You can’t go on a road trip anywhere in the United States without seeing a Cracker Barrel sign at least once. It’s the place you can count on for comfort food right off your highway exit.
There’s something for everyone there. Want breakfast for dinner? No problem! Want dinner for lunch? Go ahead and order it.
Cracker Barrel has been in our lives since 1969. It’s become an American icon…a tradition.
There’s someone in the midst though. He’s trying to come in and take over the restaurant chain we’ve grown to love. This person is Sardar Biglari.
For the last two and a half years, he’s tried to convince Cracker Barrel’s board of directors to sell the company. Here’s what he had to say in a recent filing with the SEC:
“We believe Cracker Barrel’s assets would be far more productive under our leadership than in the hands of present leadership. Thus, we are willing to purchase the business because we perceive a significant upside under our management. But other sophisticated buyers also should have the opportunity to bid for the company.”
James W. Bradford, who is the Cracker Barrel Chairman, has and continues to reject Biglari. His latest refute was:
“We are disappointed that Mr. Biglari is seeking to call a special meeting to vote on a proposal requesting that the company commence a sale process, particularly in light of his defeat by substantial margins in three consecutive proxy contests.”
It’s a tug of war between Cracker Barrel and Biglari, and the business model is the rope. Cracker Barrel says its restaurant-plus-retail chain is a good model, while Biglari believes in other ideas.
Biglari may be on to something though.
Healthy Comfort Food?
Any person going to Cracker Barrel knows that he is not going to be getting the healthiest foods on the planet. The bulk of the menu is meat-based dishes and they are anything but lean.
America is turning away from fatty meats, and many are shunning meat altogether. Google searches for the term “vegan” have reportedly risen in popularity all across the country over the last five years. Are more people turning vegan? You bet!
The Business Journal for Meat and Poultry Processors reported the USDA is expecting a decrease in beef consumption in 2014 of about 4.8 percent. The consumption already decreased from 2012 to 2013 by about 1.2 percent.
The USDA also reports that people will 12.2% less meat than in 2007.
The trends are clear: People are interested in pursuing vegan options, and those that aren’t will still eat less meat in 2014. Cracker Barrel, and other meat-heavy comfort food outlets will face depressed demand for nearly all of their dishes.
In August, Cracker Barrel addressed this demand by launching a line of healthier menu options under the moniker “Wholesome Fixin’s.” The menu includes a number of meals with a total calorie count under 600.
The move was meant to entice new customers who would otherwise avoid Cracker Barrel in favor of a less artery-clogging meal.
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Sit-down Restaurants vs. QSRs
The inclusion of healthier fare brings up an important trend in food service: the continued increase in the popularity of QSR’s (Quick Service Restaurants.)
The top ten chains that grew the most in 2013 were:
- Firehouse Subs
- Jimmy John’s Gourmet Sandwiches
- Buffalo Wild Wings Grill & Bar
- Chipotle Mexican Grill
- Moe’s Southwest Grill
- Little Caesars Pizza
- Panda Express
From this list, only two are “sit down” restaurants – Cheddar’s and Buffalo Wild Wings Grill & Bar.
Speed is one issue here, and menu is another. The two hallmarks of QSRs are their fast food-like speed, and their narrowly focused menus. Cracker Barrel already offers a broad selection of sandwiches, platters, side dishes, and desserts, and that creates a more strenuous supply and management system for each restaurant. By broadening its menu to include healthier food, Cracker Barrel is putting itself at a slight disadvantage.
The main thing that Cracker Barrel has over all of these Quick Service Restaurants is retail. While the retail side doesn’t make as much as the restaurant, it provides an important revenue stream and contributes to increased customer spending.
Is Cracker Barrel a Bad Investment?
With Biglari being the largest shareholder of the restaurant with almost 20%, he is going to continue with his quest on getting the company to sell. He is currently working on partnering with a bank to secure finances, so he can try to buy the company. It won’t work because Tennessee law prohibits him from buying it, but it shows that Biglari is going to try anything he can to try to get his way.
Despite all of the people proclaiming veganism, and ducking into QSRs for fast meals, shares for Cracker Barrel were up 70% in 2013. Since Biglari successfully took over both Western Sizzlin’ and Steak and Shake, his antics are actually driving up the share value.
He understands these restaurant trends as they apply to “heartland” dining.
So it’s a good idea to watch the company knock down his takeover attempts, because it gives the market a clear picture of just how desirable the property it is, even with a conciliatory healthier menu.