It was shaping up to be a solid summer for Cracker Barrel.
COVID-19 cases were declining, dining restrictions were being lifted, and pent-up Americans were preparing to hit the road for summer vacations—a key consideration for the chain's many Interstate-adjacent stores.
However, not all of that went as planned. And other factors, chiefly the industry’s ongoing labor crisis, combined to make it a difficult three months at the 663-unit chain.
“May sales were softer than we expected,” said CEO Sandra Cochran on the chain’s fiscal fourth quarter earnings call Tuesday. “And unfortunately, this softness persisted through most of the fourth quarter.”
Specifically, same-store restaurant sales for the period ended July 30 were down 6.8% compared to 2019.
Cochran blamed four factors for the slowdown:
- Summer travel did not return to the degree the chain was expecting.
- A resurgence of COVID-19 cases, particularly in Cracker Barrel markets, affected traffic and employee availability.
- Consumers gravitated toward higher-check, celebratory occasions not typically served by Cracker Barrel.
- Staffing challenges impeded its ability to meet demand.
The chain felt the labor pinch most on weekends, when its restaurants sometimes didn’t have enough workers to handle the influx of guests at breakfast and lunch, said interim CFO Doug Couvillion, according to a transcript from financial services site Sentieo.
As it emerges from what Cochran called one of the most challenging years in its 50-year history, though, Cracker Barrel appears to be getting some of those staffing problems under control.
For one thing, it has made “significant progress” in hiring, particularly in the back of house, and is now turning its attention to hiring and training servers. Cochran credited a “grassroots effort” for helping the company reduce by half the number of stores in critical condition in the fourth quarter.
Its employee turnover rate, another area of focus, remains elevated, she said, “but it is still, we believe, lower than what the industry is.”
The addition of more technology in its restaurants is also expected to help ease the staffing struggles. An initiative to install new POS systems in its stores was stunted by hardware shortages, Couvillion said—but it should yield labor savings as it’s rolled out more broadly.
“That POS system, we believe, has been foundational to allowing us to implement the tablets program with our servers,” he said. “In the second half of the year, we hope to begin piloting a labor initiative, all of which will be supported with this new POS system.”
The ability for dine-in guests to pay using the chain’s mobile app is also expected to ease servers’ workload, he said.
Meanwhile, early returns from the current quarter showed improvement: Same-store restaurant sales are currently flat compared to the first fiscal quarter of 2019, Couvillion said. Cochran tied the sales boost directly to staffing.
“I think the biggest single thing is we've made a lot of progress on getting staffed,” she said. “In those restaurants where we've been able to both get staffed and have an opportunity to train new staff, I think we're seeing that we are better able to take care of the guest demand when it comes.”
Other bright spots:
- The chain’s retail business and its Maple Street Biscuit Company fast-casual brand combined to mostly offset the drop in restaurant sales. The company plans to open 15 Maple Streets in 2022, bringing that concept’s total unit count to about 55.
- The company is pleased with its Chicken and Biscuits virtual brand, which will be in a total of 500 stores by the end of Q1. It’s been doing so well, in fact, that it's launching a second one, the breakfast-focused Pancake Kitchen, in about 100 stores over the same period. Off-premise made up about 19% of the chain’s restaurant sales in the quarter.
- The chain expects to have beer and wine available in most of its restaurants by the end of fiscal Q3, with executives noting that a 2% sales mix is “absolutely attainable” for the menu segment it launched in 2019.