Thanksgiving dinner spread from Cracker Barrel
Cracker Barrel

During the week of Thanksgiving, sales of heat and serve meals were better than anticipated.

Cracker Barrel CEO: ‘Too Much Noise’ to Predict the Future

Restaurant and retail same-store sales are down 20 percent quarter-to-date.

At Cracker Barrel, crystal balls aren’t a part of the inventory.

With COVID-19 cases rising and state and local authorities changing guidance without warning, CEO Sandy Cochran and CFO Jill Golder said there’s too much noise and shifting in the regulatory environment to make any predictions for what Q2 may bring.

The first quarter, which ended October 30, saw same-store sales at restaurants decrease 16.4 percent, compared to a 39.4 percent drop in Q4. Traffic declined 18.3 percent, but average check rose 1.9 percent, which included core menu pricing of roughly 1 percent. Revenue at restaurants decreased 15.1 percent to $515.2 million.

However, those numbers don’t include many of the restrictions instituted throughout November in a handful of states.

The brand divides restaurants into four categories: indoor dining above 50 percent, indoor dining below 50 percent, no dine-in, but guests are allowed inside, and curbside only. Operators are constantly shuffling between descriptions and remain unsure how long they’ll fit into one tier or another.

Due to COVID, about 100 of Cracker Barrel’s 663 stores have closed dining rooms. The best barometer the brand could offer is that retail and restaurant comps are down 20 percent quarter-to-date.

“We’ve got some communities where I do believe the concerns in the communities about the issue broadly is reducing people’s interest in dining in,” Cochran said during Cracker Barrel’s Q1 earnings call. “We have other communities where they don’t seem at all impacted by the recent resurgences in terms of what’s happening there. We’ve got some stores that maybe they were more travel related and the absence of the travel leading into the season we believe had an impact on them. Tearing it all apart is very difficult.”

The flow of business will prove crucial over the next few months as the second quarter is typically the busiest time of year for Cracker Barrel because of the brand’s connection to the holidays. So far, the brand is pleased with the performance of its heat and serve meals. In addition to its meal that serves up to 10 guests, Cracker Barrel introduced new offerings that serve up to six customers to reach those interested in smaller gatherings.

During the week of Thanksgiving, the sales of the heat and serve meals were better than anticipated. That aligns with the brand’s recent off-premises performance, which increased 122 percent in Q1 compared to last year. The channel accounted for 25 percent of business, up from 9 percent in the year-ago period.


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“There a lot of work being done from our culinary team about what is the right additions to the menu to meet the needs of the guest that wants to use the brand off-premise,” Cochran said. “… They’ve actually designed some things that I think are interesting—taking our Meatloaf and making a terrific sandwich with it and some things that we can put in a box. … I’m looking forward to testing some of those things in the latter half of this year through next.”

In the first quarter, the South was the strongest region in terms of sales. Dinner remained the strongest daypart, but all three times of day saw improvements. Golder attributed the rise to increases in dining room capacity, the new lunch and dinner menu, off-premises initiatives, and front porch dining.

There’s a handful of stores that have even returned to positive sales year-over-year.

“It does seem like people were less likely to travel and probably are less likely to travel during the holiday season given the resurgence in COVID,” Golder said. “With that said, even though travel was probably down in the aggregate for us, we do believe that overall we’re poised to benefit from those guests when travel opens back up.”

Although it’s still early, Cracker Barrel’s new wine and beer program played an incremental role in the first quarter. The beverages are offered in approximately 250 stores and represented 1 percent of dine-in sales. By the end of the fiscal year, Cochran said she expects the program to be in roughly 600 stores. However, it won’t increase beyond that because of the higher costs of licenses in the remaining markets.

This is the first time in Cracker Barrel's history that it's added alcohol to the menu. CEO has said the beer and wine options are meant to improve the dinner daypart. However, she noted in Cracker Barrel's Q1 earnings call that mimosas have become popular during breakfast and lunch. The brand is continuing to test new items and the first seasonal mimosa. Cochran said she's encouraged by the early results, especially in Florida, where the program has been rolled out the longest. 

"Our guests have told us that offering beer and wine would reduce the veto vote — that is, those guests who would choose Cracker Barrel for a given dining occasion, but ultimately go elsewhere because they would like to have a beer or a glass of wine with their meal — especially during weekend dinner," a Cracker Barrel representative told CNN

Cracker Barrel is confident that the sales mix can double in the next year, especially because the current success was achieved with little merchandising and promotion. Cochran noted that materials aren’t allowed on the table in a COVID world, so there are limited opportunities inside the store to tell customers about the new program. She also mentioned that many guests are so frequent that they don’t look at the menu.

“What we’re using now is what we can. We have posters as you walk into the dining room and so on,” Cochran said. “But I think as we go back to a more normal environment, we’ll have more opportunities to tell the story more effectively. … For a lot of our restaurants, they’ve only just rolled it out, so our servers are still getting comfortable with the fact that we have a new beverage program and how to offer it.”

Fast-casual Maple Street Biscuit Company, which Cracker Barrel acquired a little more than a year ago, saw comps grow 20 percent in the first quarter, year-over-year. Cochran said Maple Street’s performance was in line with expectations and that Cracker Barrel still believes the fast casual will achieve AUV of more than $1 million. Maple Street operated 35 units at the end of the first quarter.

“When we look at Maple Street, I’d say we’re being opportunistic and patient,” said Golder, referencing future development plans. “That team is in the process of building the pipeline for opening new units. … Frankly, as we get through the next quarter, we’ll be able to provide more color on where we are with that.”

Golder said the brand is on pace to reach its sustainable cost savings goal of $50 million. In Q1, Cracker Barrel saw $12 million in savings, which brings the current amount to roughly $25 million. The rest of the savings will come in the next two quarters, Golder noted. The chain anticipates that a little more than half of the savings will come from labor and related areas and roughly 20 percent from G&A. The majority of the other savings will come from other operating expenses.

The offsets to the savings come in three categories: investments in labor and supplies to support safety protocols, expenses related to strategic initiatives ($8 million for the beverage program and digital initiatives in fiscal 2021), and a net $20 million expense from sale leaseback transactions.