BBQ HOLDINGS, INC. - Annual Report: 2012 (Form 10-K)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended January 1, 2012

Commission File No. 0-21625

FAMOUS DAVE’S of AMERICA, INC.

(Exact name of registrant as specified in its charter)

12701 Whitewater Drive, Suite 200

Minnetonka, MN 55343

(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code (952) 294-1300

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-seasoned issuer, as defined in Rule 405 of the Securities Exchange Act of 1934 (the Act) Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

The aggregate market value of common stock held by non-affiliates of the registrant was approximately $72.8 million as of July 1, 2011 (the last business day of the registrant’s most recently completed second quarter), assuming solely for the purpose of this calculation that all directors, officers, and more than 10% shareholders of the registrant are affiliates. The determination of affiliate status for this purpose is not necessarily conclusive for any other purpose.

As of March 12, 2012, 7,615,048 shares of the registrant’s Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the registrant’s definitive Proxy Statement for our Annual Meeting of Shareholders (the “2011 Proxy Statement”) are incorporated by reference into Part III of this Form 10-K, to the extent described in Part III. The 2011 Proxy Statement will be filed within 120 days after the end of the registrant’s fiscal year ended January 1, 2012.

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PART I

ITEM 1. BUSINESS

General Development of Business

Famous Dave’s of America, Inc. (“Famous Dave’s”, “Company” or “we”) was incorporated as a Minnesota corporation in March 1994 and opened its first restaurant in Minneapolis, Minnesota in June 1995. As of January 1, 2012, there were 187 Famous Dave’s restaurants operating in 37 states, including 54 company-owned restaurants and 133 franchise-operated restaurants. An additional 63 franchise restaurants were committed to be developed through signed area development agreements at January 1, 2012.

In fiscal 2011, the Company realized a comparable sales increase for all company-owned restaurants of 1.5% compared to a comparable sales increase of 0.7% for fiscal 2010. The franchise-operated restaurants saw improvement in their comparable sales, as well, ending the year with comparable sales that were flat to the prior year compared to a decrease of 0.8% in fiscal 2010. During 2011, the Company opened two new company-owned restaurants, including one which was a “Shack” style counter-service restaurant (see Concept evolution below) and eight new franchise-operated restaurants.

On the marketing front, during 2011 we featured unique promotions, including our Citrus Grill offering which featured entrées under 660 calories, our third Dave’s Day, which is a celebration of our founder, and a Southside Rib Tip promotion, representing a core menu item that was reinvented with a dry rub and a new Southside Sauce. Also, we continued to develop innovative and foundational training programs, such as those that support our “Guest Experience” initiative and we rolled out extensive training materials to all company-owned and franchise-operated restaurants.

Fiscal 2011 earnings per diluted share were $0.68, including $0.04 of non-cash impairment charges for specific restaurant assets. This compared to earnings per diluted share of $0.82 in fiscal 2010, which included a $0.15 non-cash net gain related to our acquisition of certain restaurants in New York and New Jersey.

In 2012, the Company will continue to focus on the following three key initiatives and believes that if we do all successfully, we will generate shareholder value and create a long-term sustainable brand.

Growth and extension of brand presence

We expect to open up to fifteen new restaurants in fiscal 2012, including two to three company-owned restaurants and a franchise-operated restaurant in Winnipeg, Canada which would be our first international restaurant. We will also continue to invest in our existing base of restaurants and have several significant remodeling projects planned that will combine both exterior and interior remodeling efforts. Finally, we will continue to pursue the expansion of our geographical footprint by entering into new area development and franchise agreements, with both new and existing partners. To incentivize growth, any partner which signs a franchise agreement and opens a “Shack” style counter service restaurant in fiscal 2012 will have their initial franchise fee’s reduced by 50% for that restaurant. We have a clear vision for growth, incorporating both the counter service, as well as full-service formats. Our long-term goal is clear: we anticipate growing to 400-500 restaurants system-wide domestically, with additional future growth internationally.

Concept evolution

It is important that Famous Dave’s remains relevant, and as such, we will continue to evolve our concept in terms of menu, restaurant format and guest satisfaction as part of a long-term strategy to remain top of mind with

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guests. In 2012, we will strategically manage our menu seeking to improve it with new, innovative and relevant offerings, including new items, new plate presentations, ala cart items and exciting limited time offers. Also, we will continue to be actively engaged in our communities through catering as well as through supporting and sponsoring charitable and community events on a regular basis.

In 2011, the Company built a counter-service, quick casual, “Shack” style restaurant. The “Shack” style restaurant was the reinvention of the “counter service” type restaurant which was the style of many of the Company’s early restaurants. In 2012, we will continue to refine the “Shack” concept, reviewing the layout of the restaurants, trade dress, music, décor, ambiance, and menu offerings. We anticipate the “Shack” format to be a potentially strong growth vehicle that should achieve broad acceptance among guests, offer compelling economics in terms of construction costs, and provide speed to market and an additional growth vehicle for our system.

Enhancing core systems, processes and infrastructure

As part of this initiative, we will continue the implementation of systems that will focus on the guest, such as a redesign of our web presence, Guest Experience initiatives, and an e learning pilot for our company and franchise restaurants. Additionally, we will continue to enhance other core systems such as our Human Resource Information System (HRIS), our budgeting and forecasting system, and labor scheduling tool. These infrastructure systems will help increase efficiency and will allow our team to focus their efforts on better serving our guest.

Financial Information about Segments

Since our inception, our revenue, operating income and assets have been attributable to the single industry segment of the foodservice industry. Our revenue and operating income for each of the last three fiscal years, and our assets for each of the last two fiscal years, are set forth elsewhere in this Form 10-K under Item 8, Financial Statements and Supplementary Data.

Narrative Description of Business

Famous Dave’s restaurants, a majority of which offer full table service, feature hickory-smoked off-the-grill entrée favorites. We seek to differentiate ourselves by providing high-quality food in distinctive and comfortable environments with signature décor and signage. As of January 1, 2012, 48 of our company-owned restaurants were full-service and 6 were counter-service. Generally, our prototypical design includes the following elements: a designated bar, a signature exterior smokestack, a separate entrance for our category-leading “TO GO” business and a patio (where available). This design enables us to capitalize on a consistent trade-dress and readily identifiable look and feel for our future locations. We have 6,000 and 5,000 square foot packages that can be built as a free standing building, a 4,000 square foot model that most likely would be constructed as an end cap of a building, and a new 3,000 square foot design which would be constructed as a counter service location in an existing building.

In 2011, we and several of our franchisees, successfully converted restaurants from existing casual dining chains. Also, franchisee’s converted other retail buildings into restaurants such as a car dealership and a movie rental store. In late 2011, one of those conversions was a company-owned restaurant in Eden Prairie, Minnesota, which was converted to a prototype “Shack” style counter service restaurant, utilizing our new 3,000 square foot prototype. We will continue to evolve this “Shack” counter fast casual format and bring this to our franchise community as well. In fiscal 2010, we opened one full-service restaurant which was a conversion of another restaurant concept and was approximately 6,000 square feet. We did not open any restaurants in 2009, however, the restaurants that we opened in 2006, 2007, and 2008 were approximately 6,000 square feet, and had approximately 175 seats, with an additional 50 seats in the bar, and 32 additional seats on the patio.

As previously mentioned, we offer lower cost conversion packages that provide our franchisees with flexibility to build in cost effective formats, which includes opportunities to convert existing restaurants and

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other footprints into a Famous Dave’s restaurant. Due to the flexibility and scalability of our concept, we believe that there are a variety of development opportunities available now and in the future.

We pride ourselves on the following:

High Quality Food — Each restaurant features a distinctive selection of authentic hickory-smoked off-the-grill barbecue favorites, such as flame-grilled St. Louis-style and baby back ribs, Texas beef brisket, Georgia chopped pork, country-roasted chicken, and generous signature sandwiches and salads. Additionally in 2011, we added our Citrus Grill family of entrée’s featuring shrimp, salmon, steak tenderloins, and naked ribs, served with grilled pineapple and a side of broccoli, at less than 660 calories. Also, enticing side items, such as honey-buttered corn bread, potato salad, coleslaw, Shack Fries^TM and Wilbur Beans^TM, accompany the broad entrée selection. Homemade desserts, including Famous Dave’s Bread Pudding, Hot Fudge Kahlua Brownies, and Key Lime Pie, are a specialty. To complement our entrée and appetizer items and to suit different customer tastes, we offer six regional tableside barbeque sauces: Rich & Sassy^®, Texas Pit^TM, Georgia Mustard^TM, Devil’s Spit^®, Sweet and Zesty^TM and Wilbur’s Revenge. These sauces, in addition to a variety of seasonings, rubs, marinades, and other items are also distributed in retail grocery stores throughout the country under licensing agreements. Additionally, we often introduce specialty barbeque sauces with our limited time offerings and popular ones may get added to our menu, such as our Pineapple Rage and Southside BBQ sauces.

We believe that high quality food, “scratch cooking” and the fact that we smoke our meats daily at each of our restaurants are principal points of differentiation between us and other casual dining competitors and are a significant contributing factor to repeat business. We also feel that our focus on barbecue being a noun, a verb and a culture allows for product innovation without diluting our brand. As a noun, barbeque refers to the art of the smoke and sauce. As a verb, barbeque refers to the act of grilling. As a culture, barbeque refers to the competitive spirit. As a result, we see no geographic impediments to scaling our concept and brand.

Distinctive Environment — Décor and Music — Our original décor theme was a nostalgic roadhouse shack (“Original Shack”), as defined by the abundant use of rustic antiques and items of Americana. In late 1997, we introduced the “Lodge” format which featured décor reminiscent of a comfortable “Northwoods” hunting lodge with a full-service dining room and small bar. In addition, we developed a larger “Blues Club” format that featured authentic Chicago Blues Club décor and live music seven nights a week. We have evolved our format to that of a full-service concept with several “Prototypical” designs that incorporate the best attributes of the past restaurants while providing a consistent brand image for the future. Of our 54 restaurants as of January 1, 2012, 48 were full-service restaurants and 6 were counter-service restaurants. Below is a breakdown of the various styles of full and counter-service restaurants:

Full-service:

Counter-service:

We are evolving our Shack concept with a new fast casual format and opened our first new prototype in 2011 in Eden Prairie, MN. In 2012, the Company will continue to review the layout of the restaurants, trade dress, music, décor, ambiance, and menu offerings.

