42 slides from Cracker Barrel Old Country Store's proxy contest presentation, Oct 29, 2020
Slide 1: Biglari Capital Corp. Investor Presentation
Biglari Capital Corp. Investor Presentation October 2020 1
Slide 2: Executive Summary
Executive Summary • Biglari Capital Corp. (BCC) has maintained significant ownership interest in Cracker Barrel (CBRL) for almost a decade. • We firmly believe that Cracker Barrel is an A+ brand. We have consistently sought to ensure that management and the Board focus on the core brand in order to
Slide 3: Our history of shareholder advocacy
Our history of shareholder advocacy Our Ideas for Value Creation Cracker Barrel’s Response Ultimate Outcome “…we are deeply disturbed over your failure to “The SEC has no issues with it.“ “Management has not given this disclosure in the Disclosure disclose operating segments for both the – Former CE
Slide 4: Our advocacy has consistently delivered results
Our advocacy has consistently delivered results 3rd Quarter Disclosure 20111 4th Quarter Disclosure 20112 Cracker Barrel begins to report Cost of Goods Sold Disclosure on a segmented basis providing shareholders with increased transparency Cracker Barrel announces launch of Licensing licensing partn
Slide 5: Our advocacy has consistently delivered results (cont.)
Our advocacy has consistently delivered results (cont.) CBRL plans Biglari calls to New Store Openings1 to ramp up halt new stores new store in order to New Stores openings to assess Cracker Barrel changes 18 30 per profitability3 16 year2 course and slows pace of 14 13 Company reassesses new store
Slide 6: The Board lacks relevant skill-set
The Board lacks relevant skill-set • The lack of restaurant expertise on the Board has resulted in failure to improve operating performance and has led to poor capital allocation decisions ($137 million loss from Punch Bowl Social investment). • The shift in strategy to include acquisitions and inve
Slide 7: …. our nominee brings needed experience
…. our nominee brings needed experience • We are seeking to help restore the Board’s focus on the core brand and implement improved capital allocation execution with robust financial disclosures. • We are recommending that a restaurant Board with limited restaurant experience add the necessary indus
Slide 8: Total Shareholder Return (TSR) Analysis
Total Shareholder Return (TSR) Analysis 8
Slide 9: Peer Overview: Texas Roadhouse & Darden are best comps
Peer Overview: Texas Roadhouse & Darden are best comps Cracker Barrel’s Disclosed Casual Dining Peer Group1 Most Comparable Peers Ticker CBRL TXRH DRI EAT BLMN CAKE BJRI DENN DIN PLAY Store Data Total Number 698 611 1,866 1,663 1,473 294 209 1,683 3,628 136 % International None 5% 2% 23% 17% 11% Non
Slide 10: Cracker Barrel vs. Texas Roadhouse
Cracker Barrel vs. Texas Roadhouse Total stores: 617 Total stores: 698 # of owned stores: 521 # of owned stores: 360 # of leased stores: 96 # of leased stores: 338 Store footprint: 7200-7600 square feet Store footprint: 7200 square feet (excl. retail space) # of seats: 270-300 guests # of seats: 180
Slide 11: Cracker Barrel's distorted TSR calculations
Cracker Barrel’s distorted TSR calculations Claim By changing measurement dates Cracker Barrel inflated its TSR “We also delivered higher TSR against the median of our family/casual dining peers over the 5-year period prior to the pandemic and have done so year-to-date in calendar 2020 as well” – CB
Slide 12: Cracker Barrel has underperformed over 1-, 3-, and 5-years
Cracker Barrel has underperformed over 1-, 3-, and 5-years* 1-Year TSR 3-Year TSR 5-Year TSR 140% 140% 140% 125.5% 120% 120% 120% 100% 100% 100% 92.4% Peer Median: 42.0% Peer Median: 46.0% 77.8% 80% 80% 80% 65.5% 61.2% 60% 60% 60% 48.7% 38.3% 40% 40% 40% 30.8% Peer Median: 2.3% 20.3% 20% 20% 15.6% 2
Slide 13: The tale of two periods
The tale of two periods Claim Reality “Prior to the pandemic, Cracker Barrel’s 10-year TSR was 520% … ” The 10-Year TSR reflects gains from overperformance which occurred from 2010 to – CBRL shareholder letter, 10/1/20 2015. In the last 5 years, Cracker Barrel has significantly underperformed many o
Slide 14: Operating Performance Analysis
Operating Performance Analysis 14
Slide 15: Cracker Barrel's failed business strategy
