Regardless of what else can be said about Sardar Biglari, and there’s certainly plenty, he’s no quitter. After years of trying unsuccessfully to commandeer control of Cracker Barrel Old Country Stores, he’s trying yet again to put himself in power, gangland-style, this time taking to the mattresses against the family chain’s board instead of its executive team.
With roughly six weeks to go until director elections, the activist investor is all but accusing the current board of kicking puppies and canceling Christmas. He sent a blistering letter on Tuesday to fellow shareholders, laying out his case that the panel’s lax oversight has cost stakeholders $2.9 billion in lost market value since 2019.
Not coincidentally, his remedy for the situation is electing himself and two allies to the board. With another proxy already a director, Biglari’s faction would then control four of the 10 seats—enough, he’s wagering, to let him put his turnaround plan in action for the ailing chain.
Management, led by new CEO Julie Masino, has already detailed a strategy and begun its implementation. Essentially it calls for drawing more visits from current Cracker Barrel fans while pulling new customers into the tent through a combination of re-engineering the menu and operations, updating the interior and exterior look of the restaurants and amping up the brand’s traditional appeal to the value-conscious.
But Biglari has some issues with that plan, not the least of them being a price tag of more than $600 million.
“The plan the Board has adopted involves remodeling the units with new booths and banquettes, which have not been part of store interiors to date,” he writes to fellow shareholders. “Yet the problem lies not in the seating but in getting more people to sit in it. We do not believe changing the furniture and altering the decor are going to change the Company’s trajectory or solve the Company’s underlying problem of declining traffic.”
He lists the key points of his alternative strategy: Sell off Maple Street Biscuit Co., Cracker Barrel’s young sister concept, to lessen distraction from the turnaround; halt all unit openings and eliminate the development team to save money; and, in somewhat of an overlap to what Masino has planned to do, focus laser-like on improving store-level operations and economics. He just disagrees with her on the how, or at least to some degree.
In his estimation, Cracker Barrel’s plan is “a strategy to undifferentiate itself — and at a high cost,” writes Biglari, who controls 9.3% of its stock. “It should not be all things to all people, but known for offerings that are differentiated in an old-fashioned way whose consistent ingredient is quality.”
Yet Masino has sounded the same principle. Indeed, she’s emphasized that any innovation has to be consistent with Cracker Barrel’s old-timey theme. Give her five minutes and she’s almost certain to mention a new shepherd’s pie, a premium comfort dish that’s not exactly a leap from Cracker Barrel signatures like chicken pot pie or meatloaf. Masino says it’s been a huge hit and an example of where the menu is heading.
Biglari slings plenty of vitriol in his criticism, but it’s not all heat without substance. He notes, for instance, that management burned through $1.4 billion in capital between 2011 and 2023, only to see operating income fall by $46 million. And Cracker Barrel’s stock price has fallen 70% over the last five years.
They’re familiar laments from the activist. But he lays the blame this time on the company’s board, not its CEO, a marked departure from his sharp past attacks on Masino’s predecessor, Sandy Cochran. “The collective Board bears full responsibility for the Company’s poor operating performance, poor capital allocation record, and poor shareholder returns,” he writes.
Biglari has even indicated that he’d not oppose Masino’s retention of a board seat.
He does take issue with the CEO’s public contention that “we’re just not as relevant as we once were.”
“If so, where was the Board during this period of slow and steady decline?” Biglari writes.
He adds, “We believe Cracker Barrel is relevant; the problem rests not with the brand but with its board.”
Later in the day, the company responded to Biglari's love note.
"Cracker Barrel’s new CEO is leading an energized team executing on a detailed strategic transformation plan that was informed by extensive consumer research and analysis and is demonstrating strong early results," it said in a press release. "We are focused on executing on our transformation, while Mr. Biglari is focused on running an unnecessary proxy contest – his seventh campaign in 13 years.
"Needless to say, the Cracker Barrel Board disagrees with virtually all of Mr. Biglari’s statements, and we look forward to engaging with our shareholders on these matters in due course."
Cracker Barrel’s annual shareholder meeting is scheduled to be held on Nov. 21.
Update: Cracker Barrel's response to Biglari has been added.