of approximately $7.2 million, depreciation and
amortization of approximately $5.5 million, an increase in deferred taxes of approximately $1.2 million, stock-based
compensation of $1.1 million and an increase in the use of restricted cash of $533,000. These net increases were
partially offset by an approximate $2.3 million gain on the acquisition of seven restaurants and an approximate
$531,000 decrease in accrued liabilities.
Net cash used for investing activities for each of the last three fiscal years was approximately $5.5 million in
fiscal 2012, $5.1 million in fiscal 2011, and $11.8 million in fiscal 2010. In fiscal 2012, we used approximately $6.7
million for capital expenditures for the construction of two new company-owned restaurants, continued investment in,
and remodeling projects for our existing restaurants and various corporate infrastructure projects. This was partially
offset by $1.2 million in proceeds from the sale of restaurant assets. In fiscal 2011, we used approximately $5.5 million
for capital expenditures for the construction of two new company-owned restaurants, continued investment in, and
remodeling projects for our existing restaurants and various corporate infrastructure projects. In fiscal 2010, we used
approximately $5.3 million for capital expenditures and $6.8 million for the acquisition of the seven New York and
New Jersey restaurants. The capital expenditures were primarily for continued investment in, and remodeling projects
for our existing restaurants, including approximately $364,000 for the New York and New Jersey restaurants, as well as
for the conversion of a new company-owned restaurant, and various corporate infrastructure projects.
We expect total 2013 capital expenditures to be approximately $7.1 million, primarily reflecting two new
restaurant openings, continued investments in our existing restaurants, including a significant remodeling project, and
continued investments in corporate infrastructure systems.
Net cash used for financing activities was approximately $3.2 million in fiscal 2012, $8.2 million in fiscal
2011, and $2.5 million in fiscal 2010. In fiscal 2012, we had draws on our line of credit of approximately $30.4 million
and had repayments of approximately $27.8 million. The maximum balance on our line of credit during fiscal 2012 was
$16.2 million. Additionally, we used approximately $5.9 million to repurchase approximately 541,000 shares of our
common stock at an average price of $10.68 per share, excluding commissions. In fiscal 2011, we had draws on our line
of credit of approximately $28.6 million and had repayments of approximately $30.6 million. The maximum balance on
our line of credit during fiscal 2011 was $16.0 million. Additionally, we used approximately $5.7 million to repurchase
approximately 610,000 shares of our common stock at an average price of $9.42 per share, excluding commissions. In
fiscal 2010, we had draws on our line of credit of approximately $20.5 million and had repayments of approximately
$21.0 million. The maximum balance on our line of credit during fiscal 2010 was $16.0 million. Additionally, we used
approximately $8.7 million to repurchase approximately 1.1 million shares of our common stock at an average price of
$8.18 per share, excluding commissions. We are still under a stock repurchase authorization, and our three primary uses
for capital will be to grow our system, and reduce our debt levels, and when appropriate, repurchase our shares.
The Company and certain of its subsidiaries (collectively known as the “Borrower”) currently have a Credit
Agreement with Wells Fargo Bank, National Association, as administrative agent and lender (the “Lender”). The
Credit Agreement was amended on November 1, 2012 and will expire on July 5, 2016, and contains a $30.0 million
revolving credit facility (the “Facility”) with an opportunity, subject to the Company meeting identified covenants and
elections, to increase the commitment to $50.0 million, and a term loan (the “Term Loan”).
Principal amounts outstanding under the Facility bear interest either at an adjusted Eurodollar rate plus an
applicable margin or at a Base Rate plus an applicable margin. The Base Rate is defined in the Credit Agreement as
the greater of the Federal Funds Rate (0.25% at December 30, 2012) plus 0.5% or Wells Fargo’s prime rate (3.25% at
December 30, 2012). The applicable margin will depend on the Company’s Adjusted Leverage Ratio, as defined, at the
end of the previous quarter and will range from 1.50% to 2.50% for Eurodollar Rate Loans and from 0.00% to 1.00%
for Base Rate Loans. Unused portions of the Facility will be subject to an unused Facility fee which will be equal to
either 0.25% or 0.375% of the unused portion, depending on the Company’s Adjusted Leverage Ratio. Our rate for the
unused portion of the Facility as of December 30, 2012, was 0.375%. An increase option exercise fee will apply to
increased amounts between $30.0 and $50.0 million. Our current weighted average rate for the fiscal years ended
December 30, 2012 and January 1, 2012 was 2.82% and 2.72%, respectively.
The Facility contains customary affirmative and negative covenants for credit facilities of this type, including
limitations on the Borrower with respect to indebtedness, liens, investments, distributions, mergers and acquisitions,
40
dispositions of assets and transactions with affiliates of the Borrower, among others. The Facility also includes various
financial covenants that have maximum target capital expenditures, cash flow ratios, and adjusted leverage ratios. If
the Company’s Adjusted Leverage Ratio is greater than 3.00 to 1.00, an additional covenant applies that limits the
maximum royalty receivable aged past 30 days. In addition, capital expenditure limits include permitted stock
repurchase limits (limited to $10.0 million in aggregate during any 12 month period, and $30.0 million in aggregate
during the term of the agreement).
The Credit Agreement currently provides for up to $3.0 million in letters of credit to be used by the Company,
with any amounts outstanding reducing our availability for general corporate purchases, and also allows for the
termination of the Facility by the Borrower without penalty at any time. At December 30, 2012 we had $13.6 million
in borrowings under this Facility, and had approximately $620,000 in letters of credit for real estate locations. As of
December 30, 2012, we were in compliance with all of our covenants after we obtained an amendment to our credit
facility on March 14, 2013.
If the bank were to call the Facility prior to expiration, the Company believes there are multiple options available
to obtain other sources of financing. Although possibly at different terms, the Company believes there would be other
lenders available and willing to finance a new credit facility. However, if replacement financing were unavailable to
us, termination of the Facility without adequate replacement would have a material and adverse impact on our ability to
continue our business operations.
We expect to use any borrowings under the Credit Agreement for general working capital purchases as needed.
Under the Facility, the Borrower has granted the Lender a security interest in all current and future personal property of
the Borrower.
Contractual Obligations
(In thousands)
Payments Due by Period (including interest)
Long Term Debt(1)
Financing Leases
Line of Credit(2)
Operating Lease Obligations
Sublease Income
Total
$
Total
6,157
4,237
13,600
144,969
(26)
$
168,937
2013
2014
2015
2016
2017
Thereafter
$
908
647
---
6,000
(26)
$
907
653
---
6,154
---
$
897
673
---
6,251
---
$
3,445
$
680
13,600
5,988
---
---
700
---
6,036
---
$
---
884
---
114,540
---
$
7,529
$
7,714
$
7,821
$
23,713
$
6,736
$ 115,424
(1)This is variable interest rate debt and the interest expense assumption was based on projected interest rates ranging from 4.0% to 6.8% over the term of the loan at
December 30, 2012.
(2)The Company pays interest on the outstanding line balance in accordance with the terms contained in our Credit Facility (see note 8 to our financial statements and
appearing elsewhere in this Annual Report). However, the Company has excluded interest payments from this commitment table because it uses the Line of Credit for
working capital purposes, as such, it will periodically draw upon and partially repay the line of credit throughout any given year. This results in fluctuations in the
annual outstanding balance, therefore, making it difficult to accurately estimate future principal balances and interest payments as of December 30, 2012. Additionally,
the Company is contractually required to repay the balance at maturity, July 5, 2016.
See Notes 8 and 9 to our Consolidated Financial Statements included in this Annual Report on Form 10-K for
details of our contractual obligations.
Off-Balance Sheet Arrangements
Our Company does not have any off-balance sheet arrangements (as such term is defined in Item 303 of
regulation S-K) that are reasonably likely to have a current or future effect on our financial condition or changes in
financial condition, operating results, or liquidity.
41
Income Taxes
In 2012, we had cumulative state net operating loss carry-forwards for tax reporting purposes of approximately
$38.5 million for state purposes, which if not used, will begin to expire in fiscal 2020. This amount may be adjusted
when we file our fiscal 2012 income tax returns in 2013.
Inflation
The primary inflationary factors affecting our operations include food, beverage, and labor costs. In addition, our
leases require us to pay taxes, maintenance, repairs and utilities and these costs are subject to inflationary increases. In
some cases, some of our lease commitments are tied to consumer price index (CPI) increases. We are also subject to
interest rate changes based on market conditions.
We believe that increasing inflation rates have contributed to some price instability. There is no assurance,
however, that inflation rates will continue at their current levels or decrease.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our Company’s financial instruments include cash and cash equivalents and long-term debt. Our Company
includes as unrestrictive cash and cash equivalents, investments with original maturities of three months or less when
purchased and which are readily convertible into known amounts of cash. Our Company’s unrestricted cash and cash
equivalents are not subject to significant interest rate risk due to the short maturities of these instruments. We have no
derivative financial instruments or derivative commodity instruments in our cash and cash equivalents. The total
outstanding long-term debt of all our Company as of December 30, 2012 was approximately $22.1 million, including
our line of credit, our term loan with Wells Fargo and financing lease obligations. The terms of our credit facility with
Wells Fargo Bank, National Association, as administrative agent and lender are discussed above under “Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition, Liquidity and
Capital Resources.”
Some of the food products purchased by us are affected by commodity pricing and are, therefore, subject to price
volatility caused by weather, production problems, delivery difficulties and other factors that are outside our control.
To control this risk in part, we have fixed-price purchase commitments for food from vendors. In addition, we believe
that substantially all of our food is available from several sources, which helps to control food commodity risks. We
now have secondary and in some cases tertiary source suppliers for key items in order to protect the supply chain and to
ensure a more fair and competitive pricing environment. We believe we have some ability to increase menu prices, or
vary the menu options offered, if needed, in response to a food product price increase.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of Famous Dave’s of America, Inc. are included herein, beginning on
page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period
42
covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that as of such date our disclosure controls and procedures were effective.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended). Our
management assessed the effectiveness of our internal control over financial reporting as of December 30, 2012. In
making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) in Internal Control-Integrated Framework. Our management has concluded that,
as of December 30, 2012, our internal control over financial reporting is effective based on these criteria.
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our
disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any,
within Famous Dave's of America have been detected.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting during our most recently-completed fiscal
quarter ended December 30, 2012 that have materially affected or are reasonably likely to materially affect our internal
controls over financial reporting.
ITEM 9B. OTHER INFORMATION
On March 14, 2013, the Company and certain of its subsidiaries (collectively with the Company as the
"Borrower") entered into a Third Amendment (the "Amendment") to the Company's Second Amended and Restated
Credit Agreement with Wells Fargo Bank, National Association, as administrative agent and lender (the "Lender")
("Credit Agreement"). As described elsewhere in this report, the Credit Agreement provides for loans consisting of a
revolving credit facility of $30.0 million, with an opportunity, subject to the Company meeting identified covenants
and elections, to increase the amount to $50.0 million (the "Facility"), a term loan (the "Term Loan") and up to $3.0
million of letters of credit which reduce the availability of the Facility. At December 30, 2012, the principal amount
outstanding under the Facility and the Term Loan was $13.6 million and $5.4 million, respectively, along with
approximately $620,000 in letters of credit for real estate locations. The Borrower has granted the Lender a security
interest in all of the Borrower's current and future personal property to secure obligations under the Credit Agreement.
The facility contains customary affirmative and negative covenants for credit facilities of this type, including financial
covenants. Pursuant to the Amendment, the parties amended a financial covenant relating to the Company's percentage
of aged franchise royalties receivable. The foregoing description of the Amendment does not purport to be complete
and is qualified in its entirety by reference to the Amendment itself, a copy of which is filed as Exhibit 10.11 to this
report and incorporated herein by reference. The benefits of the representations and warranties set forth in the
Amendment are intended to be relied upon by the parties to the Amendment only, and do not constitute continuing
representations and warranties of the Borrower to any other party or for any other purpose.
On March 14, 2013, the Company's Compensation Committee approved amendments to the target amounts of
annual incentive cash bonus and long-term equity incentive compensation that Christopher O'Donnell, the Company's
President and Chief Operating Officer, is eligible to receive under his employment arrangement with the Company. As
amended, the target amount of cash bonus that Mr. O'Donnell is eligible to receive under the Company's annual
incentive compensation (bonus) plan and the target grant amount under the Company's long-term equity incentive
compensation plan are equal to 75% of his base salary. The target amount of cash bonus is in effect for the 2013 fiscal
year and the target grant amount under the long-term equity incentive compensation plan will be in effect for fiscal
2014. Each is reduced from 100% of base salary previously. Mr. O'Donnell's annualized base salary of $400,000
remains unchanged.