Broad-Based Appeal — We believe that our concept has broad appeal because it attracts customers of all ages, the menu offers a variety of items, and our distinctive sauces allow our guests to customize their experience, appealing to many tastes. We believe that our distinctive barbecue concept, combined with our high-quality food, makes Famous Dave’s appeal to families, children, teenagers and adults of all ages and socio-economic backgrounds.

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Operating Strategy

We believe that our ability to achieve sustainable profitable growth is dependent upon us delivering high-quality experiences in terms of both food and hospitality to every guest, every day, and to enhance brand awareness in our markets. Key elements of our strategy include the following:

Operational Excellence — During fiscal 2011, we continued to focus on operational excellence and integrity, and on creating a consistently enjoyable guest experience, both in terms of food and hospitality, across our system. We define operational excellence as an uncompromising attention to the details of our recipes, preparation and cooking procedures, handling procedures, rotation, sanitation, cleanliness and safety. Operational excellence also means an unyielding commitment to provide our guests with precision service during every visit. In our restaurants, we strive to emphasize value and speed of service by employing a streamlined operating system based on a focused menu and simplified food preparation techniques.

Our menu focuses on a number of popular smoked, barbeque, grilled meat, entrée items and delicious side dishes which are prepared using easy-to-operate kitchen equipment and processes that use prepared proprietary seasonings, sauces and mixes. This streamlined food preparation system helps lower the cost of operation by requiring fewer staff, lower training costs, and eliminates the need for highly compensated chefs. In order to enhance our appeal, expand our audience, and feature our cravable products, we promote Limited-Time Offerings (LTOs) which can provide higher margins than our regular menu items. We believe that constant and exciting new product introductions, offered for a limited period of time, encourage trial visits, build repeat traffic and increase exposure to our regular menu. Additionally, in order to increase customer frequency, we have assembled a research and development product pipeline designed to generate approximately four product introductions annually.

During 2011, we offered our guests several promotions and LTOs, which were well received. Early in 2011, we featured the Citrus Grill promotion which highlighted six entrées all less than 660 calories. Additionally, four of the six featured items were added to the regular menu. During the spring, and in support of the appearance of our founder, Dave Anderson, on the Food Network’s “Best in Smoke” reality show, we featured Blackberry BBQ sauce on our St. Louis-style ribs and Georgia chopped pork along with an appetizer featured on the show, Georgia Pork Lettuce Wraps.

In the summer of 2011, we had our “US of BBQ — Hawaii” offering, which featured Huli Buli Chicken and a Kahlua brownie. Also, we celebrated our 3rd “Dave’s Day” where guests named Dave, David, or Davey could receive a free entrée up to $15.00 and if a guest’s middle name was Dave, David, or Davey, they could receive  ¹/2 off any entrée up to $7.50. Lastly, this summer our Hog Days of Summer LTO featured our “Buck a Bone” and “$0.50 Wing” promotion where a guest could buy up to six St. Louis style spare ribs for a $1.00 each or six or more chicken wings for $0.50 each with the purchase of an entrée.

This past fall we featured our “Southside Rib Tip” promotion. Our rib tips have always been a core menu item, but we reinvented them, changing the cut and seasoning them with a dry rub and a new Southside Sauce developed by Dave Anderson, and paired them with hell-fire pickle chips and pickled red onions. As we look to 2012, we have a full pipeline of new and innovative limited time offerings. Our current limited time offering, which runs in support of the Lenten season, is featuring our Beer-Battered Cod, and on Fridays we are offering an All-You-Can-Eat Cod fish special.

Human Resources and Training/Development — We know a key ingredient to our success as an employer and of our concept lies with our ability to hire, train, engage and retain FAMOUS team members at all levels of our organization. We place a great deal of importance on creating an exceptional working environment for all of our team members. Through our Human Resource, Talent Management and Training/Development resources, tools and programs, we continually enhance and support superior performance within our restaurants. Our foundational guiding principle is to have Raving Internal Fans which emphasizes our commitment to doing the right thing for the organization while ensuring we have the right people in the right roles with the right resources and tools.

We are a performance-based organization committed to recognizing and rewarding performance at all levels of the organization. Our performance management process includes performance calibration at the organizational

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level as a means of providing measureable, comparative team member evaluations relative to peer contribution, taking into account specific core competencies and goals, as well as our core values of Famous PRIDE (Passion, Respect, Innovation, Diversity, Excellence). It is designed to provide a complete picture of performance that is consistent across the organization. We offer a total rewards program that is benchmarked closely against the industry and includes health and welfare coverage, 401(k) and non-qualified deferred compensation with a company match, base pay and incentive pay programs developed to sustain our market competitive position.

We strive to instill enthusiasm and dedication in our Team Members and continually solicit feedback regarding our organization. We are in the second year of our Talking PRIDE Team Member Engagement Survey. Through our Talking PRIDE Engagement Survey results, we have established baseline action plans which are continually benchmarked to enhance our team member experience. We have conducted a follow-up Pulse Survey to measure our progress with effectively sharing results, establishing action plans, and implementing actions. We have an annual Business Conduct Survey that is offered to all Support Center and Restaurant Management Team Members. The results of this survey allow us to measure the extent to which “Do the Right Thing” exists in our organization. The results are shared within the organization and we measure and monitor progress in this area. In 2012, we will be introducing ethical workplace training for all managers in our business to allow us to continue to strengthen our strong base as a value and ethics based organization. In addition, we have an online employee ethics compliance tool, which includes a bi-lingual anonymous call center, and a sophisticated issue tracking and reporting platform across all Famous Dave’s company locations.

We have numerous programs designed to recognize and reward our team members for outstanding performance. These programs include the Famous PRIDE Award, Spirit of the Flame Award and Ring of Fire Program. Our Famous PRIDE Award encourages those within the company to submit nominations for fellow team members who live and breathe Famous PRIDE. Five individuals receive this prestigious honor each year. Our Spirit of the Flame Award encourages those within the organization to nominate and recognize one winner from our company operations team or support center and one winner from our franchise community. The two individuals receiving this award are selected based on their demonstration of continuous and exemplary FAMOUS behavior and outstanding contributions resulting in a significant and positive impact to Famous Dave’s brand and business. Our Ring of Fire Program recognizes the MOST FAMOUS of the FAMOUS. This program, offered to both company and franchise operations, rewards those operating practices that will help us grow strong as a system. Exceptional operational performance is defined by consistently adhering to Famous Dave’s programs and systems and also by having a high regard for guests, team members, the community and the Famous Dave’s culture.

These initiatives are crucial towards our ability to maintain turnover levels that are below industry averages consisting of several data sources for our industry. Our restaurant management turnover for fiscal 2011 was approximately 12%, restaurant hourly turnover was approximately 45%. During fiscal 2011, our Human Resource and Training organization focused on the selection and retention of talent through programs in overall performance management, safety and risk reduction, and continued enhancements in our organizational structures for all positions in the business.

In the Training and Development arena, we offer a variety of ongoing on-the-job and classroom training programs for the operations teams (hourly team members, Restaurant Managers, and Multi-Unit Managers) in an effort to create defined career paths. Our FD101 University provides our newer restaurant managers a foundational training for restaurant operations, including ServSafe Food and Alcohol Certification; followed by our Famous Dave’s Management Certification program which provides a library of workshop offerings for our operators including the guest experience, and orientation to training. In 2011, Famous Dave’s introduced Managing with PRIDE (MWP) workshops, completed training of all current corporate operations and support center managers and built the program into the FD101 curriculum. MWP is a comprehensive vignette-based program designed to provide managers an easy-to-remember behavioral model that defines when and how, conduct, behavior, and performance are governed by organizational policy and law.

In 2011, we introduced new tools to assist system-wide manager and team development including an orientation tool-kit and Investment Training for locations with targeted development/improvement needs. We will continue to develop resources and add tools to support our system. For instance, in 2012 we will be

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introducing a variety of new programs, including: ethics based training, expanding our Managing with PRIDE program, the Pitmaster Program, Multi-Unit Manager Workshops, and Leadership Development. We will maximize the use of technology by piloting an e-learning platform to enable us to continue expanding the reach of our programs through an electronic-based learning system with interactive modules and online testing and administration.

Our system-wide Brand Conference is held annually in March and features business sessions on Marketing, Guest Experience, Training, and Product Innovation. Participants include all company-owned restaurant General Managers, Area Directors, and Directors of Operations, as well as many Franchise Partners, Franchise General Managers and Franchise Multi-Unit Operators.

Restaurant Operations

Our ability to manage multiple restaurants in geographically diverse locations is central to our overall success. In each market, we place specific emphasis on the positions of Area Director and General Manager, and seek talented individuals that bring a diverse set of skills, knowledge, and experience to the Company. We strive to maintain quality and consistency in each of our restaurants through the careful training and supervision of team members and the establishment of, and adherence to, high standards relating to performance, food and beverage preparation, and maintenance of facilities.

All General Managers must complete a seven-week training program, during which they are instructed in areas such as food quality and preparation, customer service, hospitality, and team member relations. We have prepared operations’ manuals relating to food and beverage quality and service standards. New team members participate in training under the close supervision of our Management. Each General Manager reports to an Area Director, who manages from five to eight restaurants, depending on the region. Our Area Directors have all served as General Managers, either for Famous Dave’s or for other restaurants, and are responsible for ensuring that operational standards are consistently applied in our restaurants, communication of company focus and priorities, and supporting the development of restaurant management teams. In addition to the training that the General Managers are required to complete as noted above, our Area Directors receive additional training through Area Director Workshops that focus specifically on managing multiple locations, planning, time management, staff and management development skills.

