Cracker Barrel Old Country Store, Inc. · NASDAQ:CBRL
Cracker Barrel Old Country Store — Proxy Contest (October 2024)
120 slides from Cracker Barrel Old Country Store's proxy contest presentation, Oct 25, 2024
Slide 1: Cracker Barrel Is in Crisis
Cracker Barrel Is in Biglari Capital Corp. Crisis
Slide 2: Legal Disclaimer
Legal Disclaimer The materials contained herein (the “Materials”) represent the opinions of Biglari Capital Corp. and its affiliates (collectively, “Biglari Capital”) and are based on publicly available information with respect to Cracker Barrel Old Country Store, Inc. (the “Company”). Biglari Capit
Slide 3: Table of Contents
04 About Biglari Capital Corp. 15 Executive Summary 34 What Went Wrong? 52 What Went Wrong? Poor Capital Allocation Table of 60 Shareholder Value Destruction 66 The Board Has Failed at Executing Numerous Initiatives Repeatedly Contents 79 A Flawed Board is Responsible for the Current Malaise 96 Our
Slide 4: About Biglari Capital Corp.
About Biglari Ca p! I ital > & C3 8 OF ee eee ee a aS a ieee een ee eee
Slide 5: About Biglari Capital Corp.
About Biglari Capital Corp. Ownership Interest: Biglari Capital Corp. (“Biglari Capital”) has been an investor in Cracker Barrel for over 13 years. Biglari Capital, led by its founder Sardar Biglari, has invested in an array of companies for 24 years and has been operating restaurant chains for 18 y
Slide 6: Steak 'n Shake Was Failing
Steak ‘n Shake Was Failing After the company was unable to recruit a CEO, Sardar Biglari assumed the role of CEO in August 2008 –in the midst of the Great Recession Source: FactSet; Note: Historical share price adjusted for rights offerings, and stock splits 6
Slide 7: Steak 'n Shake's Remarkable Turnaround
Steak ‘n Shake’s Remarkable Turnaround As a result of Mr. Biglari's focused turnaround strategy, Steak ’n Shake was awarded the Golden Chain accolade by Nation's Restaurant News in 2010 Steak ‘n Shake Same-Store Sales Growth 28 quarterly increases in same-store sales 7
Slide 8: Case Study: Steak 'n Shake's Transformation
Case Study: Steak ‘n Shake’s Transformation > In 2020, Mr. Biglari successfully transformed the business model from full-service to self-service while implementing a new owner-operator program. > The transformation included: > New point-of-XFQJX^XYJR > Self-TWIJWPNTXPX\NYM+FHJ5F^YJHMSTQTL^ > Product
Slide 9: Key Elements Of The Transformation
Key Elements Of The Transformation Transformation Plan Achievements Product quality Self-order kiosks New point-of- enhancements 10 consecutives quarters 40% lower with Face Pay XFQJX^XYJR and menu of SSS growth breakeven point YJHMSTQTL^ simplification Embarking on a Reducing Remodeling of the jour
Slide 10: High ROIC Remodeling At Steak 'n Shake
High ROIC Remodeling At Steak ‘n Shake Before Remodel After Remodel 10
Slide 11: Results: Massive Increase In Operating Income
Results: Massive Increase In Operating Income Operating Earnings 30 US millions 26.2 25 20 15 13.5 11.5 10 5 - “Since 2019, Steak ‘n Shake’s improvement in gross margin — namely, the profit after deducting (5) food and labor costs as a percentage of net sales (4.6) — has been better than that of eve
Slide 12: Prime Cost Comparison Between Steak 'n Shake And Cracker Barrel
Prime Cost (Food And Labor) Comparison Between Steak ‘n Shake And Cracker Barrel Prime Costs (Food and Labor) % of Revenue 75.0% 70.0% 69% 68% 65% 65.0% 60.0% 56% 55.0% 50.0% Source: 10-K for Cracker Barrel. Based on COGS excluding depreciation and rent and labor costs. Steak ‘n Shake data from Bigl
Slide 13: Setting The Record Straight On Steak 'n Shake
Setting The Record Straight On Steak ‘n Shake What Transformation Cracker Barrel Plan said Reality > By repeating the same statement about Steak ‘n Shake’s performance four years later, Cracker Barrel is ignoring the current reality. “As we wrote to you in 2020, we consider the deterioration of Stea
Slide 14: Biglari Capital's Positions Have Largely Been Proven Correct
Biglari Capital’s Positions At Cracker Barrel Have Largely Been Proven To Be Correct Theme Cracker Barrel Assertions Biglari Capital’s Advocacy Outcome We’ve [Cracker Barrel] had an Only 60 new stores were opened 2011: Cracker Barrel should focus on existing expansion plan in place that takes us bet
Slide 15: Executive Summary
Executive Summary —
Slide 16: Why Are We Here?
Why Are We Here? › Cracker Barrel (“Company”) is at a critical inflection point. While the Board recently stated that “Cracker Barrel is not in crisis”, we believe otherwise: › Shareholders have lost 70% of their investment value in the past five years; › Cracker Barrel has worst-in-class operating
Slide 17: Why Are We Here? (contd.)
