Famous Dave's Reports Fourth Quarter Results of $0.08 Per Share; Full Year Results of $0.62 Per Share

These results compare to revenue of $32.8 million and a net loss of $2.0 million, or ($0.22) per diluted share for the comparable period in the prior year. For the full year ended January 3, 2010, the company reported net income of $5.7 million, or $0.62 per diluted share, on total revenue of approximately $136.0 million, as compared with net income of $389,000, or $0.04 per diluted share, on total revenue of approximately $140.4 million for fiscal 2008.

“During 2009, we improved our bottom line, generated strong cash flow and strengthened our balance sheet; positioning Famous Dave’s well to meet the challenges and opportunities of 2010.” Fiscal 2009’s fourth quarter and full year results include an approximate $0.05 per diluted share impact resulting from a 53rd fiscal week, compared to 52 weeks in the prior fiscal year.

The fiscal 2009 full year results also reflect approximately $0.05 of net charges for asset impairments, lease terminations, other closing costs, and early debt retirement. Fiscal 2008’s fourth quarter and full year results include an approximate $0.23 and $0.49 per diluted share, respectively, in net charges for asset impairments, lease terminations, and other closing costs.

“We were pleased with the response to our targeted promotional efforts during the fourth quarter, which helped boost sales and traffic for dine-in, to-go and catering,” said Christopher O’Donnell, president and chief executive of Famous Dave’s. “Additionally, our operations team did a ‘famous’ job of executing and maintaining a high level of guest satisfaction during the quarter, and despite the challenging sales environment of 2009, the company delivered solid financial results.”

Fourth quarter same store sales for company-owned restaurants open for 24 months or more declined 3.4 percent year-over-year, while same store sales for its franchise-operated restaurants declined 8.5 percent. Full year same store sales for company-owned restaurants decreased 6.3 percent, while its franchise-operated restaurants declined 8.5 percent.

Sales results for company-owned restaurants reflect general declines in consumer spending, which impacted the dine-in, to-go and catering business segments. Sales declines were slightly offset by the impact of weighted average price increases of approximately 2.3 percent since December 2008 and sales building promotional activity. Off-premise sales for fiscal 2009 totaled 31.1 percent of sales compared to 32.4 percent for fiscal 2008.

Franchise royalty revenue for the quarter totaled $4.1 million, up 6.0 percent from the comparable period in 2008. Franchise royalty revenue for the full year totaled $16.9 million, a slight decrease from 2008’s royalty revenue. The full year decrease in franchise royalty revenue reflects the decline in comparable sales for franchise-operated restaurants, partially offset by the annualization of a net nine additional franchise-operated restaurants open since the fourth quarter of 2008.

Fiscal 2009 results reflect net charges of approximately $0.05 per diluted share. A loss on the early extinguishment of debt of $0.04 per diluted share, lease termination charges of $0.02 per diluted share, carrying costs related to closed units of $0.01 per diluted share, and software impairments of $0.01 per diluted share, were partially offset by a gain of $0.03 per diluted share on lease terminations for two previously closed restaurants.

Stock-Based Compensation

Earnings results for the fourth quarter of 2009 included approximately $221,000, or $0.02 per diluted share, in compensation expense related to the company’s stock-based incentive programs, as compared to a credit of approximately $4,000, for the prior year comparable period. Stock-based compensation expense for the full year ended January 3, 2010 was approximately $832,000 compared to approximately $694,000 for the prior year comparable period.

Common Share Repurchases

During the quarter, the company repurchased 31,600 shares of common stock under its current authorization, at an average price of $5.95 per share, excluding commissions, for a total of approximately $188,000.

Marketing and Development

Marketing and Development highlights during the quarter included a Limited Time Offer featuring a “Smokin’ hot meatloaf and potatoes” entrée and a 12 ounce smoked rib-eye steak with Dave’s special barbeque butter. Additionally, sales stimulation tactics were used to promote dine-in and catering occasions.

During the fourth quarter of fiscal 2009, three franchise-operated restaurants opened in Lake Delton, Wisconsin, Topeka, Kansas and Ft. Collins, Colorado. Two franchise-operated restaurants closed in Augusta, Georgia and Grand Rapids, Michigan. One company-owned location closed in Naperville, Illinois. Famous Dave's ended the quarter with 177 restaurants, including 45 company-owned restaurants and 132 franchise-operated restaurants, located in 37 states. Additionally, during the fourth quarter, the company entered into an Area Development Agreement for four restaurants in Nevada and Northern California. Subsequent to the quarter, two franchise-operated restaurants closed in West Virginia.

Acquisition of Seven Franchise Restaurants

As previously announced, on March 2, 2010, the Company was approved as the winning bidder for seven franchise restaurants based in New Jersey and New York. The Company utilized its line of credit, and paid approximately $6.8 million for the assets. This amount will be converted to a long-term loan provided by Wells Fargo Bank, N.A. This loan will have a seven year term, bears interest at LIBOR plus 225 basis points and has no prepayment penalties associated with it. In connection with this term loan, the Company is amending its existing Credit Agreement to address future covenant requirements to ensure compliance as a result of the additional indebtedness.

The acquisition of these seven restaurants is expected to add approximately $14.5 million in revenue, net of lost royalty fees, for the remainder of fiscal 2010. Due to acquisition costs, anticipated repairs and maintenance, and increased operational expense, associated with the acquisition, these restaurants are not expected to contribute to earnings during fiscal 2010. The Company will, however, record a one-time non-cash gain in the first quarter of 2010, equal to the difference between the purchase price and the fair market value of the assets acquired. The seven restaurants are expected to be additive to earnings in subsequent years.

Outlook

For 2010, Famous Dave's expects to open one new company-owned restaurant and anticipates the addition of approximately eight franchise-operated restaurants. The company plans to spend approximately $5.5 million on capital expenditures in 2010 for one new company-owned restaurant, several remodels of existing company-owned restaurants, maintenance for existing restaurants and anticipated capital expenditures for the newly acquired restaurants, and various infrastructure projects.

“We remain optimistic about the coming year, and plan to build on the recent momentum we’ve experienced over the last couple of months,” O’Donnell said. “During 2009, we improved our bottom line, generated strong cash flow and strengthened our balance sheet; positioning Famous Dave’s well to meet the challenges and opportunities of 2010.”