Cracker Barrel’s recovery is far from over. 

The comeback for guests 65 years and older—a big portion of the chain’s customer base—is one of the largest pieces of evidence. 

During Friday’s Q1 earnings call, one investor called out the 8.7 percent increase next year in Social Security and Supplemental Security Income for about 70 million, but CMO Jennifer Tate said sentiment is still at all-time lows among the older cohort. With that said, Cracker Barrel provided data from July through September showing improvement in 65-plus traffic, but CEO Sandy Cochran said it was likely supported by lapping of the Delta variant in 2021. 

The 664-unit Cracker Barrel is cautiously optimistic that further improvement will occur through the balance of the year, but the picture is hazy, with talks of inflation, COVID, and recession still muddying the picture. 

“With pressure in terms of food, gas, and rent and all that being up significantly more,” Tate said during the brand’s Q1 earnings call, describing the older crowd’s hesitancy. “Food inflation in the grocery store is up 20 percent. And gas prices, although they’re low today, it’s been incredibly volatile—up, down, up, down. Their sentiment is very negative. Their outlook for the future, their financial insecurity is very high. Even though we have seen some improvement in trends of our 65-plus guests, there is still quite a bit recovery left for us with that group.”

In the quarter, restaurant same-store sales lifted 7 percent year-over-year, boosted by 8 percent pricing. Of that pricing amount, 5 percent was carryover from fiscal 2022 and 3 percent was new. Overall, Cracker Barrel said the hikes haven’t led to pushback. The chain is actually seeing an increase in visitation from younger customers—18 to 34 years old in particular—and lower income guests. 

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The company said millennial and Gen Z customers are attracted to the breadth of culinary and beverage news, digital marketing, and technology enhancements. Cochran praised the performance of Cracker Barrel’s new breakfast launch in June. That’s particularly true for the Build Your Own Homestyle Breakfast option, which younger consumers appreciate because of customization. The brand also saw favorable check mix in the quarter, thanks to increased sales of Barrel Bites, premium sides, desserts, nonalcoholic beverages, and beer and wine. 

Tate said that regardless of age, customers are typically attracted to Cracker Barrel for similar reasons, like the experiential nature and value. But the younger generation has shown an increased interest in mix-driving initiatives. 

“They are very likely to try a crafted coffee, like a latte, or if they’re over 21, we can interest them in a mimosa or one of our signature alcoholic beverages,” Tate said. “They opt into Barrel Bites, with our shareables category, and our premium sides and desserts. So we have been able to entice them into those voluntary check builders. They are very like to opt in to trying new things.”

In terms of technology, Cracker Barrel rolled out a new app in November that reduces friction. It’s the foundation for an upcoming loyalty program that’s scheduled to debut in the fourth quarter. Tate laid out three goals for the program—drive frequency and traffic among all demographics, but especially younger customers; delight guests and build loyalty over time; and unlock the power of data for everything the brand does, such as the innovation pipeline.

Along those same lines, the brand has seen consistent success with its digital marketing capabilities. 

“This year we’ve seen really solid results from the increase in targeted digital marketing that we’ve done amongst the younger-skewing segment,” Tate said. “So we’ve been leveraging the great insights we’ve had from our segmentation study and enhancing the amount and the quality of the digital marketing that we’ve been doing with those groups. And we’re seeing that pay out as we’ve grown frequency.”

The move fits well into the chain’s off-premises journey too. In Q1, sales outside the four walls accounted for 20 percent. After a solid August and September and slower October, November sales exceeded expectations, thanks to off-premises sales from the brand’s well-known Heat n’ Serve holiday meals. One of the brand’s goals for fiscal 2023 is to expand catering sales 25 percent to $100 million. Cochran said enhancements to offerings and optimized marketing support has driven meaningful growth within this channel, and the brand is on track to meet this growth target. 

Restaurant costs of good sold in the first quarter was 29.1 percent versus 26 percent in 2021, a 310-basis-point increase. This was fueled by 16.7 percent commodity inflation and higher freight costs. Inflation occurred across Cracker Barrel’s market basket, but the biggest drivers were poultry, dairy, and produce. Commodities are expected to moderate, but CFO Craig Pommels said the timing is complicated because of market basket swings. Chicken and poultry prices may be lower, but that’s offset by higher expenses for eggs, dairy, and produce. 

Labor costs were 34.8 percent, a slight decrease from 35 percent last year. Wage inflation was 8 percent in the quarter. 

In fiscal 2023, Cracker Barrel projects revenue growth of 6-8 percent, commodity inflation of 8-9 percent, wage inflation of 5-6 percent, and an operating income margin in the low 4 percent range. Three to four new Cracker Barrel units should open, as well as 15-20 Maple Street Biscuit Company restaurants. The brand’s cost savings initiatives are expected to realize $20-$25 million. 

“We continue to operate in a challenging environment of economic uncertainty,” Pommels said. “That makes predicting the balance of the year particularly difficult. Consumer confidence, recessionary risks, inflation, and supply chain constraints are some of the things that—depending on whether, when, and how much they shift—can impact our business positively or negatively for the balance of the year.”