Why Are We Here? (contd.) › The Transformation Plan represents a high-risk proposition due to the Board’s: › Dereliction in addressing prolonged guest traffic declines, underperformance of store-unit economics, and deteriorating operating metrics; › Failed acquisitions and investments; and › Lack of
Slide 18: Shareholder Value Destroyed Over All Relevant Time Periods
Shareholder Value Destroyed Over All Relevant Time Periods 1-year Total Shareholder Return 3-Year Total Shareholder Return 5-Year Total Shareholder Return 166.6% 108.5% 55.1% 55.4% 28.0% 29.9% 12.4% 17.6% (10.6%) (11.6%) (10.6%) (10.6%) (49.6%) (65.3%) (70.2%) Cracker Casual Proxy Peers S&P Mid S&P
Slide 19: Significant Deterioration In Key Operating Metrics Persists
Significant Deterioration In Key Operating Metrics Persists… Guest Traffic Change (YoY) CBRL Board claims 8.0% “…Cracker Barrel struggled coming out of the pandemic more than some brands…” 5.3% 2.1% 0.6% Cracker Barrel Board Letter to Shareholders, Oct. 9, 2024 (1.2%) (2.0%) (0.2%) (1.9%) (1.3%) (1.
Slide 20: Worst-In-Class Operating Income Margin and Store-Level EBITDA Margin
Worst-In-Class Operating Income Margin and Store-Level EBITDA Margin (Pre-G&A And Depreciation) 13.9% Operating Income Margin (LTM) 11.5% 9.0% 8.8% 5.2% 5.2% 3.6% 1.7% 1.3% 29.3% Store-level Earnings Margin LTM (Pre G&A and Pre-Depreciation)* 19.8% 16.5% 15.2% 14.0% 13.9% 13.3% 11.1% 11.0% Source: F
Slide 21: Cracker Barrel Board Has A Failed Capital Allocation Record
Cracker Barrel Board Has A Failed Capital Allocation Record In FY24, Operating Income and Adjusted EBITDA fell to the lowest level since pandemic despite $850 million capex since FY19 New Stores Nearly 60% of stores on the West Coast closed Investments Punch Bowl $137 million loss on Social: Failed
Slide 22: Capital Allocation Record Is Abysmal Despite $850 Million Capex
The Board’s Capital Allocation Record Is Abysmal: Despite $850 Million In Capital Spend, Adj. EBITDA Is At The Lowest Point Post-Pandemic Cumulative Capex Since FY19 Adj. EBITDA since FY19 (USD Millions) (USD Millions) 398.6 853.6 726.2 284.2 277.5 600.8 251.2 503.7 211.6 433.5 180.7 137.5 FY19 FY20
Slide 23: Since Appointment Of The New CEO, TSR Is Down 50%
Since Appointment Of The New CEO, Cracker Barrel TSR Is Down 50% In A Year Total Shareholder Return Under Julie Masino Aug 7, 2023 – Aug 16, 2024 50.7% 24.9% (14.0%) (19.7%) (52.2%) Cracker Barrel Casual Dining Peers Proxy Peers S&P Mid Cap 400 S&P 500 Restaurants Source: FactSet, data as of 7-Augus
Slide 24: Negative Market Reaction To The Transformation Plan
Negative Market Reaction To The Transformation Plan Suggests Investors Have Little Faith In The Board And The Management Team 1-Day Impact Of Strategic Plan Announcement (announced May 16, 2024) 0.0% (0.4%) (2.0%) (1.5%) (1.8%) (4.0%) (6.0%) (8.0%) (10.0%) (12.0%) (14.0%) (14.5%) (16.0%) S&P Mid Cap
Slide 25: Will The $700 Million Remodeling Plan Solve The Problems?
Considering Market Skepticism, Will The $700 Million Remodeling Plan Solve The Problems? “As a follow-up, do you have a strategic advantage in that you are a traditional look, so you don't really have to redesign the restaurants every six or seven years?” “Yes. ….But my rule of thumb is if there's a
Slide 26: Biglari Capital Is Skeptical About The Transformation Plan
Like The Market, Biglari Capital Is Skeptical About The Transformation Plan Cracker Barrel announced the Is store ambiance the root cause Directors who previously failed plan based on results from 2 of Cracker Barrel’s problems? cannot be trusted test stores only › The Board is spending 70% of › Whe
Slide 27: Have Changes In Product Quality And Portion Sizes Impacted Traffic?
Have Changes In Product Quality And Portion Sizes Impacted Customer Traffic? 2021 2024 Sirloin steak Steak tips Cracker Barrel Core Product – Country Boy breakfast Source: FactSet, Street Research 27
Slide 28: What Went Wrong With Technology Solutions Such As Handheld Devices?
