Cracker Barrel Old Country Store, Inc.

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Cracker Barrel Old Country Store, Inc.

P.O. Box 787, Hartmann Drive
Lebanon, Tennessee 37088-0787
(615) 444-5533
Fax: (615) 443-6780

Public Company
Employees: 18,035
Sales: $517.60 million
Stock Exchanges: NASDAQ
SICs: 5812 Eating Places; 5947 Gifts, Novelty & Souvenir Shops

Cracker Barrel Old Country Store, Inc., operates a chain of 182 country-style restaurants and gift shops located primarily along interstate highways in the Southeast, Midwest, mid-Atlantic, and southwest United States. The restaurants serve Southern down home fare, such as grits, catfish, and turnip greens, at moderate prices. Cracker Barrel gift shops, considered by management to be an integral part of the restaurants country atmosphere, sell reproductions of early American crafts and such food items as preserves and old-fashioned candies. Cracker Barrel ranks among the 12 largest family restaurant chains in the United States. Its sales volume (more than $3 million per existing unit since 1991) is the highest in its class.

The first Cracker Barrel Old Country Store was founded in September 1969 by Dan Evins, a Shell gas station operator who felt he could attract more customers if a restaurant and gift shop were located on the stations lot. He borrowed $40,000 and built his first combination gas station, restaurant, and store along the interstate highway just outside Lebanon, Tennessee. Within one month, Cracker Barrel Old Country Store began to make a profit. Evins incorporated the company the following year and sold half of the new business to a group of local businessmen, raising $100,000 to open his second restaurant/gift-shop/gas station. By 1974, Cracker Barrel was operating 10 units, all located along interstate highways and all making a profit.

Although Cracker Barrels restaurant and gift shop sales grew, Evinss gasoline business was less profitable. When the gasoline crisis hit in the early 1970s, the company began building new restaurants without gas stations attached. In 1974, Evins ended his distribution contract with Shell Oil. The restaurants did so well without gasoline service that by the late 1980s, Cracker Barrel had eliminated gasoline service from all its locations.

Cracker Barrels solid growth began attracting the interest of independent investors, prompting the company to register with the Securities and Exchange Commission in 1974. Rapid expansion continued through the end of the decade. By 1983, the company was operating 27 units located along interstate highways in Tennessee, North Carolina, South Carolina, Georgia, Kentucky, Florida, and Alabama. Between 1978 and 1983, net income and revenues increased at annual rates of 26 percent and 25 percent, respectively, resulting primarily from the addition of new restaurants. In late 1981, when high interest rates threatened the companys expansion, Cracker Barrel went public, selling shares on the NASDAQ exchange.

Despite Cracker Barrels continued expansion, sales began to slip. In 1985, Evins tried to stem the slide by making some broad management changes. We had some people in our management who had grown up in this company, and we were growing fairly fast for a small company, Evins told Restaurant Business at that time. We realized that what we needed was some heavier parts in our equipment, so to speak. Changes included the establishment of a new marketing department and the hiring of five executives, all with experience in larger organizations. Net sales rose 20 percent to $80 million and net income grew 49 percent in 1986, due in part to improved operating efficiency and higher margins on sales.

Cracker Barrel also began opening restaurants near tourist destinations, including Opryland; Gatlinburg, Tennessee; and Hilton Head, South Carolina. By the end of 1987, the Cracker Barrel chain consisted of 53 stores in eight states, with annual net sales slightly over $99 million.

Analysts cite several reasons for Cracker Barrels success. One, said Restaurant Hospitality magazine, has been its unrivaled ability to evoke nostalgia without being corny. Cracker Barrel employees are simply warm and friendly. The stores look old-fashioned but are never cute. This atmosphere, reinforced by its inexpensive country cookin menu, helped Cracker Barrel carve out a niche for itself in the family restaurant business.

Cracker Barrel also instituted extensive manager and employee training programs in the 1980s, which greatly improved store efficiency and profit margins. Potential managers spend 10 weeks in an extensive training session, whereas hourly employees follow an on-the-job course, called the Personal Achievement Responsibility (PAR) program. Rewards, such as increased wages and cheaper benefits, are given for the successful completion of company-set goals. The result has been a turnover rate among hourly employees of 160 percent, approximately half the industry average.

Cracker Barrels tight management system helped it weather the recession in 1990 and achieve existing per-unit sales of over $2.7 million, almost double the per-unit sales of its nearest competitor, Big Boy. Around the same time, however, the company got caught in a controversy when it fired a number of homosexual employees. For a short time, it seemed the controversy would threaten Cracker Barrels expansion into the northern states. Nationally televised protests against the firings sprang up in New York City, Atlanta, and a number of small towns. The City of New York, which held $3.6 million worth of Cracker Barrel shares in a pension fund, threatened to make waves if the company didnt change its policy. Cracker Barrel announced it would no longer fire employees based on their sexual orientation, although protesters claimed that discrimination continued covertly. Despite the controversy (or perhaps because of the publicity it generated), company profits jumped 50 percent in 1991 to $22.8 million The number of Cracker Barrel units grew to 106.

In the early 1990s, Cracker Barrel opened new restaurants at a rate of over 20 units per year, and expanded into states such as Michigan, Wisconsin, and Missouri. For the first time in its history, however, Cracker Barrel faced some direct competition when Bob Evans Farms, Inc., opened seven Bob Evans General Stores with atmosphere and menu items that closely resembled those of Cracker Barrel. Bob Evans also opened the first of a chain of Hometown Restaurants, slated for development in towns with populations of 30,000 or less.

Analysts predicted heavy competition between the two restaurant chains because both intended to pursue the same market of vacationers hungry for a homey atmosphere and comfort food. Cracker Barrel seemed well prepared for a market share battle. Net income in 1992 rose 48 percent to $33.9 million, and the number of units expanded to 127. A 1992 Consumer Reports survey gave the chain the top customer satisfaction rating, while a survey appearing in the February 1, 1994 issue of Restaurant & Instition magazine found that Cracker Barrel has done the job better than all of its family-restaurant competitors, Our goal is to become a national network, Evins said in 1987. With its strong management system and sales that led the industry, Cracker Barrel seemed in a position to do just that.

Further Reading:

Cracker Barrel Set the Surveys Standard for Family Dining for the Fourth Straight Year, Restaurant & Institution February 1, 1994

Farkas David, Kings of the Road, Restaurant Hospitality August, 1991, p 118

Ganem, Beth Carlson, My Country, Right or Wrong, Restaurant Hospitality February 1993, p 73

Gutner, Todd, Nostalgia Sells, Forbes April 27 1992 p 102

Hayes Jack Cracker Barrel Protesters Don t Shake Loyal Patrons,Nation s Restaurant News August 26 1991 p 3

Oleck, Joan Bad Politics Restaurant Business June 10, 1992 p 80 Rhein Liz, Along the Interstate with Cracker Barrel Restaurant Business June 10, 1987 p 113

Walkup Carolyn, Family Chains Beat Recession Blues with Value, Service, Nation s Restaurant News August 5 1991, p 100

Yanez, Luisa, Food Fight on the Interstate, Restaurant Business September 20, 1992 p 50

Maura Troester