MarketWatch  Feb 20  Comment 
Cracker Barrel Old Country Store Inc. reported fiscal second-quarter net income of $91.1 million, or $3.79 per share including a benefit $1.63 after the tax overhaul, up from $52.7 million, or $2.19 per share, for the same period last year....


Business Overview

Since Cracker Barrel was brought to life in 1969, the old-country styled restaurant chain has striven to maintain its simple, comforting environment. Though it started out with one small store connected to a gas station in Tennessee, the now 598 store franchise has managed to maintain the small town environment its patrons have come to know and love. One of the most unique aspects of this restaurant chain is the combination of restaurant and retail store. A similar layout will be found in all Cracker Barrel stores throughout the country. Customers will find the entrance on a front porch filled with rocking chairs that can be sat in while waiting for a table or purchased to take home. When first entering the store, customers will go in through the retail portion of the chain which consist of both decorative and functional items such as toys, games, candles, centerpieces, and often many seasonal/holiday-themed items. The rest of the store consists of the dining area which includes a stone fireplace almost always lit, various board games(often checkers) to be played while waiting for food, and of course the rustic tables to dine at. This consistent layout allows the customer to feel at home no matter what particular store he or she chooses to dine at and leads to a high return on new customers.

Market Segments

Cracker Barrel's revenues are generated form two main areas of the company: restaurant and retail. This unique combination enables Cracker Barrel to not only rely on its restaurant sales (though these are the main revenues of the company), but allows them to slightly depend on its retail sales as well.


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Cracker Barrel's restaurant segment is the majority of the chain's revenues resulting in approximately 80% of its yearly revenues. It is the segment that has always maintained the loyal customer base the chain has come to know and love. CBRL enjoys consistent growth in its restaurant segment and can attribute this to its warm, inviting atmosphere and its menu populated with country-styled comfort food. The chain focuses on giving the customers a "home-away-from-home" environment and executes this through the use of stone fireplaces, board games, and a welcoming environment where they are treated exceptionally well. Its restaurant segment boasted a 2.0% increase in revenue from the third to fourth quarter with a 0.8% boost in sales for the year as a whole.


The retail segment of CBRL is what really makes the company stand out as a whole. Though some restaurants have a small snack stand behind the register or a small selection of post cards next to the door, Cracker Barrel prides themselves on devoting almost half of each location's real estate to a full gift shop. Though the chain sells over 2700 different kinds of gifts throughout its roughly 600 locations, there are several signature items that can be found in almost any restaurant throughout the country.

  • Rocking Chairs - Walking into any Cracker Barrel restaurant usually entails the customer walking onto a porch covered in rocking chairs of various colors and sizes. These fine rocking chairs have been made by the Hinkle family for the last six generations and are a crowd favorite of Cracker Barrel customers.
  • The "Peg Game" - Consists of a triangular-shaped board in which players try to eliminate as many pegs as possible by jumping over them. One sits on every table of the dining room and has become a staple in the chain's retail stores.
  • Jumbo Checker Rug - Each restaurant has one of these jumbo checker rugs set up (typically on a barrel) in front of the stone fireplace, providing the customers with a nice, playful environment while waiting for their food. Each rug is actually made in the United State from recycled materials. [2]

These signature items are only a part of the vast quantity of purchasable goods in each gift shop. Various food items, candy, home decoration items, and other games can be purchased in the gift shop. As far as the revenues brought in from the gift shop go, it accounts for the other 20% of the chain's total revenues. In the fourth quarter, ending 7/30/10, the retail segment of CBRL brought in an approximate total of $115,000,000 in revenue with each store averaging $193,400 for the quarter.[3]

Financial Metrics


CBRL reported revenues of $2.4 billion in 4Q of 2010, this was an increase of approximately 9.2% from the previous quarter's revenues and approximately a 1.3% increase from the previous year's revenues.[4] Though Cracker Barrel is a proven successful restaurant with many years of improved income to back it up, the restaurant business is not a dynamic industry in which extreme growth is a rarity from year to year. As it can be seen in the financial data table, the greatest growth in the last 4 years was from 2009 to 2010 which was barely a 9% increase in revenues.

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Stock Price/Volume

As of March 2011, CBRL had a volume of approximately 350,000 though this number often fluctuates between 200,000 and 800,000. Since 2010, the stock price has peaked at as high as $58 and has bottomed out as low as $44. As stated before, restaurants lack the dynamic changes in stock prices that other industries, such as technology, feature in their stock value. In the last few quarters, CBRL has increased its average dividend from 20 cents to 22 cents in the last few quarters.[6]

Company Outlook

In the next year, management expects approximate sales growth to be 4% which is reasonable looking at recent years sales and revenue growth. Cracker Barrel may not have dynamic growth, but they can consistently post low growth numbers from year to year. They also expect EPS to be in the range of $3.95 to $4.10. [7]

SWOT Analysis


Cracker Barrel's greatest strength can be considered the family values it strives to maintain in all of its restaurants. It is not a tangible strength such as money or brick-and-mortar locations, but the experience customers, especially families, enjoy when they choose to dine at Cracker Barrel. Another of its greatest strengths is differentiation. As mentioned before, the restaurant uses a unique combination of restaurant and retail; therefore, the chain's sales come from both the restaurant portion of the store as well as the retail portion of the store. This unique setup helps differentiate Cracker Barrel from classic breakfast restaurants such as Denny's and IHOP and gives its customers an experience it cannot get anywhere else.