We also have two Directors of Operations. Each of these individuals is responsible for approximately half of the company-owned restaurants, which allows us to have our operations’ leadership closer to the day-in and day-out business of our restaurants. The Directors of Operations assist in the professional development of our Area Directors and General Managers. They are also instrumental in driving our vision of operational integrity and contributing to the improvement of results achieved at our restaurants, including building sales, developing personnel and growing profits. These Directors report to the Vice President of Company Operations.

Staffing levels at each restaurant vary according to the time of day and size of the restaurant. However, in general, each restaurant has approximately 40 to 60 team members.

Off-Premise Occasions — Focus on Convenience — In addition to our lively and entertaining dine-in experience, we provide our guests with maximum convenience by offering expedient take-out service and catering. We believe that Famous Dave’s entrées and side dishes are viewed by guests as traditional American “picnic foods” that maintain their quality and travel particularly well, making them an attractive choice to replace a home-cooked meal. Also, the high quality, reasonable cost and avoidance of preparation time make take-out of our product particularly attractive. Our off-premise sales provide us with revenue opportunities beyond our in-house seating capacity and we continue to seek ways to leverage these segments of our business. During fiscal 2011, our industry-leading off-premise sales for the casual dining sector, was approximately 32.0% of net restaurant sales, compared to 31.0% for fiscal 2010.

Catering, which grew modestly in 2011, accounts for approximately 9.9% of our net sales for fiscal 2011, as compared to 9.5% in 2010. We see catering as an opportunity for new consumers to sample our product who would not otherwise have had the opportunity to visit our restaurants, and each restaurant has a dedicated vehicle to support our catering initiatives.

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“TO GO,” accounted for approximately 22.1% of net restaurant sales for fiscal 2011 and grew slightly from 21.5% of net restaurant sales in 2010. This was due to a continued focus on our “TO GO” guests, which included the roll out of our on-line ordering system. Additionally, our restaurants have been designed specifically to accommodate a significant level of “TO GO” sales, including a separate “TO GO” entrance with prominent and distinct signage, and for added convenience, we separately staff the “TO GO” counter. We believe our focus on “TO GO” enables Famous Dave’s to capture a greater portion of the “take-out” market and allows consumers to “trade within our brand,” when dining in is not always an option. We pursue efforts to increase awareness of “TO GO” in all company-owned and franchise-operated restaurants by featuring signage and merchandising both inside and outside the restaurants.

Customer Satisfaction — We believe that we achieve a significant level of repeat business by providing high-quality food, efficient friendly service, and warm caring hospitality in an entertaining environment at moderate prices. We strive to maintain quality and consistency in each of our restaurants through the purposeful hiring, training and supervision of personnel and the establishment of, and adherence to, high standards of performance, food preparation and facility maintenance. We have also built family-friendly strategies into each restaurant’s food, service and design by providing children’s menus, smaller-sized entrees at reduced prices and changing tables in restrooms. We diligently monitor the guest experience through the use of an interactive voice response (IVR) guest feedback system to ensure that our system is producing desired results. Through this IVR system, we obtain an OSAT score, which measures overall guest satisfaction using a rating scale of one to five. The company rating is based on the number of responses that give the highest rating of five. During 2011, our guest satisfaction scores increased over the prior year. As part of this continued initiative, the Company will monitor a new metric, “Raving Fans,” which is a combination of the OSAT scores, the guest’s intent to return in the next 30 days, and their intent to recommend Famous Dave’s to others.

Value Proposition and Guest Frequency — We offer high quality food and a distinctive atmosphere at competitive prices to encourage frequent patronage. Lunch and dinner entrees range from $5.99 to $23.32 resulting in a per person average of $15.38 during fiscal 2011. During fiscal 2011, lunch checks averaged $13.39 and dinner checks averaged $16.62. We believe that value priced offerings and new product introductions, offered for a limited period of time, will help drive new, as well as infrequent guests into our restaurants for additional meal occasions. We offer an ‘All American Feast’ which serves 5-6 guests at an excellent value. During the fourth quarter of fiscal 2011, the Company used targeted direct mail to businesses and consumers that featured promotions for dine-in, to-go, and catering, as well as a “bounce-back” program that offered free entrees, appetizers and other items for guests who return during the promotional timeframe. This promotion was successful in terms of comparable sales growth and increased guest counts, however resulted in a higher level of discounts. Our limited time offerings throughout the year were system-wide with all company-owned restaurants and approximately 90% of our franchise locations participated. We supported the promotions with radio and TV advertising.

Marketing and Promotion

We believe that Famous Dave’s is the category-defining brand in barbecue. Specializing in a unique and distinctive brand of grilled, smoked, and southern style food, our menu specialty helps set the brand apart from the rest of the crowded field in casual dining. To further develop the advertising and promotional materials and programs designed to create brand awareness and increase the reach of the brand, we have a system-wide marketing fund. All company-owned, and those franchise-operated restaurants with agreements signed after December 17, 2003, are required to contribute a percentage of net sales to this fund. In 2011, the required contribution to this fund was 0.75%. To further leverage our brand position, in 2012, the contribution has been increased to 1.0% of net sales.

The marketing team, working with outside consultants and other resources, is responsible for the advertising, promotion, creative development, branding and media-buying for Famous Dave’s. In addition to the traditional marketing and publicity methods, Famous Dave’s uses marketing efforts that include television, internet, radio, email Club, direct mail, website marketing promotion and outdoor billboards. During 2011, we reached 1.2 million PIG Club (Pretty Important Guest Loyalty Club) members and 150,000 fans on Facebook. In 2012, we will also be incorporating more social media features into our advertising strategy.

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Since inception, Famous Dave’s has won over 500 awards, including the “Best Sauce in America.”In 2011, Famous Dave’s won the People’s Choice Award “Best Ribs in America” at the 2011 Great American Rib Cook-Off in Cleveland and “Best BBQ Restaurant” at the 2011 National Capital Barbecue Battle in Washington, D.C., for the sixth year in a row. Famous Dave’s was also named a category-leading franchise opportunity by Entrepreneur Magazine in 2011. Additional awards won by our system during 2011 were:

The strategic focus for marketing and promotion for 2012 remains the same — to be the category–defining brand in BBQ, create more competitive distinction, and continue to strengthen the perception of value in the consumer’s mind. We plan to feature four limited time offerings in 2012 that will introduce our customers to new flavor profiles, innovative products and provide value and margin opportunity. In 2012, we will launch a new website focused on improving the brand image and faster revenue generation. Additionally, a number of new initiatives are planned around enhancing the menu, the guest experience, events marketing and social media.

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Location Strategy

We believe that the barbeque segment of the casual dining niche of the restaurant industry continues to offer strong growth opportunities, and we see no impediments to our growth on a geographical basis. Our geographical concentration as of January 1, 2012 was 44% Midwest, 19% South, 27% West and 10% Northeast. We were located in 37 states as of January 1, 2012.

We prepare an overall market development strategy for each market. The creation of this market strategy starts with identifying trade areas that align demographically with the guest profile. The trade areas are then assessed for viability and vitality and prioritized as initial, second tier, or future development. Since markets are dynamic, the market strategy includes a continual and ongoing assessment of all existing restaurant locations. If financially feasible, a restaurant may be relocated as the retail or residential focus in a trade area shifts.

We have a real estate site selection model to assess the site quality and trade area quality of new locations. This process involves extensive consumer research in our existing restaurants captured in a guest profile, which is updated on an annual basis. Each location is evaluated based on three primary sales drivers, which include: sales potential from the residential base (home quality), employment base (work quality), and retail activity (retail quality). Locations are also evaluated on their site characteristics which include seven categories of key site attributes, including, but not limited to, access, visibility, and parking.

As part of our development strategy, we will seek conversion opportunities for future restaurants in order to streamline the development process and to minimize the up-front investment. We will also evaluate the use of our 6,000, 5,000, 4,000 and 3,000 square foot prototypes where it makes sense. With the reintroduction of the “Shack” style counter-service restaurant, we believe this format will allow us to access new markets or strategically locate these restaurants in existing markets where a full-service restaurant could not be sustained. We intend to finance development through the use of cash on hand, cash flow generated from operations, and through availability on our revolving line of credit.

Company-Owned Restaurant Expansion — We are planning to open two to three company-owned restaurants in 2012, including one “Shack” style, counter-service, fast casual format. In the future, we will continue to build in our existing markets in high profile, heavy traffic retail locations as part of our future operating strategy to continue to build brand awareness. Our plan is to focus on sustainable, controlled growth, primarily in markets where multiple restaurants can be opened, thereby expanding consumer awareness, and creating opportunities for operating, distribution, and marketing efficiencies.

Franchise-Operated Restaurant Expansion — We anticipate opening 10 to 12 new franchise restaurants during 2012. This will include our first restaurant outside of the U.S., in Canada. Our goal is to continue to improve the economics of our current restaurant prototypes, while providing more cost-effective development options for our franchisees. As of January 1, 2012, we had signed franchise area development agreements with aggregate commitments for 63 additional units that are expected to open over approximately the next seven years. However, there can be no assurance that these franchisees will fulfill their commitments or fulfill them within the anticipated timeframe. Our franchise system is a significant part of our brand’s success. As such, another one of our goals is to be a valued franchisor; to enhance communication and recognition of best practices throughout the system and to continue to expand our franchisee network. During 2012, to incentivize growth of the “Shack” style counter-service; any of our franchisees who signs a franchise agreement and opens one will receive a 50% discount on the initial franchise fee for this restaurant.

Generally, we find franchise candidates with prior franchise casual-dining restaurant experience in the markets for which they will be granted. In the past, area development agreements generally ranged from 3 to 15 restaurants, however, due to economic and market conditions, we have been willing to discuss smaller unit agreements as well. We are also looking at individual franchise restaurants in the right markets where it makes sense. Additionally, we believe the “Shack” format will allow us to bring new franchisees into the system who specialize in fast-casual counter-service concepts and who normally would not be interested in our brand.

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Purchasing

To provide the freshest ingredients and in order to maximize operational efficiencies for our food products, we strive to obtain consistent quality items at competitive prices from reliable sources, including identifying secondary suppliers for many of our key products. Additionally, our secondary suppliers help us assure supply chain integrity and better logistics. Finally, to reduce freight costs, we continually optimize our distribution networks. The products are then shipped directly to the restaurants through our foodservice distributors. Each restaurant’s management team determines the daily quantities of food items needed and orders such quantities to be delivered to their restaurant.

