USA, MN: BBQ Holdings agrees to acquire Granite City Food and Brewery’s assets

BBQ Holdings Inc., the parent company of Famous Dave’s, announced on February 13 a purchase agreement to acquire the assets of craft beer chain Granite City Food and Brewery. Terms of the deal were not disclosed, FSR magazine reported.

The move is BBQ Holdings’ first foray outside of the barbecue sector. Its other two brands are the recently created Clark Crew BBQ and fast-casual prototype Real Famous BBQ.

The move comes two months after Granite City filed for Chapter 11 bankruptcy protection so it could reorganize and facilitate a structured sale. Richard Lynch, chairman of the board and CEO of Granite City, said in an affidavit in December that competition in casual dining hurt operating performance and margins. Seven restaurants were closed prior to the filing. At the time of the bankruptcy, the beer chain employed more than 2,200 people across 15 states.

Granite City, founded in 1999, had 25 units, located primarily in the Midwest, at the time of the filing.

“This meaningfully accretive acquisition of Granite City Food and Brewery aligns with our strategy to accelerate growth and expansion as a multi-brand restaurant company,” Jeff Crivello, CEO of BBQ Holdings, said in a statement. “As an award-winning concept, Granite City is a fantastic addition to the BBQ Holdings family, and we look forward to the synergies we can create between multiple brands.

"Granite City fits in well with our operating philosophy of great food and great service," he added.

Minnesota-based Famous Dave’s formed the publicly owned BBQ Holdings in September 2019, with hopes of expanding its barbecue footprint across the country. In December, BBQ Holdings opened Oklahoma City-based Clark Crew BBQ in partnership with Travis Clark, a pitmaster who previously worked with Famous Dave’s to improve food quality and consistency. At the end of January, the brand announced the opening of Real Famous BBQ in Provost, Utah, a fast-casual offshoot of Famous Dave’s, in partnership with Ascend Hospitality Group.

Combined, BBQ Holdings oversees 126 locations in 33 states and three countries.

When Granite City filed for Chapter 11, its assets included four rock-and-roll-inspired Cadillac Ranch restaurants and a centralized beer production facility in Ellsworth, Iowa, which enables each unit to brew beer on-site (the production facility generates the “wort” that’s transported to fermentation vessels at Granite City locations).

In addition to increased competition in the casual space, Granite City credited “the number of new entrants into the craft beer and brew pub space exploded during the second decade of the new millennium” for its struggles. The brand is considered an early entrant into the craft beer market sector, but “suddenly faced competition from hundreds of new brewpubs and craft brewers,” the company said.

Also, Granite City was saddled with real-estate baggage. Many of Granite City’s locations were located in or near shopping malls and locked into long-term leases the company said appeared favorable at the time, typically with options to renew. It simultaneously spent heavy capital building out restaurants “in a manner that featured those distinctive characteristics associated with the brand.” Units are typically 9,800 square feet with interior finishes that incorporate granite and other rock materials and natural woods and glass. Granite City restaurants are open-concept and have outdoor patios.

“As a result of the Great Recession that began in 2008, consumer income growth stagnated for nearly a decade. This led to an overall decline in consumer spending, including retail spending and spending to eat out,” the company said.

Granite City has worked to improve traffic and sales declines this year. In February, it introduced a menu and guest experience relaunch in six of its markets. By July, it expanded to 17 additional locations. It also attempted to improve financial performance and enhance liquidity by pursuing lease concessions and seeking extensions of the time afforded to pay food and beverage suppliers.

As for Famous Dave’s, the brand’s company-run same-store sales lifted 0.4 percent in the third quarter. Off-premises business rose 4.7 percent and catering jumped 12.7 percent.

Domestic franchise units saw a 2.1 percent same-store sales boost in Q3 versus a negative 1.4 percent drop in the year-ago period. For the nine months leading up to September 29, same-store sales increased 1.4 percent versus a 1.3 percent decline.

Famous Dave’s system had 32 corporate stores and 96 franchises as of September 29.

The chain has several initiatives planned for this coming year, including drive-thru locations and the introduction of 17 units bought back from franchisees.

BBQ Holdings also tapped Jim Gilbertson as CFO in January. Gilbertson spent seven years at Granite City from 2007 to 2014.

16 February, 2020