Cracker Barrel has been plagued with weaknesses mostly affecting its reputation which is one of the chain's most important assets. One of the worst effects on its reputation resulted from some claimed racist activities throughout the company. For example, managers allegedly allowed white servers to refuse service to black customers and black customers who complained about bad service were not taken as seriously as white customers.[8] Along with racism accusations, Cracker Barrel kept sexual orientation out of its non-discrimination act for hiring new employees until recently. This requirement of employees to display heterosexual values when working at the restaurant to maintain the family values the company strives to maintain was highly debated by many gay rights activists. [9]


Cracker Barrel's ability to somewhat adjust themselves to what their customers and the general public desires provides a great opportunity for Cracker Barrel to improve how its viewed by minorities. As mentioned before, Cracker Barrel used to require its employees to display normal heterosexual behavior; however, they caught up with the present and introduced a sexual orientation clause into its non-discrimination act for hiring employees. CBRL scored a 15 out of 100 in the Human Rights Campaign in 2008 before introducing this act; however, after the change they recorded an increase to 55 out of 100. Though this score is still not the best, it is a vast increase and future changes will hopefully allow the score to increase. [10]


Threats are more widely covered in the Competition section of this page; however, some brief points will be highlighted in this section. As far as net income, Cracker Barrel's greatest competition is Denny's. Though Denny's posted revenues 75% less than Cracker Barrel's, their net income was just under one half of Cracker Barrel. This may not be the closest competition, but Cracker Barrel still needs to consider its industry and competition. They are currently sitting in a good spot in the restaurant industry, but they may not always have this good fortune.[11]

Industry Trends/Forces

Cracker Barrel is a Leader Among Consumer Surveys

Zagat, a well known consumer survey used to rate full-service restaurants, rated Cracker Barrel as the best place to have breakfast in 2010. This prestigious award, in conjunction with another national independent consumer study which gave Cracker Barrel top marks in several categories only helped boost the chain’s historical reputation.[12] This increase in goodwill can be seen reflected in the stock price, rising from 33.36/share in January to 54.55/share in December of 2010.[13]

Cracker Barrel Continuously Meets Forecasts

Cracker Barrel continuously meets earnings expectations and forecast 2011 profits equivalent to Wall Street’s preditions. Despite early gains, the restaurant chain closed several points higher, as usual. Cracker Barrel’s fourth quarter profits grew from $22.8 million (99 cents per share) to $27.4 million ($1.14 per share), or 20.2%.[14]


Cracker Barrel’s main competitors include restaurants in the family dining sector, including Bob Evans (BOBE), Denny’s (DENN), Applebees, IHOP, and Ruby Tuesday (RT).[15] Cracker Barrel is the leader in the family dining market, in both revenue and net income from continuing operations. Cracker Barrel’s competitive edge comes from the fact that they are open extended hours, 6:00 am to 10:00pm, something which many of their competitors do not offer. Cracker Barrel's retail store, as stated before, is also an effective means to attract customers from other restaurants to their store.

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Family Dining

Bob Evans Farms, Inc. (BOBE)

Bob Evans has both a retail food line and two chains of full service restaurants. Bob Evans restaurants operate mainly in the Midwest, Mid-Atlantic, and Southwest parts of the United States. Its other brand name, Mimi’s Café, operates mainly in the Western region on the United States. Bob Evan’s retail food line is available in most major supermarkets across the country.

Denny’s (DENN)

Denny’s has over 1500 restaurants nationwide and offers around the clock dining. With a wide variety on their menu, they cater to those looking for something, “anytime, anywhere”. As of 2009, Denny’s is the largest family service restaurant. [16]

Applebee’s (APPB)

Applebee’s claims to be the largest family dining chain in the world. They focus on creating a “neighborhood” atmosphere. Although Applebee’s is a bar and grill, they are still one of Cracker Barrel’s main competitors because of their focus on creating a laid back, fun, family atmosphere.


The majority of IHOP restaurants are franchised by The International House of Pancakes, LLC. IHOP’s menu focuses mostly on moderately priced breakfast food any time of the day, although they do offer other options as well. In 2007, Applebee’s was bought by IHOP, and the new company is now called DineEquity, Inc (DIN).

Ruby Tuesday (RT)

Ruby Tuesday offers moderately priced family dining with a more upscale feel than most other restaurants in its market segment. The chain focuses on creating a fresh, luxurious casual dining experience. [17]

Take Out

Bob Evans, Ruby Tuesday, Applebees, and select Denny’s all have takeout options on their menus. Cracker Barrel does not offer a carry out option at their restaurant.