What Went Wrong With Technology Solutions Such As Handheld Devices? 28
Slide 29: Failed Execution On Handhelds Impacted Speed And Service
Failed Execution On Handhelds Impacted Speed, Efficiency, And Customer Service 2017 2024 Source: Cracker Barrel Investor Presentation for 2017 29
Slide 30: Incumbent Management Nominees
Carl Berquist And Meg Crofton Lack The Expertise To Provide Management Oversight Incumbent Management Nominees Carl T. Berquist Meg G. Crofton Independent Chairman, Member of Chair of the Nominating and Roles Nominating and Governance and Audit Governance Committee, Member of the Committees Compensa
Slide 31: Biglari Capital Nominees Have More Relevant Experience
Biglari Capital Nominees Have More Relevant Experience Cracker Barrel Nominees Biglari Capital Nominees Key Skills for Transformation Plan Carl Berquist Meg Crofton Sardar Biglari Milena Alberti-Perez Michael Goodwin 8 8 9 Restaurant Operating Experience (C-suite) Operating Capital Allocation Experi
Slide 32: Our Nominees Are Poised To Ensure The Plan Succeeds
Our Nominees Are Poised To Ensure That The Transformation Plan Succeeds Sardar Biglari Milena Alberti-Perez Michael Goodwin Transformation Plan Focus Areas › Restaurant Industry knowledge › $600-700 million capex plan › Investment in digital technology › Store operations › New store openings › POS d
Slide 33: Conclusion
Conclusion › Cracker Barrel now ranks worst-in-class in most operating performance metrics. › The Board failed to address the core business, failed in capital allocation, and failed in total shareholder return with 70% of shareholder value lost in the last five years. › The market and analysts lack
Slide 34: What Went Wrong?
_What Went Wrong?
Slide 35: Cracker Barrel Failures Can Be Attributed To The Following Factors
Cracker Barrel Failures Can Be Attributed To The Following Factors: Lack of Focus on Poor A Board Lacking in Core Business Capital Allocation Required Experience Investments in new stores failed (high Recent refreshment added store closure rates in West Coast) Declining directors that lack operation
Slide 36: Lack of Focus On Core Business
Lack of Focus On Core Business Lack of Poor A Board Lacking Focus on Core Business Capital Allocation in Required Experience 01. Declining guest traffic 02. Deteriorating operating margins and ROIC 36
Slide 37: For Over A Decade Cracker Barrel Has Failed To Address Declining Guest Traffic
For Over A Decade Cracker Barrel Has Failed To Address Declining Guest Traffic Annual Guest Traffic Growth (YoY) FY24 was the worst year in terms of traffic decline since FY10 excluding the Covid impact 8.0% 5.3% 2.1% 0.6% (0.2%) (0.7%) (1.2%) (2.0%) (1.9%) (1.3%) (1.4%) (1.9%) (3.5%) (5.0%) (21.6%)
Slide 38: Resulting In Worst-In-Class Guest Traffic
…. Resulting In Worst-In-Class Guest Traffic Cumulative Change in Guest Traffic (2019 – 2024) 20.9% (1.8%) (9.7%) (13.0%) (16.1%) (18.8%) *Comparable peers include casual dining peers with a majority of company-owned stores instead of franchise stores 38
Slide 39: Guest Traffic Decline Is Shocking In High-growth States
Guest Traffic Decline Is Shocking As Almost Half Of The Stores Are In High-growth States States Population Growth (2013-2023) Number of stores Florida 15.6% 83 Texas 15.2% 67 Tennessee 9.7% 59 Georgia 10.6% 53 North Carolina 10% 43 South Carolina 12.7% 28 Total number of stores in growth 333 states
Slide 40: Deteriorating Customer Value Proposition Is Responsible For Traffic Loss
We Believe A Deteriorating Customer Value Proposition Is Responsible For Traffic Loss Deteriorating Declining Constant Reduced Lost Quality of Service Price Portion Size Guest Traffic Product Standards Increases 40
Slide 41: Customer Reviews Suggest Poor Customer Value Proposition
Customer Reviews Suggest Cracker Barrel Continues To Suffer From Poor Customer Value Proposition The worst! We use to love Cracker Barrel but we stopped going in 2023. The food was not good and they have forgotten who their customers are. But we thought let's give them another try. We were driving b
Slide 42: Even Stores Close To HQ Have Not Improved Service Or Food Quality
Even Stores Close To The Company HQ Have Not Improved Service Or Food Quality Source: https://www.yelp.com/biz/cracker-barrel-old-country-store-nashville-2?sort_by=date_desc 42
Slide 43: A Recent Customer Review That Received 2,500 Likes
A Recent Customer Review That Received 2,500 Likes Sums up The Challenges Cracker Barrel Faces With Improving Its Core Business > Long wait time > Poor service > Poor food quality > Unprofessional management > Unhappy customer Source: Cracker Barrel Facebook page 43
Slide 44: Worst-In-Class Post-Pandemic Recovery in Unit-level Sales
Failure to Address Guest Traffic Has Resulted In Worst-In-Class Post-Pandemic Recovery in Unit-level Sales vs. Peer Group Change in Average Unit Sales (FY’19 – LTM) 47.2% 24.1% 22.5% 18.1% 13.8% 12.0% 11.4% 9.2% Source: 10-K filings 44
Slide 45: Worst-In-Class Restaurant Margin Deterioration
