November 16, 2017 - 3:08pm EST by
2017 2018
Price: 4.70 EPS 0 0.85
Shares Out. (in M): 7 P/E 0 5.5
Market Cap (in $M): 35 P/FCF 0 0
Net Debt (in $M): -2 EBIT 0 0
TEV ($): 33 TEV/EBIT 0 0

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DAVE is a casual dining, BBQ-themed restaurant concept.

I am posting this idea as an interesting turnaround situation. Given short interest, there should also be strong short-term positive trading dynamics as well.  Potential for significant upside should franchisee comps improve further/turn positive versus very little downside given valuation.

DAVE reported it's 3Q earnings a couple days ago and held a brief conference call.  I think the 3Q report marks a significant turning point.  Here were several significant items:

  • The first is that the company's SSS finally turned positive in their company operated units (+0.9%).  Franchisees were still negative, but excluding the impact on the puerto rico stores, there was an improvement to -1.5% vs. 1H -4.1%.


  • The second major positive, discussed on the very brief call and mentioned in the PR, is that DAVE's will be at an $8M run-rate in G&A within 90 days.  For perspective, 3Q G&A was $3.8M and the first nine months of 2017 was $12M.  Reducing the G&A from current run-rate alone should add close to $1 per share (pre-tax).


  • Company is transforming itself into a franchisee-only model.  Post the close of 3Q, company owned stores were reduced from 25 down to 16, with a franchisee buying the bulk of these units.  With 136 franchised units and only 16 company-owned at this point and further reductions likely, DAVE is positioning itself for a simplified income statement with essentially a $14.5-$15M royalty stream and G&A of $8M. 


  • There are over 800k shares short with approximately 60 DTC.


  • Incentivized new CEO who will be "expeditiously addressing the development and evolution of the Famous Dave’s concept."


Once the dusts settles on DAVE, you should have a company with a franchisee royalty stream of roughly $14.5M, and G&A at $8.0M.  Company store operating margins are positive and improving, up 70bips YoY for the nine months to 6.1% vs. 5.4% and for 3Q they improved 320 bips from 3.8% to 7.0%.  I am assuming that the income from these uniits roughly offsets the D&A.  This leaves us with about $0.85c pretax.  (net interest expense should be negligible as company sold some shares post the close of the quarter and also received approxiimatley $1.5M net as the purchase price for the co-owned stores which were franchised out).  (Note: DAVE also owns some of the remaining real estate for some of its remaining co-owned stores, so there is potentially some additional asset sales in addition to converting these to franchised units).





further deterioration in casual dining sector

unquantified need to invest in the brand





I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.


  • investors taking notice of transformation to franchisee-only model
  • further rationalization of co-owned store inventory
  • asset sales
  • reduction in G&A leades to big swing in profitability
  • real estate sales
  • investment in concept leads to further turn in comps
  • additional franchising agreements (beyond re-franchisiing of existing store-owned inevntory)
  • short-covering
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