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Investor’s Battle With Cracker Barrel Reignites

Biglari says chain is “in perilous times”; it fires back that his plans “risk destroying value”

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Photo: jetcityimage/iStock by Getty Images

While Cracker Barrel Old Country Store (Lebanon, Tenn.) has built a loyal fan base with a warm-and-fuzzy approach to its restaurants, the same can’t be said for its corporate boardroom, which again is under heavy fire from investor Biglari Capital Corp. The latter firm has been in a near-constant battle with the board since acquiring a stake in the chain in 2011, with the latest salvo coming in the form of an open letter to Cracker Barrel’s shareholders pushing the investment company’s plan to install three new board members (including founder Sardar Biglari).

“Cracker Barrel is in perilous times. Not only is a change to its board warranted but we believe it is also mandatory for the sake of the company’s future,” wrote Biglari, whose company owns just over 2 million shares in the homestyle family restaurant chain. “… On May 16, 2024, management discussed its ‘strategic transformation plan,’ a high-capital-expenditure strategy. Over the next three years, the company plans to spend $600 million to $700 million in capital expenditures, which represents about 70% of Cracker Barrel’s market capitalization.

“The plan the board has adopted involves remodeling the units with new booths and banquettes, which have not been part of store interiors to date. Yet the problem lies not in the seating but in getting more people to sit in it. We do not believe changing the furniture and altering the decor are going to change the company’s trajectory or solve its underlying problem of declining traffic.

“We believe the questionable transformation plan is indicative of a poorly constituted board that cannot relate to the Cracker Barrel brand or its customers. It lacks turnaround experience and is critically missing the skill set needed to address the underlying business challenges.”

Click here for the full text of Biglari’s message.

In response, Cracker Barrel issued its own letter to shareholders that said the stakes at its Nov. 21 shareholder vote “are very high this year” because of Biglari’s board nominations. “This marks the seventh time Mr. Biglari has pursued a costly and distracting proxy contest in the last 13 years. Each time his proxy contests have gone to a vote, our shareholders have rejected Mr. Biglari’s nominees and his positions by significant and increasing margins. We ask that you reject Mr. Biglari again for the reasons we discuss in this letter…”

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“… We are the first to acknowledge that Cracker Barrel struggled coming out of the pandemic more than some brands, and since then the company has not delivered the results that our shareholders expect and deserve. But to be clear, contrary to Mr. Biglari’s claims, Cracker Barrel is not in crisis. Our traffic, while lower than we want or need it to be, is still significant, and we operate profitably; we just need to do a lot of hard work to reinvigorate the brand and regain a leadership position in our industry.”

Click here to see Cracker Barrel’s full letter to shareholders.

Cracker Barrel has about 660 company-owned locations in 44 states.

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