Cracker Barrel Old Country Store — the brand best known for rocking chairs out front, a gift shop of tchotchkes inside, and for being the restaurant of choice for road-tripping families — has been struggling for a long time.
After several quarters of negative traffic and sales, new CEO Julie Felss-Masino announced last month that the family-dining chain would be undergoing a brand makeover to become more relevant, with five pillars of change, ranging from store remodels and tech investments to menu changes and pricing. While brand makeovers are not unusual (Domino’s and Papa Johns both announced new strategic overhauls at the start of the year), Cracker Barrel needs to walk a pretty narrow balance beam of modernizing the brand without drifting from the kitschy, homey vibe the chain is famous for.
During Cracker Barrel’s investor update call, which was hosted just two weeks before the company’s Q3 quarterly earnings, Massino broke down the ways in which the company is trying to dig itself out of the red and onto a positive path forward. While these company updates typically don’t pique the interest of the public outside of investor and restaurant news circles, mainstream media picked up the story, and Cracker Barrel was trending on X, the social media platform formerly known as Twitter.
The general consensus is that Cracker Barrel might not be relevant, but a “modern corporate” makeover of the nostalgia-heavy brand would be worse:
Even though the Cracker Barrel brand has evoked strong nostalgic feelings in customers (or even social media users who have not been to the restaurant in years), it is apparent that change needs to happen. During Cracker Barrel’s Q3 earnings call last week, the company reported same-store sales declines of 1.5% and 5% negative traffic trends.
“With traffic down almost 20% from 2019, guests are telling us they're not choosing us,” Massino said during the call. “We heard from them that the experience in Cracker Barrel just isn't as relevant, specifically at dinner…. We've held up quite well at breakfast. But what guests have told us is that the Cracker Barrel experience, there are more relevant choices for them in the dinner daypart based on the experiential factors.”
Store remodels will be a major part of Cracker Barrel’s reinvention plan, with a focus on adding more comfortable seating, brighter lighting, and freshened paint jobs. The issue is that a paint job might not be enough to elevate the Cracker Barrel brand, but these aesthetic changes might also alienate fans who have always found Cracker Barrel’s steadfast theming to be charming, rather than irrelevant.
This could be why the company is starting off slowly with two new stores acting as the remodel guinea pigs to gauge guest reaction:
“They are very much lab stores at the moment — we're seeing great guest feedback on the quick remodels that we did there and just the feeling of lighter, brighter, fresher, cleaner, and a place where you want to have dinner,” Massino said. “It’s feeling like a better version of Cracker Barrel, and we believe we’re on the right track.”
Cracker Barrel is also facing challenges with its lower income consumers. While this has been a theme across multiple company earnings calls this quarter, it is especially relevant for brands like Cracker Barrel known for their appeal to the price-sensitive consumer.
“Traditionally, Cracker Barrel has been a great value, and we've actually held up well over the longer term with the under-$60,000 [household income] consumer, but more recently, you've seen some pressure there,” Masino said.
Just like the store makeovers, the new Cracker Barrel barbell pricing strategy is a risk that could alienate customers used to eating inside a restaurant that has not made many changes for years, including the pricing. However, Masino explained that the barbell pricing strategy will allow the company to be “sharper” with pricepoints, and appeal to that same lower-income customer, while allowing customers of any stripes to spend more if they want to explore the menu.
“We've been really maniacal about thinking about how we protect value while making sure that we take price in a way that better sets us up for success and better flows through,” she said. “We've taken about 3% of price, and most of that is flowing through.”
For the third quarter ended April 26, Cracker reported a loss of $9.2 million or $0.41 per share, down or $1.19 per share, down 166% from $13.96 million or $0.63 per share the same quarter the year prior. The company closed four Cracker Barrel stores and opened zero Maple Steet Biscuit Company units in the third quarter for a total of 721 restaurants portfolio-wide.
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