Cracker Barrel isn’t alone in its challenge to generate guest traffic. It’s an industry-wide challenge tied to a few factors, including oversaturation and the rise of at-home dining. But the issue really spiked toward the end of fiscal 2018, as transactions dropped 3.5 percent, year-over-year, at the casual-dining leader.
There were a few factors at hand. Some were near-term (calendar shifts) and others spoke to a wider view. Cracker Barrel’s menu innovation and value proposition, in particular, were disconnected. Guest experience metrics were falling. The company had to bring the message into focus. It also needed to work through some service ticks that failed to align with a district brand identity. The example chief executive Sandy Cochran gave was a “check back, check down” strategy where servers would hand tables checks early on. This worked during certain dayparts, like breakfast, where speed is a key driver, and in specific markets, but it was degenerative in others. The down-home hospitality of Cracker Barrel’s can’t always be timed.
The chain set off to fix all of these missteps and has made solid progress so far.
Cracker Barrel reported same-store sales growth of 1.3 percent in the third quarter of fiscal 2019, which ended May 3. Traffic dropped 1.8 percent, year-over-year.
After a 0.4 percent decline in comps in Q4, Cracker Barrel has now put together three straight positive periods: 1.4 percent in Q1, 3.8 percent in Q2, and now 1.3 percent in Q3.
Those measure against comparable quarters of 0.2 percent, 1.1 percent, and 1.5 percent, respectively.
Cracker Barrel posted net income of $50.41 million in Q3 and operating income of $65.9 million. Revenue was $739.6 million, an improvement from the year-ago figure of $721.41 million.
A 3.1 percent boost in average check helped lift the overall comp.
Here’s a larger slice of the traffic picture:
- Q3 2019: –1.8 percent
- Q2 2019: 0.1 percent
- Q1 2019: –1.6 percent
- Q4 2018: –3.5 percent
- Q3 2018: –1.3 percent
- Q2 2018: –0.9 percent
- Q1 2018: –1.8 percent
- Q4 2017: –1.8 percent
- Q3 2017: –2.1 percent
- Q2 2017: –2.1 percent
- Q1 2017: –1.7 percent
One of the biggest initiatives in Cracker Barrel’s effort to win back visits, and a topic that dominated Tuesday’s conference call, is the chain’s new signature fried chicken platform. Cracker Barrel believes the product fits right into its brand DNA and addresses some previous concerns. It’s value through abundance, built into the menu so customers can count on it, and a check driver as well as traffic magnet.
Cracker Barrel even delayed some other directives, like point-of-sale and server tablet rollouts, to focus on the launch.
The bone-in chicken was tested last fall to work out operational kinks, equipment configurations, and measure guest reaction. Cracker Barrel’s first official offering arrived in May as Southern Fried Chicken, which celebrated the company’s 50th anniversary. The deal was half a chicken (breast, thigh, leg, and wing) served with two country sides, and homemade buttermilk biscuits or corn muffins for $10.79. Cracker Barrel also delivers the dish to tables with bear-shaped bottles of honey.
Cracker Barrel spent years developing the breading’s spice and flour blends and had to redesign kitchens in more than 650 restaurants to accommodate the equipment. It retrained employees, of which Cracker Barrel has north of 70,000, as well.
The most prominent change was the actual frying system, Cochran said. Cracker Barrel had never offered bone-in chicken. There’s just Homestyle Chicken on Sundays.
In addition to the summer menu launch, Cracker Barrel developed a Southern Fried Chicken Picnic Box for to-go orders. It includes 12 pieces of chicken, two sides, and biscuits, as well as a half-gallon of tea or lemonade. Desserts can be added for extra. The option runs $33.99.
While most of the sales for the product have been dine-in so far, Cochran said, it’s an offer that satisfies one of Cracker Barrel’s fastest-growing segments. As a percent of sales, off-premises jumped 110 basis points in Q3 versus the prior-year quarter. Third-party delivery coverage is live in nearly 350 locations with another 100 units on deck for 2019.
“Fried chicken could play an important role in our off-premises and catering initiatives. But we're going to just build on this platform over time,” Cochran said.
Last year, she noted, “whole chains have been built on the idea that bone-in fried chicken is a terrific protein for to-go.”
Cochran said Tuesday Cracker Barrel supported “this major initiative” with hourly labor training and advertising. The chain plans to air 12 weeks of national TV and recently updated the creative on its entire system of billboards, with the majority of the new messaging touting the fried chicken.
One of the top targets for Cracker Barrel in this traffic push remains infrequent guests. Lighter users were particularly impacted from the chain’s menu and service misses last year. Loyal users tend to forgive an ineffective deal or one-off experience more than those travelers who drop in on their way to somewhere else.
Cracker Barrel benefits from the breadth of its appeal, and that includes those customers who might be driving down I-95 on vacation and don’t have a Cracker Barrel back home. This is especially true in Q2 and Q4 during holidays and the summer.
“We've been focused on ensuring that we can drive trial with things like the craveable food, like our fried chicken platform that we clearly message it,” Cochran said, noting the billboard changes.
“Our marketing and media is focused on capturing the travel guest,” she added. “And then ensuring that when they do stop with us, that the hospitality they receive and what is often a very busy time is meets their expectations.”
Overall marketing will be up over last year in the range of 40 basis points, CFO Jill Golder said. There are 12 fiscal weeks versus six national in 2018 as the fried chicken ads circulate.
Cochran said guest feedback of the new product has been positive. It will continue through the summer before Cracker Barrel launches Sunday Chicken Homestyle all day in the fall. And then the chain intends to bring hand breaded, batter-breaded tenders to the menu. Perhaps on a sandwich.
Moving forward, Cracker Barrel won’t dial back the marketing investment necessarily, but it will benefit from less training.
“We want to be sure we continue to drive awareness of the offer and the brand and the excitement of this,” Cochran said. “In the case of the sandwich, for example, the new news; the case of the Sunday Chicken available all day and the tenders and so on.”
Cracker Barrel has opened eight stores in fiscal 2019 so far, with the final opening for the year taking place in May.