43
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE
REGISTRANT
Information in response to this Item is incorporated herein by reference to our definitive proxy statement to be
filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this form 10-K.
The Company has adopted a Code of Ethics specifically applicable to its CEO, COO, CFO and Key Financial &
Accounting Management. In addition, there is a more general Code of Ethics applicable to all team members. The
Code of Ethics is available on our website at www.famousdaves.com and a copy is available free of charge to anyone
requesting it.
ITEM 11. EXECUTIVE COMPENSATION
Information in response to this Item is incorporated herein by reference to our definitive proxy statement to be
filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Securities Authorized for Issuance under Equity Compensation Plans
The Company maintains the 1995 Stock Option and Compensation Plan (the “Management Plan”), the 1997
Employee Stock Option Plan (the “Employee Plan”), the 1998 Director Stock Option Plan (the “Director Plan”) and the
2005 Stock Incentive Plan (the “2005 Plan”). We have also granted stock incentives outside of these equity
compensation plans in limited situations. The Management Plan prohibits the granting of incentives after December
29, 2005, the tenth anniversary of the date the Management Plan was approved by the Company’s shareholders.
Similarly, the Employee Plan prohibits the granting of incentives after June 24, 2007, the tenth anniversary of the date
the Employee Plan was approved by the Company’s board of directors. The Director Plan prohibits the granting of
incentives after June 10, 2008, the tenth anniversary of the date the Director Plan was approved by the Company’s
shareholders. As such, no further grants of incentives may be made under the Management Plan, the Employee Plan or
the Director Plan. Nonetheless, these plans will remain in effect until all outstanding incentives granted there-under
have either been satisfied or terminated.
The purpose of the 2005 Plan, is to increase shareholder value and to advance the interests of the Company by
furnishing a variety of economic incentives designed to attract, retain and motivate team members (including officers),
certain key consultants and directors of the Company. Under the 2005 Plan, an aggregate of 228,429 shares of our
Company’s common stock remained unreserved and available for issuance at December 30, 2012.
The Management Plan, the Director Plan and the 2005 Plan have each been approved by the Company’s
shareholders. The Employee Plan was not submitted for approval to the Company’s shareholders. The following table
sets forth certain information as of December 30, 2012 with respect to the Management Plan, the Employee Plan, the
Director Plan and the 2005 Plan.
44
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options Warrants
and Rights
(A)
Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants and
Rights
(B)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (A))
(C)
40,000
50,000
492,990
582,990
$
$
$
$
6.15
6.96
10.98
6.83
7,125
590,115
$
$
6.35
6.79
---
---
228,429
228,429
---
228,429
Plan Category
Equity compensation plans approved by
shareholders:
1995 Stock Option and Compensation
Plan
1998 Director Stock Option Plan
2005 Stock Incentive Plan(1)
TOTAL
Equity compensation plans not approved by
shareholders:
1997 Employee Stock Option Plan
TOTAL
(1)The number of securities reserved for issuance upon exercise of outstanding awards granted under the 2005 Plan includes 412,990 performance shares, 75,000
restricted shares, and 5,000 stock options.
Information in response to this Item is incorporated herein by reference to our definitive proxy statement to be filed
pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Information in response to this Item is incorporated herein by reference to our definitive proxy statement to be filed
pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this form 10-K.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information in response to this Item is incorporated herein by reference to our definitive proxy statement to be filed
pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this form 10-K.
45
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Documents filed as part of this Form 10-K:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets – December 30, 2012 and January 1, 2012
Consolidated Statements of Operations – Years ended December 30, 2012, January 1, 2012 and
January 2, 2011
Consolidated Statements of Shareholders’ Equity – Years ended December 30, 2012, January 1, 2012
and January 2, 2011
Consolidated Statements of Cash Flows – Years ended December 30, 2012, January 1, 2012 and
January 2, 2011
Notes to Consolidated Financial Statements
Financial Statement Schedule:
Schedule II. Schedule of Valuation and Qualifying Accounts
Exhibits:
See "exhibit index" on the page following the consolidated financial statements and related footnotes
and the signature page to this Form 10-K
46
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Famous Dave’s of America, Inc.
We have audited the accompanying consolidated balance sheets of Famous Dave’s of America, Inc. (a Minnesota
corporation) and subsidiaries (the “Company”) as of December 30, 2012 and January 1, 2012, and the related
consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period
ended December 30, 2012. Our audits of the basic consolidated financial statements included the financial statement
schedule listed in the index appearing under Item 15. These financial statements and financial statement schedule are
the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to
perform an audit of its internal control over financial reporting. Our audit included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Famous Dave’s of America, Inc. and subsidiaries as of December 30, 2012 and January 1, 2012
and the results of their operations and their cash flows for each of the three years in the period ended December 30,
2012, in conformity with accounting principles generally accepted in the United States of America. Also in our
opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/ Grant Thornton LLP
Minneapolis, Minnesota
March 15, 2013
F-1
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 30, 2012 AND JANUARY 1, 2012
(in thousands, except per-share data)
ASSETS
December 30,
2012
January 1,
2012
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable, net
Inventories
Deferred tax asset
Prepaid expenses and other current assets
Notes receivable
Total current assets
Property, equipment and leasehold improvements, net
Other assets:
Intangible assets, net
Other assets
$
$
2,074 $
689
3,427
2,760
596
2,800
---
12,346
1,148
275
3,430
2,754
247
1,765
60
9,679
60,429
60,972
2,815
663
76,253
$
2,841
347
73,839
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and financing lease obligations
Accounts payable
Accrued compensation and benefits
Other current liabilities
$
Total current liabilities
Long-term liabilities:
Line of credit
Long-term debt, less current portion
Financing lease obligations, less current portion
Deferred tax liability
Other liabilities
Total liabilities
Shareholders’ equity:
Common stock, $.01 par value, 100,000 shares authorized,
7,514 and 7,707 shares issued and outstanding
at December 30, 2012 and January 1, 2012 respectively
Additional paid-in capital
Retained earnings
Total shareholders’ equity
$
946 $
3,640
3,511
4,020
12,117
13,600
4,703
3,802
1,231
7,033
42,486
73
1,188
32,506
33,767
76,253 $
904
1,940
4,696
4,397
11,937
11,000
5,383
4,068
1,147
6,210
39,745
77
5,871
28,146
34,094
73,839
See accompanying notes to consolidated financial statements.
F-2
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED
DECEMBER 30, 2012, JANUARY 1, 2012, AND JANUARY 2, 2011
(in thousands, except per share data)
Revenue:
Restaurant sales, net
Franchise royalty revenue
Franchise fee revenue
Licensing and other revenue
Total revenue
Costs and expenses:
Food and beverage costs
Labor and benefits costs
Operating expenses
Depreciation and amortization
General and administrative expenses
Asset impairment and estimated lease
termination and other closing costs
Pre-opening expenses
Gain on acquisition, net of acquisition costs
Net loss on disposal of property
Total costs and expenses
Income from operations
Other expense:
Interest expense
Interest income
Other expense, net
Total other expense
Income before income taxes
Income tax expense
Net income
Basic net income per common share
Diluted net income per common share
Weighted average common shares outstanding - basic
Weighted average common shares outstanding - diluted
December 30,
2012
January 1,
2012
January 2,
2011
$
$
$
$
135,730
17,354
730
1,174
154,988
42,431
44,257
38,364
6,000
16,849
370
474
---
30
148,775
$
136,896
16,611
320
984
154,811
40,829
43,170
38,398
5,616
16,463
513
412
---
14
145,415
$
131,154
15,902
345
867
148,268
38,754
41,352
36,107
5,547
16,165
74
300
(2,036)
22
136,285
6,213
9,396
11,983
(1,050)
7
(5)
(1,048)
5,165
(805)
4,360
0.58
0.57
7,455
7,650
$
$
$
(1,085)
22
(7)
(1,070)
8,326
(2,764)
5,562
0.70
0.68
7,972
8,149
$
$
$
(1,140)
171
---
(969)
11,014
(3,796)
7,218
0.84
0.82
8,620
8,784
See accompanying notes to consolidated financial statements.
F-3
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED
DECEMBER 30, 2012, JANUARY 1, 2012, AND JANUARY 2, 2011
(in thousands)
Balance - January 3, 2010
Exercise of stock options
Tax benefit for equity
awards issued
Common stock issued
Performance shares surrendered to
cover payroll taxes incurred
Repurchase of common stock
Stock-based compensation
Deferred compensation
Net income
Balance - January 2, 2011
Exercise of stock options
Tax benefit for equity
awards issued
Common stock issued
Performance shares surrendered to
cover payroll taxes incurred
Repurchase of common stock
Stock-based compensation
Deferred compensation
Net income
Balance - January 1, 2012
Exercise of stock options
Tax benefit for equity
awards issued
Common stock issued
Performance shares surrendered to
cover payroll taxes incurred
Repurchase of common stock
Stock-based compensation
Deferred compensation
Net income
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Retained
Earnings
Total
9,202
$
92 $
17,536
$
15,366 $
32,994
93
---
26
(9)
(1,067)
---
---
---
1
---
---
---
(11)
---
---
---
351
62
---
(68)
(8,735)
861
231
---
---
---
---
---
---
---
---
7,218
352
62
---
(68)
(8,746)
861
231
7,218
8,245
$
82 $
10,238
$
22,584 $
32,904
41
---
40
(9)
(610)
---
---
---
---
---
1
---
(6)
---
---
---
128
80
153
(82)
(5,753)
1,183
(76)
---
---
---
---
---
---
---
---
5,562
128
80
154
(82)
(5,759)
1,183
(76)
5,562
7,707
$
77 $
5,871
$
28,146 $
34,094
33
---
414
(101)
(539)
---
---
---
---
---
2
---
(6)
---
---
---
22
990
1,464
(1,189)
(5,768)
1,096
(1,298)
---
---
---
---
---
---
---
---
4,360
22
990
1,466
(1,189)
(5,774)
1,096
(1,298)
4,360
Balance - December 30, 2012
7,514
$
73 $
1,188
$
32,506 $
33,767
See accompanying notes to consolidated financial statements.
F-4
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 30, 2012, JANUARY 1, 2012, AND JANUARY 2, 2011
(in thousands)
December 30, January 1,
January 2,
2012
2012
2011
$
4,360 $
5,562 $
7,218
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to cash flows provided by
operations:
Depreciation and amortization
Amortization of deferred financing costs
Net loss on disposal of property
Gain on acquisition of restaurants
Asset impairment and estimated lease
termination and other closing costs
Inventory reserve
Deferred income taxes
Deferred rent
Stock-based compensation
Tax benefit for equity awards issued
Changes in operating assets and liabilities, net of acquisition:
Restricted cash
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Deposits
Accounts payable
Accrued compensation and benefits
Other current liabilities
Long-term deferred compensation
Cash flows provided by operating activities
Cash flows from investing activities:
Payments received on notes receivable
Proceeds from the sale of restaurant assets
Payments for acquired restaurants
Purchases of property, equipment and leasehold improvements
Purchases of intangible assets
Issuance of note receivable
Cash flows used for investing activities
Cash flows from financing activities:
Proceeds from long-term debt
Proceeds from draws on line of credit
Payments on line of credit
Payments for debt issuance costs
Payments on long-term debt and financing lease obligations
Proceeds from exercise of stock options
Tax benefit for equity awards issued
Repurchase of common stock
Cash flows used for financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
6,000
21
30
---
370
72
(265)
912
1,264
990
(414)
(304)
(134)
(1,043)
47
1,601
(2,383)
(1,462)
(36)
9,626
60
1,200
---
(6,712)
(21)
---
(5,473)
---
30,400
(27,800)
(62)
(905)
22
990
(5,872)
(3,227)
926
1,148
5,616
59
14
---
513
6
659
911
1,259
80
(181)
(333)
(310)
604
19
(2,042)
208
(740)
(52)
11,852
378
---
---
(5,506)
---
---
(5,128)
---
28,600
(30,600)
(96)
(680)
128
80
(5,662)
(8,230)
(1,506)
2,654
1,148
$
5,547
56
22
(2,343)
74
8
1,161
671
1,092
62
533
(83)
(153)
(478)
(6)
(70)
1
470
102
13,884
428
---
(6,822)
(5,296)
---
(64)
(11,754)
6,800
20,500
(21,000)
(24)
(416)
352
62
(8,746)
(2,472)
(342)
2,996
2,654
Cash and cash equivalents, end of year
$
See accompanying notes to consolidated financial statements.
