Still struggling, Famous Dave's changes CEOs again

With a group of hedge funds supporting him, Ed Rensi took the reins of Famous Dave's of America just over a year ago and aimed to finally revive the struggling barbecue restaurant chain.

Now, the revolving door in the chief executive suite at Minnetonka-based Dave's has turned again, and Rensi has become the company's third ex-CEO in three years.

Rensi, who made his mark in the restaurant business at McDonald's, has resigned as CEO effective immediately, the company said Thursday. However, Rensi, 70, will remain on the board and head its efforts to tap international markets.

"He's kind of been the expected savior, but it hasn't gone well," said Mark Smith, a stock analyst with Feltl and Co. in Minneapolis.

Adam Wright, a founder of Blue Clay Capital Management in Minneapolis, will step in as interim CEO while Famous Dave's board looks for a new leader. Wright won a seat on Famous Dave's board in 2013 after Blue Clay acquired a chunk of Dave's stock, currently measured at 6.1 percent.

Blue Clay is one of four hedge funds that have gobbled up at least 38 percent of Dave's stock in the past few years. As the activist money managers piled on and hope grew for a turnaround, Dave's stock more than doubled, and was sitting at over $30 in March. It closed Thursday at $20.01, down 81 cents, or 3.9 percent.

Famous Dave's, a well-known chain in the Twin Cities, has 50 company-owned locations and another 134 franchise restaurants in 34 states, Puerto Rico and Canada. Its sales, which were $149 million in 2014, have been stagnant for the past several years and its profit growth anemic.

Rensi, a veteran restaurant executive who had headed McDonald's U.S. operations in the 1990s, had big plans to remodel Famous Dave's restaurants and refresh the menu. While ribs, brisket and the like would continue as anchors, Rensi aimed to incorporate smoked meats into more dishes like flatbreads and tacos.

The company has sunk a lot of money into a prototype Famous Dave's in the Chicago suburb of Bolingbrook, including extending the bar, expanding the patio and adding several TVs. Rensi said in an interview with the Star Trib­une in the winter that Dave's franchisees were interested in the remodel, but wanted to know the cost. Hard numbers were expected to roll out this spring.

About 75 percent of Dave's restaurants are franchised, so franchisee support is critical.

While franchisees liked some of the changes, some balked at extensive and expensive remodelings, Smith said.

"I think Ed angered franchisees by coming in and telling them it's my way or the highway," he said. "Franchisees don't like to be told how to run their business and dictated [to] on how much money to spend."

Rensi could not be reached for comment. Wright and Famous Dave's Chief Financial Officer Richard Pawlowski did not return calls for comment.

The CEO shuffle at Dave's began in October 2012, when veteran Dave's executive Christopher O'Donnell was replaced by John Gilbert, who had been CEO of Vermont Teddy Bear, an online retailer of stuffed animals. Gilbert exited Dave's suddenly and without explanation in February 2014, replaced on an interim basis by Rensi, who shed the temporary title three months later.

During Gilbert's tenure, activist hedge funds began buying into the company. It started near the end of 2012 with Chicago investor Patrick Walsh, was followed by Blue Clay, New York-based Pleasant Lake Partners and more recently New York's LionEye Capital Management. Pleasant Lake and LionEye each own about 13 percent of Famous Dave's.

Rensi, who became a Famous Dave's board member a month before Gilbert left, has said that Walsh and Jonathan Lennon of Pleasant Lake recruited him to the company. Both are current board members of Famous Dave's.

"We recognize Ed's continuing contributions to Famous Dave's and, in particular, his willingness to provide his valuable leadership and experience to the company during a period of transition," Board Chairman David J. Mastrocola said in a statement. Mastrocola, a co-founder of Pleasant Lake, could not be reached for further comment.

Famous Dave's has hired Heidrick & Struggles, a leading executive recruiting firm, to help find a new CEO.

In the meantime, Wright "is well qualified for the interim [CEO] position, given his knowledge of the company's operations as well as his insight into the franchisee relationships," Smith wrote in a research note.

Staff writer Paul Walsh contributed to this report.

Mike Hughlett • 612-673-7003