Having franchise and owned store performance going in opposite directions is not a sustainable business model; DAVE has to address franchise operating performance declining at a greater rate than the owned stores. BBQ branding is an opportunity, but...there is little to stop new competetitors from entering markets...many operators get their start via BBQ competeition, earn BBQ award, think they have a saleable product, open a store. Further, I doubt it wouldn't be to difficult for any of the establsihed restarurant to add BBQ (reheated from commercial off-site sources). Is demand for BBQ still growing or has it leveled off?? I don't know. DAVE management seems to take prudent action, but evetually the business has to grow or evolve to something beside sit-down restaurant. As an investment, DAVE is value-in-a-range, not a growth story.
You can't save yourself out of a recession.
And people don't show up in hungry crowds because you've "synchronized" your franchise and company-owned stores.
Put the main team on growth of same-store sales and number of stores, and have another to look at cost reduction and efficiency.
Someone got it right: this segment is at a small fraction of saturation. Lots of room. Either DAVE takes it or someone else does, and DAVE has the best model right now.
At $14+ per average check metric DAVE may be limited to pricing power, at the upper edge of what one can call 'casual dining'. Beer, wine remains a possible source of 'per check' growth, it surpirses that management aknowledges such but never really explains what their strategy is to make it happen. Two surprises, a few quarters ago they said they would hold off buying stock in lieu of paying off debt; 1. actually they buy back 440,000 shares (at an attractive price versus today and the past year buyback efforts; 2. they add debt for the bankrupt franchise purchase. Hhhhmmmmmm, OK with the franchise buyback but have to think about using debt instead of cash while using cash to buy stock. Does that make sense? Also, how does an accounting profit result at closing of an asset purchase at bankruptcy? Hhhhmmm again. Comments?
It's smart because debt is cheap right now and so is the price of the stock (or it was at 7.00 per share). Once the stock price becomes fairly valued (now?) or overvalued they can start paying off the debt which will most likely remain cheap for a few years.
Lack of meaningful revenue growth continues. Cash management a positive. Stabalized operations, no growth within the existing owned-franchised store base. Is BBQ a mature product niche? Perhaps. Leverage by putting parts of the DAVE menu in other established resturant operators, such as CBRL? Or joint branding single sites, such as done by TacoBell/KFC? Bottles of sauce in grocery stores isn't going to make much difference. Don't know. Conference call today 11am EST.