Mail Stop 3561
April 11, 2006
BY U.S. Mail and Facsimile [ (952) 294 - 1310 ]
Ms. Diana Garvis Purcel
Chief Financial Officer
FAMOUS DAVE`S OF AMERICA, INC.
12701 Whitewater Drive, Suite 200
Minnetonka, MN 55343
Re: Famous Dave`s of America, Inc.
Form 10-K for Fiscal Year Ended January 1, 2006
Filed March 17, 2006
File No. 0-21625
Dear Ms. Purcel:
We have limited our review of your January 1, 2006 Annual
Report
on Form 10-K to the issues addressed below and have the following
comments. Where indicated, we think you should revise your
documents
in response to those comments in future filings with us. Please
confirm that such comments will be complied with. If you
disagree,
we will consider your explanation as to why our comments are
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. After reviewing the information,
we
may or may not raise additional comments.
Pursuant to Rule 101(a)(3) of Regulation S-T, your response
should be submitted in electronic form, under the label "corresp,"
within 15 business days of the date of this letter.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
FORM 10-K (Fiscal Year Ended January 1, 2006)
Management`s Discussion and Analysis
Overview, page 23
1. Refer to your revenue recognition policy for franchise area
development fees disclosed in MD&A and Note 1 on page F-12 to the
audited financial statements. We note you recognize the entire
$10,000 area development fee upon signing of the area development
agreement, due to the fact that the fee is non-refundable. We
also
note the continued and expected growth in the number of your
franchisees in each fiscal year. We believe this fee should be
recognized over the life of the franchise agreement due to the
benefit of having received an upfront payment to provide secure
territory coverage to your franchisee over the term of the
agreement,
for which you will receive royalties based on franchisee sales.
As
the revenue source of area development fees will continue to grow
in
proportion with the expansion of new franchisees and may be
significant to your revenue generating operations, tell us the
consideration given to revising your accounting policy, in future
filings, to amortize these fees over the life of the agreement.
Your
response should also address the guidance provided in SAB Topic
13.A.3(f). We may have additional comment after review of your
response.
Results of Operations, page 25
2. Refer to the table on page 26. The line item captioned
"Restaurant costs and expenses" and the subtotal captioned "Income
from restaurant operations" are non-GAAP financial measures. As
such, they are subject to the requirements of FR-65 and the
related
guidance made available by the Division of Corporation Finance.
We
note the importance of brand awareness, growth, location,
purchasing,
information systems, human resources and training and customer
satisfaction programs to your overall revenue growth and
profitability. For that reason, we believe that the expenses
relating to the corporate and administrative functions that
facilitate that growth should be included in any measure of
profitability or performance. Please omit the above referenced
non-
GAAP measures from your filed reports and focus your performance
and
profitability discussions on "operating income" and other GAAP
measures. Please note the related staff comments cited in our
comment letter dated November 9, 2004. These comments were
intended
to also apply to numerical presentations and tables of this type.
Fiscal Year 2005 Compared to Fiscal Year 2004, page 27
Other Income (Expense), Net
3. We note this category includes gains (losses) from disposal or
write-off of property. In accordance with the guidance in
paragraph
45 of SFAS 144 as well as footnote 68 in Staff Accounting Bulletin
No. 104 (Topic 13), you should classify gains (losses) from the
sale
of assets within operating income (loss) in the consolidated
statements of operations. Please revise accordingly in future
filings.
Payments Due by Period, page 36
4. In order to increase the transparency of cash flows, we believe
you should include scheduled interest payments in the table.
Where
interest rates are variable and unknown, you may determine the
appropriate methodology used to estimate these interest payments.
Your methodology should be explained in a footnote to the table.
Financial Statements
Note 1. Nature of Business and Significant Accounting Policies
Variable Interest Entities, page F-13
5. You state that you do not provide financial support to
franchisees
in your typical franchise relationship, that these relationships
are
not considered to be variable interests, and that the entities
were
not consolidated upon adoption of FIN 46. We note your various
transactions with Martin O`Dowd, your former president and CEO, as
described on page F-21. Please discuss these arrangements, and
explain your conclusions regarding the appropriate accounting to
be
applied to them, in greater detail.
Other
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
Closing
You may contact Ms. Beverly A. Singleton, Staff Accountant,
at
(202) 551-3328, or Ms. Margery Reich, Senior Staff Accountant, at
(202) 551-3347 if you have questions regarding comments on the
financial statements and related matters. Please contact me at
(202)
551-3211 with any other questions.
Sincerely,
David R. Humphrey
Accounting Branch Chief
Ms. Diana Garvis Purcel
Famous Dave's of America, Inc.
April 11, 2006
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