Cracker Barrel is cutting jobs at its headquarters as it works to recover from an ill-fated rebrand that has hurt sales and profits.
The Lebanon, Tennessee-based family-dining chain did not say how many employees will be affected by the restructuring, which is taking place in two waves. But the company estimated that the process will save it $20 million to $25 million a year.
“What we’re doing here is driving incredible focus,” said CFO Craig Pommells during an earnings call Tuesday. “Our highest priority is food and the guest experience. There’s some other workstreams that are value-creating, but over a longer period of time, that we have pulled back on for now.”
The announcement was part of the chain’s business update for the three months ended Oct. 31, a period during which it unveiled a new, more modern logo that sparked intense backlash from consumers, who complained that it was bland and “woke.” The controversy, which appears to have been fueled by social media bots, led to calls to boycott the chain and oust its CEO and even drew a rebuke from President Trump.
Cracker Barrel quickly walked back the logo, as well as a plan to remodel its restaurants, but the damage was done. For the quarter, same-store sales declined 4.7% on a 7.3% traffic decline. Total revenues fell 5.7%, and income swung to a loss of $24.6 million.
The fallout from the logo debacle was exacerbated by a softer macroeconomic backdrop, executives said. And trends have worsened more recently, with traffic down about 11% quarter to date.
The results prompted the company to lower its already dim expectations for the rest of its fiscal year. It’s now expecting total revenue of $3.2 billion to $3.3 billion, down from $3.35 billion to $3.45 billion, which would mean traffic of negative 8% to 10%, down from negative 4% to 7% previously.
It’s also forecasting adjusted EBITDA of $70 million to $110 million, versus its prior outlook of $150 million to $190 million. The new estimate includes the savings it will get from restructuring.
To turn things around, Cracker Barrel is focusing on improving its food and customer experience through new menu launches and better operations.
On the food front, it's continuing to bring back old customer favorites. Most recently, that included country fried turkey, cinnamon swirl French toast, and the much-requested turkey sausage. Up next are hamburger steak and eggs in a basket. It’s also introducing innovative new items, like a breakfast burger.
The operations side remains a work in progress. After rolling out the first phase of a plan to streamline its back-of-house operations this summer, the company determined that it wasn’t working and has returned to its former processes.
“What we really saw was that the teams struggled with the complexity of it at scale,” said CEO Julie Masino. “Everything had to be perfect, is really what we learned as we rolled it out. And that's, in our world, just very difficult to control for.”
The chain is still testing other ways to improve efficiency, she added. And it recently promoted longtime field operations leader Doug Hisel to the new role of SVP of store operations. The move puts headquarters closer to teams on the ground, and it already appears to be delivering results: Executives said the chain’s Google rating has been running at its highest level since early 2020, and its food taste, service, value and experience scores all improved between 3% and 4% in October and even more in November.
“These metrics are important leading indicators, and we expect they will translate into improved traffic over time,” Masino said.
While those efforts will take time to fully pay off, the chain is also taking steps to boost business in the near-term. In the first quarter, it launched a series of buy one, get one offers, a kids eat free promotion and all-you-can-eat pancakes for National Pancake Day.
For the holidays, it’s introducing its take on the Happy Meal: Kids meals will come with a free toy of up to $5 from the chain’s gift shop, or $5 off a more expensive toy.
“We're actually really pumped about that,” Masino said. “It is uniquely Cracker Barrel. It activates both sides of our business. And unlike some LTOs that are so prescriptive, what I personally love about this is that you get to pick.”
At the same time, the company also said it plans to reduce its advertising spend by $12 million to $16 million over the remainder of the year as part of its cost-cutting efforts. Some analysts on the earnings call questioned how this would impact the chain’s ability to drive much-needed traffic.
Masino said, essentially, that some of its other work has to come first.
“We have a brand reputation issue that we are working through, and that takes rebuilding trust one guest at a time. And that's going to take some time,” she said. “And that's why we're so focused on operations, so that everybody who comes in has a great experience and that will get that momentum ball rolling in that direction.”
Executives also pointed to the chain’s loyalty program, Cracker Barrel Rewards, which now has more than 10 million members who account for 40% of sales. “We're able to talk to those guests directly in a more cost-effective way,” Pommells said, which could help the chain manage with less advertising.
Cracker Barrel’s stock was down about 8% in after hours trading Tuesday.
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