Bob Evans - All of the items on Bob Evan’s menu are available for take out, but require a call ahead. You can also purchase Bob Evan’s brand food at most supermarkets.[18]

Ruby Tuesday - Ruby Tuesday has a take out option called Ruby Tue to Go. They have a full menu that requires the patron to call ahead of time to place their order.[19]

Applebees - Applebees carryout option is called Curbside to Go. Patrons select from smaller menu than in-house dining and are required to place their order ahead of time.[20]

Alcohol Sales

Ruby Tuesday and Applebee’s are the only two of Cracker Barrel’s competitors to serve alcohol. This would enable them to capture more of the market share, especially at dinnertime, of those who which to drink an alcoholic beverage with their meal. [21]

Porter's Five Forces Analysis

Threat of Substitutes - When thinking of Cracker Barrel as purely a restaurant, the threat of substitutes would seem to be a thing of great concern to the 600 store chain; however, the environment provided by the chain and the addition of the gift shop to each store keeps the threat at a manageable level. CBRL sits high above the typical family restaurants thought of for breakfast and leaves it in a comfortable competitive advantage.

Threat of New Entrants - Though it is fairly easy to enter the restaurant industry, it is very difficult to create a franchise as successful as Cracker Barrel or IHOP. As it stands, there a handful of nationally popular restaurants known for their breakfast and it's hard to break into this already existent market.

Bargaining Power of Buyers and Suppliers - In the current restaurant industry, bargaining power typically favors the buyers rather than the suppliers. Though there are only so many popular restaurants to choose from, customers still get to decide which restaurant they eat at and can easily go to different chains due to an almost nonexistent switching cost. This means restaurants such as Cracker Barrel need to focus on keeping the customer happy and loyal.


  1. http://investor.crackerbarrel.com/releasedetail.cfm?ReleaseID=507232
  2. [http://www.crackerbarrel.com/browse-retailstore.cfm?doc_id=278#top "Retail Store Description" accessed 3/4/2010
  3. [http://investor.crackerbarrel.com/releasedetail.cfm?ReleaseID=507232 "CBRL Supplemental Information" accessed 3/4/2010
  4. http://finance.yahoo.com/q/is?s=CBRL&annual "CBRL Income Statements" accessed 3/4/2010
  5. http://www.google.com/finance?q=NASDAQ:CBRL&fstype=ii "Financial Information CBRL" accessed 3/4/2011
  6. http://finance.yahoo.com "CBRL Stock Information" accessed 3/4/2011
  7. http://stocks.investopedia.com/stock-analysis/2010/cracker-barrel-leaving-investors-happy-cbrl-txrh-rt-din-dri1126.aspx "CBRL Financial Outlook" accessed 3/4/2011
  8. http://www.nytimes.com/2004/05/04/us/cracker-barrel-agrees-to-plan-to-address-reports-of-bias.html?ref=cbrlgroupinc "Alleged Racist Complaints" accessed 3/4/2011
  9. http://www.gaytoday.com/events/120502ev.asp "LGBT Rights and CBRL" accessed on 3/4/2011
  10. http://en.wikipedia.org/wiki/Cracker_Barrel_Old_Country_Store "CRBL HR Campaign" accessed on 3/4/2011
  11. http://finance.yahoo.com/q?s=DENN&ql=0 "Denny's Revenues and Net Income" accessed on 3/4/2011
  12. http://www.thestreet.com/story/10838548/1/cracker-barrel-breakfast-8220best8221-in-2010-zagat-consumer-survey.html "CBRL Zagat Survey" accessed on 3/6/2011
  13. http://finance.yahoo.com/q/hp?s=CBRL&a=00&b=1&c=2010&d=00&e=1&f=2011&g=m "Increase in CBRL Stock in 2010" accessed on 3/6/2011
  14. http://www.thestreet.com/story/10860171/1/cracker-barrel-gains-on-forecast.html "Cracker Barrel Gains on Forecast" accessed on 3/6/2011
  15. http://investors.dineequity.com/phoenix.zhtml?c=104384&p=irol-disclaimer "CBRL Competition" accessed on 3/4/2011
  16. http://www.dennys.com/en/page.aspx?ID=31&title=History "Denny's Information" accessed on 3/4/2011
  17. http://www.rubytuesday.com/our-story "Ruby Tuesday History" accessed on 3/4/2011
  18. http://www.bobevans.com/menu/carryout.aspx "Bob Evans Carryout" accessed on 3/4/2011
  19. http://www.rubytuesday.com/assets/menu/pdf/rubytuego/tgs2b_0211.pdf "Ruby Tuesdays Carrout" accessed on 3/4/2011
  20. http://www.applebees.com/ "Applebees Carryout" accessed on 3/4/2011
  21. http://www.rubytuesday.com/thebar "Ruby Tuesday Bar" accessed on 3/4/2011
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