Approximately 90% of our food and non-alcoholic beverage purchases are on contract, with the majority being proteins. Pork represents approximately 37% of our total purchases, while chicken is approximately 10%, beef, which includes hamburger and brisket, is approximately 11%, and seafood is approximately 2%. Our purchasing department contracts, our food and beverage costs and trends associated with each are discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Our purchasing team is also responsible for managing the procurement of the non-food items for our restaurants, including restaurant equipment, small wares and restaurant supplies. Also, they contract many of our restaurants repair and maintenance services along with strategically managing our utility costs.

Information Technology

Famous Dave’s recognizes the importance of leveraging information and technology to support and extend our competitive position in the restaurant industry. We continue to invest in capabilities that provide secure and efficient operations, maximize the guest experience, and provide the ability to analyze data that describes our operations.

We have implemented a suite of restaurant and support center systems which support operations by providing transactional functions (ordering, card processing, etc.) and reporting at both the unit and support center level. Interfaces between Point-of-Sale (POS), labor management, inventory management, menu management, key suppliers, team member screening/hiring and financial systems all contribute to the following operator and corporate visibility:

This visibility enables every level of the Famous Dave’s organization to manage the key controllable costs within our industry, including food and labor costs.

Below are the significant information technology initiatives completed in fiscal 2011:

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In 2012, the department will leverage technology to support the needs of the Company through several initiatives listed below:

Trademarks

Our Company has registered various trademarks, makes use of various unregistered marks, and intends to vigorously defend these marks. “Famous Dave’s” and the Famous Dave’s logo are registered trademarks of Famous Dave’s of America, Inc. The Company highly values its trademarks, trade names and service marks and will defend against any improper use of its marks to the fullest extent allowable by law.

Franchise Program

We have offered franchises of our concept since July 1998 and currently file our franchise disclosure document in all 50 states. Our growth and success depends in part upon our ability to attract, contract with and retain qualified franchisees. It also depends upon the ability of those franchisees to successfully operate their restaurants with our standards of quality and promote and develop Famous Dave’s brand awareness.

Although we have established criteria to evaluate prospective franchisees, and our franchise agreements include certain operating standards, each franchisee operates his/her restaurants independently. Various laws limit our ability to influence the day-to-day operation of our franchise restaurants. We cannot assure you that franchisees will be able to successfully operate Famous Dave’s restaurants in a manner consistent with our standards for operational excellence, service and food quality.

At January 1, 2012, we had 43 ownership groups operating 133 Famous Dave’s franchise restaurants. Signed area development agreements, representing commitments to open an additional 63 franchise restaurants, were in place as of January 1, 2012. There can be no assurance that these franchisees will fulfill their commitments or fulfill them within the anticipated timeframe. We continue to grow the franchise program and anticipate 10 to 12 additional franchise restaurants will open during fiscal 2012.

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As of January 1, 2012, we had franchise-operated restaurants in the following locations:

Our Franchise Operations Department is made up of a Vice President of Franchise Operations, who guides the efforts of two Directors of Franchise Operations, each supported by two Territory Directors. The Directors of Franchise Operations have responsibility for supporting our franchisees geographically throughout the country and play a critical role for us as well as for our franchise community. Directors of Franchise Operations manage the relationship between the franchisee and the franchisor and provide an understanding of the roles, responsibilities, differences, and accountabilities of that relationship. They are active participants towards enhancing performance, as they partner in strategic and operational planning sessions with our franchise partners and review the individual strategies and tactics for obtaining superior performance for the franchisee. The Directors of Franchise Operations share best practices throughout the system and work to create a one-system mentality that benefits everyone. In addition, they ensure compliance with obligations under our area development and franchise agreements. Franchisees are encouraged to utilize all available assistance from the Directors of Franchise Operations and the Support Center but are not required to do so.

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In 2011, the Company launched a comprehensive operations’ scorecard and training tool that we call “FD Powers” that will help us measure our operational effectiveness of our company-owned and franchise-operated restaurants. This scorecard will be used to evaluate, monitor and improve operations in areas such as guest satisfaction, health and safety standards, community involvement, and local store marketing effectiveness, among other operating metrics. Also, we generally provide support as it relates to all aspects of franchise operations including, but not limited to, store openings, operating performance, and human resource strategic planning. Finally, the Company solicits feedback from our franchise-system by conducting a Franchise Satisfaction Survey every year. The results of this survey used to better support the needs of the franchise system while maintaining a one-system mindset.

Our franchise-related revenue consists of area development fees, initial franchise fees and continuing royalty payments. Our area development fee consists of a one-time, non-refundable payment equal to $10,000 per restaurant in consideration for the services we perform in the preparation for executing each area development agreement. Substantially all of these services, which include, but are not limited to, a meeting with Famous Dave’s Executive Team and performing potential franchise background investigation, are completed prior to our execution of the area development agreement and receipt of the corresponding area development fee. As a result, we recognize this fee in full upon receipt. Our initial, non-refundable, franchise fee is typically $30,000 to $40,000 per restaurant, of which $5,000 is recognized immediately when a franchise agreement is signed, reflecting the commission earned and expenses incurred related to the sale. The remaining non-refundable fee of $25,000 to $35,000 is included in deferred franchise fees and is recognized as revenue when we have performed substantially all of our obligations, which generally occurs upon the franchise entering into a lease agreement for the restaurant(s). During fiscal 2012, to incentivize growth, any partner who signs a franchise agreement and opens a “Shack” style counter service restaurant in fiscal 2012 will have their initial franchise fee’s reduced by 50% for that restaurant. The franchise agreement represents a separate and distinct earnings process from the area development agreements. Franchisees are also required to pay us a monthly royalty equal to a percentage of their net sales, which has historically varied from 4% to 5%. In general, new franchises pay us a monthly royalty of 5% of their net sales.

Because of the continuing difficult economic environment and scarcity of capital for development, we offered a reduced royalty rate for twelve months from date of opening for franchisees that opened restaurants during 2010 and 2009. In fiscal 2011, we modified and extended this growth incentive program. The modification offered new and existing franchisees reduced levels of franchise royalties, based on a sliding scale, for new restaurants opened during 2011. All franchise restaurants opened in the first, second, and third quarters paid a reduced royalty of 2.5%, 3%, and 4%, respectively, from the date of opening through the remainder of 2011. Any openings in the fourth quarter and beyond were at the 5% royalty rate. In 2012, there are no reduced royalty rate programs.

The franchisee’s investment depends primarily upon restaurant size. This investment includes the area development fee, initial franchise fee, real estate and leasehold improvements, fixtures and equipment, POS systems, business licenses, deposits, initial food inventory, small wares, décor and training fees as well as working capital. In 2012, franchisees will be required to contribute 1.0% of net sales to a marketing fund dedicated to building system-wide brand awareness.

Seasonality

Our restaurants typically generate higher revenue in the second and third quarters of our fiscal year as a result of seasonal traffic increases and high catering sales experienced during the summer months, and lower revenue in the first and fourth quarters of our fiscal year, due to possible adverse weather which can disrupt guest and team member transportation to our restaurants.

Government Regulation

Our Company is subject to extensive state and local government regulation by various governmental agencies, including state and local licensing, zoning, land use, construction and environmental regulations and various regulations relating to the sale of food and alcoholic beverages, sanitation, disposal of refuse and waste

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products, public health, safety and fire standards. Our restaurants are subject to periodic inspections by governmental agencies to ensure conformity with such regulations. Any difficulty or failure to obtain required licensing or other regulatory approvals could delay or prevent the opening of a new restaurant, and the suspension of, or inability to renew a license, could interrupt operations at an existing restaurant, any of which would adversely affect our operations. Restaurant operating costs are also affected by other government actions that are beyond our control, including increases in minimum hourly wage requirements, workers compensation insurance rates, health care insurance costs, property and casualty insurance, and unemployment and other taxes. We are also subject to “dram-shop” statutes, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person.

As a franchisor, we are subject to federal regulation and certain state laws that govern the offer and sale of franchises. Many state franchise laws impose substantive requirements on franchise agreements, including limitations on non-competition provisions and the termination or non-renewal of a franchise. Bills have been introduced in Congress from time to time that would provide for federal regulation of substantive aspects of the franchisor-franchisee relationship. As proposed, such legislation would limit, among other things, the duration and scope of non-competition provisions, the ability of a franchisor to terminate or refuse to renew a franchise, and the ability of a franchisor to designate sources of supply.

The 1990 Federal Americans with Disabilities Act prohibits discrimination on the basis of disability in public accommodations and employment. We could be required to incur costs to modify our restaurants in order to provide service to, or make reasonable accommodations for, disabled persons. Our restaurants are currently designed to be accessible to the disabled, and we believe we are in substantial compliance with all current applicable regulations relating to this Act.

Team Members

As of January 1, 2012, we employed approximately 3,315 team members of which approximately 325 were full-time. None of our team members are covered by a collective bargaining agreement. We consider our relationships with our team members to be good.

Famous Dave’s makes written and oral statements from time to time, including statements contained in this Annual Report on Form 10-K regarding its business and prospects, such as projections of future performance, statements of management’s plans and objectives, forecasts of market trends and other matters that are forward-looking statements within the meaning of Sections 27A of the Securities Exchange Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Statements containing the words or phrases “will likely result,” “anticipates,” “are expected to,” “will continue,” “is anticipated,” “estimates,” “projects,” “believes,” “expects,” “intends,” “target,” “goal,” “plans,” “objective,” “should” or similar expressions identify forward-looking statements which may appear in documents, reports, filings with the Securities and Exchange Commission, news releases, written or oral presentations made by our officers or other representatives to analysts, shareholders, investors, news organizations, and others, and discussions with our management and other Company representatives. For such statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Our future results, including results related to forward-looking statements, involve a number of risks and uncertainties. No assurance can be given that the results reflected in any forward-looking statements will be achieved. Any forward-looking statements made by us or on our behalf speak only as of the date on which such statement is made. Our forward-looking statements are based upon assumptions that are sometimes based upon estimates, data, communications and other information from suppliers, government agencies and other sources that may be subject to revision. Except as otherwise required by applicable law, we do not undertake any obligation to update or keep current either (i) any forward-looking statements to reflect events or circumstances arising after the date of such statement, or (ii) the important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or which are reflected from time to time in any forward-looking statement which may be made by us or on our behalf.