2,074
$
F-5
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business - We, Famous Dave's of America, Inc. (“Famous Dave’s” or the “Company”), were
incorporated in Minnesota on March 14, 1994. We develop, own, operate and franchise restaurants under the
name "Famous Dave's". As of December 30, 2012, there were 188 Famous Dave’s restaurants operating in 34
states and one Canadian province, including 53 company-owned restaurants and 135 franchise-operated
restaurants. An additional 62 franchise restaurants were committed to be developed through signed area
development agreements as of December 30, 2012.
Seasonality – Our restaurants typically generate higher revenue in the second and third quarters of our
fiscal year as a result of seasonal traffic increases and high catering sales experienced during the summer months,
and lower revenue in the first and fourth quarters of our fiscal year, due to possible adverse weather which can
disrupt customer and team member transportation to our restaurants.
Principles of consolidation – The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned and majority-owned subsidiaries. Any inter-company transactions and
balances have been eliminated in consolidation.
Management’s use of estimates – The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires us to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassifications – Certain reclassifications have been made to prior year amounts to conform to the
current year’s presentation.
Financial instruments – Due to their short-term nature, the carrying value of our current financial assets
and liabilities approximates their fair value. The fair value of long-term debt approximates the carrying amount
based upon our expected borrowing rate for debt with similar remaining maturities and comparable risk.
Segment reporting – We have company-owned and franchise-operated restaurants in the United States and
Canada, and operate within the single industry segment of foodservice. We make operating decisions on behalf of
the Famous Dave’s brand which includes both company-owned and franchise-operated restaurants. In addition,
all operating expenses are reported in total and are not allocated to franchising operations for either external or
internal reporting.
Fiscal year – Our fiscal year ends on the Sunday nearest December 31st of each year. Our fiscal year is
generally 52 weeks; however it periodically consists of 53 weeks. The fiscal years ended December 30, 2012
(fiscal 2012), January 1, 2012 (fiscal 2011), and January 2, 2011 (fiscal 2010) all consisted of 52 weeks.
Unrestricted cash and cash equivalents – Cash equivalents include all investments with original
maturities of three months or less or which are readily convertible into known amounts of cash and are not legally
restricted. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000,
while the remaining balances are uninsured at December 30, 2012 and January 1, 2012. The Company has not
experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and
cash equivalents.
Accounts receivable, net – We provide an allowance for uncollectible accounts on accounts receivable
based on historical losses and existing economic conditions, when relevant. We provide for a general bad debt
reserve for franchise receivables due to increases in days’ sales outstanding and deterioration in general economic
F-6
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
market conditions. This general reserve is based on the aging of receivables meeting specified criteria and is
adjusted each quarter based on past due receivable balances. Additionally, we have periodically established a
specific reserve on certain receivables as necessary. Any changes to the reserve are recorded in general and
administrative expenses. The allowance for uncollectible accounts was approximately $236,000 and $18,000, at
December 30, 2012 and January 1, 2012, respectively. In 2012, the increase in the allowance for doubtful
accounts was primarily due to the receivable aging for two franchise partners. Accounts receivable are written off
when they become uncollectible, and payments subsequently received on such receivables are credited to
allowance for doubtful accounts. Accounts receivable balances written off have not exceeded allowances
provided. We believe all accounts receivable in excess of the allowance are fully collectible. If accounts
receivable in excess of provided allowances are determined uncollectible, they are charged to expense in the
period that determination is made. Outstanding past due accounts receivable are subject to a monthly interest
charge on unpaid balances which is recorded as interest income in our consolidated statements of operations. In
assessing recoverability of these receivables, we make judgments regarding the financial condition of the
franchisees based primarily on past and current payment trends, as well as other variables, including annual
financial information, which the franchisees are required to submit to us.
Inventories – Inventories consist principally of small wares and supplies, food and beverages, and retail
goods, and are recorded at the lower of cost (first-in, first-out) or market.
Notes receivable - Notes receivable consist of receivables primarily related to our on-going business
agreements with franchisees and we consider such receivables to have similar risk characteristics and evaluate
them as one collective portfolio segment and class for determining the allowance for doubtful accounts. We
monitor the financial condition of our franchisees and record provisions for estimated losses on receivables when
we believe it is probable that our franchisees or licensees will be unable to make their required payments.
Balances of notes receivable due within one year are included in the current portion of notes receivable while
amounts due beyond one year are included in notes receivable less current portion. Notes receivable that are
ultimately deemed to be uncollectible, and for which collection efforts have been exhausted, are written off
against the allowance for doubtful accounts. Interest income recorded on financing receivables has traditionally
been immaterial. The fair value of notes receivable currently approximates their carrying value.
Property, equipment and leasehold improvements, net – Property, equipment and leasehold
improvements are capitalized at a level of $250 or greater and are recorded at cost. Repair and maintenance costs
are charged to operations when incurred. Furniture, fixtures, and equipment are depreciated using the straight-line
method over estimated useful lives ranging from 3-7 years, while buildings are depreciated over 30 years.
Leasehold improvements are amortized using the straight-line method over the shorter of the lease term, including
reasonably assured renewal options, or the estimated useful life of the assets. Décor that has been installed in the
restaurants is recorded at cost and is depreciated using the straight-line method over seven years.
Liquor licenses - The Company has transferable liquor licenses in jurisdictions with a limited number of
authorized liquor licenses. These licenses were capitalized as indefinite-lived intangible assets and are included in
intangible assets, net in our consolidated balance sheets (see note 5) at December 30, 2012 and January 1, 2012.
We annually review the liquor licenses for impairment and in fiscal 2012 and 2011, no impairment charges were
recorded. Additionally, the costs of obtaining non-transferable liquor licenses that are directly issued by local
government agencies for nominal fees are expensed as incurred. Annual liquor license renewal fees are expensed
over the renewal term.
Debt issuance costs – Debt issuance costs are amortized to interest expense over the term of the related
financing. The carrying value of our deferred debt issuance costs, classified in other long-term assets, is
approximately $221,000, and $180,000 respectively, net of accumulated amortization of $668,000 and $647,000,
respectively, as of December 30, 2012 and January 1, 2012, respectively.
F-7
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Construction overhead and capitalized interest – We capitalize construction overhead costs until the
time a building is turned over to operations, which is approximately two weeks prior to opening. In fiscal 2012,
2011, 2010, we capitalized construction overhead costs of approximately $203,000, $196,000, and $126,000,
respectively. In fiscal 2012, we capitalized interest costs of approximately $28,000. There were no capitalized
interest costs in fiscal years 2011 and 2010. We depreciate and amortize construction overhead and capitalized
interest over the same useful life as leasehold improvements.
Advertising costs – Advertising costs are charged to expense as incurred. Advertising costs were
approximately $4.6 million, $4.7 million, and $4.2 million for fiscal years 2012, 2011, and 2010, respectively, and
are included in operating expenses in the consolidated statements of operations.
Software implementation costs – We capitalize labor costs associated with the implementation of
significant information technology infrastructure projects based on actual labor rates per person including
benefits, for all the time spent in the implementation of software. In fiscal 2012 and 2010, we did not capitalize
any software implementation costs. In 2011, we capitalized approximately $48,000.
Research and development costs – Research and development costs represent salaries and expenses of
personnel engaged in the creation of new menu and Limited-Time Offering (“LTO”) items, recipe enhancements
and documentation activities. Research and development costs were approximately $399,000, $342,000, and
$346,000, for fiscal years 2012, 2011, and 2010, respectively, and are included in general and administrative
expenses in the consolidated statements of operations.
Pre-opening expenses – All start-up and pre-opening costs are expensed as incurred. In fiscal 2012 and
2011, we had pre-opening expenses of approximately $474,000 and $412,000, respectively, related to two
Company-owned restaurants. In fiscal 2010, we had pre-opening expenses of approximately $300,000 related to
one Company-owned restaurant. Also, included in pre-opening expenses is pre-opening rent during the build-out
period.
Lease accounting – We recognize lease expense on a straight-line basis for our operating leases over the
entire lease term including lease renewal options and build-out periods where the renewal is reasonably assured
and the build-out period takes place prior to the restaurant opening or lease commencement date. Rent expense
recorded during the build-out period is reported as pre-opening expense. We account for construction allowances
by recording a receivable when its collectability is considered probable, and relieve the receivable once the cash is
obtained from the landlord for the construction allowance. Construction allowances are amortized as a credit to
rent expense over the full term of the lease, including reasonably assured renewal options and build-out periods.
Recoverability of property, equipment and leasehold improvements, impairment charges, and exit
and disposal costs – We evaluate restaurant sites and long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of
restaurant sites to be held and used is measured by a comparison of the carrying amount of the restaurant site to
the undiscounted future net cash flows expected to be generated on a restaurant-by-restaurant basis. If a restaurant
is determined to be impaired, the loss is measured as the amount by which the carrying amount of the restaurant
exceeds its fair value. Fair value, as determined by the discounted future net cash flows, is estimated based on the
best information available including estimated future cash flows, expected growth rates in comparable restaurant
sales, remaining lease terms and other factors. If these assumptions change in the future, we may be required to
take additional impairment charges for the related assets. Considerable management judgment is necessary to
estimate future cash flows. Accordingly, actual results could vary significantly from the estimates.
Exit or disposal activities, including restaurant closures, include the cost of disposing of the assets as well
as other facility-related expenses from previously closed restaurants. These costs are generally expensed as
incurred. Additionally, at the date we cease using a property under an operating lease, we record a liability for the
F-8
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
net present value of any remaining lease obligations, net of estimated sublease income. Any subsequent
adjustments to that liability as a result of lease termination or changes in estimates of sublease income are
recorded in the period incurred. Upon disposal of the assets associated with a closed restaurant, any gain or loss
is recorded in the same caption as the original impairment within our consolidated statements of operations.
Asset retirement obligation – We recognize a liability for the fair value of a required asset retirement
obligation (“ARO”) when such obligation is incurred. The Company’s AROs are primarily associated with
leasehold improvements which, at the end of a lease, the Company is contractually obligated to remove in order to
comply with the lease agreement. The net ARO liability included in other long term liabilities in our consolidated
balance sheets was $106,000 at December 30, 2012 and $102,000 at January 1, 2012.
Marketing fund and restricted cash – In fiscal 2004, we established a system-wide Marketing fund.
Company-owned restaurants in addition to franchise-operated restaurants, that entered into franchise agreements
with the Company after December 17, 2003, are required to contribute a percentage of net sales to the fund that is
used for public relations and marketing development efforts throughout the system. These restaurants were
required to contribute 1.00% and 0.75% of net sales to this fund during fiscal 2012 and 2011, respectively. In
fiscal 2013, due to carryover amounts in the fund, the contribution will be 0.75% of net sales. The assets held by
this fund are considered restricted and are in an interest bearing account. Accordingly, we reflected the cash
related to this fund in restricted cash and the liability is included in accounts payable on our consolidated balance
sheets. As of December 30, 2012 and January 1, 2012, we had approximately $689,000 and $275,000 in this
fund, respectively.
Gift cards – We record a liability in the period in which a gift card is issued and proceeds are received. As
gift cards are redeemed, this liability is reduced and revenue is recognized. We recognize gift card breakage
income as an offset to operating expense based on a stratified breakage rate per year. This breakage rate is based
on a percentage of sales when the likelihood of the redemption of the gift card becomes remote.
Interest income – We recognize interest income when earned.
Net income per common share – Basic net income per common share (“EPS”) is computed by dividing
net income by the weighted average number of common shares outstanding for the reporting period. Diluted EPS
equals net income divided by the sum of the weighted average number of shares of common stock outstanding
plus all additional common stock equivalents relating to stock options when dilutive. Following is a
reconciliation of basic and diluted net income per common share:
(in thousands, except per share data)
Net income per common share – basic:
Net income
Weighted average shares outstanding
Net income per common share – basic
Net income per common share – diluted:
Net income
Weighted average shares outstanding
Dilutive impact of common stock equivalents outstanding
Adjusted weighted average shares outstanding
Net income per common share – diluted
2012
Fiscal Year
2011
2010
$
$
$
$
4,360 $
7,455
0.58 $
4,360 $
7,455
195
7,650
0.57 $
5,562 $
7,972
0.70 $
5,562 $
7,972
177
8,149
0.68 $
7,218
8,620
0.84
7,218
8,620
164
8,784
0.82
F-9
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
There were 15,000, 25,500, and 158,640 options outstanding as of December 30, 2012, January 1, 2012, and
January 2, 2011, respectively, that were not included in the computation of diluted EPS because they were anti-dilutive.