Resulting In The Worst-In-Class Restaurant Margin Deterioration Restaurant Earnings Margin 5-Year Restaurant Earnings Margin Change (excludes G&A and depreciation) In Basis Points (2019-2024) 2019 2024 Change (bps) Olive Garden 20.50% 21.70% 1.20 Darden 18.70% 19.80% 1.10 Dave & Buster's 28.80% 29.3
Slide 46: Worst-In-Class Change In Operating Income Growth
Worst-In-Class Change In Operating Income Growth Operating Income Growth FY19 – LTM / FY24 104.5% 26.3% 24.7% (0.5%) (84.0%) (U.S. Only) Texas Roadhouse Olive e Garden Gard Ga den en Bloomin’ Brands Brinker Cracker Barrel Source: FactSet, Company filings *Comparable peers include casual dining peers
Slide 47: Worst-In-Class Adj. EBITDA And Operating Income Margins
Worst-In-Class Adj. EBITDA And Operating Income Margins Adjusted EBITDA Margin (LTM) Operating Income Margin (LTM) 30.5% 24.6% 21.9% 22.4% 17.4% 15.7% 13.9% 12.7% 11.5% 10.6% 10.5% 9.0% 8.8% 10.0% 8.5% 8.3% 6.1% 5.2% 5.2% 3.6% 1.7% 1.3% DIN PLAY Steak n DENN DRI TXRH BLMN EAT BJRI CAKE CBRL DIN PLAY
Slide 48: Operating Income Has Declined 84% And Adjusted EBITDA By 47%
Overall, Operating Income Has Declined 84% And Adjusted EBITDA By 47% Operating Income* Adj. EBITDA (USD millions) (USD millions) 398.6 282.8 284.2 277.5 251.2 211.6 180.7 148.9 153.0 120.6 45.1 33.7 FY19 FY20 FY21 FY22 FY23 FY24 FY19 FY20 FY21 FY22 FY23 FY24 *Operating Income excludes gain on sale
Slide 49: Despite Investing $850 Million In Capex Since FY19
….Despite Investing $850 Million In Capex Since FY19 Cumulative Capex Since FY19 (USD Millions) 853.6 726.2 600.8 503.7 433.5 137.5 FY19 FY20 FY21 FY22 FY23 FY24 Source: 10-K, Company filings 49
Slide 50: Impact of New Investments: $200 Million In Impairment And Store Closing Charges
Impact of New Investments: $200 million In Impairment and Store Closing Charges (In US$ Millions) 2020 2023 2024 Total Impairment “Sardar Biglari was right. Cracker $22.5 $11.7 $17.4 $51.6 Barrel’s failed acquisition of Punch (for CBRL and MSBC stores) Bow Social was one of the “worst business blund
Slide 51: Poor Financial Metrics Have Pushed ROIC Below Cost of Capital
Poor Financial Metrics Have Pushed ROIC Well Below The Cost of Capital ROIC 22.5% 13.8% 7.8% 6.1% 2.6% (2.2%) 2019 2020 2021 2022 2023 2024 Source: FactSet 51
Slide 52: Poor Capital Allocation
Poor Capital Allocation
Slide 53: Cracker Barrel Failures Can Be Attributed To The Following Factors
Cracker Barrel Failures Can Be Attributed To The Following Factors: Lack of Focus on Poor A Board Lacking in Core Business Capital Allocation Required Experience Investments in new stores failed (high store closure rates in West Coast) Non-core investments - Punch Bowl Social lost shareholders $137
Slide 54: New Store Investments Have Failed
New Store Investments Have Failed Cracker Barrel Claims: Reality The Board cannot be trusted given its history of new investments and West Coast expansion failed to deliver. Results: › In FY24, Operating Income and Adjusted EBITDA fell to the lowest level since pandemic › Despite investing $850 mill
Slide 55: The Board's Rationale For Expanding On The West Coast Is Not Clear
The Board’s Rationale For Expanding On The West Coast Is Not Clear > West Coast has higher construction and labor costs > Distribution cost is higher considering most of company stores are concentrated in the South > West Coast does not have a growing middle- class population > Cracker Barrel has li
Slide 56: West Coast Expansion Efforts Ended With A Near 60% Closure Rate
West Coast Expansion Efforts Ended With A Near 60% Closure Rate “… in our 40-year history, we've Recent Closure Data closed fewer than 20 stores” - - CEO, Sandra B. Cochran, March 2015 # of stores with Total Stores Closure Rate challenged Closed 16 for CA & OR: performance 58% 24 Closure Rate: 3% of
Slide 57: Investment In New Brands Have Failed
Investment In New Brands Have Failed Cracker Barrel claims: Reality Why did the Board approve new concepts when the core business was failing? Results: › $137 million loss on Punch Bowl Social investment › No material impact of Maple Street Biscuit Company (MSBC) on revenue and profits › $4.7 millio
Slide 58: Maple Street Has Been A Distraction
Maple Street Has Been A Distraction No. of Overview: Investment in MSBC locations › CBRL acquired MSBC for $36 million in Oct 2019. MSBC had 28 Stores as of Sept 13, 2024 (10-K) 68 company owned stores and five franchised locations1 Stores closed during FY23 - FY24 6 › 13 MSBC stores had deteriorati
Slide 59: The Biggest Casualty Is The 80% Dividend Cut
The Biggest Casualty Of Deteriorating Financial Performance Is The 80% Dividend Cut $10.65 10-Yr Average (2014-2024): $5.7 per share $8.55 $8.10 $8.00 $4.90 $5.20 $5.20 $4.00 $3.90 $3.00 $1.30 $1.00 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025E Source: FactSet,
Slide 60: Shareholder Value Destruction
Shareholder Value Destruction
Slide 61: Cracker Barrel Has The Worst TSR Over All Measurement Periods
