As most restaurants have taken pricing increases last year, the question on all operators’ minds is, “how far can I push the envelope until it affects my customer’s ability to afford my food?” While there is no one-size-fits-all answer to this, Cracker Barrel Old Country Store seems to have figured out how to strike a balance between raising prices significantly (9% price increases last quarter and likely 8.5% the rest of the year) and making sure that customers still find everyday value in their menu.
Coming off a challenging several quarters in the waning years of the pandemic, Cracker Barrel reported 7.4% same-store sales increase for the second quarter ended Jan. 27, driven mainly by their pricing strategy and offset by a 1.7% pricing decline, which they claim is in line with the rest of the industry. Cracker Barrel CEO Sandra Cochran said that they balance these price increases by continuing to offer more value, like the company’s current meal promotion which touts 20 entrees on the menu for $12. Cracker Barrel also recently reintroduced $5 take-home offerings: if you purchase an entrée in-store, you can get a second ready-to-heat entrée for $5.
“We’re excited about several menu initiatives that will further reinforce value leadership,” Sandra Cochran said during Tuesday’s earnings call. “Our current menu promotion is focused on value and variety […] We continue to monitor the effects of pricing: protecting margins and preserving value strength.”
Simultaneously, the company is also promoting newer, more premium-priced options with younger customers in mind, and those that might not mind spending that 8-9% price increase.
“We’re also pleased with the work we’re doing on check-building initiatives, like beverage attach, premium sides, and Barrel Bites,” Cochran said. “We’re watching all that especially with price increases we’re taking, to make sure those guests who can afford something more indulgent, that those items are on the menu and for those guests looking for value, we’re marketing around that to be helpful.”
Besides a pricing balancing act, Cracker Barrel’s other surprising star of the second quarter was catering, which exceeded expectations, especially in the period after the busy Thanksgiving/holiday season.
“We are continuing to see the catering channel do well, driven by enhancements and we are on track to grow the channel by 25% to $100 million this year,” Cochran said.
Moving forward, Cracker Barrel hopes to improve its appeal to a younger customer base, even as their strength with older and lower income customers continues to grow, through initiatives like new menu items and the upcoming loyalty rewards program, which is on track to launch in Q4.
For the second quarter of 2023, Cracker Barrel’s revenue increased 8.3% to $933.9 million, almost at pre-COVID levels. Net income declined 19% to $30.5 million or $1.37 per share, as compared with the prior year quarter’s net income of $37.6 million or $1.60 per share. Cracker Barrel opened two net new Maple Street Biscuit Company units last quarter and one Cracker Barrel opening, bringing the portfolio net total to 721 restaurants.
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