So much for the idea that Sardar Biglari was going away from his Cracker Barrel investment quietly.
The activist investor, whose company Biglari Holdings owns Steak ‘n Shake, on Wednesday sent a letter to Cracker Barrel CEO Sandra Cochran that is critical of new store openings and in particular the company’s Holler & Dash fast-casual concept.
The letter comes after Biglari sold thousands of shares in recent months, reducing his stake in the Lebanon, Tenn.-based family-dining chain from nearly 20% to 14.7%.
The reduction had seemingly been an indication that Biglari was turning his attention to other matters, such as a loan to Fatburger owner Fat Brands. And it opened up possibilities that Cracker Barrel could buy back investors’ shares without worrying about increasing Biglari’s voting power over the company.
Instead, Biglari has reignited an activist push against Cracker Barrel that had been dormant since 2013, when the investor lost his third straight effort to win seats on the company’s board of directors.
In this instance, Biglari is taking issue with Holler & Dash, the fast-casual biscuit concept that Cracker Barrel opened in 2016, and which currently has seven locations. “From the outset, we believed Holler & Dash was an ill-conceived project that was destined to fail,” Biglari wrote. “After three years, our conviction has only intensified. The company has no business pursuing a startup.”
He called it a “de novo maneuver” that “necessitated significant administrative expenses” and “continues to distract managerial attention from the brand that brought all of us here.”
“Does anyone believe that Holler & Dash will move the financial needle?”
(Question: Does anybody think that Western Sizzlin’ or Maxim magazine move the Biglari Holdings needle? Just asking.)
Biglari also takes issue with new Cracker Barrel locations. The company has opened 52 locations since 2011, Biglari wrote, costing the company $240 million.
Biglari has long railed against Cracker Barrel’s investment in new locations, arguing they are not a good use of capital. He argued back in 2011 that the company received just a 4% return on restaurants opened between 2004 and 2009, and he asked Cochran to publish the total investment in new stores as well as pertinent data to judge the returns the newly built restaurants have generated since 2011.
Biglari also wants Cracker Barrel to either maintain or increase its special dividend of $3.75 a share.
During the last earnings call, Cochran said that the company has “some options that were not previously available” regarding capital allocation and that the board would consider whether to do share buybacks or whether to continue paying the dividend.
Cracker Barrel has long paid dividends but has paid out the large special dividend for years because it could not buy back shares.
Biglari says the dividend should continue. “Special dividends should be paid irrespective of our level of ownership,” he wrote.
“Simply because we are a near 15% owner instead of 20% should not change the company’s capital allocation policy,” Biglari wrote, noting that he remains the single largest shareholder in Cracker Barrel.
And he is clearly not going away.