Cracker Barrel Has The Worst TSR Performance Over All Applicable Measurement Periods Total Shareholder Returns 1-Year 3-Year 5-Year Proxy Peers (11.6%) (10.6%) 17.6% Family Dining peers (10.6%) (10.6%) 12.4% S&P 500 28.0% 29.9% 108.5% S&P Midcap 400 Restaurants 55.1% 55.4% 166.6 CRACKER BARREL (49.6
Slide 62: Shareholders Have Lost 70% Of Their Investment In Five Years
Shareholders Have Lost 70% Of Their Investment In The Last Five Years 1-YEAR TOTAL Shareholder Return 3-Year Total Shareholder Return 5-Year Total Shareholder Return 166.6% 108.5% 55.1% 55.4% 28.0% 29.9% 12.4% 17.6% (10.6%) (11.6%) (10.6%) (10.6%) (49.6%) (65.3%) (70.2%) Cracker Casual Proxy Peers S
Slide 63: Worst-In-Class TSR Under Both Current And Former CEOs
The Board Has Failed To Safeguard Shareholder Interest With Worst-In-Class TSR Performance Under Both Current And Former CEOs 5-year Total Shareholder Return under Sandra Cochran* Total Shareholder Return under Julie Masino As of Aug 6, 2023 Aug 7, 2023 – Aug 16, 2024 77.2% 74.0% 50.7% 24.9% 24.0% (
Slide 64: Management Change Has Failed To Restore Investor Confidence
Management Change Has Failed To Restore Investor Confidence: Cracker Barrel’s Share Price Has Fallen A Cumulative 64% Following Earnings/Strategic Announcements 1-day price reaction to earnings and Transformation Plan announcements (%) Former CEO Current CEO 6.1 2.1 1.1 (0.3) (0.6) (1.1) (2.0) (2.7)
Slide 65: Investor Reaction To Biglari Capital Campaign
Investor Reaction To Biglari Capital Campaign 1-day impact of preliminary proxy filing by Biglari Capital 5.9% 0.1% 0.3% (0.1%) (0.8%) Cracker Barrel S&P Mid Cap 400 Restaurants S&P 500 Proxy Peers Casual Dining Peers Source: FactSet, Preliminary Proxy Filing Announcement Date: 23-Sep-2024 65
Slide 66: The Board Has Failed at Executing Numerous Initiatives Repeatedly
The Board Has Failed at Executing Numerous Initiatives Repeatedly
Slide 67: Refine The Brand: Same Buzz Words For Years
Refine The Brand: Cracker Barrel Has Repeated The Same Buzz Words For Years 2022 2023 2024 2024 Strategic Transformation Plan Refining the brand: evolving the brand across all touchpoints to refine and strengthen positioning to delight existing and new guests. “…Grow traffic” “Grow traffic…” “Deligh
Slide 68: Craveability And Menu Enhancements Discussed Since FY20
Craveability And Menu Enhancements Have Been Discussed Since FY20 2020 2022 2023 2024 2024 Strategic Transformation Plan Enhancing the Menu: Introducing menu innovation focused on craveability and traffic drivers, streamlining processes to improve execution, and optimizing strategic pricing to prote
Slide 69: Store And Guest Experience: Repeated Concepts, Same Failed Results
Store And Guest Experience: Repeated Concepts, Same Failed Results 2020 2022 2023 2024 2024 Strategic Transformation Plan Evolving the store and guest experience: delivering an exceptional guest experience through operational excellence and improved store design and atmosphere; testing remodel proto
Slide 70: Digital And Off-Premise: Loyalty Program Promises Still Unfulfilled
Digital And Off-Premise: Cracker Barrel’s Loyalty Program Promises Still Unfulfilled 2020 2022 2023 2024 2024 Strategic Transformation Plan Winning in digital and off- premise: growing the off- premise business and leveraging technology such as Cracker Barrel rewards; leveraging guest data to better
Slide 71: Employee Experience: Failed To Implement POS Systems
Employee Experience: Cracker Barrel Has Failed To Implement POS Systems 2017 2022 2023 2024 2024 Strategic Transformation Plan Elevating the employee experience: upgrading training and development programs and tools and simplifying job roles and utilizing technology to improve the employee experienc
Slide 72: Share Price Fell 15% Upon Announcement Of Transformation Plan
Cracker Barrel’s Share Price Fell 15% Upon Announcement Of The Board Approved Transformation Plan Market reaction to Strategic Plan Announcement (announced May 16, 2024) “A big reason the stock is down is that there wasn’t much of a plan… $60 1-Day Decline: (14.5%) They announced a plan for a plan b
Slide 73: Negative Market Reaction To The Transformation Plan
Negative Market Reaction To The Transformation Plan Suggests Investors Have Little Faith In The Board And The Management Team 1 Day Impact Of Strategic Plan Announcement (announced May 16, 2024) 0.0% (0.4%) (2.0%) (1.5%) (1.8%) (4.0%) (6.0%) (8.0%) (10.0%) (12.0%) (14.0%) (14.5%) (16.0%) S&P Mid Cap
Slide 74: Independent Analysts Question Lack Of Milestones And View Guidance As Aggressive
Independent Analysts Question The Lack Of Milestones And View Guidance As “Aggressive” “Management's plan to drive sales and margins may prove successful, but it “While plans to accelerate SSS & remodel units were encouraging, further will be a 'show me' story. details and initial traction against i
Slide 75: Media Coverage of The Transformation Plan Has Not Been Favorable
