The breakfast chain is devising a comprehensive plan to regain visits and boost sales.

In the wake of sales and traffic struggles for the past several months, Cracker Barrel is prepared to transform.

Julie Masino, a former Taco Bell executive who recently took over as CEO, described it as a “data-driven and multi-phased” process that includes a comprehensive review of the company and a wide-ranging assessment of near-term and long-term opportunities. Cracker Barrel partnered with a firm—spending $10 million in consulting fees—to give outside expert advice and challenge the chain’s philosophies.

Cracker Barrel’s same-store sales dropped 0.5 percent in Q1, backed by a 6.8 percent increase in pricing. Traffic declined 7.1 percent and menu mix slid 0.2 percent. The company reported total revenue of $823.8 million for the first quarter, representing a decrease of 1.9 percent compared to last year. Restaurant revenue decreased 0.2 percent to $660.8 million.

“Our strategic transformation project is intended to ensure we continue to evolve the business and play to our strengths and differentiators to drive long-term value creation, improve profitability, and to win market share,” Masino said during Cracker Barrel’s Q1 earnings call. “This involves refining our brand strategies and positioning, identifying and prioritizing the most impactful growth drivers, defining required capabilities and enablers, and last but not least, executing with excellence.”

The plan kicked off in late September, and the chain recently completed the initial diagnostic phase of the project. Masino said the findings give Cracker Barrel confidence that actions it’s already taken to address near-term traffic concerns are working. A major one was bolstering marketing efforts in the first quarter. The brand increased its media spend by roughly 20 percent and refined its messaging to focus on core customers. This included more advertisements on television during premium sporting events, like college football. Within these promotions, Cracker Barrel highlighted its value proposition by featuring the $8.99 price point during breakfast and its 20 under $12 special during lunch and dinner. Additionally, the chain invested in local TV advertising in key markets that’s provided “a really strong return on investment and return on traffic,” Masino said.

“The environment is more promotional,” said CFO Craig Pommells. “That’s what we’re seeing in our results. The consumer is pressured but they haven’t shut down. They’re still dining out, they’re making choices. And what was important to us was that we are top of mind. And in order to be top of mind, you have to communicate to folks, and we’ve ramped up our communication, and we’ve also focused our communication around what we’re calling the core plus group, a lot of our traditional core plus elements of our growth segments that are closer to that core. You reach those folks in college football, NASCAR, things like that. And that is working for us.”

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As for its digital channels, new loyalty program Cracker Barrel Rewards launched during the quarter. The rollout was supported by a multichannel media campaign, with country icon Dolly Parton helping drive awareness and enrollment. The company didn’t provide exact figures, but Masino said enrollment thus far has exceeded expectations.

Inside restaurants, Cracker Barrel invested in labor hours and emphasized staffing, retention, training, and development. Because of this, labor and related expenses were 37 percent in Q1, up from 34.8 percent in the year-ago period. Hourly restaurant wage inflation was approximately 5 percent. Well worth the cost, according to Pommells.

“We’re known for a lot of things. But one of them is hospitality. And because of that, we have been investing more in labor to ensure that, one, we can deliver that hospitality—and we are—and two, that we can really serve that kind of peak demand,” the CFO said. “So that’s an investment that we’re making in the short term for sure. Now one of the other benefits that you get from that is, that’s also a better experience for the employees, and we’re seeing turnover comes down. So as we think about, ‘Hey, how do all of these investments play out over time,’ one of the ways that it plays out is your turnover comes down and you actually get more efficient over time. So we’re investing for the future. We’re investing to grow our traffic in the short term. We think our investments are well-timed for the environment. And we think over a period of time, that will also help our profitability.”

The combination of these strategies fueled sequential monthly improvements in comparable store traffic from August through November. The company earned more than $110 million in sales during Thanksgiving week, a new record, and served about 6 million customers. The top five stores alone served more than 80,000 guests over the week.

Looking further into Q2 and the rest of the fiscal year, Masino said the macroeconomic environment continues to be uncertain and mixed. She believes a recession is less likely, but inflation is still hurting consumer sentiment, which remains at relatively low levels. Cracker Barrel has talked in-depth on past earnings calls about its struggles to attract key older demographics. Also, the labor market appears to be cooling and savings accumulated during the COVID pandemic are drying up and debt burdens from higher interest rates are rising.

“We believe that the investments that we’ve made to focus on the guest experience, to emphasize our strong value proposition across our dayparts, that was an important pivot in Q1,” Masino said. “It had been accelerating the frequency and enhancing our business model and will continue to help us drive performance and win share in this very, very mixed environment.”

Cracker Barrel ended Q1 with 661 company-owned stores nationwide. Maple Street Biscuit had 60 restaurants.

For 2024, Cracker Barrel expects total revenue between $3.4 billion and $3.5 billion (it earned $3.44 billion in fiscal 2023), pricing between 4.5 percent to 5 percent, two new Cracker Barrel restaurants and 9 to 11 new Maple Street units, commodity inflation in the low-single digits, and hourly wage inflation in the mid-single digits. The brand cautioned investors that uncertainties in the environment could cause actual results to differ materially from those expected.

Chain Restaurants, Feature, Finance, Growth