Cracker Barrel Turns to Menu Changes and Delivery to Boost Traffic and Sales – Motley Fool

Seeking to dish up tasty, home-style Southern cooking to its customers and mouth-watering growth for its investors, Cracker Barrel Old Country Store (NASDAQ:CBRL) mostly succeeded in its fiscal Q2 2020, but might have come up a few biscuits short. Efforts to shore up profits with a refreshed dinner menu, a vigorous delivery push, and integration of a new acquisition drove decent comparable-restaurant sales growth. However, traffic fell slightly short, and Cracker Barrel's long history of rising value seems to have reached a plateau, making it uncertain whether the company has lost momentum or is about to catch its second wind.

Cracker Barrel recently began upgrading and simplifying it menus, aiming to strengthen overall sales and the dinner daypart in particular. According to CEO Sandra Cochran during the company's Q2 2020 earnings call, its country fried steak and chicken and dumplings were "improved" with higher quality and better cooking processes. Simultaneously, Cracker Barrel raised the prices of these items and other improved foods on the menu.

Sales results clearly show that the appeal of the more toothsome recipes dished up to customers more than offset the impact of higher prices. The average size of checks rose by 4%, while traffic fell by 0.2%, leading to 3.8% overall growth in comparable-store restaurant sales. Quarterly operating income rose 3.2% year over year. These results surpassed those of the casual dining industry as a whole.

Image source: Cracker Barrel

Cochran noted that mild winter temperatures over much of Cracker Barrel's main area of operations meant that traffic wasn't affected by winter cold and storms as severely as in previous years. Therefore, the slight decline in traffic likely resulted from the pricier menu items. However, the growth in check size greatly outpaced the decline in traffic, indicating that the restaurant has hit on menu item changes that are genuinely pleasing diners, making them willing to spend more.

Cracker Barrel achieved and beat its 10% goal by increasing quarterly deliveries to 13.2% of its total sales. Out of its approximate 695 total restaurants in the USA, around 600 locations now provide off-premise sales. The company hasn't tied itself to a single delivery service, but uses GrubHub (NYSE:GRUB), DoorDash, Uber Eats, Postmates, and any other available partner to get everything from individual meals to catered food to customers' doorsteps.

Off-premise sales are especially strong around major holidays like Thanksgiving and Christmas, according to CEO Cochran. She noted that Easter was expected to provide another boost to deliveries, though not on the same scale as the big winter holidays.

In addition to refreshed, higher quality dishes on the menu and fast-growing deliveries, Cracker Barrel is also working at integrating its new acquisition, Maple Street Biscuit Company, into operations. Where Cracker Barrel's internal menu improvements aim squarely at dinner, Maple Street addresses the other end of the dining day with breakfast items. Cracker Barrel made an outlay of $36 million in cash to buy out the brand back in October 2019, adding breakfast expertise and 28 locations to its business.

Founder and CEO Scott Moore remains at the acquisition's head, though now with the full backing of Cracker Barrel's resources for future expansion. The subsidiary will remain fairly autonomous, according to Moore, giving it the freedom to grow its business in line with its existing strategies.

Cracker Barrel has consistently outperformed the S&P 500 since 2006, rising in value by more than 300% between then and January 2020, while the S&P500's value increased roughly 150% during the same timeframe. Over the past several years, the company's gains have leveled out, moving in a channel centered on its approximate current stock price.

However, all current signs suggest that Cracker Barrel isn't content to just coast on its existing success, but is vigorously pursuing a multipronged strategy to maintain the initiative. While maintaining its wholesome, folksy, country-themed image, it's innovating in the key areas of its existing menu, delivery, and acquisitions chosen to shore up areas Cracker Barrel isn't currently focusing on internally, such as breakfast in the case of Maple Street.

Its success with revitalizing popular, existing foods may foreshadow positive results from its planned addition of entirely new dishes in the near future, too. Chicken pot pie and country fried pork chops, along with other as-yet-undisclosed menu items, will soon be getting the quality makeover. Cracker Barrel seems to be making sure its current cuisine stays high-quality and relevant, while exploring fresh possibilities for expansion. Fools investing in restaurant stocks may want to monitor its earnings to see whether its long-term performance and 14-year winning streak endure into the future.

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Cracker Barrel Turns to Menu Changes and Delivery to Boost Traffic and Sales - Motley Fool