In another message to fellow Cracker Barrel shareholders, Sardar Biglari defended his nomination to the board and slammed the brand’s long-term growth strategy.
Biglari, the owner of Steak ’n Shake and Western Sizzlin’, controls 2.1 million shares, or 8.7 percent of Cracker Barrel. That equates to a roughly $240 million investment in the brand. The outspoken shareholder has spent the past few months outwardly criticizing Cracker Barrel for its decisions, primarily the one involving the investment and eventual cut of Punch Bowl Social. He claimed the move lost $137.1 million in eight months, representing a 100 percent loss.
In his latest note, he examined Cochran’s 2017 letter to shareholders in which she described the brand’s long-term strategy. He specifically disparaged parts about enhancing the core, expanding the footprint, and extending the brand, citing his concern with Cracker Barrel’s ability to achieve each of those objectives.
“Losing $137 million of shareholders’ money in eight months with a venture capital investment is reason enough to add one board member with restaurant experience,” Biglari said in the letter. “We believe it is a strategic error to pursue the unknown and unproven when there is a known and proven Cracker Barrel brand with high profit potential attached. It is time to eliminate the idea of extending beyond the Cracker Barrel brand; disclose data on the expansion of the footprint; and, above all, focus on enhancing the core Cracker Barrel brand.”
THE BACK-AND-FORTH SO FAR:
Biglari then discussed his board nominee, Raymond Barbrick, CEO of The Briad Group. According to him, Barbrick has more than 30 years of restaurant experience in the casual-dining and quick-service sectors, serving as CEO of several concepts.
In a previous letter, Cochran said Cracker Barrel used a nationally recognized third-party recruiting firm to assist with interviewing Barbrick. Both the firm and independent board members decided he didn’t have enough experience. They questioned his lack of experience with public companies and the relevancy of his work history, considering that most of the restaurants he oversaw have exited the casual-dining segment.
The board instead chose to appoint Gisel Ruiz, a former Walmart executive.
Cracker Barrel said Biglari’s latest proxy fight is another attempt to pursue his own agenda at the expense of all shareholders.
“Our Board thoroughly reviewed Mr. Barbrick’s candidacy and unanimously determined that he would not contribute meaningful additive experience, skills, or ideas to our Board,” Cracker Barrel said in a statement. “We recommend that all shareholders vote in support of Cracker Barrel’s highly qualified Board to ensure the Company can continue executing its strategy and delivering significant value for all shareholders.”
However, Biglari said Cochran was previously “CEO of Books-A-Million, a failed bookstore enterprise, before joining Cracker Barrel in 2009.” He added that none of the current board members have had experience in the casual-dining sector prior to joining Cracker Barrel.
“We believe that with his extensive restaurant background, Mr. Barbrick would be invaluable as a board member, and would strive to (1) bring discipline to the Company’s capital allocation; (2) focus the Board and management on the Cracker Barrel brand; (3) reject all egregious acquisitions and investments; (4) disclose to shareholders the returns on capital deployed in new stores opened in the past decade; and (5) return capital to shareholders through dividends and/or share repurchases,” Biglari said.
In addition, Biglari responded to Cochran’s criticisms of his company, Biglari Holdings. Cochran pointed to the brand’s same-store sales drops of 6.9 percent and traffic decreases of 11.2 percent in 2019 as the “deterioration of Steak ’n Shake.” She described it as a “cautionary tale of poor capital allocation, underinvestment, lack of strategic vision, subpar leadership, and lost brand identity.”
In return, Biglari said Steak ’n Shake was losing more than $100,000 per day when Biglari Holdings took over in August 2008, but then his company turned the brand around amid the Great Recession.
He called Cochran’s statements “inflammatory and misleading.” He attributed the comments to a management team that is “embarrassed and unable to defend their strategy.”
“In the end, this election is not about my company or what is good for our group but what is good for all shareholders,” Biglari said. “After the dismal outcomes of chancy, unrelated acquisitions and start-ups, we believe shareholders would benefit from being represented on the Board by an individual with an extensive restaurant background. Shareholders have rights and the Board has a responsibility to serve the best interests of the Company’s owners. Our nominee, Raymond Barbrick, is committed to upholding that responsibility.”