Stock-based compensation – We recognize compensation cost for share-based awards granted to team members
based on their fair values at the time of grant over the requisite service period. Our pre-tax compensation cost for stock
options and other incentive awards is included in general and administrative expenses in our consolidated statements of
operations (see Note 10).
Cash flows from the exercise of stock options resulting from tax benefits in excess of recognized cumulative
compensation cost (excess tax benefits) is classified as cash flows from financing activities. There were no stock
options granted during fiscal years 2012, 2011, or 2010.
Income Taxes – We provide for income taxes based on our estimate of federal and state income tax liabilities.
These estimates include, among other items, effective rates for state and local income taxes, allowable tax credits for
items such as taxes paid on reported tip income, estimates related to depreciation and amortization expense allowable
for tax purposes, and the tax deductibility of certain other items. Our estimates are based on the information available
to us at the time that we prepare the income tax provision. We generally file our annual income tax returns several
months after our fiscal year-end. Income tax returns are subject to audit by federal, state, and local governments,
generally years after the tax returns are filed. These returns could be subject to material adjustments or differing
interpretations of the tax laws.
Revenue recognition – We record restaurant sales at the time food and beverages are served. We record sales of
merchandise items at the time items are delivered to the guest. All sales taxes are presented on a net basis and are
excluded from revenue. We have detailed below our revenue recognition policies for franchise and licensing
agreements.
Franchise arrangements – Our franchise-related revenue consists 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 a meeting with Famous Dave’s
Executive Team and performing a 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 is typically $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). In 2013 after our Franchise
Disclosure Document is filed, we will be adjusting our franchise fee to $45,000. During fiscal 2012, to incentivize
growth, we reduced the initial franchise fee by 50% for any partner who signed a franchise agreement and opened a
“Shack” style counter service restaurant 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 franchises pay us
a monthly royalty of 5% of their net sales.
Because of the continuing difficult economic environment and scarcity of capital for development, we offered a
reduced royalty rate for twelve months from date of opening for franchisees that opened restaurants during fiscal 2010.
In fiscal 2011, we modified and extended this growth incentive program. The modification offered new and existing
franchisees reduced levels of franchise royalties, based on a sliding scale, for new restaurants opened during 2011. All
franchise restaurants opened in the first, second, and third quarters paid a reduced royalty of 2.5%, 3%, and 4%,
respectively, from the date of opening through the remainder of 2011. Any openings in the fourth quarter and beyond
were at the 5% royalty rate. In 2012, there were no reduced royalty rate programs, and there are currently no reduced
royalty rate programs in fiscal 2013.
F-10
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Licensing and other revenue – We have a licensing agreement for our retail products, the initial term of which
expires in April 2015 with renewal options of five years, subject to the licensee’s attainment of identified minimum
product sales levels. Licensing revenue is recorded based on royalties earned by the Company in accordance with our
agreement. Licensing revenue for fiscal years 2012, 2011, and 2010 was approximately $731,000, $702,000, and
$595,000, respectively.
Periodically, we provide additional services, beyond the general franchise agreement, to our franchise
operations, such as new restaurant training, information technology setup and décor installation services. The cost of
these services is recognized upon completion and is billed to the respective franchisee and is generally payable on net
30-day terms. Other revenue related to these services for fiscal years 2012, 2011, and 2010 was approximately
$443,000, $282,000, and $272,000, respectively.
(2)
INVENTORIES
Inventories consisted approximately of the following at:
(in thousands)
Small wares and supplies
Food and beverage
Retail goods
December 30,
2012
January 1,
2012
$
$
1,576
1,161
23
2,760
$
$
1,571
1,145
38
2,754
(3)
NOTES RECEIVABLE
Notes receivable consisted approximately of the following at:
(in thousands)
December 30,
2012
January 1,
2012
Old School BBQ, Inc. – monthly installments of approximately
$5.7 including interest at 9.0%. This note was paid in full in
November 2012. It was secured by property and equipment and
guaranteed by the franchise owners.
Total notes receivable
Less: current maturities
Long-term portion of notes receivable
$
---
---
---
---
$
60
60
(60)
---
F-11
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS, NET
Property, equipment and leasehold improvements, net, consisted approximately of the following at:
(in thousands)
Land, buildings and improvements
Furniture, fixtures, and equipment
Décor
Construction in progress
Assets held for sale (See note 16)
Accumulated depreciation and amortization
Property, equipment and leasehold improvements, net
December 30,
2012
January 1,
2012
$
$
72,509
39,325
2,773
787
---
(54,965)
$
60,429
$
70,980
37,186
2,806
274
1,200
(51,474)
60,972
(5)
INTANGIBLE ASSETS
The Company has intangible assets that consist of liquor licenses and lease interest assets. The liquor licenses
are indefinite lived assets (see note 1) and are not subject to amortization. The lease interest assets are amortized, to
occupancy costs, on a straight-line basis over the remaining term of each respective lease. Amortization for each of the
next five years is expected to be approximately $48,000.
F-12
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of beginning and ending amounts of intangible assets for the years ended January 1, 2012 and
December 30, 2012, respectively, is presented in a table below:
Remaining
estimated
useful life
(years)
Original
Cost
Additions
Accumulated
Amortization
Net
Book
Value
Less
Current
Portion(1)
Non
Current
Portion
(in thousands)
Balance at January 1, 2012
Lease interest assets
Liquor licenses
28
$
1,417 $
1,560
$
---
---
(88)
$
1,329 $
(48)
$
---
1,560
---
1,281
1,560
Total
$
2,977 $
---
$
(88)
$
2,889 $
(48)
$
2,841
Remaining
estimated
useful life
(years)
Original
Cost
Additions
Accumulated
Amortization
Net
Book
Value
Less
Current
Portion(1)
Non
Current
Portion
(in thousands)
Balance at December 30, 2012
Lease interest assets
Liquor licenses
27
$
1,417 $
---
$
(135)
$
1,282 $
(48)
$
1,560
21
---
1,581
---
1,234
1,581
Total
$
2,977 $
21 $
(135)
$
2,863 $
(48)
$
2,815
(1)The current portion of lease interest assets are located in prepaid expenses and other current assets.
(6) OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following at:
(in thousands)
Gift cards payable
Other liabilities
Sales tax payable
Accrued property and equipment purchases
Deferred franchise fees
Income taxes payable
December 30,
2012
January 1,
2012
$
$
1,863
1,112
803
153
89
---
4,020
$
$
1,916
1,196
863
42
105
275
4,397
F-13
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) OTHER LIABILITIES
Other liabilities consisted of the following at:
(in thousands)
Deferred rent
Other liabilities
Asset retirement obligations
December 30,
2012
January 1,
2012
$
$
$
6,785
147
101
7,033
$
5,915
193
102
6,210
(8) CREDIT FACILITY AND DEBT COVENANTS, LONG-TERM DEBT, AND FINANCING LEASE
OBLIGATIONS
The Company and certain of its subsidiaries (collectively known as the “Borrower”) currently have a Credit
Agreement with Wells Fargo Bank, National Association, as administrative agent and lender (the “Lender”). The
Credit Agreement was amended on November 1, 2012 and will expire on July 5, 2016, and contains a $30.0 million
revolving credit facility (the “Facility”) with an opportunity, subject to the Company meeting identified covenants and
elections, to increase the commitment to $50.0 million, and a term loan (the “Term Loan”).
Principal amounts outstanding under the Facility bear interest either at an adjusted Eurodollar rate plus an
applicable margin or at a Base Rate plus an applicable margin. The Base Rate is defined in the Credit Agreement as
the greater of the Federal Funds Rate (0.25% at December 30, 2012) plus 0.5% or Wells Fargo’s prime rate (3.25% at
December 30, 2012). The applicable margin will depend on the Company’s Adjusted Leverage Ratio, as defined, at the
end of the previous quarter and will range from 1.50% to 2.50% for Eurodollar Rate Loans and from 0.00% to 1.00%
for Base Rate Loans. Unused portions of the Facility will be subject to an unused Facility fee which will be equal to
either 0.25% or 0.375% of the unused portion, depending on the Company’s Adjusted Leverage Ratio. Our rate for the
unused portion of the Facility as of December 30, 2012, was 0.375%. An increase option exercise fee will apply to
increased amounts between $30.0 and $50.0 million. Our current weighted average rate for the fiscal years ended
December 30, 2012 and January 1, 2012 was 2.82% and 2.72%, respectively.
The Facility contains customary affirmative and negative covenants for credit facilities of this type, including
limitations on the Borrower with respect to indebtedness, liens, investments, distributions, mergers and acquisitions,
dispositions of assets and transactions with affiliates of the Borrower, among others. The Facility also includes various
financial covenants that have maximum target capital expenditures, cash flow ratios, and adjusted leverage ratios. If
the Company’s Adjusted Leverage Ratio is greater than 3.00 to 1.00, an additional covenant applies that limits the
maximum royalty receivable aged past 30 days. In addition, capital expenditure limits include permitted stock
repurchase limits (limited to $10.0 million in aggregate during any 12 month period, and $30.0 million in aggregate
during the term of the agreement).
The Credit Agreement currently provides for up to $3.0 million in letters of credit to be used by the Company,
with any amounts outstanding reducing our availability for general corporate purchases, and also allows for the
termination of the Facility by the Borrower without penalty at any time. At December 30, 2012 we had $13.6 million
in borrowings under this Facility, and had approximately $620,000 in letters of credit for real estate locations. As of
December 30, 2012, we were in compliance with all of our covenants after we obtained an amendment to our credit
facility on March 14, 2013.
If the bank were to call the Facility prior to expiration, the Company believes there are multiple options available
to obtain other sources of financing. Although possibly at different terms, the Company believes there would be other
lenders available and willing to finance a new credit facility. However, if replacement financing were unavailable to
us, termination of the Facility without adequate replacement would have a material and adverse impact on our ability to
F-14
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
continue our business operations.
We expect to use any borrowings under the Credit Agreement for general working capital purchases as needed.
Under the Facility, the Borrower has granted the Lender a security interest in all current and future personal property of
the Borrower.
Our credit facility consisted of the following at:
(in thousands)
December 30,
2012
January 1,
2012
Credit facility - Wells Fargo - balloon payment of the outstanding
balance due July 2016
Less: current maturities
Long-term credit facility net of current portion
$
$
$
13,600
---
13,600
$
11,000
---
11,000
Required principal payments under our credit facility are as follows:
(in thousands)
Fiscal Year
2013
2014
2015
2016
Total
Long-Term Debt
$
$
---
---
---
13,600
13,600
Principal amounts outstanding under the Term Loan bear interest at the same rate as the Facility. The weighted
average interest rate of the Term Loan for fiscal years ended December 30, 2012 and January 1, 2012 was 2.43% and
2.54%, respectively. The Company is required to make minimum annual amortization payments of 10.0% of the
principal balance of the Term Loan.
F-15
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Long-term debt consisted approximately of the following at:
(in thousands)
December 30,
2012
January 1,
2012
Notes Payable - Wells Fargo - monthly installments are
approximately $57 until July 2016; at which time we have a
balloon payment of approximately $3,003 including interest at an
adjusted Eurodollar rate plus 225 basis points for an interest rate
period of one, two, three, or six months; which is determined by
the Company and is due July 2016, secured by the property and
equipment
Less: current maturities
Long-term debt net of current maturities
Required principal payments on long-term debt are as follows:
$
$
5,383
(680)
4,703
$
$
6,063
(680)
5,383
(in thousands)
Fiscal Year
2013
2014
2015
2016
Total
Financing Lease Obligation
$
$
680
680
680
3,343
5,383
On March 31, 1999, the Company completed a $4.5 million financing obligation involving three existing
restaurants as part of a sale/leaseback transaction. Under this financing, we are obligated to make monthly payments of
$52,315 (which increases 4.04% every two years) for a minimum of 20 years. At the end of the 20 year lease term, we
may extend the lease for up to two additional five year terms. We also have the option to purchase the leased
restaurants on the 20th anniversary of the lease term and between the first and second five year option terms. The option
purchase price is the greater of $4.5 million or the fair market value, as defined in the agreement, of the properties at
the time the purchase option is exercised. Based upon our continued involvement in the leased property and its
purchase option, the transaction has been accounted for as a financing arrangement. Accordingly, the three existing
restaurants are included in property, equipment and leasehold improvements, and are being depreciated over a 20 year
term. In addition, as the monthly lease payments are made, the obligation will be reduced by the 20 year amortization
table.