Cracker Barrel’s failed business strategy Strategy Results Performance Our View ✓ Enhancing the performance of existing stores is the best X path to long-term value creation ✓ Restoring guest traffic volumes to mid 2000 levels • Negative guest traffic in each of last five years would add more than $
Slide 16: How Cracker Barrel failed to execute its 2017 Three-Year Plan
How Cracker Barrel failed to execute its 2017 Three-Year Plan Management’s Plan1 Actual Performance KEY BUSINESS DRIVERS OF OUR THREE-YEAR PLAN Negative guest traffic growth in FY18, FY19 and 1HFY20 Store level operating margins declined from 15.5% in FY17 to 14.2% in FY19 Sales to investment
Slide 17: History of guest traffic loss
History of guest traffic loss Quarterly Guest Traffic Declines (% yoy) 17
Slide 18: Texas Roadhouse gained traffic when Cracker Barrel lost
Texas Roadhouse gained traffic when Cracker Barrel lost Cracker Barrel lost comparable guest traffic while its nearest peer generated gains in guest traffic over a similar period1 FY16 FY17 FY18 FY19 FY16 FY17 FY18 FY19 5% 3.9% 4% 3.6% 3% 2.1% 2% 1.8% 1% 0% -1% -0.7% -1.3% -1.4% -2% -1.9% -3% 1. Gue
Slide 19: Failure to enhance margins
Failure to enhance margins 2017 Plan Target: Operating Income 2017 Plan Target: Costs Outcome “We expect approximately 5% compound “We are targeting $40 million dollars in annual cost reductions to be achieved by Operating income margin has declined annual operating income growth over by 150 bps sin
Slide 20: Failure to improve new unit economics
Failure to improve new unit economics New Store Cost has increased 80% under current While Average Unit Volume (AUV) has remained largely flat management and 59% since FY15 in recent years $8.5 $8.5 Millions Millions 7.8 $7.5 $7.5 $6.5 6.3 $6.5 6.1 $5.5 $5.5 5.1 4.9 4.6 4.6 4.6 4.7 4.5 $4.5 $4.5 4.3
Slide 21: Texas Roadhouse gained traffic and improved AUV
Texas Roadhouse gained traffic and improved AUV 6.0 Millions 5.6 “We finished 2019 with comparable 5.5 restaurant sales up 4.7% for company 5.2 restaurants. As a result, our average unit volumes increased to $5.6 million. A 5.0 decade earlier, our average unit volumes 5.0 were $3.7 million, so over
Slide 22: Failure to benefit from $700M in capex + acquisitions
Failure to benefit from $700M in capex + acquisitions Cumulative capex and acquisition Pre-tax Income 800 800 Millions Millions 738 700 700 615 600 600 500 500 400 373 400 299 300 300 266 278 266 $272 222 200 200 113 100 100 FY16 FY17 FY18 FY19 2QFY20 FY16 FY17 FY18 FY19 LTM2QFY20 Cumulative capex a
Slide 23: Deteriorating Sales to Investment Ratio
Deteriorating Sales to Investment Ratio 1.1x 1.0x New Unit Economics ($ in Millions) CBRL TXRH Olive Garden 1.0x Average Unit Volume 4.6 5.6 5.0 0.9x New Store Opening Costs 6.3 5.5 3.5-4.5 Store operating margin 14.2% 16.7% 20.6% 0.9x 0.9x Sales to Investment ratio 0.7x 1.0x 1.3x Sources: Public fi
Slide 24: Punch Bowl Social Experience
Punch Bowl Social Experience 24
Slide 25: Punch Bowl is very different from Cracker Barrel
Punch Bowl is very different from Cracker Barrel Punch Bowl offered limited synergistic opportunities due to significant differences in theme, target demographics, menu offerings, and store design Disclosed Data* Brand Maturity De novo 50+ years of history, founded in 1969 Theme Bar/party Home-style
Slide 26: Punch Bowl was a major undertaking
Punch Bowl was a major undertaking The Long-Term Plan Start Date July 18, 2019 1) Equity: Cash Outlay for 58.6% interest $ 89.1 M Purchased 58.6% economic interest 2) Debt: Promissory Notes 52.9 M for approximately $89 million. 3) Expansion – 100 Units (83 New Units) 415.0 M1 Investment Agreed to pr
Slide 27: Media questioned the Punch Bowl deal
Media questioned the Punch Bowl deal 10 Days That Changed The Restaurant Industry “…That day, lenders told Punch Bowl Social it was in default on its loan agreement and they would foreclose on the chain and its 19 restaurants. Punch Bowl turned to Cracker Barrel, which just 10 months earlier had acq
Slide 28: …. analysts also questioned the Punch Bowl deal
…. analysts also questioned the Punch Bowl deal Jake Rowland Bartlett, SunTrust Robinson: “And then I also had questions about the implications of the Punch Bowl Social investment on your capital allocation strategy. And just you ended the quarter at a much lower cash level than you typically would
