Is Cracker Barrel’s off-premise push hurting in-store traffic?

The chain’s traffic continues to decline, and the CEO thinks delivery pressure is to blame.
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Cracker Barrel Old Country Store is reporting significant growth in off-premise business, but the restaurant company—which relies heavily on sales of knickknacks and other items in its retail stores—worries the off-premise push is hurting in-store sales.

The Lebanon, Tenn.-based, 658-unit casual-dining chain Tuesday reported a traffic drop-off of 1.6% for the quarter ended Nov. 2. Same-store restaurant sales rose 1.4% during the period. That’s an improvement over the 3.5% traffic slide the company reported for its fourth quarter.

The company, which has begun adding more expensive items to its menu mix, saw check averages climb 3% year over year.

“We made progress in addressing recent traffic declines, but we still have much work remaining,” CEO Sandy Cochran said during a call with analysts.

Cracker Barrel saw off-premise growth in the “high teens,” executives noted during the earnings call. However, that expansion has come at a cost.

Stores are noting inconsistencies in guest satisfaction scores during different days and dayparts, Cochran said, and there’s concern the deterioration has been prompted by increased operational pressures caused by the influx of off-premise orders. Cracker Barrel is ramping up its training programs, with a focus on its hosts and the attentiveness of its servers, to attempt to reverse the downward trend, she said.

“We don’t ever want to sacrifice the experience of the guests that come to eat with us in the dining room,” she said.

Cracker Barrel reported total revenue of $733.5 million for the first quarter of fiscal 2019, up 3.3% year over year. Retail sales in the gift shops attached to the restaurants rose 4.3% year over year, driven by novelty merchandise including oversized plush hedgehogs and llamas, she said.

The chain is placing high hopes on the rollout of its fried chicken menu offerings, currently in 200 stores and slated to launch chainwide by summer. Executives expect fried chicken to be a popular off-premise option as well and are researching the best takeout packaging for it while formulating marketing campaigns and value-based offers around it.

“Whole chains have been built on the idea that bone-in fried chicken is a terrific protein for to-go,” Cochran said.

For Thanksgiving, Cracker Barrel introduced a number of efficiencies to make its heat-and-serve platform easier to execute, including accepting payments for orders at the back door, increasing the number of refrigerators and improving ordering technology, she said. Those operational changes will carry on throughout the holidays as Cracker Barrel seeks to drive traffic through off-premise and catering.

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