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In addition to other matters identified or described by us from time to time in filings with the SEC, including the risks described below and elsewhere in this Annual Report on Form 10-K, there are several important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or results that are reflected from time to time in any forward-looking statement that may be made by us or on our behalf.

The state of the economy and the volatility of the financial markets may adversely impact our business and results of operations and may impact our ability to comply with our credit facility’s financial covenants.

The restaurant industry is still affected by macro economic factors, including changes in national, regional, and local economic conditions, employment levels and consumer spending patterns. The recent economic recession, the slow economic recovery and volatility of the financial markets has kept consumer confidence low, and consequently, has affected the frequency of consumers’ dining out occasions, which has been harmful to our results of operations, and has negatively impacted our financial position. In addition, the impact of the continued economic downturn has resulted in a deceleration of the number and timing of restaurant openings and, depending on its duration and severity, could adversely affect our ability to comply with financial covenants under our credit facility on a continuing basis. These financial covenants include, without limitation, maximum target capital expenditures, cash flow ratios, adjusted leverage ratios, and in certain circumstances, a maximum aged royalty receivable. There can be no assurances that government responses to the disruptions in the financial markets and overall economy will restore consumer confidence, stabilize the markets or increase liquidity and the availability of credit. As of January 1, 2012, we were in compliance with all of the financial covenants under our credit facility.

In the event we fail to comply with these or other financial covenants in the future and are unable to obtain similar waivers, our lender will have the right to demand repayment of all outstanding amounts, which totaled $11.0 million at January 1, 2012, and to terminate the existing credit facility. If we were unable to repay outstanding amounts, either using current cash reserves, a replacement facility or another source of capital, our lender would have the right to foreclose on our personal property, which serves as collateral for the credit facility. Replacement financing may be unavailable to us on similar terms or at all, especially if current credit market conditions persist. Termination of our existing credit facility without adequate replacement, either through a similar facility or other sources of capital, would have a material and adverse impact on our ability to continue our business operations.

Our future revenue and operating income are dependent on consumer preference and our ability to successfully execute our plan.

Our Company’s future revenue and operating income will depend upon various factors, including continued and additional market acceptance of the Famous Dave’s brand, the quality of our restaurant operations, our ability to grow our brand, our ability to successfully expand into new and existing markets, our ability to successfully execute our franchise program, our ability to raise additional financing as needed, discretionary consumer spending, the overall success of the venues where Famous Dave’s restaurants are or will be located, economic conditions affecting disposable consumer income, general economic conditions and the continued popularity of the Famous Dave’s concept. An adverse change in any or all of these conditions would have a negative effect on our operations and the market value of our common stock.

It’s our plan to open 2 to 3 new company-owned restaurants in 2012, and we are anticipating the opening of 10 to 12 new franchise restaurants. There is no guarantee that any of the company-owned or franchise-operated restaurants will open when planned, or at all, due to many factors that may affect the development and construction of our restaurants, including landlord delays, weather interference, unforeseen engineering problems, environmental problems, construction or zoning problems, local government regulations, modifications in design to the size and scope of the project, and other unanticipated increases in costs, any of which could give rise to delays and cost overruns. There can be no assurance that we will successfully implement our growth plan for our company-owned and franchise-operated restaurants. In addition, we also face all of the risks, expenses and difficulties frequently encountered in the development of an expanding business.

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Competition may reduce our revenue and operating income.

Competition in the restaurant industry is intense. The restaurant industry is affected by changes in consumer preferences, as well as by national, regional and local economic conditions, including real estate, and demographic trends, traffic patterns, the cost and availability of qualified labor, and product availability. Discretionary spending priorities, traffic patterns, tourist travel, weather conditions, and the type, number and location of competing restaurants, among other factors, will also directly affect the performance of our restaurants. Changes in any of these factors in the markets where we currently operate our restaurants could adversely affect the results of our operations.

Increased competition by existing or future competitors may reduce our sales. Our restaurants compete with moderately-priced restaurants primarily on the basis of quality of food and service, atmosphere, location and value. In addition to existing barbeque restaurants, we face competition from steakhouses and other restaurants featuring protein-rich foods. We also compete with other restaurants and retail establishments for quality sites.

Many of our competitors have substantially greater financial, marketing and other resources than we do. Regional and national restaurant companies continue to expand their operations into our current and anticipated market areas. We believe our ability to compete effectively depends on our ongoing ability to promote our brand and offer high quality food and hospitality in a distinctive and comfortable environment. If we are unable to respond to, or unable to respond in a timely manner, the various competitive factors affecting the restaurant industry, our revenue and operating income could be adversely affected.

Our failure to execute our franchise program may negatively impact our revenue and operating income.

Our growth and success depends in part upon increasing the number of our franchised restaurants, through execution of area development and franchise agreements with new and existing franchisees in new and existing markets. Our ability to successfully franchise additional restaurants will depend on various factors, including our ability to attract, contract with and retain quality franchisees, the availability of suitable sites, the negotiation of acceptable leases or purchase terms for new locations, permitting and regulatory compliance, the ability to meet construction schedules, the financial and other capabilities of our franchisees, our ability to manage this anticipated expansion, and general economic and business conditions. Many of the foregoing factors are beyond the control of the Company or our franchisees.

Our growth and success also depends upon the ability of our franchisees to operate their restaurants successfully to our standards and promote the Famous Dave’s brand. Although we have established criteria to evaluate prospective franchisees, and our franchise agreements include certain operating standards, each franchisee operates his/her restaurant independently. Various laws limit our ability to influence the day-to-day operation of our franchise restaurants. We cannot assure you that our franchisees will be able to successfully operate Famous Dave’s restaurants in a manner consistent with our concepts and standards, which could reduce their sales and correspondingly, our franchise royalties, and could adversely affect our operating income and our ability to leverage the Famous Dave’s brand. In addition, there can be no assurance that our franchisees will have access to financial resources necessary to open the restaurants required by their respective area development agreements, which would negatively impact our growth plans.

The restaurant industry is subject to extensive government regulation that could negatively impact our business.

The restaurant industry is subject to extensive state and local government regulation by various government agencies, including state and local licensing, zoning, land use, construction and environmental regulations and various regulations relating to the preparation and sale of food and alcoholic beverages, sanitation, disposal of refuse and waste products, public health, safety and fire standards, minimum wage requirements, workers’ compensation and citizenship requirements. Due to the fact that we offer and sell franchises, we are also subject to federal regulation and certain state laws which govern the offer and sale of franchises. Many state franchise laws impose substantive requirements on franchise agreements, including limitations on non-competition provisions and termination or non-renewal of a franchise. We may also be subject in certain states to “dram-shop” statutes, which provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person.

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Any change in the current status of such regulations, including an increase in team member benefits costs, any and all insurance rates, or other costs associated with team members, could substantially increase our compliance and labor costs. Because we pay many of our restaurant-level team members rates based on either the federal or the state minimum wage, increases in the minimum wage would lead to increased labor costs. In addition, our operating results would be adversely affected in the event we fail to maintain our food and liquor licenses. Furthermore, restaurant operating costs are affected by increases in unemployment tax rates and similar costs over which we have no control.

Recent health care legislation enacted by the Federal Government mandates menu labeling of certain nutritional aspects of restaurant menu items such as caloric, sugar, sodium, and fat content. Altering our recipes in response to such legislation could increase our costs and/or change the flavor profile of our menu offerings which could have an adverse impact on our results of operations. Additionally, minimum employee health care coverage mandated by state or federal legislation could have an adverse effect on our results of operations and financial condition.

We are subject to the risks associated with the food services industry, including the risk that incidents of food-borne illnesses or food tampering could damage our reputation and reduce our restaurant sales.

Our industry is susceptible to the risk of food-borne illnesses. As with any restaurant operation, however, we cannot guarantee that our internal controls and training will be fully effective in preventing all food-borne illnesses. Furthermore, our reliance on third-party food suppliers and distributors increases the risk that food-borne illness incidents could be caused by third-party food suppliers and distributors outside of our control and/or multiple locations being affected rather than a single restaurant. New illnesses resistant to any precautions may develop in the future, or diseases with long incubation periods could arise that could give rise to claims or allegations on a retroactive basis. Reports in the media or on social media of one or more instances of food-borne illness in one of our company-owned restaurants, one of our franchise-operated restaurants or in one of our competitor’s restaurants could negatively affect our restaurant sales, force the closure of some of our restaurants and conceivably have a national impact if highly publicized. This risk exists even if it were later determined that the illness had been wrongly attributed to the restaurant. Furthermore, other illnesses could adversely affect the supply of some of our food products and significantly increase our costs. A decrease in guest traffic as a result of these health concerns or negative publicity could materially harm our business, results of operations and financial condition.

Our ability to exploit our brand depends on our ability to protect our intellectual property, and if any third parties make unauthorized use of our intellectual property, our competitive position and business could suffer.

We believe that our trademarks and other intellectual proprietary rights are important to our success and our competitive position. Accordingly, we have registered various trademarks and make use of various unregistered marks. However, the actions we have taken or may take in the future to establish and protect our trademarks and other intellectual proprietary rights may be inadequate to prevent others from imitating our products and concept or claiming violations of their trademarks and proprietary rights by us. Although we intend to defend against any improper use of our marks to the fullest extent allowable by law, litigation related to such defense, regardless of the merit or resolution, may be costly and time consuming and divert the efforts and attention of our management.

Our financial performance is affected by our ability to contract with reliable suppliers at competitive prices.

