The classic chain's off-premises business continues to surge as well.
One of Cracker Barrel’s priorities in fiscal 2020 is to drive top-line growth, and a revamped menu is proving to be a key part of that strategy.
The brand is implementing a “menu evolution” initiative to strengthen its dinner daypart—where it faces the most competition—by introducing new items and simplifying the menu.
Soon, Cracker Barrel will offer a new chicken pot pie and country fried pork chop, in addition to a new menu design that reorganizes offerings into new categories. Sandra Cochran, president and CEO, said the optimized menu will emphasize signature menu items and the brand’s value and variety.
“The work we're doing around the dinner initiative, we do believe is in that way we've redesigned the menu,” said Cochran during the company’s Q2 review. “We are seeking to ensure that we continue to first have great value and to highlight it, make it easy for our guests to find the value. … And so I think that we'll be well-positioned for an environment that we're assuming going forward is going to remain very competitive and very promotional.”
Comp sales grew 3.8 percent in Q2 (651 units in comp base), which includes a 4 percent jump in average check and 0.2-percent dip in traffic. Golder noted that the rise in average check came from a 2.2 percent increase in the price of core menu items and a menu mix impact of 1.8 percent. The mix favorability was driven by growth in the off-premises business, off-premises price increases, and the brand’s fried chicken platform. In 2020, Cracker Barrel expects comp sales growth between 2 percent and 2.5 percent.
Off-premises sales were a boon for the chain in Q2. The brand sold a record number of Heat N’ Serve meals during the Thanksgiving and Christmas holiday season, overcoming a 15-percent increase in average price. The Heat N’ Serve meal—which feeds up to 10 people—includes ham, mashed potatoes, gravy, a choice of three sides, rolls, and two pies. Cracker Barrel is optimistic about seeing year-over-year sales growth in this offering during Easter.
“We believe the continued growth of this business underscores the trust that guests have in Cracker Barrel to provide a convenient and delicious home-cooked meal at a good value,” Cochran said.
Off-premises business represented 13.2 percent of sales in Q2 and grew 210 basis points. Jill Golder, senior vice president and chief financial officer, said the brand saw double-digit growth across delivery, carryout, and catering. Third-party delivery is available in about 600 stores, and the chain will test several initiatives to expand reach and frequency, like an increase in marketing support.
Average-unit volume in Q2 in restaurants stood at $985,300, up from $950,400 in 2018. Restaurant revenue increased 5 percent to $663 million in Q2, a year-over-year increase of 4.2 percent. Cracker Barrel ended Q2 with 695 company-owned units, and expects to open six new country stores, two Punch Bowl Socials, and one Maple Street Biscuit Company unit in 2020.
Cracker Barrel is continuing to integrate Maple Street, which includes the conversion of Holler and Dash into Maple Street units. The conversion process is expected to finish in the next few months. Maple Streets are now open on Sunday, a move Cochran said will improve the business model and increase AUV to over $1 million.
“We remain very excited about this acquisition and are looking forward to growing the brand after we complete the integration and build a strong foundation for its long-term success,” Cochran said.
Retail comp sales grew 1.3 percent in Q2, but the topline retail performance fell short of the chain’s expectations. Seasonal assortments did well, but there was a weakness in women’s apparel and gifting assortments. Flat retail same-store sales are expected in 2020.