Slide 29: The Punch Bowl debacle and unresolved issues
The Punch Bowl debacle and unresolved issues July 2019 August September October November December January February March 2020 July 18: Nov 6: Feb. 25: March 15: Cracker Barrel Fort Worth Closure “we were pleased with their [Punch Punch Bowl CEO commits $140M Bowl] holiday sales and are looking infor
Slide 30: Cracker Barrel's new plan
Cracker Barrel’s new plan Business model improvements designed to generate approximately CBRL failed to achieve guest Cost Savings traffic, cost reduction and margin $50 million in annual, sustainable savings improvements goals set in 2017 Strategic initiatives: expansion of digital and technologica
Slide 31: Board and Governance
Board and Governance 31
Slide 32: Cracker Barrel Board has limited industry experience
Cracker Barrel Board has limited industry experience Restaurant Experience on Peer Company Boards Restaurant Experience on Cracker Barrel’s Board Thomas H. Barr’s William W. McCarten Recent Experience Recent Experience “Since February 2016, Mr. Barr has “Since 2004, Mr. McCarten has served as served
Slide 33: Mr. Barbrick brings additive and complimentary experience
Mr. Barbrick brings additive and complimentary experience CBRL Board Notable Restaurant Capital Prior Public Nominee/Director Age Tenure Experience Experience Allocation Board Exp. Our Nominee Raymond P. Barbrick 67 New ✓ ✓ ✓ Gilbert R. Davila 57 New Gisel Ruiz 50 New ✓ Thomas H. Barr 52 8
Slide 34: Cracker Barrel's Board is filled with overlapping experience
Cracker Barrel’s Board is filled with overlapping experience: Do shareholders really benefit from directors with similar backgrounds? William W. McCarten Carl T. Berquist • Director, Marriott Vacations Worldwide • CFO, Marriott Intl. (2009 – 2015) • President, Marriott Services Group (2001 – • EVP,
Slide 35: Reciprocal Board recruitment?
Reciprocal Board recruitment? Prior to joining the CBRL Board, Norman Johnson was the CEO/Chair of CLARCOR, an industrials company. James Bradford served on the CLARCOR Board and joined the Cracker Barrel Board in 2011. Norman E. Johnson James W. Bradford CLARCOR CLARCOR CEO/Chairman Director March
Slide 36: The Board's refreshment efforts have failed to add needed skills
The Board’s refreshment efforts have failed to add needed skills Board attempts to Despite losing $137M in eight months, the Board continues to refresh itself without Board lacks refresh without restaurant expertise adding restaurant experience and expertise in casual dining adding restaurant of own
Slide 37: Cracker Barrel nominee has no restaurant experience
Cracker Barrel nominee has no restaurant experience Norman E. Johnson No relevant industry experience Age: 72 Recent proxy statement has “no industry Board Tenure: 8 years Background: Manufacturing, logistics experience” listed, restaurant or otherwise During his Board tenure, helped destroy $
Slide 38: Our Nominee: Raymond Barbrick
Our Nominee: Raymond Barbrick Mr. Barbrick brings extensive restaurant industry and related capital allocation experience Current Experience • President, co-CEO & COO of the Briad Group – an owner operator of one of the largest Wendy’s franchises in North America. Briad also owns and operates Hilton
Slide 39: Conclusion
Conclusion • For the duration of our investment in Cracker Barrel, we have advocated for measures that would enhance the brand and deliver value to shareholders. • We believe change is warranted due to: • Lagging TSR relative to closest peers and benchmark index (the S&P Mid-Cap 400 Restaurants Inde
Slide 40: Appendix
Appendix 40
Slide 41: 'Diversification' History and On-the-Job "Learning"
‘Diversification’ History and On-the-Job “Learning” Management Commentary Start Date July 2016 October 11, 2019 “…[the Holler & Dash] opening plan is more driven by us trying to open enough Investment New concept launch/organic Acquired for $36M cash to get the learnings…before we've opened Targeted
Slide 42: Disclaimer
Disclaimer The materials contained herein (the “Materials”) represent the opinions of Biglari Capital Corp. and its affiliates (collectively, “BCC”) and are based on publicly available information with respect to Cracker Barrel Old Country Store, Inc. (the “Company”). BCC recognizes that there may b