In order to maximize operating efficiencies, we have entered into arrangements with food manufacturers and distributors pursuant to which we obtain approximately 90% of the products used by the Company, including, but not limited to, pork, poultry, beef, and seafood. We believe that our relationships with our food manufacturers and distributors are excellent. We anticipate no interruption in the supply of product delivered by these companies; however, we have arrangements with several secondary suppliers in the case of a supply disruption. Although we may be able to obtain competitive products and prices from alternative suppliers, an

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interruption in the supply of products delivered by our food suppliers could adversely affect our operations in the short term. Due to the rising market price environment, our food costs may increase without the desire and/or ability to pass that price increase to our customers.

While we do contract for utilities in all available states, the costs of these energy-related items will fluctuate due to factors that may not be predictable, such as the economy, current political/international relations and weather conditions. Because we cannot control these types of factors, there is a risk that prices of energy/utility items will increase beyond our current projections and adversely affect our operations.

We could be adversely impacted if our information technology and computer systems do not perform properly or if we fail to protect our customers’ credit card information or our employees’ personal data.

We rely heavily on information technology to conduct our business, and any material failure, interruption of service, or compromised data security could adversely affect our operations. While we take it very seriously and expend significant resources to ensure that our information technology operates securely and effectively, any security breaches could result in disruptions to operations or unauthorized disclosure of confidential information. Additionally, if our guests’ credit card or other personal information or our team members’ personal data are compromised, our operations could be adversely affected, our reputation could be harmed, and we could be subjected to litigation or the imposition of penalties.

Pursuant to its authority to designate and issue shares of our stock as it deems appropriate, our board of directors may assign rights and privileges to currently undesignated shares which could adversely affect the rights of existing shareholders.

Our authorized capital consists of 100,000,000 shares of capital stock. Our Board of Directors, without any action by the shareholders, may designate and issue shares in such classes or series (including classes or series of preferred stock) as it deems appropriate and establish the rights, preferences and privileges of such shares, including dividends, liquidation and voting rights. As of March 12, 2012, we had 7,615,048 shares of common stock outstanding.

The rights of holders of preferred stock and other classes of common stock that may be issued could be superior to the rights granted to the current holders of our common stock. Our Board’s ability to designate and issue such undesignated shares could impede or deter an unsolicited tender offer or takeover proposal. Further, the issuance of additional shares having preferential rights could adversely affect the voting power and other rights of holders of common stock.

None.

ITEM 2. PROPERTIES

The development cost of our restaurants varies depending primarily on the size and style of the restaurant, whether the property is purchased or leased, and whether it is a conversion of an existing building or a newly constructed restaurant. We have 6,000 and 5,000 square foot packages that can be built as a free standing building, a 4,000 square foot model that most likely would be constructed as an end cap of a building and a 3,000 square foot design which would be constructed as a counter service location in an existing building. Additionally, we offer lower cost conversion packages that provide our franchisees with the flexibility to build in cost effective formats, such as, opportunities to convert existing restaurants into a Famous Dave’s restaurant.

In fiscal 2011, the company opened a 5,400 square foot full service restaurant and a 3,000 square foot “Shack” style counter-service restaurant, both of which were conversions of other restaurant concepts. In 2011, several franchisees’ successfully converted restaurants from existing casual dining concepts. In fiscal 2010, the company opened one 6,400 square foot restaurant that was also a conversion of another restaurant concept. We did not open any restaurants in 2009; however the restaurants we opened in 2006, 2007, and 2008 were approximately 6,000 square feet, and had approximately 175 seats, with an additional 50 seats in the bar, and 32 additional seats on the patio, where available. Due to the flexibility and scalability of our concept, there are a

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variety of development opportunities available now and in the future. In 2012, we expect to open 2 to 3 company-owned restaurants, and 10 to 12 franchise-operated restaurants.

Our leased restaurant facilities are occupied under agreements with remaining terms ranging from 1 to 36 years, including renewal options. Such leases generally provide for fixed rental payments plus operating expenses associated with the properties. Several leases also require the payment of percentage rent based on net sales. We believe that our properties will be suitable for our needs and adequate for operations for the foreseeable future.

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The following table sets forth certain information about our existing company-owned restaurant locations, as of January 1, 2012, sorted by opening date:

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All seat count and square footage amounts are approximate.

Our executive offices are currently located in approximately 23,900 square feet in Minnetonka, Minnesota. In 2011, we negotiated a lease amendment for our executive offices which extends our lease to November 2018, with two five-year renewal options. The minimum annual rent commitment remaining over the lease term, including renewal options is approximately $4.8 million, net of sublease income. In 2010, in an effort to reduce general and administrative expense, we entered into a sublease for 2,100 square feet, in our executive office building, through August of 2013.

ITEM 3. LEGAL PROCEEDINGS

From time-to-time, we are involved in various legal actions arising in the ordinary course of business. In the opinion of our management, the ultimate dispositions of these matters will not have a material adverse effect on our consolidated financial position and results of operations. Currently, there are no significant legal matters pending.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

PART II

Market Information

Our common stock has traded on the NASDAQ Stock Market since July 24, 1997 under the symbol DAVE. Currently, our common stock trades on the NASDAQ Global Market. The following table summarizes the high and low sale prices per share of our common stock for the periods indicated, as reported on the NASDAQ Global Market.

Holders

As of March 5, 2012, we had approximately 440 shareholders of record and approximately 4,313 beneficial shareholders.

Dividends

Our Board of Directors has not declared any dividends on our common stock since our inception, and does not intend to pay out any cash dividends on our common stock in the foreseeable future. We presently intend to retain all earnings, if any, to provide for our growth, repurchase our common stock, and reduce our debt levels. The payment of cash dividends in the future, if any, will be at the discretion of the Board of Directors and will depend upon such factors as earnings levels, capital requirements, loan agreement restrictions, our financial condition and other factors deemed relevant by our Board of Directors.

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Stock Performance Graph

Below is a line-graph presentation that compares the cumulative, five-year return to the Company’s shareholders (based on appreciation of the market price of the Company’s common stock) on an indexed basis with (i) a broad equity market index and (ii) an appropriate published industry or line-of-business index, or Peer Group Index constructed by the Company. The following presentation compares the Company’s common stock price for the period from December 31, 2006 through January 1, 2012, to the S&P 500 Stock Index and to the S&P Small Cap Restaurant Index.

The Company has elected to use the S&P Small Cap Restaurant Index in compiling its stock performance graph because it believes the S&P Small Cap Restaurant Index represents a comparison to competitors with similar market capitalization to the Company.

The presentation assumes that the value of an investment in each of the Company’s common stock, the S&P 500 Index and S&P Small Cap Restaurants was $100 on December 31, 2006, and that any dividends paid were reinvested in the same security.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Famous Dave’s of America, Inc., the S&P 500 Index, and S&P Small Cap

Restaurants

Copyright© 2012 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.

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Purchases of Equity Securities by the Issuer

On November 4, 2010, our Board of Directors approved a stock repurchase program that authorized the repurchase of up to 1.0 million shares of our common stock in both the open market or through privately negotiated transactions. During fiscal 2010, we had repurchased 174,100 shares under this program for approximately $1.8 million at an average market price of $10.33, excluding commissions. During fiscal 2011, we repurchased 610,166 shares under this program for approximately $5.8 million at an average market price per share of $9.42, excluding commissions. Since the program was adopted in November 2010, we have repurchased 784,266 shares for approximately $7.5 million at an average market price per share of $9.62, excluding commissions.

The following table includes information about our share repurchases for the fiscal year ended January 1, 2012:

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ITEM 6. SELECTED FINANCIAL DATA

The selected financial data presented below should be read in conjunction with the consolidated financial statements and notes included elsewhere in this Form 10-K, and in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-K.

The selected financial data as of and for the fiscal years ended January 1, 2012 (fiscal 2011), January 2, 2011 (fiscal 2010), January 3, 2010 (fiscal 2009), December 28, 2008 (fiscal 2008), and December 30, 2007 (fiscal 2007) have been derived from our consolidated financial statements as audited by Grant Thornton LLP, independent registered public accounting firm.

FINANCIAL HIGHLIGHTS

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Certain statements contained in this Annual Report on Form 10-K include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are based on information currently available to us as of the date of this Annual Report, and we assume no obligation to update any forward-looking statements except as otherwise required by applicable law. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors may include, among others, those factors listed in Item 1A of and elsewhere in this Annual Report and our other filings with the Securities and Exchange Commission. The following discussion should be read in conjunction with “Selected Financial Data” above (Item 6 of this Annual Report) and our financial statements and related footnotes appearing elsewhere in this Annual Report.

OVERVIEW

Famous Dave’s of America, Inc. was incorporated as a Minnesota corporation in March 1994 and opened its first restaurant in Minneapolis in June 1995. As of January 1, 2012, there were 187 Famous Dave’s restaurants operating in 37 states, including 54 company-owned restaurants and 133 franchise-operated restaurants. An additional 63 franchise restaurants were in various stages of development as of January 1, 2012.

Fiscal Year

Our fiscal year ends on the Sunday nearest December 31st of each year. Our fiscal year is generally 52 weeks; however it periodically consists of 53 weeks. The fiscal year ended January 1, 2012 (fiscal 2011) and January 2, 2011 (fiscal 2010) consisted of 52 weeks and the fiscal year ended January 3, 2010 (fiscal 2009) consisted of 53 weeks. Fiscal 2012, which ends on December 30, 2012, will consist of 52 weeks.

Basis of Presentation — The financial results presented and discussed herein reflect our results and the results of our wholly-owned and majority-owned consolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Application of Critical Accounting Policies and Estimates — The following discussion and analysis of the Company’s financial condition and results of operations is based upon its financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amount of assets, liabilities and expenses, and related disclosures. On an on-going basis, management evaluates its estimates and judgments. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. Management bases its estimates and judgments on historical experience, observance of trends in the industry, information provided by customers and other outside sources and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies reflect its more significant judgments and estimates used in the preparation of the Company’s consolidated financial statements. Our Company’s significant accounting policies are described in Note 1 to the consolidated financial statements included herein.

