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Hot Concepts 2018: Holler & Dash Biscuit House Holler & Dash Biscuit House

Activist pushes Cracker Barrel to divest Holler & Dash

Sardar Biglari letter says fast-casual concept ‘destined to fail’

Sardar Biglari, the large Cracker Barrel Old Country Store Inc. shareholder who five years ago lost a battle to force a sale or other transaction of the company, this week urged it to divest or eliminate its fast-casual Holler & Dash Biscuit House, according to filings with the Securities and Exchange Commission.

Activist investor Biglari, whose San Antonio, Texas-based Biglari Holdings Inc. and affiliates also own the Steak ‘n Shake and Western Sizzlin brands, said the Lebanon, Tenn.-based family-dining Cracker Barrel should jettison its seven-unit Holler & Dash concept, which debuted in 2016.

“From the outset, we believed Holler & Dash was an ill-conceived project that was destined to fail,” Biglari wrote in a “Dear Sandy” letter to Sandra Cochran, the company’s president and CEO. “After three years, our original conviction has only intensified. The company has no business pursuing a start-up.”

A Cracker Barrel spokesperson said Thursday the company would have no comment on the letter.

Biglari said his Lion Fund II L.P. owns 3.5 million, or 14.7%, of Cracker Barrel’s 24 million outstanding shares. Biglari’s holdings are down from nearly 20% six years ago, when Biglari unsuccessfully waged several proxy fights for board seats, the last in 2013.

“We are becoming increasingly concerned about Cracker Barrel’s recent and potential capital allocation decisions,” Biglari said in the letter.

He added that divesting Holler & Dash would reduce general and administrative expenses.

“It is time that you sign the death certificate on the Holler & Dash venture,” Biglari said.

Biglari also questioned Cracker Barrel’s reporting of financial performance at new Cracker Barrel units, asking that company “publish the total investment in new stores along with all pertinent data so we can judge the returns for the period under your leadership as CEO.”

He also said the company should maintain or increase its special dividend, which was paid last August at $3.75 a share.

For the second quarter ended Feb. 1, Cracker Barrel’s net income fell 33.3% to $60.8 million, or $2.52 a share, from $91.1 million, or $3.79 a share, in the same period last year, which included a one-time benefit from the 2017 tax act. Revenues increased 3% to $811.7 million from $787.8 million.

Cracker Barrel has not released separate financial results for the Holler & Dash division.

Cracker Barrel’s same-store restaurant sales increased 3.8% in the quarter, with comparable restaurant traffic increasing 0.1%. Same-store store retail sales declined 1.4% in the quarter.

Cracker Barrel, founded in 1969, has 659 locations in 45 states as well as the seven Holler & Dash restaurants. Nation’s Restaurant News cited Holler & Dash as a “Hot Concept” in 2018.

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

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