Cracker Barrel Has a Guest Traffic Problem
Chief executive Sandy Cochran is concerned with Cracker Barrel’s traffic. The casual chain’s same-store sales declined 0.4 percent in the fourth quarter, year-over-year, with average check up 3.1 percent. But a guest traffic drop of 3.5 percent spoke to a larger worry for the 660-unit brand.
For the fiscal 2018 calendar, traffic fell 1.9 percent (comps increased 0.6 percent). Cracker Barrel posted total revenue of $810.9 million in Q4, an increase of 9.1 percent compared to last year's $743.2 million.
"I'm concerned with our traffic trends, and over the past few months, our team has been rigorously analyzing the underlying factors of our underperformance," Cochran said during a September 18 conference call.
Here’s a look at the bigger picture at play in regards to comparable guest traffic:
- Q4 2018: –3.5 percent
- Q3 2018: –1.3 percent
- Q2 2018: –0.9 percent
- Q1 2018: –1.8 percent
- Q4 2017: –1.8 percent
- Q3 2017: –2.1 percent
- Q2 2017: –2.1 percent
- Q1 2017: –1.7 percent
Cochran added there were a number of factors exacerbating the Q4 spike. However, “there are other issues which contributed to traffic erosion over both the quarter and the entire year.”
In the short-term outlook, the underperformance of Cracker Barrel’s Campfire menu and marketing promotion sagged results. It was the chain’s third consecutive year running the program, and, Cochran said, new menu items didn’t resonate. The company’s media strategy to run fewer weeks at higher concentrations also fell flat.
But turning to the larger dynamic, Cracker Barrel is dealing with declines across guest experience metrics and faltering on value positioning, as well as failing to deliver “craveable food offerings,” at the rate it needs. Cochran believes this hurt traffic, especially with lighter users.
“We've been reevaluating the touch points we have with our guests in order to execute more consistently, particularly at dinner, which has been the most challenged of our dayparts,” she said in regards to the guest experience.
One example of this is what Cracker Barrel calls the “check back, check down,” process, where servers will give a table their check before they’re finished eating. This has worked with travelers and earlier dayparts, but it’s not an effective strategy with dinner guests in every market, Cochran said.
Cracker Barrel is also executing a holistic review of its employee experience. “… we're looking more at every piece of it, how we are training our employees, how we are communicating to them, how we define the service model," Cochran said.
The company is working to implement a new point-of-sale system that will help on the sales side on top of cost savings. It’s going to allow servers to have tablets as well, “which we believe will help both the guest service experience, along with us being able to better manage the labor and leverage labor,” Cochran said. With the technology, Cracker Barrel will be able to look at a new labor system and food cost management system. About 40 restaurants currently have the POS in place. Up to 80 will join in fiscal 2019.
Bank on bone-in fried chicken
An emphatic part of Cracker Barrel’s reenergized goal of “delivering craveable food offerings” is the continued introduction of bone-in fried chicken to the chain’s core menu. It’s a hand-breaded four-piece half chicken plate, served with two sides and bread that is “executable at high volumes,” Cochran said.
Cracker Barrel began testing the product last fall to iron out operational issues and gather guest intel. Based on positive results, the brand expedited rollout and now features bone-in friend chicken in about 45 restaurants. Cochran said Cracker Barrel plans to have nearly 170 additional restaurants featuring the product before Thanksgiving, which is typically a monster sales day for the chain (it sold some 500,000 pounds of turkey last year).
In addition to driving repeat visits, Cochran said the platform has strong off-premises potential. “We're very excited about the fried chicken platform, but the initiative is complex as the platform requires multiple new pieces of kitchen equipment. Our time line is aggressive, but we're prioritizing initiatives such as fried chicken that focus on traffic and sales,” she said.
After the expansion to 170 restaurants is complete, Cochran said Cracker Barrel would take a break and kick back up in January. The platform aligns with Cracker Barrel’s desire to push the value conversation as well. In this case, Cohran credits the abundance of the offering.
“We are excited about that bone-in fried chicken because even though when customers have experienced that product, they think it's bountiful and a very good value for the amount of food they're getting for the price,” added Don Hoffman, senior vice president of marketing.
Value in value
“We continue to believe that everyday value is a key differentiator for the Cracker Barrel brand. In the current environment in which there's a heightened focus on value both from our consumer and our competitors, we must do a better job of communicating and reinforcing our value offering,” Cochran said.
How will Cracker Barrel fix this? First it will make value and affordability priorities for its culinary team through all stages of product development for menu promotions, Cochran said, as well as for core menu additions. It will also push its “Daily Delights” platform.
Cracker Barrel tested “Daily Delights” during fiscal 2018 before implementing it systemwide in August. The offering allows Cracker Barrel to communicate everyday value with Sunrise Specials at breakfast, Weekday Lunch Specials, and the Country Dinner Plates. The overall premise is that guests can count on three specific price points—$4.99, $5.99, and $7.99 for the three dayparts, respectively. Cochran said Cracker Barrel’s culinary team is looking for ways to bring fresh news to those three platforms. “… Daily Delights is one of the strategies that we're using to reinforce everyday value, but we continue to keep value top of mind in product development that we do and in other offerings and pricing strategies that we use throughout the business model,” Hoffman said.
Expect to see a renewed communications strategy around these value deals and the price-point message in the future.
Off-premises, and the catering boom
Cracker Barrel is making a concerted effort to accelerate the off-premises side of its business, growing by “introducing new offerings, increasing our awareness and delivery coverage and improving our processes and execution,” Cochran said.
The chain is adding new catering items in Q1, including a 4-layer breakfast bowl and chicken and waffle sandwich. Cracker Barrel brought on a catering sales manager in key markets in recent months to help drive awareness and sales, and plans to expand to additional areas over the course of the year. “We believe that the expanded fleet of catering vans, coupled with the catering sales managers, will help further unlock the B2B catering opportunity,” Cochran said.
In fiscal 2019, Cracker Barrel hopes to grow its third-party and in-house catering delivery platforms. It expects to have third-party delivery available in more than 200 stores by year’s end, and to add to its catering van fleet so it covers a large subset of Cracker Barrel’s system.
Growth plans, and the halting of Holler & Dash
Cracker Barrel opened eight new locations in the fourth quarter. It debuted three Holler & Dash stores as well since the prior-year fourth quarter. The company expects to open eight Cracker Barrel restaurants in 2019. As for the fast-casual Holler & Dash, Cochran said this year would be spent on making adjustments to the model and processes based on customer feedback and operational learnings before further expansion.
“And then when we’re ready, we will continue expansion,” she said.
The goal from the beginning was to open a group of “alpha stores,” in diverse markets to validate the company’s expectations and figure its build-out potential.
The effect of Florence
Cracker Barrel has felt the effect of the storm, which hit the East Coast late last week. Jill Golder, the chain’s CFO, said five stores remain closed. Thirty-seven were closed or had some modified hours at some point in time. She added Cracker Barrel hopes to open three later this week and that the team reported no injuries to employees. The negative effect on same-store sales was about 30 basis points.