F-16
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financing lease obligations consisted of the following at:
(in thousands)
December 30,
2012
January 1,
2012
Financing lease – Spirit Financial – monthly installments of $52-
$59 – including an interest rate of 9.63%, due in March 2019.
Less current maturities
Long-term financing lease net of current maturities
$
$
4,068
(266)
3,802
$
$
4,292
(224)
4,068
Required principal payments under our financing leases are as follows:
(in thousands)
Fiscal Year
2013
2014
2015
2016
2017
Thereafter
Total
$
$
266
300
351
393
454
2,304
4,068
(9) OPERATING LEASE OBLIGATIONS
We have various operating leases for existing and future restaurants and corporate office space with remaining
lease terms ranging from 1 to 35 years, including lease renewal options. Fourteen of the leases require percentage rent
between 3% and 7% of annual gross sales, typically above a natural breakeven point, in addition to the base rent. All
of these leases contain provisions for payments of real estate taxes, insurance and common area maintenance costs.
Total occupancy lease costs for fiscal years 2012, 2011, and 2010, including rent, common area maintenance costs, real
estate taxes and percentage rent, were approximately $9.8 million, $9.5 million, and $8.8 million, respectively.
Minimum rents were approximately $5.7 million, $5.6 million, and $5.3 million, for fiscal years 2012, 2011, and 2010,
respectively. Percentage rent was approximately $87,000, $94,000, and $326,000 for fiscal years 2012, 2011, and
2010, respectively. Due to a lease amendment in 2010, one restaurant lease converted its rent payments from a
percentage rent to a minimum rent structure, thus reducing percentage rent year over year.
In December of 2009, the Company sublet 2,100 square feet of its corporate office space until August 2013.
Sublease income has reduced the future minimum lease payments. In 2012, 2011, and 2010, the Company recognized
$34,000, $32,000, and $23,000, respectively, of sublease income which partially offset our total rent expense.
F-17
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Future minimum lease payments (including reasonably assured renewal options) existing at December 30, 2012
were:
(in thousands)
Fiscal Year
2013
2014
2015
2016
2017
Thereafter
Total operating lease obligations
Sublease income
Net operating lease obligations
$
$
6,000
6,154
6,251
5,988
6,036
114,540
144,969
(26)
144,943
(10) PERFORMANCE SHARES, STOCK OPTIONS, OTHER FORMS OF COMPENSATION, AND
COMMON SHARE REPURCHASES
Stock-based Compensation
We have adopted a 1995 Stock Option and Compensation Plan, a 1997 Employee Stock Option Plan, a 1998
Director Stock Option Plan and a 2005 Stock Incentive Plan (the “Plans”), pursuant to which we may grant stock
options, stock appreciation rights, restricted stock, performance shares, and other stock and cash awards to eligible
participants. Under the Plans, an aggregate of 228,429 shares of our Company’s common stock remained unreserved
and available for issuance at December 30, 2012.
F-18
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We recognized stock-based compensation expense in our consolidated statements of operations for the years
ended 2012, 2011, and 2010, respectively, as follows:
For the Years Ended
(in thousands)
Performance Share Programs:
2008 Program
2009 Program
2010 Program
2011 Program
2012 Program
Performance Shares
Director Shares
Restricted Stock and
Restricted Stock Units
Performance Shares
December 30,
2012
January 1,
2012
January 2,
2011
$
$
$
$
$
---
---
153
343
464
960
94
$
$
---
235
343
469
---
1,047
76
101
244
380
---
---
725
231
210
1,264
$
136
1,259
$
136
1,092
Since fiscal 2005, stock incentive awards for employees of the Company (whom we refer to as team members),
including officers, have primarily taken the form of performance shares. We have a program under which management
and certain director-level team members may be granted performance shares under the 2005 Stock Incentive Plan,
subject to certain contingencies. Issuance of the shares underlying the performance share grants is contingent upon the
Company achieving a specified minimum percentage of the cumulative earnings per share goals (as determined by the
Compensation Committee) for each of the three fiscal years covered by the grant. Upon achieving the minimum
percentage, and provided that the recipient remains a team member during the entire three-year performance period, the
Company will issue the recipient a percentage of the performance shares that is based upon the percentage of the
cumulative earnings per share goal achieved. No portion of the shares will be issued if the specified percentage of
earnings per share goal is achieved in any one or more fiscal years but not for the cumulative three-year period.
No recipient will have any rights as a shareholder based on the performance share grants, unless and until the
conditions have been satisfied, and the shares have been issued to the recipient. In accordance with this program, we
recognize as compensation expense the value of these stock grants as they are earned in our consolidated statements of
operations throughout the performance period.
As of December 30, 2012, we had three performance share programs in progress. All of these performance share
awards qualify for equity-based treatment. Accordingly, we recognize compensation cost for these share-based awards
based on their fair value, which is the closing stock price at the date of grant over the requisite service period (i.e. fixed
treatment). Participants in each performance share program are entitled to receive a specified number of shares of
common stock (“Performance Shares”) based upon our achieving a specified percentage of the cumulative total of the
earnings per share goals established by our compensation committee for each fiscal year within a three-year
performance period (the “Cumulative EPS Goal”). In the second and third year of any performance share program, the
estimated attainment percentage is based on the forecasted earnings per share for that program. For the 2010 program,
which completed its vesting in 2012, the attainment percentage was 86.9%. The estimated attainment percentage for
the 2011 program currently is 88.2%. For the 2012 program, and for the first year of any program, we estimate the
attainment rate to be 100%. We have recorded compensation net of the estimated non-attainment rates. We will
continue to evaluate the need to adjust the attainment percentages in future periods.
F-19
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the first quarter of fiscal 2012, we issued 263,891 shares upon satisfaction of conditions under the 2009
performance share program, representing the achievement of approximately 99.0% of the target payout for this
program. Recipients elected to forfeit 101,203 of those shares to satisfy tax withholding obligations, resulting in a net
issuance of 162,688 shares.
For each of the 2010 and 2011 programs in progress as of December 30, 2012, if the Company achieves at least
80% of the Cumulative EPS Goal, then each recipient will be entitled to receive a percentage of the “Target” number of
Performance Shares granted that is equal to the percentage of the Cumulative EPS Goal achieved, up to 100%. The
maximum share payout a recipient will be entitled to receive is 100% of the “Target” number of Performance Shares
granted if the Cumulative EPS Goal is met.
The Compensation Committee elected to change the terms of the Performance Share Program for the fiscal 2012
program. As revised, the participants’ rights to receive Performance Shares will be contingent on the Company
achieving cumulative earnings per share for fiscal 2012, 2013 and 2014 equal to at least the sum of the amounts
achieved by the Company during fiscal 2011, 2012 and 2013 (as adjusted by the Compensation Committee, if
applicable). If the Company achieves this threshold, then participants will be entitled to receive a percentage of their
“Target” number of Performance Shares equal to the percentage of the Cumulative EPS Goal achieved by the
Company, up to 100%. If the Company achieves more than 100% of the Cumulative EPS Goal, then participants will
be entitled to receive 100% of their “Target” number of Performance Shares, plus an additional percentage equal to
twice the incremental percentage increase in the Cumulative EPS Goal achieved over 100% (e.g., if the Company
achieves 103% of the Cumulative EPS Goal, then participants will be entitled to receive 106% of their “Target”
number of Performance Shares); provided that the maximum payout under the fiscal 2012 program is capped at 110%
of the “Target” number of Performance Shares.
At December 30, 2012, the following performance share programs were in progress:
Award
Date
1/4/2010
1/3/2011
1/2/2012
Performance
Share Program
2010 Program
2011 Program
2012 Program
Target No. of
Performance Shares
(Originally Granted)(1)
193,700
129,900
144,200
No. of Performance
Shares (Outstanding
at December 30, 2012)
169,100(2)
117,700(2)
134,900(2)
(1)Assumes achievement of 100% of the applicable cumulative EPS goal.
(2)Assumes an estimated payout equal to the forecasted achievement of the applicable
cumulative EPS Goal, net of employee forfeitures.
F-20
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Board of Directors’ Compensation
We recognized Board of Directors’ Compensation expense in our consolidated statement of operations for the
years ended 2012, 2011, and 2010, respectively, as follows:
(in thousands)
2012
Fiscal Years
2011
2010
Stock-based compensation(1)(2)(3)
Cash compensation
Total board of directors' compensation
$
$
94
395
489
$
$
76
413
489
$
$
231
255
486
(1)On May 5, 2009 and September 29, 2009 one-time 25,000 share restricted stock awards were granted to Lisa A. Kro and Wallace B. Doolin,
respectively, upon joining the Board of Directors. The grants to Ms. Kro and Mr. Doolin had grant date fair values of $168,000 and $150,000,
respectively, and will vest ratably over a period of five years beginning on the commencement date of their Board service.
(2)On August 2, 2011, a one-time 15,000 share restricted stock award was granted to John F. Gilbert III, upon assuming his new position on the
Board of Directors. The grant to Mr. Gilbert had a grant date fair value of $153,750 and will vest ratably over a period of five years beginning on
the commencement date of his Board service.
(3)On May 5, 2009, a total of 66,000 shares were issued to our Board of Directors on which date the closing price of our common stock was $6.72.
On September 29, 2009, 5,000 shares were issued to Wallace B. Doolin on which the closing price of our common stock was $6.00. The total
compensation cost of approximately $474,000 has been reflected in general and administrative expenses in our consolidated statements of
operations for fiscal 2009 and fiscal 2010.
Stock Options
The stock options we had issued under the Plans were fully vested as of January 3, 2010 and expire 10 years
from the date of grant. The 1995 Stock Option and Compensation Plan expired on December 29, 2005, the 1997
Employee Stock Option Plan expired on June 24, 2007, and the 1998 Director Stock Option Plan expired on June 19,
2008. Although incentives are no longer eligible for grant under these plans, each such plan will remain in effect until
all outstanding incentives granted thereunder have either been satisfied or terminated.
F-21
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information regarding our Company’s stock options is summarized below:
(number of options in thousands)
Options outstanding at January 3, 2010
Exercised(1)
Options outstanding at January 2, 2011
Exercised(2)
Options outstanding at January 1, 2012
Canceled or expired
Exercised(3)
Options outstanding at December 30, 2012
Options exercisable at January 2, 2011
Options exercisable at January 1, 2012
Options exercisable at December 30, 2012
Number of
Options
Weighted Average
Exercise Price
351
(104)
247
(54)
193
(11)
(80)
102
247
193
102
$
$
$
$
$
5.68
4.30
6.27
4.79
6.68
10.98
5.97
6.80
6.27
6.68
6.80
(1)In 2010, option holders elected to forfeit approximately 11,000 shares to satisfy the strike price and tax withholding obligations, resulting in a
net issuance of approximately 93,000 shares.
(2)In 2011, option holders elected to forfeit approximately 13,000 shares to satisfy the strike price and tax withholding obligations, resulting in a
net issuance of approximately 41,000 shares.
(3)In 2012, option holders elected to forfeit approximately 46,000 shares to satisfy the strike price and tax withholding obligations, resulting in a
net issuance of approximately 34,000 shares.
The following table summarizes information about stock options outstanding at December 30, 2012:
(number outstanding and number exercisable in thousands)
Options Outstanding and Exercisable
Exercise prices
$4.16
$6.50
-
-
$6.50
$10.98
Number
outstanding
77
25
102
Weighted-
average
remaining
contractual life
in years
0.95
1.97
1.2
Weighted- average
exercise price
$
$
$
5.99
9.28
6.80
The aggregate intrinsic value of options (the amount by which the market price of the stock on the date of
exercise exceeds the exercise price of the option) exercised during fiscal 2012 was approximately $241,000. As of
December 30, 2012, the aggregate intrinsic value of options outstanding and exercisable was approximately $248,000.