We have discussed the development and selection of the following critical accounting estimates with the Audit Committee of our Board of Directors and the Audit Committee has reviewed our disclosures relating to such estimates in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Recognition of Franchise-Related Revenue — Initial franchise revenue is recognized when we have performed substantially all of our obligations as franchisor. Franchise royalties are recognized when earned as promulgated by Financial Accounting Standards Board (FASB) Accounting Standards Codification for Franchisors.

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Our franchise-related revenue consists of area development fees, initial franchise fees and continuing royalty payments. Our area development fee consists of a one-time, non-refundable payment equal to $10,000 per restaurant in consideration for the services we perform in preparation of executing each area development agreement. Substantially all of these services, which include, but are not limited to a meeting with Famous Dave’s Executive Team and performing potential franchise background investigation, are completed prior to our execution of the area development agreement and receipt of the corresponding area development fee. As a result, we recognize this fee in full upon receipt. Our initial, non-refundable, franchise fee is typically $30,000 to $40,000 per restaurant, of which $5,000 is recognized immediately when a franchise agreement is signed, reflecting the commission earned and expenses incurred related to the sale. The remaining non-refundable fee of $25,000 to $35,000 is included in deferred franchise fees and is recognized as revenue when we have performed substantially all of our obligations, which generally occurs upon the franchise entering into a lease agreement for the restaurant(s). During fiscal 2012, to incentivize growth, any partner who signs a franchise agreement and opens a “Shack” style counter service restaurant in fiscal 2012 will have their initial franchise fee’s reduced by 50% for that restaurant. The franchise agreement represents a separate and distinct earnings process from the area development agreements. Franchisees are also required to pay us a monthly royalty equal to a percentage of their net sales, which has historically varied from 4% to 5%. In general, new franchises pay us a monthly royalty of 5% of their net sales.

Because of the continuing difficult economic environment and scarcity of capital for development, we offered a reduced royalty rate for twelve months from date of opening for franchisees that opened restaurants during 2010 and 2009. In fiscal 2011, we modified and extended this growth incentive program. The modification offered new and existing franchisees reduced levels of franchise royalties, based on a sliding scale, for new restaurants opened during 2011. All franchise restaurants opened in the first, second, and third quarters paid a reduced royalty of 2.5%, 3%, and 4%, respectively, from the date of opening through the remainder of 2011. Any openings in the fourth quarter and beyond were at the 5% royalty rate. In 2012, there are no reduced royalty rate programs.

Asset Impairment and Estimated Lease Termination and Other Closing Costs — In accordance with FASB Accounting Standards Codification for Property, Plant, and Equipment, we evaluate restaurant sites and long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of restaurant sites to be held and used is measured by a comparison of the carrying amount of the restaurant site to the undiscounted future net cash flows expected to be generated on a restaurant-by-restaurant basis. If a restaurant is determined to be impaired, the loss is measured by the amount by which the carrying amount of the restaurant site exceeds its fair value. Fair value is estimated based on the best information available including estimated future cash flows, expected growth rates in comparable restaurant sales, remaining lease terms and other factors. If these assumptions change in the future, we may be required to take additional impairment charges for the related assets. Considerable management judgment is necessary to estimate future cash flows. Accordingly, actual results could vary significantly from such estimates. Restaurant sites that are operating but have been previously impaired are reported at the lower of their carrying amount or fair value less estimated costs to sell.

Lease Accounting — In accordance with FASB Accounting Standards Codification for Leases, we recognize lease expense for our operating leases over the entire lease term including lease renewal options where the renewal is reasonably assured and the build-out period takes place prior to the restaurant opening or lease commencement date. We account for construction allowances by recording a receivable when its collectability is considered probable, depreciating the leasehold improvements over the lesser of their useful lives or the full term of the lease, including renewal options and build-out periods, amortizing the construction allowance as a credit to rent expense over the full term of the lease, including renewal options and build-out periods, and relieving the receivable once the cash is obtained from the landlord for the construction allowance. We record rent expense during the build-out period and classify this expense as pre-opening expenses in our consolidated statements of operations.

Liquor licenses — As part of the New York/New Jersey acquisition completed in March of 2010 (see note 18 to our financial statements and appearing elsewhere in this Annual Report), the Company acquired transferable liquor licenses in jurisdictions with a limited number of authorized liquor licenses. These licenses

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were capitalized as indefinite-lived intangible assets and are included in intangible assets, net in our consolidated Balance Sheets (see note 5 to our financial statements) at January 1, 2012 and January 2, 2011. In accordance with the FASB Accounting Standards Codification for Intangibles — Goodwill and Other Intangibles, we annually review the liquor licenses for impairment and in fiscal 2011 and 2010, no impairment charges were recorded. Additionally, the costs of obtaining non-transferable liquor licenses that are directly issued by local government agencies for nominal fees are expensed as incurred. Annual liquor license renewal fees are expensed over the renewal term.

Accounts Receivable, Net — We provide an allowance for uncollectible accounts on accounts receivable based on historical losses and existing economic conditions, when relevant. We provide for a general bad debt reserve for franchise receivables due to increases in days’ sales outstanding and deterioration in general economic market conditions. This general reserve is based on the aging of receivables meeting specified criteria and is adjusted each quarter based on past due receivable balances. Additionally, we have periodically established a specific reserve on certain receivables as necessary. Any changes to the reserve are recorded in general and administrative expenses. The allowance for uncollectible accounts was approximately $18,000 and $80,000, at January 1, 2012 and January 2, 2011, respectively. Accounts receivable are written off when they become uncollectible, and payments subsequently received on such receivables are credited to allowance for doubtful accounts. Accounts receivable balances written off have not exceeded allowances provided. We believe all accounts receivable in excess of the allowance are fully collectible. If accounts receivable in excess of provided allowances are determined uncollectible, they are charged to expense in the period that determination is made. Outstanding past due accounts receivable are subject to a monthly interest charge on unpaid balances which is recorded as interest income in our consolidated statements of operations. In assessing recoverability of these receivables, we make judgments regarding the financial condition of the franchisees based primarily on past and current payment trends, as well as other variables, including annual financial information, which the franchisees are required to submit to us.

Stock-based compensation — We follow the provisions of the FASB Accounting Standards Codification for Compensation-Stock Compensation, which requires us to recognize compensation cost for share-based awards granted to team members based on their fair values at the time of grant over the requisite service period. Our pre-tax compensation cost for stock options and other incentive awards is included in general and administrative expenses in our consolidated statements of operations (see Note 10 to our financial statements).

Income Taxes — We provide for income taxes based on our estimate of federal and state income tax liabilities. These estimates include, among other items, effective rates for state and local income taxes, allowable tax credits for items such as taxes paid on reported tip income, estimates related to depreciation and amortization expense allowable for tax purposes, and the tax deductibility of certain other items. Our estimates are based on the information available to us at the time that we prepare the income tax provision. We generally file our annual income tax returns several months after our fiscal year-end. Income tax returns are subject to audit by federal, state, and local governments, generally years after the tax returns are filed. These returns could be subject to material adjustments or differing interpretations of the tax laws. Accrual for uncertain tax positions are accounted for under FASB Accounting Standards Codification of Income Taxes. Additionally, uncertain positions may be re-measured as warranted by changes in facts or law. Accounting for uncertain tax positions requires significant judgment including estimating the amount, timing, and likelihood of ultimate settlement. Although the Company believes that its estimates are reasonable, actual results could differ from these estimates.

Results of Operations

Revenue — Our revenue consists of four components: company-owned restaurant sales, franchise-related revenue from royalties and franchise fees, licensing revenue from the retail sale of our sauces and rubs, and other revenue from the opening assistance we provide to franchise partners. We record restaurant sales at the time food and beverages are served. Our revenue recognition policies for franchising are discussed under “Recognition of Franchise-Related Revenue” above. Our franchise-related revenue consists of area development fees, initial franchise fees and continuing royalty payments. We record sales of merchandise items at the time items are delivered to the customer.

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We have a licensing agreement for our retail products, with renewal options of five years, subject to the licensee’s attainment of identified minimum product sales levels. Based on achievement of the required minimum product sales, the agreement will be in force until April 2015 at which time these levels will be re-evaluated.

Periodically, we provide additional services, beyond the general franchise agreement, to our franchise operations, such as new restaurant training and décor installation services. The cost of these services is billed to the respective franchisee, is recorded as other income when the service is provided, and is generally payable on net 30-day terms. Since 2010, the franchise agreements require a 50% deposit be paid in advance for these services.

Costs and Expenses — Restaurant costs and expenses include food and beverage costs, operating payroll, team member benefits, restaurant level supervision, occupancy costs, repair and maintenance costs, supplies, advertising and promotion, and restaurant depreciation and amortization. Certain of these costs and expenses are variable and will increase or decrease with sales volume. The primary fixed costs are corporate and restaurant management salaries and occupancy costs. Our experience is that when a new restaurant opens, it incurs higher than normal levels of labor and food costs until operations stabilize, usually during the first 12-14 weeks of operation. As restaurant management and team members gain experience following a restaurant’s opening, labor scheduling, food cost management and operating expense control are improved to levels similar to those at our more established restaurants.

General and Administrative Expenses — General and administrative expenses include all corporate and administrative functions that provide an infrastructure to support existing operations and support future growth. Salaries, bonuses, team member benefits, legal fees, accounting fees, consulting fees, travel, rent, and general insurance are major items in this category. We record expenses for Managers in Training (“MITs”) in this category for approximately six weeks prior to a restaurant opening. We also provide franchise services, the revenue of which are included in other revenue and the expenses of which are included in general and administrative expenses.

The following table presents items in our consolidated statements of operations as a percentage of total revenue or net restaurant sales, as indicated, for the following fiscal years:

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Fiscal Year 2011 Compared to Fiscal Year 2010

Total Revenue

Total revenue of approximately $154.8 million for fiscal 2011 increased approximately $6.5 million, or 4.4%, from total revenue of $148.3 in fiscal 2010. Fiscal 2011 and 2010 both consisted of 52 weeks.

