Cracker Barrel CEO Sandy Cochran was “very optimistic” about the brand’s trajectory heading into the fourth quarter.

The 664-unit company was looking forward to families traveling during the summer and customers returning to normalized routines. After an impressive start and a high-performing Mother’s Day, sales softened during the latter half of May, but the chain assumed that was due to the shift in Memorial Day on the calendar and potentially the shutdown of the Colonial Pipeline.

However, the softening pace didn’t budge, and sales slowed below expectations, causing Q4 comps to drop 6.8 percent compared to 2019, after decreasing 8.6 percent in Q3.

“We were encouraged by the pace of sales recovery and our sequential monthly restaurant sales improvements through April,” Cochran said during the chain’s Q4 and fiscal 2021 earnings call. “However May sales were softer than we expected, and unfortunately this softness persisted through most of the fourth quarter.”

Cochran attributed a handful of factors to the deceleration. First, the summer travel season didn’t follow traditional patterns. Although volumes increased versus Q3, Cracker Barrel’s statistics showed road travel was down versus 2019. One of the assumptions by Cracker Barrel is that customers that are more vulnerable—the elderly and families with small children—were more reluctant to travel than what was expected. Also, stores depending on tourism and international travel informed Cochran that visitation levels hadn’t returned to the levels they were projecting.

Additionally, Cracker Barrel pointed to the growing spread of COVID and the Delta variant, particularly in the South, where stores are more concentrated. On the final day of May, the U.S. reported just over 9,000 COVID cases, according to the CDC. By the end of July, that shot up to nearly 93,000. The growth in cases not only impacted guest frequency, but also employees’ ability to consistently work. Another reason for the less-than-stellar sales trend was general consumer preference for celebratory, higher-check occasions that Cracker Barrel isn’t known for. Other chains have recognized this movement and have benefited, such as Ruth’s Chris Steak House, which saw comps jump 17 percent in July compared to 2019. 

READ MORE: Some Cracker Barrel Stores Face ‘Critical’ Labor Battle

The final factor Cochran listed—and arguably the most obvious—is the ongoing industry-wide labor shortage that has plagued restaurants for months. In May, Cochran told analysts that 10 percent of the footprint was designated as a “critical” labor situation and another 25 percent was labeled as “concerning.” Cracker Barrel has felt staffing challenges mostly on weekends when stores occasionally didn’t have enough employees to service elevated guest counts, especially in the breakfast and lunch daypart.

But there is good news on that front. Cochran said operators have made “impressive” progress. The chain reduced the number of critical or concerning locations to half of what it was when Cracker Barrel entered the fourth quarter.

The company is now focused on onboarding and training new employees and attracting enough staff to meet historically higher volumes that come in the second quarter. Cracker Barrel has vastly improved back-of-house-employment, so the brand has shifted to hiring more servers. Once those employees start, the next move is targeting retention.

“Our turnover is elevated than what it’s been historically, at really both the hourly and the manager level, but it is still below what we believe the industry is, and I think we will be able to get that under control as we focus on that in the first and second quarter this year,” Cochran said.

In Q1, Cracker Barrel expects sales to be negatively affected by rising COVID cases in core markets, but despite this headwind, comps are currently flat versus 2019, and the chain believes those levels will remain throughout the period. Another encouraging sign is the fact that weekday sales have continued to be strong and were positive compared to two years ago in the fourth quarter.

To Cochran, it shows some customers are returning to their regular habits.

“I do think that we’re seeing in some communities some normalization of routines as we’ve now gone back to the back-to-school session and so on,” the CEO said. “So, we are pleased that we’ve seen the improvement and are hopeful that we will see continued recovery as we head into the second quarter.”

“We’re pleased with the performance we’ve seen at the breakfast daypart and in the weekday breakfast in particular, which says we’ve got a lot of our guests wanting to get back to normal,” she continued later on the earnings call. “And so, it really is a state where many of our customers are just anxious to recover and get back to their routines. And on the other hand, we’ve got consumers that have increased concern with the Delta variant and we’re just going to have to deal with that as it moves through in the next few months.”

As Cracker Barrel heads further into fiscal 2022, the company plans to leverage brand advantages to drive frequency from new and existing guests, starting with continued evolution of the menu. The chain finished the final phase of its dinner menu upgrades in Q4, and now will shift to breakfast.

Similar to what Cracker Barrel did with dinner items, the strategy is to streamline breakfast offerings to alleviate confusion, enable customization with build-your-own products, and highlight value. At the same time, the brand will improve back-of-house procedures and add new items to fuel check growth. The changes will be split into two phases, with the first part currently under test.

The company also hopes to bolster its off-premises presence. Cracker Barrel is confident that it can retain at least 60 percent of off-premises growth experienced during the peak of COVID through awareness building, advertising, and bigger partnerships with third parties, especially virtual concepts.

The chain’s first digital brand, Chicken ‘n Biscuits, was expanded to 100 stores at the end of August. Pleased with the concept’s performance thus far, the company expects the virtual brand to reach roughly 500 locations by the end of Q1. As that product expands, Cracker Barrel will introduce a second concept, Pancake Kitchen, in roughly 100 stores.

In Q4, off-premises sales were more than double what they were in 2019, and the chain retained roughly 75 percent of its peak growth from pre-COVID levels. To boost sales outside the four walls even further, Cracker Barrel will soon introduce a new loyalty program. The brand recently selected an implementation partner and anticipates a pilot test during the second half of fiscal 2022.

The company’s recent work follows the establishment of its digital store, which provides an integrated experience for customers ordering food and retail. 

“We believe the work we did to enhance our digital systems and launch our digital store was foundational not only to our continued growth in off-premise, but also to improving the frequency of visits from the core users of the brand,” Cochran said. “This work provides us with the technological infrastructure and rich guest data to drive additional guest frequency in fiscal ’22, including increased personalization and a customization in our digital marketing and the introduction of a loyalty program.”

While Cracker Barrel zeroes in on these goals, it continues to build its beer and wine program. The beverages are available in 501 stores as of Tuesday, and will reach 600 outlets by the end of Q3. The brand is shooting for a 2 percent mix.

Although Cracker Barrel’s performance fell behind in Q4, the 37-unit Maple Street Biscuit Company experienced an opposite trend. The fast casual delivered significant sales growth with sequential improvements in average weekly sales each month. In Q4, AUVs on an annualized basis were more than $1.2 million, and the chain achieved a store level EBITDA margin of roughly 18 percent for the full fiscal year.

Cracker Barrel projects three openings in fiscal 2022, as well as 15 new stores for Maple Street. The company also foresees commodity and wage inflation in the mid-to-high single digits and capital expenditures of roughly $120 million.

The company reported total revenue of $2.81 billion for fiscal 2021, representing an increase of 11.8 percent compared to fiscal 2020 and a decrease of 8.2 percent versus fiscal 2019. Total revenue in Q4 was $784.4 million, or a 58.4 percent increase against 2020 and a 0.3 percent decrease compared to 2019.