F-22
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restricted Stock
On October 8, 2012, John Gilbert III, was named Chief Executive Officer by the Company’s Board of
Directors. Pursuant to the agreement governing Mr. Gilbert’s employment, the Company granted 150,000 shares of
restricted stock having an aggregate grant date fair value of $1,465,500. These shares of restricted stock will vest in
equal annual installments on each of the first five anniversaries of the grant date provided that Mr. Gilbert remains
employed by the Company through the applicable vesting date. The compensation expense will be recognized under
general and administrative expense in our consolidated statements of operations in equal quarterly installments
commencing in the fourth quarter of fiscal 2012 and continuing through the applicable service period until the third
quarter of fiscal 2017.
Restricted Stock Units
On October 8, 2012, the Company’s Board of Directors named Christopher O’Donnell President and Chief
Operating Officer. Prior to his appointment, he was the President and Chief Executive Officer from September 11,
2008 until October 8, 2012. Pursuant to the agreement dated September 11, 2008, governing Mr. O’Donnell’s
employment, the Company granted 50,000 restricted stock units having an aggregate grant date fair value of $454,000.
These restricted stock units will vest in three equal installments on the three, four and five year anniversaries of the
grant date provided that Mr. O’Donnell remains employed by the Company through the applicable vesting date, and
will vest in its entirety upon a “change of control” as defined in the employment agreement. To the extent vested, Mr.
O’Donnell will have the right to receive shares comprising the restricted stock units upon a termination of his
employment that is a “separation from service” (as determined by Section 409A of the Internal Revenue Code of 1986,
as amended), at which point the restricted stock units will become issued and outstanding shares. If Mr. O’Donnell is a
“specified employee” (as determined under Section 409A) as of the date of his separation from service, the issuance of
shares will occur six months following such separation from service (or, if earlier, upon his death). The compensation
expense for this grant is being recognized in equal quarterly installments as general and administrative expense in our
consolidated statements of operations through the applicable service period which expires in the third quarter of fiscal
2013.
In addition, on September 11, 2008, the Company made a grant of 25,000 restricted stock units to the Company’s
Chief Financial Officer, Diana Purcel, for a grant date fair value of $227,000. This grant is subject to the same terms
and conditions as Mr. O’Donnell’s grant.
Common Share Repurchases
On August 6, 2008, our Board of Directors approved a stock repurchase program that authorized the repurchase
of up to 1.0 million shares of our common stock in both the open market or through privately negotiated transactions.
As of September 2010, we had repurchased all of the shares under this authorization, for approximately $7.8 million at
an average market price per share of $7.79, excluding commissions.
On November 4, 2010, our Board of Directors approved a stock repurchase program that authorized the
repurchase of up to 1.0 million shares of our common stock in both the open market or through privately negotiated
transactions. As of May 1, 2012 we repurchased all of the shares under this program for approximately $8.8 million at
an average market price per share of $9.91, excluding commissions.
On May 1, 2012, our Board of Directors approved a stock repurchase program that authorized the repurchase of
up to 1.0 million shares of our common stock in both the open market or through privately negotiated transactions. As
of December 30, 2012, we repurchased 323,862 shares under this program for approximately $9.8 million at an average
market price per share of $10.49, excluding commissions.
F-23
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Employee Stock Purchase Plan
The Company maintains an Employee Stock Purchase Plan, which gives eligible team members the option to
purchase Common Stock (total purchases in a year may not exceed 10% of a team member’s current year
compensation) at 100% of the fair market value of the Common Stock at the end of each calendar quarter. For the year
ended December 30, 2012 and January 1, 2012, there were approximately 4,725 shares and 5,230 shares purchased,
respectively, with a weighted average fair value of $10.51 and $9.41, respectively. For the fiscal years ended
December 30, 2012 and January 1, 2012, the Company did not recognize any expense related to the stock purchase plan
due to it being non-compensatory as defined by IRS Section 423.
(11) RETIREMENT SAVINGS PLANS
401(k) Plan
We have a pre-tax salary reduction/profit-sharing plan under the provisions of Section 401(k) of the Internal
Revenue Code, which covers employees meeting certain eligibility requirements. In fiscal 2012, 2011, and 2010 we
matched 25.0%, of the employee’s contribution up to 4.0% of their earnings. Team member contributions were
approximately $618,000, $564,000, and $538,000, for fiscal 2012, 2011, and 2010, respectively. The employer match
was $89,000, $86,000, and $84,000 for fiscal 2012, 2011, and 2010, respectively. There were no discretionary
contributions to the plan in fiscal 2012. There were approximately $11,000 in discretionary contributions to the Plan
during fiscal 2011 and 2010.
Non-Qualified Deferred Compensation Plan
We have a Non-Qualified Deferred Compensation Plan effective as of February 25, 2005 (the “Plan”). Eligible
participants are those team members who are at the “director” level and above and who are selected by the Company to
participate in the Plan. Participants must complete a deferral election each year to indicate the level of compensation
(salary, bonus and commissions) they wish to have deferred for the coming year. This deferral election is irrevocable
except to the extent permitted by the Plan Administrator, and the Regulations promulgated by the IRS. During fiscal
2012, 2011, and 2010, we matched 25% of the first 4.0% contributed and paid a declared interest rate of 6.0% on
balances outstanding. The Board of Directors administers the Plan and may change the rate or any other aspects of the
Plan at any time.
Deferral periods are limited to the earlier of termination of employment or not less than three calendar years
following the end of the applicable Plan Year. Extensions of the deferral period for a minimum of five years are
allowed provided an election for extension is made at least one year before the first payment affected by the change.
Payments can be in a lump sum or in equal payments over a two-, five- or ten-year period, plus interest from the
commencement date.
The Plan assets are kept in an unsecured account that has no trust fund. In the event of bankruptcy, participants
entitled to future payments under the Plan would have no greater rights than that of an unsecured general creditor of the
Company and the Plan confers no legal rights for interest or claim on any specific assets of the Company. Benefits
provided by the Plan are not insured by the Pension Benefit Guaranty Corporation (PBGC) under Title IV of the
Employee Retirement Income Security Act of 1974 (“ERISA”), because the pension insurance provisions of ERISA do
not apply to the Plan.
For fiscal years ended December 30, 2012 and January 1, 2012, eligible participants contributed approximately
$144,000 and $134,000 to the Plan and the Company provided matching funds and interest of approximately $76,000
and $66,000, net of distributions of approximately $65,000 and $40,000, respectively. The distributions were due to
executive departures and required distributions in accordance with our Plan. The outstanding deferred compensation
balance at December 30, 2012 and January 1, 2012, was approximately $878,000 and $723,000, respectively.
F-24
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12)
INCOME TAXES
The following table summarizes the income tax expense for the last three fiscal years:
(in thousands)
Current:
Federal
State
Deferred:
Federal
State
Total income tax expense
2012
Fiscal Year
2011
2010
$
$
(695)
(375)
(1,070)
268
(3)
265
(805)
$
$
(1,644)
(461)
(2,105)
(742)
83
(659)
(2,764)
$
$
(2,134)
(501)
(2,635)
(1,137)
(24)
(1,161)
(3,796)
The impact of uncertain tax positions taken or expected to be taken on income tax returns must be recognized
in the financial statements at the largest amount that is more likely than not to be sustained upon audit by the relevant
taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more
likely than not of being sustained.
A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits for the years ended
December 30, 2012, January 1, 2012, and January 2, 2011, respectively, is presented in the table below:
(in thousands)
Balance at January 3, 2010
Increases attributable to tax positions taken during prior periods
Decreases due to lapses of statutes of limitations
Balance at January 2, 2011
Increases attributable to tax positions taken during prior periods
Audit settlements
Decreases due to lapses of statutes of limitations
Balance at January 1, 2012
Increases attributable to tax positions taken during prior periods
Decreases due to lapses of statutes of limitations
$
55
734
(19)
770
34
(754)
(43)
7
21
(7)
Balance at December 30, 2012
$
21
At December 30, 2012, January 1, 2012, and January 2, 2011 the Company had unrecognized tax benefits that
had an effect on the annual effective tax rate of $21,000, $7,000, and $77,000, respectively, which if recognized, would
affect the annual effective rate. In fiscal year 2012, the amount of unrecognized tax benefits increased due to additional
F-25
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
federal and state reserves, and decreased due to the passing of the federal statute. In fiscal year 2011, the amount of
unrecognized tax benefits decreased due to the final settlement of a federal audit. For fiscal 2010, the difference
between the amounts affecting the annual effective rate and the balance on January 2, 2011 related to the unrecognized
deferred tax benefits related to federal and state income taxes.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of
income tax expense. Total accrued interest and penalties amounted to $11,000 on a gross basis at December 30, 2012
and January 1, 2012. There was no expense for interest and penalties related to uncertain tax positions recognized in
the consolidated statements of operations in fiscal 2012. In fiscal 2011, there was $24,000 in interest and penalties
related to uncertain tax positions recognized in the consolidated statements of operations.
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. As of
December 30, 2012, the Company was no longer subject to income tax examinations for taxable years before 2009 in
the case of U.S. federal and taxable years generally before 2008 in the case of state taxing authorities.
Deferred taxes, detailed below, recognize the impact of temporary differences between the amounts of assets
and liabilities recorded for financial statement purposes and such amounts measured in accordance with tax laws.
Realization of the net operating loss carry forwards and other deferred tax temporary differences are contingent on
future taxable earnings. During fiscal years 2012 and 2011, our deferred tax asset was reviewed for expected
utilization using a “more likely than not” approach as required by assessing the available positive and negative
evidence surrounding its recoverability.
F-26
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 30, 2012, the realization of the deferred tax asset is more likely than not based on our taxable
income for fiscal 2012 and fiscal 2011 and based on the expectation that our Company will generate the necessary
taxable income in future years. However, there is a portion of the state net operating loss carry forward and state tax
credit carry forward, for which the Company has created a valuation allowance listed in the table below.
(in thousands)
Deferred tax asset:
Deferred rent
State net operating loss carry-forwards
Accrued and deferred compensation
Tax credit carryover
Deferred revenue
Lease reserve
Intangible property basis difference
Other
Accrued expenses
Inventories
Total deferred tax asset
Deferred tax liability:
Property and equipment basis difference
Inventories
Prepaid expenses
Accrued expenses
Financing lease obligations
Total deferred tax liability
Net deferred tax assets
Valuation allowance
December 30,
2012
January 1,
2012
$
$
$
$
$
$
$
$
2,466
1,784
1,484
365
289
113
96
89
45
32
6,763
(4,601)
(574)
(281)
(144)
---
(5,600)
1,1631
(1,798)
2,286
1,575
1,389
15
152
174
167
7
172
---
5,937
(4,188)
(578)
(346)
---
(135)
(5,247)
6901
(1,590)
Total net deferred tax liability
$
(635)
$
(900)
In 2012, we had cumulative net operating loss carry-forwards for tax reporting purposes of approximately $38.5
million for state purposes, which if not used, will begin to expire in fiscal 2020. This amount may be adjusted when we
file our fiscal 2012 income tax returns in 2013.
F-27
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 2012, we realized the benefit from the cumulative impact of tax credits for employee reported tips for the
current year as well as four previous tax years that were amended, or in the case of fiscal 2011, initially filed. This
resulted from a more precise calculation methodology for this tax credit, and will continue to benefit us in the future.
Reconciliation between the statutory rate and the effective tax rate is as follows:
Federal statutory tax rate
State taxes, net of federal benefit
Tax effect of permanent differences – meals and entertainment
Tax effect of permanent differences – Tip Credit(1)
Tax effect of permanent differences – Other(2)
Tax effect of general business credits
Uncertain tax positions
Other(3)
Effective tax rate
Fiscal Year
2011
2010
34.0 %
34.0 %
3.6
0.5
2.1
(0.1)
(6.7)
---
(0.2)
3.6
0.3
1.7
(0.2)
(5.4)
0.6
(0.1)
33.2 %
34.5 %
2012
34.0 %
4.0
0.9
5.7
(1.1)
(16.9)
0.2
(11.2)
15.6 %
(1)Increase attributable to the larger add-back of employment tax credits due to increased credit.
(2)The decrease is attributable to a greater impact of additional deductions based on lower than expected pre-tax income.
(3)The decrease in the effective income tax rate, year over year, was primarily attributable to an increase in the impact of employment tax credits for
tipped employees for the previous open tax years. The Company amended certain tax returns to capture the additional credit during the third and
fourth quarters of fiscal 2012. The impact was treated discretely in the periods the amended returns were filed.
