Heads Are Rolling at Famous Dave’s as Its Turnaround Begins


Source:  Famous Dave's

Nobody likes to see mass layoffs at any organization. However, they can often be a signal of major change - which may or may not be a good thing. While the company didn't come out calling them layoffs (they called them resignations), some major shakeups have just occurred at Famous Dave's of America (NASDAQ: DAVE  ) . For this company, it may just mark the beginning of a turnaround for the BBQ chain. Ed Rensi, now CEO of Famous Dave's, was brought in to turn around the company fast, and he doesn't seem to be wasting any time.

Ed in da house
Recall back on Feb. 10, Famous Dave's announced that Rensi came on board as the new interim CEO. Rensi was made famous over at McDonald's where he started working for minimum wage as a cook and worked his way up the ranks to general of the McDonald's empire, AKA the CEO. From there, he helped turned McDonald's into a powerhouse through the 1990s and helped define what it is today.

Then Rensi came to Famous Dave's, looking to duplicate to some degree his previous success by leading the organization, military style, into a BBQ chain powerhouse. At the time of the announcement and until recently, it was unclear if he was just on board temporarily or if he had a more permanent role.

Source: Famous Dave's

During the last conference call, it was asked of Rensi if Famous Dave's engaged a firm to help it search for a CEO. The analyst asking added, "Ed, can you talk about your desire to drop the interim from your current title?" Ed confidently and authoritatively responded, "I intend to be the permanent interim CEO."

Now it's officially official
On May 23, Famous Dave's made an announcement. First, "interim" was indeed dropped from Rensi's title, as he was finally appointed as the full-fledged CEO. Additionally, Richard A. Pawlowski was named as the new CFO. Pawlowski was specifically tapped for his experience in acquisitions and turnaround situations, particularly with restaurants. Diana Purcel, who was Famous Dave's CFO for the past 10 years, will be suddenly "leaving the company to pursue other opportunities."

Is that a code for being let go? Rensi didn't seem very fond of her. In my last article, I remarked, "Rensi listed items one by one, using numbers so carefully detailed you might have sworn he was actually the CFO." You might think that perhaps this one executive did really have other plans or didn't like Rensi, but two members of the board of directors also "left" at the same time, according to the announcement. It seems like it was the work of Rensi. One had been with Famous Dave's for five years and the other for 18 years.

Add to that now the Chairman of the board suddenly turned in his "resignation."  This was announced on June 9, less than three weeks he was welcoming the new board members at the time and looking "forward to their contributions and working with them in building and growing this brand."  It doesn't sound like he was planning an exit. 

Source: Famous Dave's

Conference call hints
Rensi did say on the conference call that the company was "making some tough decisions in regard to people." This implies that it was the decisions of the company regarding these people and not the other way around. Rensi added that Famous Dave's has "a lot of opportunity ahead" that's going to "require top talent." He added, "We've had a number of employees, some of which were long-term executives[, who] have exited the company recently, which is never easy for anybody involved." Again, it sounds like they went against their will.

Finally, Rensi made himself clear again on the call. He warned that there are high expectations across performance, financials, and operations: 

This is a nonnegotiable matter, and we're holding our company operators and our franchisees accountable to a strict level of performance. Again, not negotiable. We'll take action when necessary to get it.  

Take action is once again code for "let people go." 

Why all of this even matters
Usually when you see multiple resignations from longtime executives it raises an eyebrow that there is a much bigger problem within the organization. For Famous Dave's, it appears that the officers of Rensi's army are simply being realigned for the company's march forward. Fools may want to keep a close eye on this one. While there may not be much in the way of hard numbers to justify an investment in Famous Dave's quite yet, if Rensi is successful with his mission, there will be earnings that fundamentally justify the current stock price and more  in the quarters and years ahead.

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