Media Coverage of The Transformation Plan Announcement Has Not Been Favorable Source: FactSet, AlphaSense 75
Slide 76: Independent Analysts Lack Conviction In The Transformation Plan
Independent Analysts Lack Conviction In The Transformation Plan Analyst Rating ZERO Analysts have a Buy Rating Underperform › Mean Target is 46% lower than 1-year ago Hold › It is less than CBRL’s current share price Neutral Hold Mean Target Price 105.00 95.00 Hold 85.00 Underperform 75.00 65.00 Hol
Slide 77: Analysts Do Not Have Confidence In The Transformation Plan
Analysts Do Not Have Confidence In The Transformation Plan Consensus Estimates ($ in millions) FY'19A FY'20A FY'21A FY'22A FY'23A FY'24A FY'25E FY'26E Revenue $3,072.0 $2,522.8 $2,821.4 $3,267.8 $3,442.8 $3,470.8 $3,431.4 $3,488.7 % Growth -- (17.9%) 11.8% 15.8% 5.4% 0.8% (1.1%) 1.7% Operating Incom
Slide 78: Management's Claims About Early Results Are Misleading
Management’s Claims About The Early Results Of The Transformation Plan Are Misleading Cracker Barrel claims (4QFY24 Transcript): Reality “Our multiyear strategic transformation journey is off to a great start. › Management’s FY25 guidance implies further guest traffic We've hired a new dynamic CMO a
Slide 79: A Flawed Board is Responsible for the Current Malaise
A Flawed Board is Responsible for the Current Malaise
Slide 80: Flawed Board Choosing Flawed Board Members
Flawed Board Choosing Flawed Board Members Lack of Focus on Poor A Board Lacking in Core Business Capital Allocation Required Experience Recent refreshment added directors that lack operational experience at family dining concepts or capital allocation experience 80 80
Slide 81: A Flawed Board Is Responsible For The Current Malaise
A Flawed Board Is Responsible For The Current Malaise > The plan the Board has adopted requires significant change to Cracker Barrel’s physical attributes, including remodeling the units by adding new booths and banquets, which have not been part of store interiors to date. Yet the problem lies not
Slide 82: Board Refreshment Has Coincided With Shareholder Value Destruction
Board Refreshment Has Coincided With Significant Shareholder Value Destruction Thomas Barr Gilbert Dávila Darryl Wade Julie Felss Masino Appointed 5/31/2012 (not Appointed 7/1/2020 Appointed 4/1/2021 Appointed 11/1/2023 standing for reelection) Meg Crofton Gisel Ruiz Jody Bilney John Appointed 7/26/
Slide 83: Recruiting From Traditional Feeder Companies Has Not Been Successful
Recruiting From Traditional Feeder Companies Has Not Been Successful Previous Board Members Previous Board Members Previous Board Members Current Board Members Current Board Members Andrea M. Weiss Coleman H. Peterson William W. McCarten Darryl Wade John Garratt 2003 –2023 2011 – 2023 2011 –2023 202
Slide 84: Incumbent Management Nominees
Carl Berquist And Meg Crofton Lack The Necessary Expertise To Provide Needed Management Oversight Incumbent Management Nominees Carl T. Berquist Meg G. Crofton Independent Chairman, Member of Chair of the Nominating and Roles Nominating and Governance and Audit Governance Committee, Member of the Co
Slide 85: Director Carl Berquist Has Overseen Shareholder Value Destruction
Director Carl Berquist Has Overseen Massive Shareholder Value Destruction And Bears Responsibility For Cracker Barrel’s Dismal Capital Allocation Record > Capital allocation: Marriott CFO experience is almost a decade old. Responsible for approving $854 million in capex from 2019 to 2024. Operating
Slide 86: Director Meg Crofton's Experience And Poor Record Are Red Flags
Director Meg Crofton’s Experience At Tupperware, Her Flawed Board Refreshment And Poor Record At Cracker Barrel Are Huge Red Flags > Governance: As Chair of the Nominating/Governance Committee since November 2021, conducted flawed board refreshment that failed to add directors with relevant expertis
Slide 87: 95% Shareholder Value Destruction During Crofton's Tenure At Tupperware
95% Shareholder Value Destruction During Crofton’s Tenure At Tupperware Previous board experience: Tupperware (Jan 25, 2016 to Oct 16, 2023) 300 Tupperware Brands Corporation S&P 500 250 233 “In 2019, the Company [Tupperware] began facing financial headwinds and operational challenges that contribut
Slide 88: Board Skills Matrix Suggests Berquist And Crofton Lack Required Expertise
Cracker Barrel’s Board Skills Matrix Suggests Neither Carl Berquist Nor Meg Crofton Have The Required Expertise To Provide Oversight Of The Transformation Plan Source: 2023 ESG Report 88
Slide 89: The Current Board Lacks The Necessary Expertise And Experience
The Current Board Lacks The Necessary Expertise And Experience Essential for CBRL Critical for Transformation Plan Incumbent Favorable Capital Notable Experience (Abbreviated) Family Dining Capital Turnaround Nominees (excl. CBRL) Allocation Experience Allocation Technology Record Carl Berquist Marr
Slide 90: Incumbent Nominees Lack Family Dining Turnaround Experience
