In the earnings forecast article for O'Charley's (NASDAQ:CHUX), I pointed out that everyone is concerned about the margins -- Fool writers, analysts, management, and major investor Jet Capital. Now that the company has reported, how did it do?

First, the numbers. Revenue grew by 4.4% over last year to $223.6 million, but that came in under analyst estimates. However, diluted earnings came in above at $0.19 per share compared to the predicted $0.18. Unfortunately, that was down 10% from last year's $0.21. Cash and equivalents almost tripled to $14.5 million, while the long-term debt dropped by just over 10% to $133.3 million.

Now, the margins. Restaurant operating costs increased 43 basis points, but that was less than last quarter's 70 basis point move. Fortunately, the cost of food and beverage and payroll both fell by 33 and 91 basis points, respectively.

If we look at other operating expenses, we see, for instance, that advertising grew by 10.7%. There was also a large jump in general and administrative expenses. That grew by 25.9%, almost six times faster than revenue. Another portion of the increase in operating was due to stock-based compensation expense.

The above items drove the operating margin down from 4.8% to 4.2%. And when you factor in the increase in interest expense, you can easily understand the drop in net margin from 2.3% to 2%.

While one or two quarters don't make a trend, it does appear that restaurant expenses are turning around. The recent hiring of Larry Taylor as chief supply chain officer should help that trend continue.

One way to realize value from a company is to do what management is doing: Focus on daily execution, lower costs, and drive revenues. Another way is to unlock value from other assets, such as real estate. Jet Capital referred to this in its letter last May. At this time, though, management and the board are committed to the former path.

If margins return to historic levels, such as 2000's 9.8% operating and 5.1% net margins, investors would probably be satisfied. But if the process takes too long, expect major shareholders to begin putting pressure on the company to realize value via some other path.

Related casual Foolishness:

Check out our suite of newsletters with a 30-day trial to the service of your choice.

Fool contributor Jim Mueller and his wife enjoyed their recent visit to their local O'Charley's. Their waitress was pleasant and willing to talk about her experience at the company. However, they do not own shares in the company. The Fool includes diners among its investors writing for investors.