Financing

Advisors side with Cracker Barrel in its struggle with Sardar Biglari

ISS advised shareholders in the family-dining chain to opt for the 10-director slate put forth by management. A competing advisor, Glass Lewis, advised against voting a seat for Biglari.
The proxy battle is expected to be settled by Cracker Barrel's Nov. 21 shareholders' meeting. | Photo: Shutterstock

Correction: An earlier version of this story incorrectly stated that the advisory firm Glass Lewis had recommended  shareholders deny Biglari nominee Milena Alberti-Perez a board seat. The story has been adjusted to reflect that Glass Lewis did recommend she be voted onto the board. 

Investor advisory firms Institutional Shareholder Services (ISS) and Glass Lewis have both taken Cracker Barrel’s side in the family-dining chain’s proxy battle with Sardar Biglari, issuing separate recommendations that the disgruntled shareholder not be voted onto the restaurant operator’s board.

ISS issued its advisory on Monday, three days after Glass Lewis had come down in opposition to giving the investor a place on the board.

However, Glass Lewis did advise shareholders to elect one of Biglari's nominees, , former Getty Images officer Milena Alberti-Perez, to a seat.

Both firms were critical of the corporate governance practices Biglari had set up for the restaurant company he already controls, Biglari Holdings, parent of the Steak ‘n Shake and Western Sizzlin' chains. Both compete with Cracker Barrel in the family-dining market.

The checks put in place at Biglari Holdings to protect shareholders’ investments “leaves much to be desired,” concluded ISS. 

Glass Lewis contended that the governance practices in effect at Biglari Holdings “have clearly been tailored to heavily blunt the rights of unaffiliated investors” and “materially undermines the credibility of his service at other publicly traded firms.”

Biglari has run Biglari Holdings with admittedly near total control. The homepage of the company’s website states, “All major investment and capital allocation decisions are made for the company and its subsidiaries by Sardar Biglari.”

ISS was also critical of Alberti-Perez. The firm contended that she lacks restaurant-industry experience, and cited concerns about how she handled herself while interviewing with the current board as a nominee for a seat. Although Alberti-Perez had by her own admission never so much as eaten in a Cracker Barrel, she didn’t correct that potential shortcoming by visiting a store prior to the meeting with directors. 

“For a dissident candidate who lacks direct restaurant industry experience, this lack of due diligence is concerning,” ISS remarked.

Biglari had initially proposed that five seats on Cracker Barrel’s 10-person board be given to candidates he favored.  With one of the seats held already held by Jody Bilney, a director who’d been nominated by the investor in a 2022 proxy challenge, Biglari and his allies would have controlled the board.

But he tempered his nominated slate to three candidates: Himself, Alberti-Perez and Michael Goodwin, a veteran of pet supplies retailer PetSmart.  

After interviewing Goodwin, the sitting board concluded that he would be an effective director. Another director opted to retire, clearing a seat for Goodwin. Management is now urging shareholders to vote him into that seat.

The current proxy battle is the seventh attempt by Biglari over the last 14 years to steer the chain away from the strategic course that has been set by management. The current plan calls for a $700 million-plus rejuvenation effort that extends from what’s on the menu to new flooring for stores. The executive team has informed shareholders that the turnaround will likely take three years.

Biglari has called on the board to stem that process, return the earmarked capital to shareholders, and halt the rollout of a young growth concept Cracker Barrel acquired in 2019, a breakfast-and-lunch operation called Maple Street Biscuit Co. The investor has called on management to sell the chain and focus exclusively on the Cracker Barrel brand, which currently generates about 98% of the company’s revenues.

Biglari controls about 9.3% of Cracker Barrel’s stock.

His abilities as an operator have been repeatedly called into question during the current proxy contest. Cracker Barrel sent out a scathing indictment last week of the shareholder’s performance in leading restaurant chains. 

Biglari Holdings posted its financial results for the third quarter on Friday. The filing shows Steak ‘n Shake shrank by 21 locations between Jan. 1 and Sept. 30, 2024, leaving 143 branches of the chain. But 11 of those have been shut because of pending plans to sell, lease or refranchise the locations, according to SEC documents. Only 32 Western Sizzlin' stores remain in operation.

Despite the closings, the company generated a net income of $4.9 million from its restaurant holdings, a 43% increase, the securities filing shows.

The current proxy battle is expected to conclude at Cracker Barrel’s annual shareholder meeting, which is scheduled to take place in virtual form on Nov. 21.

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