(13)
SUPPLEMENTAL CASH FLOWS INFORMATION
(in thousands)
Cash paid for interest
Cash paid for taxes
Non-cash investing and financing activities:
Reclassification of additional paid-in-capital to payroll taxes
payable for performance shares issued
Accrued property and equipment purchases
Redemption of note receivable due to the
acquisition of franchise restaurants
For the Fiscal Year Ended
2012
2011
2010
987
1,554
$
$
1,057
2,392
$
$
961
1,819
1,189
(111)
$
$
82 $
$
18
---
$
---
$
68
240
613
$
$
$
$
$
F-28
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(14) SELECTED QUARTERLY DATA (UNAUDITED)
The following represents selected quarterly financial information for fiscal years 2012 and 2011 (in thousands
except per-share data).
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2012
2011
2012
2011
2012
2011
2012
2011
37,493 $
1,493 $
817 $
37,090 $
41,319 $
41,290 $
39,921 $
38,927 $
36,255 $
37,504
2,055 $
3,184 $
3,921 $
739 $
2,642 $
1,182 $
1,948 $
2,401 $
845 $
1,565 $
797 $
750 $
778
414
0.11 $
0.15 $
0.26 $
0.30 $
0.12 $
0.20 $
0.10 $
0.05
0.11 $
0.14 $
0.25 $
0.29 $
0.11 $
0.19 $
0.10 $
0.05
Revenue
Income from operations
Net income
Basic net income
per common share
Diluted net income
per common share
(15) LITIGATION
$
$
$
$
$
In the normal course of business, the Company is involved in a number of litigation matters that are incidental to
the operation of the business. These matters generally include, among other things, matters with regard to employment
and general business-related issues. The Company currently believes that the resolution of any of these pending matters
will not have a material adverse effect on its financial position or liquidity, but an adverse decision in more than one of
the matters could be material to its consolidated results of operations.
(16) ASSET IMPAIRMENT AND ESTIMATED LEASE TERMINATION AND OTHER CLOSING COSTS
Restaurant sites that are operating, but have been previously impaired, are reported at the lower of their carrying
amount or fair value less estimated costs to sell. The following is a summary of impairment for fiscal 2012, fiscal
2011, and fiscal 2010.
2012 Asset Impairment and Estimated Lease Termination and Other Closing Costs (in thousands):
Restaurants
Various
Vernon Hills, IL
Various
Total for 2012
Reason
Costs for closed restaurants(1)
Lease reserve(2)
Other
Amount
$
$
289
77
4
370
(1)The Company incurred various costs for closed restaurants primarily related to its Tulsa, OK, Vernon Hills, IL, and Yorktown, IL restaurants
which closed in 2012.
(2)The lease reserve equals the net present value of the remaining lease obligations for the Vernon Hills, IL restaurant, net of expected sublease
income, equal to zero.
F-29
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2011 Asset Impairment and Estimated Lease Termination and Other Closing Costs (in thousands):
Restaurants
Various
Gaithersburg, MD
Calhoun, MN
Tulsa, OK
Various
Total for 2011
Reason
Costs for closed restaurants(1)
Asset impairment(2)
Asset impairment(3)
Asset impairment(4)
Other
Amount
17
148
144
198
6
513
$
$
(1)The Company incurred various costs for previously closed restaurants, net of a recapture of accrued expenses for approximately $30,000, in
Palatine, IL and Carpentersville, IL.
(2)Based on the Company’s assessment of expected cash flows, an asset impairment charge was recorded for this restaurant which we expect to
relocate within its existing market in the third quarter of 2013.
(3)Based on the Company’s assessment of expected cash flows for this restaurant over the remainder of its respective lease term, an asset
impairment charge was recorded.
(4)In fiscal 2011, the Company entered into a purchase agreement for the sale of its Tulsa, OK restaurant for approximately $1.2 million. These
assets had a net book value of approximately $1.4 million and were accounted for as held for sale and an impairment charge was recorded since the
net book value of the assets exceeded the sale price. On March 2, 2012, these assets were sold (See note 17).
2010 Asset Impairment and Estimated Lease Termination and Other Closing Costs (in thousands):
Restaurant
Various
Palatine, IL
Atlanta
Various
Total for 2010
Reason
Costs for closed restaurants(1)
Lease reserve(2)
Gain on lease terminations(3)
Other
Amount
$
$
68
88
(84)
2
74
(1)The Company incurred costs for closed restaurants which primarily related to its Palatine, IL restaurant which was closed in 2010.
(2)The lease reserve equals the net present value of the remaining lease obligations for the Palatine, IL restaurant, net of expected sublease
income, equal to zero.
(3)During 2010, the Company negotiated a lease buyout for its Marietta, GA location. Total termination fees were approximately $506,000
less lease reserve of approximately $590,000 for a net gain of approximately $84,000.
F-30
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Below reflects the change in our reserve for lease termination costs for fiscal 2012 and 2011:
Balance at
Beginning
of Period
Additions
Charged to
Costs and
Expenses
Deductions
Credits to
Costs and
Expenses
and Other
Accounts
Balance at
End of
Period
87.7
---
(87.7)
$
---
---
85.7
(85.7)
$
---
(in thousands)
Year ended January 1, 2012
Reserve for lease termination costs
Year ended December 30, 2012
Reserve for lease termination costs
$
$
These amounts were recorded in other current liabilities or other liabilities depending on when we expected the
amounts to be paid.
(17) FAIR VALUE MEASUREMENTS
Non-Financial Assets Measured on a Non-Recurring Basis
There were no impairment charges recorded that required a determination of fair value in 2012. In the first
quarter of fiscal 2011, an impairment charge was recorded for approximately $148,000 for a restaurant that the
Company expects to relocate within its existing market in the third quarter of 2013. This restaurant had a carrying
value of approximately $327,000. We determined fair value based on projected discounted future operating cash flows
of the restaurant over its remaining service life using a discount rate that is commensurate with the risk inherent in our
current business model, which reflects our own judgment. The fair value of approximately $179,000 was determined
by using significant unobservable inputs (Level 3).
In the fourth quarter of fiscal 2011, an impairment charge was recorded for approximately $198,000 for a
restaurant that the Company sold in March 2012. This restaurant had a carrying value of approximately $1.2 million.
The fair value of approximately $1.4 million was determined by using the sales price in the purchase agreement (Level
3).
(18) SUBSEQUENT EVENTS
The Company evaluated for the occurrence of subsequent events through the issuance date of the Company’s
financial statements. No other recognized or non-recognized subsequent events occurred that require recognition or
disclosure in the financial statements except as noted below.
On March 14, 2013, the Company and certain of its subsidiaries (collectively known as the “Borrower”)
executed the Third Amendment to the Second Amended and Restated Credit Agreement with Wells Fargo Bank,
National Association. This amendment changed how the Company calculates the covenant for the maximum royalty
receivable aged past 30 days for the fourth quarter of fiscal 2012 and future periods. The amendment is attached as
exhibit 10.11.
F-31
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
Financial Statement Schedule
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Additions
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Deductions
Credits to
Costs and
Expenses
and Other
Accounts
Balance at
End of
Period
Year ended January 2, 2011:
Allowance for doubtful accounts
Reserve for lease termination costs
Reserve for corporate severance
Year ended January 1, 2012:
Allowance for doubtful accounts
Reserve for lease termination costs
Reserve for corporate severance
Year ended December 30, 2012:
Allowance for doubtful accounts
Reserve for lease termination costs
Reserve for corporate severance
$
$
$
$
$
$
$
$
$
67.4
589.0
---
$
$
$
79.6
87.7
10.2
$
$
$
50.9
89.2
81.3
54.8
---
27.3
17.6
---
---
$
$
$
306.7
85.7
133.0
$
$
$
$
$
$
$
$
$
(38.7)
(590.5)
(71.1)
$
$
$
(116.8)
(87.7)
(37.5)
$
$
$
79.6
87.7
10.2
17.6
---
---
(88.0)
(85.7)
(12.8)
$
$
$
236.3
---
120.2
F-32
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
FAMOUS DAVE’S OF AMERICA, INC.
(“Registrant”)
Dated: March 15, 2013
By: /s/ John F. Gilbert__
John F. Gilbert
Chief Executive Officer and Director (Principal Executive
Officer)
By: /s/ Diana Garvis Purcel
Diana Garvis Purcel
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on March 15, 2013
by the following persons on behalf of the registrant, in the capacities indicated.
Signature
Title
/s/ John F. Gilbert
John F. Gilbert
/s/ Christopher O’Donnell
Christopher O’Donnell
/s/ Dean A. Riesen
Dean A. Riesen
/s/ Wallace B. Doolin
Wallace B. Doolin
/s/ Lisa A. Kro
Lisa A. Kro
/s/ Richard L. Monfort
Richard L. Monfort
Chief Executive Officer and Director
President and Chief Operating Officer and Director
Director
Director
Director
Director
Exhibit No.
EXHIBITS
Description
3.1
3.2
3.3
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
Articles of Incorporation, incorporated by reference to Exhibit 3.1 to our Registration Statement on
Form SB-2 (File No. 333-10675) filed with the Securities and Exchange Commission on August
23, 1996
Amendment to Articles of Incorporation dated May 31, 1996, incorporated by reference to Exhibit
3.3 to our Registration Statement on Form SB-2/A (File No. 333-10675) filed with the Securities
and Exchange Commission on October 1, 1996
Second Amended and Restated Bylaws, incorporated by reference to Exhibit 3.1 to Form 10-Q
filed May 11, 2012
Trademark License Agreement between Famous Dave's of America, Inc. and Grand Pines Resorts,
Inc., incorporated by reference to Exhibit 10.11 to the Registration Statement on Form SB-2 (File
No. 333-10675) filed on August 23, 1996
1995 Employee Stock Option Plan (as amended through May 22, 2002), incorporated by reference
to Exhibit 10.1 to Form 10-Q filed August 14, 2002
Amendment to 1995 Employee Stock Option and Compensation Plan, effective November 7, 2006,
incorporated by reference to Exhibit 10.2 to Form 10-Q filed November 9, 2006
1997 Stock Option and Compensation Plan (as amended through May 22, 2002), incorporated by
reference to Exhibit 10.2 to Form 10-Q filed August 14, 2002
1998 Director Stock Option Plan (as amended through May 22, 2002), incorporated by reference to
Exhibit 10.3 to Form 10-Q filed August 14, 2002
Amended and Restated 2005 Stock Incentive Plan (as amended through January 21, 2013)
Second Amended and Restated Credit Agreement by and between Wells Fargo Bank, National
Association and Famous Dave’s of America, Inc., dated March 4, 2010, incorporated by reference
to Exhibit 10.2 to Form 8-K filed March 9, 2010
Letter amendment dated February 1, 2011, to the Second Amendment to the Amended and
Restated Credit Agreement by and between Wells Fargo Bank, National Association and Famous
Dave’s of America, Inc., incorporated by reference to Exhibit 10.11 to Form 10-K filed March 18,
2011
First Amendment to the Second Amended and Restated Credit Agreement by and between Wells
Fargo Bank, National Association and Famous Dave’s of America, Inc., dated July 5, 2011,
incorporated by reference to Exhibit 10.1 to Form 8-K filed July 5, 2011
Second Amendment to the Second Amended and Restated Credit Agreement by and between Wells
Fargo Bank, National Association and Famous Dave’s of America, Inc., dated November 1, 2012,
incorporated by reference to Exhibit 10.1 to Form 10-Q filed November 2, 2012
Third Amendment to the Second Amended and Restated Credit Agreement by and between Wells
Fargo Bank, National Association and Famous Dave’s of America, Inc., dated March 14, 2013
Employee Stock Purchase Plan, incorporated by reference to Exhibit 10.1 to Form 10-Q filed May
9, 2008
Second Amended and Restated Non-Qualified Deferred Compensation Plan, dated January 1, 2008,
incorporated by reference to Exhibit 10.16 to Form 10-K filed March 14, 2008
Exhibit No.