Incumbent Nominees Lack Family Dining Turnaround Experience Incumbent Board Nominees with Restaurant Experience Jody Bilney Darryl Wade John Garrett Cheryl Henry No family dining Questionable Recent experience Marketing experience. Yum Fine dining track record at managing high-end experience brands
Slide 91: A Breakdown in Governance Structure
A Breakdown in Governance Structure Accelerated 5-year TSR under Sandra Cochran * CEO/President Executive Chair Retirement 77.2% 74.0% Sandra Cochran Sandra Cochran On July 18, 2023, Cracker Barrel Old Country On February 22, 2024, Cracker Barrel Old Country Store, Inc. (the “Company”) announced tha
Slide 92: Thomas Barr: Longest Tenured Director Was CEO Of An Elective Cosmetic Company
Thomas Barr: The Longest Tenured Director Was The CEO Of An Elective Cosmetic Company Tom Barr CEO Sonobello Source: https://www.sonobello.com/ 92
Slide 93: Tom Barr Removed In Favor Of Biglari Capital Nominee Michael Goodwin
Tom Barr Was Included In The Preliminary Proxy Statement, But Was Ultimately Removed In Favor Of Biglari Capital Nominee Michael Goodwin Tom Barr Michael Goodwin Cracker C rackkerr Barrel Barrel recommends not to vote for Tom Barr, Barr, ttheir heir llongest ongest tenured director in the final prox
Slide 94: Cracker Barrel Needs Directors Who Can Oversee Capital Expenditures
Cracker Barrel Needs Directors Who Can Oversee Capital Expenditures Proposed Capital Expenditures Plan Key Questions for the Board and Management? › Over next three-years, total capital expenditures of $600 › Historically, Cracker Barrel invested approx. $50 million million to $700 million. annually
Slide 95: Board's Failed Oversight Of Maintenance and Technology Investments
Cracker Barrel Board’s Failed Oversight Of Maintenance and Technology Investments Q4 2020 Earnings Call: “We anticipate capital expenditures of ~$100 million for the fiscal year. Of this amount, approx. half will support strategic initiatives and new unit growth, with the remaining amount supporting
Slide 96: Our Nominees
Our Nominees
Slide 97: Our Nominee: Sardar Biglari
Our Nominee: Sardar Biglari › Chairman of the Board of Directors and Chief Executive Officer of Biglari Holdings (NYSE: BH, BH-A), a holding company owning subsidiaries engaged in a number of diverse business activities, since 2008 › In his capacity as Chairman and Chief Executive Officer of Biglari
Slide 98: Sardar Biglari's History Of Shareholder Value Creation
Sardar Biglari’s History Of Shareholder Value Creation 5-year TSR as of October 18, 2024 110.2% 58.6% Sardar Biglari Restaurant & Capital Allocation Experience (61.5%) Russell 2000 Biglari Holdings Cracker Barrel 98
Slide 99: Our Nominee: Milena Alberti-Perez
Our Nominee: Milena Alberti-Perez › Boards of Digimarc Corp. (NASDAQ: DMRC) (April 2022 – Present); Pitney Bowes Inc. (NYSE: PBI) (May 2023 – Present) and Allurion Technologies, Inc. (NYSE: ALUR) (March 2024 – Present) › Former CFO at Getty Images Holding, Inc. (NYSE: GETY) (Jan 2021 - Jan 2022); an
Slide 100: Testimonials: Milena Alberti-Perez
Testimonials: Milena Alberti-Perez “I have worked with Milena in both corporate and board settings and find her to be an outstanding board contributor with deep business experience and expertise. Equally comfortable with financial and strategic issues, as a board member, Milena has provided two of o
Slide 101: Milena Alberti-Perez Has A History of Value Creation
Milena Alberti-Perez Has A History of Value Creation Pitney Bowes Inc. S&P 500 300 Milena Alberti-Perez 250 231 200 Experienced C-level leader, public company director and former financial executive at 150 technology and publishing companies. 141 Alberti-Perez’s experience in executive roles, financ
Slide 102: Our Nominee: Michael W. Goodwin
Our Nominee: Michael W. Goodwin › Board of directors of Burlington Stores, Inc. (NYSE: BURL), an off-price retailer (Dec 2020 – Present). Member of the Audit Committee. › Mr. Goodwin most recently served as Senior Vice President of Information Technology and Chief Technology Information Officer of P
Slide 103: Our View: We advocate for the following
Our View We advocate for the following: » We believe the Cracker Barrel » Consider divesting Maple Street Biscuit. Despite continued brand is relevant. The problem investment and management focus, Maple Street has failed to rests not with the brand but with move the needle on revenue and profitabili
Slide 104: Value Bridge To Higher Earnings
Value Bridge To Higher Earnings » Reduce General and Admin expenses to peer average and what Cracker Barrel achieved in FY22 and FY23 › G&A as % of revenue jumped to 6.0% in FY24, versus 5.1% in FY23 and 4.8% in FY22 › Comparable peers* average G&A/revenue is 4.9% (LTM/FY24) › Assuming Cracker Barre
Slide 105: Our Nominees Will Ensure That Our Transformation Plan Succeeds
Our Nominees Will Ensure That Our Transformation Plan Succeeds Sardar Biglari Milena Alberti-Perez Michael Goodwin Transformation Plan Focus Areas › Restaurant Industry knowledge › $600-700 million capex plan › Investment in digital technology › Store operations › New store openings › POS deployment
