Punch Bowl Social has hit an early snag in its partnership with Cracker Barrel Old Country Store with the closing of a 4-month-old prototype that both parties had touted as a potential growth vehicle.
The now-shuttered Punch Bowl food and games outlet in Fort Worth, Texas, was smaller than most branches of the eatertainment chain. Its reduced size and lower development costs were expected to broaden Punch Bowl’s expansion options and facilitate its growth to 100 locations, the target cited by Cracker Barrel after the two brands announced an alliance in July. Cracker Barrel agreed to invest up to $140 million in the then-17-unit chain for an equity stake of less than 50%.
Cracker Barrel CEO Sandy Cochran says she still expects her charge's new partner to hit that 100-store mark.
“We’re disappointed that Fort Worth wasn't successful,” she told financial analysts after releasing Cracker Barrel’s financial results for the first quarter ended Nov. 1. “In this particular case, we believe it was a site selection issue more than a small-box issue. And we're partnering with the team at Punch Bowl to understand better all of the situation and to improve that process.”
She stressed that Cracker Barrel remains optimistic about Punch Bowl’s value as a growth vehicle.
Cochran also provided an update on Cracker Barrel’s other diversification: its acquisition of the 33-unit Maple Street Biscuit Co. concept. Like Cracker Barrel’s homegrown Holler & Dash venture, the chain offers biscuit-based breakfast and lunch items in a fast-casual format. The plan announced at the time of the $36 million deal was to convert Holler & Dash’s seven branches into units of Maple Street.
The purchase closed in October, Cochran said. “We expect the integration to last until the spring, and we look forward to accelerating growth in the months following the completion of the integration,” she added.
In revealing Q1 results, Cochran noted that industrywide traffic and sales have weakened, prompting the company to lower its guidance for its namesake concept for fiscal 2020. The company now expects to finish fiscal 2020 with a 2% rise in same-store restaurant sales, compared with the previous expectation of 2% to 3%.
For Q1, Cracker Barrel’s restaurant comps rose 2.1% despite a 1.5% decline in transactions. The brand’s average check rose 3.6%. Same-store retail sales slipped 0.9%.
The company’s net income for the quarter totaled $43.2 million, an 8% drop from the year-ago period. Revenues totaled $749 million, up 2%.