EXHIBITS
Description
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
21.0
23.1
31.1
31.2
Form of Severance Agreement dated January 4, 2008, between Famous Dave's of America, Inc.
and each of Diana G. Purcel and Christopher O’Donnell, incorporated by reference to Exhibit 10.1
for Form 8-K filed January, 8, 2008
Form 2010-2012 Performance Share Agreement and Schedule of Grants under such form,
incorporated by reference to Exhibits 10.1 and 10.2 to Form 8-K filed January 6, 2010
Form 2011-2013 Performance Share Agreement and Schedule of Grants under such form,
incorporated by reference to Exhibits 10.1 and 10.2 to Form 8-K filed January 5, 2011
Form of 2012 – 2014 Performance Share Agreement incorporated by reference to Exhibit 10.1 to
Form 8-K filed January 6, 2012
Schedule of Grants made under Form of 2012 – 2014 Performance Share Agreement, incorporated
by reference to Exhibit 10.20 to Form 10-K filed March 16, 2012
Form 2013 – 2015 Performance Share Agreement and Schedule of Grants under such form,
incorporated by reference to Exhibits 10.1 and 10.2 to Form 8-K filed January 8, 2013
Form 2013 – 2015 Performance Stock Unit Agreement and Schedule of Grants under such form,
incorporated by reference to Exhibits 10.3 and 10.4 to Form 8-K filed January 8, 2013
Form of Director Stock Grant, incorporated by reference to Exhibit 10.3 to Form 8-K filed
February 21, 2008
Restricted Stock Unit Agreement, between Famous Dave's of America, Inc. and each of Diana G.
Purcel and Christopher O’Donnell, incorporated by reference to Exhibits 10.1 and 10.2, to Form 8-
K filed September 17, 2008
Restricted Stock Agreement dated May 5, 2009, between Famous Dave’s of America, Inc. and Lisa
A. Kro, incorporated by reference from Exhibit 10.2 to Form 10-Q filed on May 7, 2009
Restricted Stock Agreement dated May 5, 2009, between Famous Dave’s of America, Inc. and
Wallace B. Doolin, incorporated by reference to Exhibit 10.1 to Form 10-Q filed on November 5,
2009
Restricted Stock Agreement dated August 2, 2011, between Famous Dave’s of America, Inc. and
John Gilbert, incorporated by reference to Exhibit 10.1 to Form 10-Q filed on August 12, 2011
Employment Offer Letter dated October 8, 2012, between Famous Dave's of America, Inc. and
John Gilbert, incorporated by reference to Exhibit 10.1 to Form 8-K filed on October 9, 2012
Confidentiality and Noncompetition Agreement dated October 8, 2012, between Famous Dave's of
America, Inc. and John Gilbert, incorporated by reference to Exhibit 10.2 to Form 8-K filed on
October 9, 2012
Restricted Stock Agreement dated October 8, 2012, between Famous Dave's of America, Inc. and
John Gilbert, incorporated by reference to Exhibit 10.3 to Form 8-K filed on October 9, 2012
Nomination Agreement dated March 1, 2013 by and among the persons and entities listed on
Schedule A thereto, Famous Dave’s of America, Inc., and Patrick Walsh, incorporated by reference
to Exhibit 10.1 to Form 8-K filed March 4, 2013
Subsidiaries of Famous Dave's of America, Inc.
Consent of Grant Thornton LLP
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit No.
32.1
32.2
101.INS
101.SCH
101.CAL
101.LAB
101.PRE
101.DEF
EXHIBITS
Description
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
XBRL Instance Document
XBRL Schema Document
XBRL Calculation Linkbase Document
XBRL Label Linkbase Document
XBRL Presentation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
SUBSIDIARIES OF FAMOUS DAVE'S OF AMERICA, INC.
Exhibit 21.0
FEIN
% of Ownership
Entity
D&D of Minnesota, Inc.
Famous Dave's Ribs of Maryland, Inc.
Famous Dave's Ribs, Inc.
Famous Dave's Ribs-U, Inc.
FDA Properties, Inc.
41-1856702
41-1958496
41-1884517
41-1884548
36-4379010
Lake & Hennepin BBQ and Blues, Inc.
41-1834594
Minwood Partners, Inc.
51-0396229
100%
96%
100%
100%
100%
100%
100%
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
We have issued our report dated March 15, 2013, with respect to the consolidated financial statements and schedule
included in the Annual Report of Famous Dave’s of America, Inc. on Form 10-K for the year ended December 30,
2012. We hereby consent to the incorporation by reference of said report in the Registration Statements of Famous
Dave’s of America, Inc. on Forms S-3 (File No. 333-86358, File No. 333-48492, File No. 333-95311, File No. 333-
54562, File No. 333-65428, and File No. 333-73504) and on Forms S-8 (File No. 333-176268, File No. 333-124985,
File No. 333-88928, File No. 333-88930, File No. 333-88932, File No. 333-16299, File No. 333-49939, and File No.
333-49965).
/s/ Grant Thornton LLP
Minneapolis, Minnesota
March 15, 2013
I, John F. Gilbert, certify that:
CERTIFICATIONS
Exhibit 31.1
1. I have reviewed this Annual Report on Form 10-K of Famous Dave’s of America, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.
Dated: March 15, 2013
By: /s/ John F. Gilbert
John F. Gilbert
Chief Executive Officer
I, Diana Garvis Purcel, certify that:
CERTIFICATIONS
Exhibit 31.2
1. I have reviewed this Annual Report on Form 10-K of Famous Dave’s of America, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.
Dated: March 15, 2013
By: /s/ Diana Garvis Purcel
Diana Garvis Purcel
Chief Financial Officer and Secretary
Certification Pursuant to Rule 13a-14(b) of the
Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
Exhibit 32.1
In connection with the Annual Report of Famous Dave's of America, Inc (the “Registrant”) on Form 10-K for the
annual period ended December 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, John F. Gilbert, Chief Executive Officer and Director of the Registrant, certify, in accordance with Rule
13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 that:
1. The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Registrant.
Dated: March 15, 2013
By:
/s/ John F. Gilbert
John F. Gilbert
Chief Executive Officer
Certification Pursuant to Rule 13a-14(b) of the
Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
Exhibit 32.2
In connection with the Annual Report of Famous Dave's of America, Inc (the “Registrant”) on Form 10-K for the
annual period ended December 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, Diana Garvis Purcel, Chief Financial Officer and Secretary of the Registrant, certify, in accordance with
Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 that:
1. The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Registrant.
Dated: March 15, 2013
By: /s/ Diana Garvis Purcel
Diana Garvis Purcel
Chief Financial Officer and Secretary
FINANCIAL HIGHLIGHTS
BOARD OF DIRECTORS, EXECUTIVE TEAM AND SHAREHOLDER INFORMATION
FISCAL YEAR
2012
2011
2010
2009
2008
(1)
($’s in 000’s, except per share data, and average weekly sales)
STATEMENT OF OPERATIONS DATA
BOARD OF DIRECTORS
EXECUTIVE TEAM
SHAREHOLDER INFORMATION
$ 154,988 $ 154,811 $ 148,268 $ 136,018 $ 140,382
Dean A. Riesen
Chairman of the Board
John F. Gilbert III
Chief Executive Officer
Revenue
Asset impairment and estimated lease termination
(2)
and other closing costs
Income from operations
Income tax (expense) benefit
Net income
Basic net income per common share
Diluted net income per common share
Cash and cash equivalents
Total assets
Long-term debt less current maturities
OTHER DATA
Total shareholders’ equity
(4)
Restaurant Sales:
Company-owned
Franchise-operated
Number of restaurants open at year end:
Company-owned restaurants
Franchise-operated restaurants
Total restaurants
Company-owned comparable
(5)
$
(370)
(805)
$ (74)
$
$
(513)
$ 11,983 $
$ 6,213 $ 9,396
$
$ (3,796) $
$ (2,764)
$ 4,360 $ 5,562 $ 7,218 $
$
$ 0.84
$
$ 0.82
$
$
$ 2,654 $
$ 2,074
$ 76,129 $
$ 76,253
$ 23,497
$ 22,105
$
$ 32,904 $
$ 33,767
0.70
0.68
$ 1,148
$ 73,839
$ 20,451
$ 34,094
0.58 $
0.57 $
(3)
(3)
(218)
$
10,514 $
(2,989) $
5,701 $
0.63 $
0.62 $
2,996 $
68,381 $
17,990
$
32,944 $
(6,912)
2,030
119
389
0.04
0.04
1,687
73,401
29,252
26,184
$ 135,730
$ 361,109
$ 136,896
$ 355,338
$ 131,154 $ 117,934 $ 122,016
$ 340,454 $ 358,696 $ 355,946
53
135
188
54
133
187
52
130
182
45
132
177
(6)
47
123
170
(1.8)%
increase
1.5% 0.7% (6.3)%
sales (decrease)
Average weekly sales:
Company-owned restaurants
Franchise-operated restaurants
(1) Fiscal 2009 consisted of 53 weeks. Fiscal 2012, 2011, 2010, and 2008 all consisted of 52 weeks.
(2) Fiscal 2012 primarily reflects closing costs for three company-owned restaurants as well as a lease reserve for one of the closed restaurants. Fiscal 2011 primarily reflects
impairment charges for three company-owned restaurants. Two of these are still operating and one has closed. Fiscal 2009 primarily reflects closing costs for two company-
owned restaurants. Fiscal 2008 reflects impairment charges for eight restaurants. Five of these have closed and three are still operating.
(3) Reflects gain on acquisition of New York and New Jersey restaurants in March 2010, of $0.15 per diluted share.
(4) Long-term debt includes our line of credit.
(5) Our comparable store sales includes company-owned restaurants that are open year round and have been open more than 24 months.
(6) For purposes of computing comparable store sales, this computation assumes fiscal 2009 was a 52-week year.
$ 49,172 $ 50,216 $ 49,187 $ 48,197 $ 50,685
$ 52,714 $ 53,096 $ 52,631 $ 53,016 $ 56,535
(2.0)%
John F. Gilbert III
Chief Executive Officer
and Member of Strategic Planning Committee
Christopher O’Donnell
President and Chief Operations Officer and
Member of Strategic Planning Committee
Wallace B. Doolin
Chairperson of Strategic Planning Committee,
Chairperson of Compensation Committee and
Member of Corporate Governance &
Nominating Committee, and Audit Committee
Lisa A. Kro
Chairperson of Audit Committee,
Member of Compensation Committee,
Member of Corporate Governance &
Nominating Committee
Richard L. Monfort
Chairperson of Corporate Governance &
Nominating Committee, Member of Audit
Committee, and Member of Strategic
Planning Committee
Christopher O’Donnell
President and Chief Operations Officer
Diana Garvis Purcel
Chief Financial Officer and Secretary
Jeff Abramson
Vice President, Purchasing
Jackie Ottoson
Vice President, Human Resources
and Training
Victor Salamone
Vice President, Franchise Development
Ben Welshons
Vice President, Sales
CHAIRMAN EMERITUS
David W. Anderson
Founder and Chairman Emeritus
RESTAURANT LOCATIONS
Investor/Analyst Contact
Diana Garvis Purcel
952-294-1300
Independent Registered Public
Accounting Firm
Grant Thornton LLP
Minneapolis, Minnesota
Legal Counsel
Maslon Edelman Borman and Brand, LLP
Transfer Agent & Registrar
Wells Fargo
Stock Exchange Listing
Common stock is traded on
the NASDAQ Global Select Market
under the symbol DAVE
Annual Meeting
The annual meeting of shareholders is
scheduled to begin at 3:00 PM (CST) on
Tuesday, April 30, 2013 at the
Company’s headquarters
REVENUE
NUMBER OF RESTAURANTS
$154.8
$155.0
$148.3
$140.4
$136.0
$160
$150
$140
$130
$120
$110
$100
$90
187
188
182
177
170
135
133
123
132
130
47
45
52
54
53
190
180
170
160
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
3.0%
2.0%
1.0%
0.0%
(1.0)%
(2.0)%
(3.0)%
(4.0)%
(5.0)%
(6.0)%
(7.0)%
COMPANY-OWNED
COMPARABLE SALES
1.5%
0.7%
(2.0)%
(1.8)%
(6.3)%
• 53 Company RestauRants
• 134 FRanChise RestauRants
2008 2009 2010 2011 2012
2008 2009 2010 2011 2012
2008 2009 2010 2011 2012
Company-Owned Franchise-Operated
As of March 2013, Famous Dave’s had a total of 187 company-owned and
franchise-operated restaurants in 34 states and 1 Canadian province.
Famous Dave’s of America, Inc.
12701 Whitewater Drive, Suite 200
Minnetonka, MN 55343
Phone: 952-294-1300 www.famousdaves.com