Slide 106: Conclusion
Conclusion › Cracker Barrel now ranks worst-in-class in most operating performance metrics. › The Board failed to address the core business, failed in capital allocation, and failed in total shareholder return with 70% of shareholder value lost in the last five years. › The market and analysts lack
Slide 107: Appendix
APPENDIX
Slide 108: Cracker Barrel Has Lost Investor Credibility
Cracker Barrel Has Lost Investor Credibility: The Board Allowed Management To Make Statements That Obfuscated The Deterioration Of The Core Business “… we are confident that our initiatives to welcome “… we delivered sales and operating income margin back our guests, drive sales, and manage costs wi
Slide 109: After Empty Promises, Sudden Admission About Loss Of Brand Relevance
After Empty Promises, Sudden Admission About The Loss Of Brand Relevance Has Damaged Management’s Credibility “we were encouraged by the improvement in our traffic trend during the quarter, which we believe was supported by our investments in labor and advertising & our focus on the guest experience
Slide 110: Biglari Capital Correctly Raised Concerns On New Stores And New Brands
Biglari Capital Correctly Raised Concerns On New Stores And New Brands “It appears the Company plans to fold its Holler & Dash units into “But to add customers through the addition of new units while Maple Street Biscuit Company locations, but the Company has not simultaneously losing customers thro
Slide 111: Capital Expenditure Commentary
Capital Expenditure Commentary “Why we're investing in more maintenance capital to ensure our stores meet our brand standards, that they compare well to the competition and that they are desirable places to work. Our incremental investments are focused on areas we think are the most impactful to the
Slide 112: Darryl Wade's Experience In Union Square Hospitality Is Not Relevant
Darryl Wade’s Experience In Union Square Hospitality Group Is Not Relevant To Cracker Barrel Southern-themed restaurant and gift Flagship: High end, ultra chic restaurant in store chain known for its rustic décor New York City Darryl Wade and home style cooking President and Chief Operating Southern
Slide 113: Darryl Wade Was EVP Of Operations At Red Lobster During Remodel
Darryl Wade Was EVP Of Operations At Red Lobster During Its Expensive Bar Harbor Remodel Program Darryl Wade: Executive Vice President of Operations, Red Lobster (Jul 2012 - Mar 2018) Sources: https://cms.realestatedesigner.com/user_pdf/Red%20Lobster%20-%204413%20E.%20Mills%20Cirlce,%20Ontario,%20CA
Slide 114: Starboard Warned That A Poorly-Timed Remodel Strategy Would Destroy Value
Starboard Warned That A Poorly-Timed Remodel Strategy Like Red Lobster’s Would Destroy Shareholder Value At Olive Garden Starboard noted Starboard warned that Red Lobster of the large spent an average amount Olive of $350K per Garden’s restaurant for the remodeling plan remodeling would cost efforts
Slide 115: New Store Designs: Customers' Lackluster Reactions
New Store Designs: Customers' Lackluster Reactions “I see what they did to try and keep the appearance but I miss the oil lamps and old fashion physique. I used to feel like I was going back in time now I feel like I’m eating at ihop” “But where is the hanging items?!?? That was my favorite” 115
Slide 116: New Store Designs Versus Authentic Cracker Barrel
New Store Designs Versus Authentic Cracker Barrel Authentic Old Country Design New Remodel Design 116
Slide 117: Customers Agree With Us
Customers Agree With Us https://www.businessinsider.in/thelife/food/news/i-ordered-the-same-breakfast-at-cracker-barrel-and-waffle-house-the-winning-meal-came-with-more-food-at-a-lower-price-/slidelist/111786890.cms https://www.businessinsider.in/retail/news/cracker-barrel-employees-and-customers-sa
Slide 118: Customer Reactions
Customer Reactions Fi 7 DEE @fuegon_- 6h way whiskeyriff + Follow : eas Teepe Tickers Deka Dai did cogs take over fast food chains in the last decade or what whiskeyriff We are in a state of EMERGENCY. $8: em_vougioukles (TikTok) Don't. tellme Cracker Barrel is@@ing modern too i) eS uy theinventorjo
Slide 119: Customer Reactions
Customer Reactions ) Sean Davis @ gs @seanmdav Cracker Barrel’s stock has lost nearly 40% of its value since she was hired as CEO less than a year ago. Leadership matters, and Cracker Barrel doesn’t have any. As a genuine Cracker Barrel lover, as @FDRLST staff can attest, | can tell you its problems
Slide 120: Customers Agree With Us
@leelu9236 2 months a0 =_ \ What has always differentiated Cracker Barrel from other places was the warmth and charm of its decoration. it serves comfort food in a comforting atmosphere. This change completely kills that. They took the warm wood tones away and replaced them with cold grey at every t
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