Restaurant Sales, net

Restaurant sales for fiscal 2011 were approximately $136.9 million, compared to approximately $131.2 million for fiscal 2010 reflecting a 4.4% increase. Total restaurant sales growth reflected the full year impact of the seven New York and New Jersey restaurants acquired March 3, 2010, two new company-owned restaurants opened August 29, 2011 and December 5, 2011, respectively, and a comparable sales increase of 1.5%, which included a weighted average pricing impact of 2.6%. The 1.5% overall comparable sales increase was, on a weighted basis, comprised of 0.3% comparable sales decrease for dine-in sales, which was completely offset by comparable sales increases of 1.1% and 0.7% for “TO GO” and catering, respectively. For fiscal 2011, off-premise sales were 32.0% of total sales, with catering at 9.9% and “TO GO” at 22.1%. This compares to 2010’s off-premise sales of 31.0%, with catering at 9.5% and “TO GO” at 21.5%. Finally, as a percentage of dine-in sales, our adult beverage sales at our company-owned restaurants were approximately 9.4% and 9.0%, for fiscal 2011 and 2010, respectively.

Franchise-Related Revenue

Franchise-related revenue consists of royalty revenue and franchise fees, which includes initial franchise fees and area development fees. Franchise-related revenue was approximately $16.9 million for fiscal 2011, compared to $16.2 million for 2010. The increase in franchise related revenue is primarily related to an increase in franchise fees which reflects a net increase of three franchise restaurants year over year and comparable sales results that were flat. Eight new franchise restaurants opened in fiscal 2011 and five restaurants closed. Fiscal 2011 included 6,691 franchise operating weeks, compared to 6,458 franchise operating weeks in fiscal 2010. There were 133 franchise-operated restaurants open at January 1, 2012, compared to 130 at January 2, 2011.

Licensing and Other Revenue

Licensing revenue includes royalties from a retail line of business, including sauces, rubs, marinades and seasonings. Other revenue includes opening assistance and training we provide to our franchise partners. Licensing royalty revenue was approximately $702,000 for fiscal 2011 as compared to $595,000 for fiscal 2010. During fiscal 2012, as a result of continued growth in our restaurant base and expanded markets, we expect to see licensing revenue continue to increase beyond fiscal 2011 levels.

Other revenue for fiscal 2011 was approximately $282,000 compared to approximately $272,000 for the comparable period of fiscal 2010 remained essentially flat due to a similar number of franchise-operated restaurants that opened during fiscal 2011 compared to fiscal 2010. The amount of other revenue is expected to increase in fiscal 2012, versus the prior year, based on increased opening assistance required and an increased number of franchise openings planned.

Same Store Net Sales

It is our policy to include in our same store net sales base, restaurants that are open year round and have been open at least 24 months. Same store net sales for company-owned restaurants open at least 24 months ended January 1, 2012 increased 1.5%, compared to fiscal 2010’s increase of 0.7%. For fiscal 2011 and fiscal 2010, there were 44 and 40 restaurants, respectively, included in the company-owned 24 month comparable sales base.

Same store net sales on a 24 month basis for franchise-operated restaurants for fiscal 2011 were flat to the prior year. In fiscal 2010, comparable sales declined 0.8%. For fiscal 2011 and fiscal 2010, there were 102 and 94 restaurants, respectively, included in the franchise-operated 24 month comparable sales base. Neither franchise-operated comparable sales nor company-owned comparable sales include the results of the seven franchise restaurants acquired in March of 2010. These restaurants will enter the full year company-owned comparable sales base in 2012.

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Average Weekly Net Sales and Operating Weeks

The following table shows company-owned and franchise-operated average weekly net sales and company-owned and franchise-operated operating weeks for fiscal 2011 and fiscal 2010:

Food and Beverage Costs

Food and beverage costs for fiscal 2011 were approximately $40.8 million or 29.8% of net restaurant sales compared to approximately $38.8 million or 29.5% of net restaurant sales for fiscal 2010. This increase is primarily due to expected commodity cost increases and higher levels of discounting during the fourth quarter of 2011 as compared to prior year.

In 2011, we made the decision to not blend and extend our 2011 pork contract later in the year due to our contracted pork costs being lower than the pork market at that time. During the latter half of 2011, we locked in our pork contract for 2012 and, as a result, we will see an approximate 20.5% year over year increase in pork costs. Should we see pork prices soften, we will aggressively pursue a strategy of blending and extending our pork contract later in fiscal 2012 into fiscal 2013. Our major chicken contract is firm through June of 2012. To control and minimize poultry costs, we will optimize the way we source, ship, and purchase these products. With this strategic management of our chicken products, we anticipate a price decrease of approximately 4.8% from fiscal 2011’s pricing. Our brisket contract extends through April of 2012 at a net cost increase of 7.9% from fiscal 2011’s pricing. Due to current market pricing, which is at record highs, we will continue to execute short term contracts until we can lock in acceptable long-term pricing. Lastly, we anticipate an approximate 7.2% year over year net decrease for the remainder of our contracts, including hamburger, seafood, and side items such as, corn, beans, apples and corn muffin mix, as well as other key items, such as, our sauces, seasonings, cooking oil, and produce.

With all indications pointing to a continuation of rising commodity prices across the industry, we plan on mitigating these price increases with a number of strategies:

We recently revised our menu and took price increases on selected menu items equal to approximately 1.5%. As such, our first quarter results will reflect approximately 3.1% weighted average price increase, and we will determine later in the year whether or not we will take any additional price increases in 2012. We will also continue to focus on the optimization of our distribution network to reduce freight costs, and will continue to evaluate and manage portion sizes for certain side items. Finally, we will continue our efforts to strategically manage limited time offerings and their potential to positively impact menu mix and margin.

As a result of all of the initiatives just mentioned, we are striving for an approximate 10 to 15 basis point decrease in our food and beverage costs as a percent of sales year over year. Additionally, to reduce pressure on our margins, we are currently anticipating a lower level of discounting in fiscal 2012.

Labor and Benefits Costs

Labor and benefits for fiscal 2011 were approximately $43.2 million or 31.5% of net restaurant sales, compared to approximately $41.4 million or 31.5% of net restaurant sales for fiscal 2010. Labor and benefits, as a percentage of restaurant sales, were flat year over year due to additional staffing required to support the fourth quarter programs. This increase was completely offset by savings from operating below our full manager matrix and favorable healthcare claims experience. For 2012, we expect labor and benefits costs as a percentage of sales, to be 20 to 25 basis points lower than fiscal 2011’s percentage. This decrease is primarily due to anticipated sales

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leverage due to a lower level of discounts year over year, partially offset by operating closer to our full manager matrix.

Operating Expenses

Operating expenses for fiscal 2011 were approximately $38.4 million or 28.0% of net restaurant sales, compared to approximately $36.1 million or 27.5% of net restaurant sales for fiscal 2010. This year over year increase was primarily related to increased occupancy costs related to the full year impact of the New York and New Jersey restaurants, as well as higher supply and advertising costs. These increases were partially offset by lower utility costs. In fiscal 2011, advertising, as a percentage of sales, was approximately 3.4% compared to 3.2% for the prior year, primarily due to the increase in the Marketing Fund contribution from 0.5% for 2010 to 0.75% for 2011 and the resulting deployment of the additional funds.

For fiscal 2012, the Company has increased the Marketing Fund contribution system-wide, to 1.0% from 0.75% for fiscal 2011, and we expect that, advertising expense in total will be approximately 3.0 percent of net sales, including the contribution to the Marketing Fund. We intend to achieve our objectives with a lower marketing spend, by enhancing the use of social media and viral marketing tools, and utilizing more targeted marketing initiatives based on the results of the consumer market research conducted in 2011. Collectively, these strategies should allow us to optimize the dollars spent while still achieving our advertising objectives.

We are projecting operating expenses as a percentage of net sales for fiscal 2012 to be approximately 30 to 35 basis points lower than 2011’s percentage. The majority of this decline relates to the decrease in advertising expense.

Depreciation and Amortization

Depreciation and amortization expense for fiscal 2011 and 2010 was approximately $5.6 million and $5.5 million, respectively, and was 3.6% and 3.7%, respectively, of total revenue.

General and Administrative Expenses

General and administrative expenses for fiscal 2011 were approximately $16.5 million or 10.6% of total revenue compared to approximately $16.2 million or 10.9% of total revenue for fiscal 2010. This percentage decrease is primarily due to revenue leverage and a reduction in our bonus accrual. General and administrative expenses as a percent of total revenue, excluding stock-based compensation and board of directors’ cash compensation, were 9.6% for fiscal 2011 and 10.0% for fiscal 2010.

For fiscal 2011, stock-based compensation and board of director cash compensation expense was approximately $1.7 million compared with $1.3 million in fiscal 2010. The increase in this expense category was primarily due to a higher stock price year over year. Due to a higher average share price for the performance share programs vesting in fiscal 2012, we anticipate stock-based compensation and board of director cash compensation to be approximately $1.9 million for fiscal 2012, as follows (in thousands):

For 2012, we expect general and administrative expenses as a percentage of revenue, to be approximately 50 to 55 basis points unfavorable to 2011’s percentage, reflecting the increased stock-based and board of director cash compensation and full accrual for bonus achievement.

Asset Impairment and Estimated Lease Termination and Other Closing Costs

In accordance with FASB Accounting Standards Codification for Property, Plant, and Equipment, we evaluate restaurant sites and long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of restaurant sites to be held and used is measured by a comparison of the carrying amount of the restaurant site to the undiscounted future net cash flows expected to be generated on a restaurant-by-restaurant basis. If a restaurant is determined to be impaired, the loss is measured by the amount by which the carrying amount of the restaurant site exceeds its fair

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value. Fair value is estimated based on the best information available including estimated future cash flows, expected growth rates in comparable restaurant sales, remaining lease terms and other factors. If these assumptions change in the future, we may be required to take additional impairment charges for the related assets. Considerable management judgment is necessary to estimate future cash flows. Accordingly, actual results could vary significantly from such estimates. Restaurant sites that are operating, but have been previously impaired, are reported at the lower of their carrying amount or fair value less estimated costs to sell. Here is a summary of these events and situations for fiscal 2011 and fiscal 2010:

2011 Asset Impairment and Estimated Lease Termination and Other Closing Costs (in thousands):