CRACKER BARREL OLD COUNTRY STORE, INC 10-K

ITEM 1. BUSINESS OVERVIEW Cracker Barrel Old Country Store, Inc. (“we,” “us,” “our” or the “Company,” which reference, unless the context requires otherwise, also includes our direct and indirect wholly owned subsidiaries), is principally engaged in the operation and development of the Cracker Barrel Old Country Store® concept (“Cracker Barrel”). We are headquartered in Lebanon, Tennessee and were originally founded in 1969. We are organized under the laws of the State of Tennessee. We maintain a website at crackerbarrel.com. We make available free of charge through our website our periodic and other reports filed with or furnished to the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we file such material with, or furnish it to, the SEC. Information on our website is not deemed to be incorporated by reference into this Annual Report on Form 10-K or any other filings that we make from time to time with the SEC. The following description of our business should be read in conjunction with the information in Part II of this report under the caption “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data.” Cracker Barrel Old Country Store Concept As of September 14, 2022, we operated 664 Cracker Barrel stores in 45 states. Our stores are not franchised. Our stores are intended to appeal to both the traveler and the local customer, and we believe they have consistently been a consumer favorite. We pride ourselves on our consistent quality, value and friendly service. Store Format : The format of our stores consists of a trademarked rustic old country-store design offering a full-service restaurant menu that features home-style country food and a wide variety of decorative and functional items such as rocking chairs, holiday and seasonal gifts, toys, apparel, cookware and foods. All stores are freestanding buildings and consist of approximately 20% of gift shop space with the remainder dedicated to our restaurant, training and storage space. Our stores have stone fireplaces and are decorated with antique‑style furnishings and other authentic and nostalgic items, reminiscent of and similar to those found and sold in the past in traditional old country stores. The front porch of each store features rows of the signature Cracker Barrel rocking chairs that we invite guests to use while waiting for a table in our dining room or after enjoying a meal and they are a popular item sold by the gift shops. Products : Our restaurants, which generated approximately 78% of our total revenue in 2022, offer home-style country cooking featuring many of our own recipes that emphasize authenticity and quality. Our restaurants serve breakfast, lunch and dinner daily and offer dine-in, pick-up and delivery services. Menu items are moderately priced. Beginning in 2020, certain of our Cracker Barrel restaurants began serving an assortment of beer and wine, and the subsequent ongoing expansion of this program throughout our system has resulted in beer and wine service in 574, or approximately 86%, of our restaurants as of the end of 2022. 5 Table of Contents Breakfast items can be ordered at any time throughout the day and include juices, eggs, pancakes, meats, grits, and a variety of biscuit specialties, such as gravy and biscuits and country ham and biscuits. Lunch and dinner items include fried and grilled chicken, chicken and dumplings, chicken pot pie, meatloaf, country fried steak, pork chops, fish, country fried shrimp, steak, roast beef, ham, vegetable plates, sandwiches and a variety of salads. We also offer multi-serving takeout family meal baskets. Additionally, from time to time, we feature new items as off-menu specials or on test menus at certain locations to evaluate possible ways to enhance customer interest and identify potential future additions to the menu. We offer weekday lunch specials, which include some of our favorite entrées in lunch-sized portions. Our menu also features weekday and weekend dinner specials that showcase a popular dinner entrée. There is some variation in menu pricing and content in different regions of the country. The average check per guest during 2022 was $12.13, which represents a 6.4% increase over the prior year. We served an average of approximately 5,900 restaurant guests per week in a typical store in 2022. The following table highlights the price ranges for our meals in 2022: Price Range Breakfast $5.99 to $15.99 Lunch and Dinner $5.19 to $18.99 The following table highlights each day-part’s percentage of restaurant sales in 2022: Percentage of Restaurant Sales in 2022 Breakfast Day-Part (until 11:00 a.m.) 25% Lunch Day-Part (11:00 a.m. to 4:00 p.m.) 39% Dinner Day-Part (4:00 p.m. to close) 36% We also offer items for sale in our gift shops that are featured on, or related to, the restaurant menu, such as pies, cornbread mix, coffee, syrups and pancake mixes. Our gift shops offer a wide variety of decorative and functional items such as rocking chairs, seasonal gifts, apparel, toys, cookware and various other gift items, as well as various candies, preserves and other food items. The following table highlights the five categories which accounted for the largest shares of our retail sales in 2022: Percentage of Retail Sales in 2022 Apparel and Accessories 28% Food 18% Toys 15% Décor 14% Bed and Bath 8% Our typical gift shop features approximately 4,100 stock keeping units. Certain food items are sold under the “Cracker Barrel Old Country Store” brand name. We believe that we achieve high retail sales per square foot of retail selling space (approximately $503 per square foot in 2022) as compared to mall stores both by offering appealing merchandise and by having a significant source of customers who are typically our restaurant guests. Product Development and Merchandising : We maintain a product development department, which develops new and improved menu items either in response to shifts in customer preferences or to create customer interest. We use a formal development and testing process, which includes guest research and in-store market tests to ensure products brought to market have a greater likelihood of meeting our goals. Menu-driven growth is built through three areas: enhancements to our current core menu offerings, the addition of new core menu offerings and limited time offer promotions we call seasonal events. Our merchandising department selects and develops products for our gift shop. We are focused on driving retail sales by converting those customers who come to us for a restaurant visit. Our assortment includes core and seasonal themes. Our seasonal themes are designed to create interest and excitement in our stores by providing our guests with additional choices. 6 Table of Contents Store Management : At each store, our store management typically consists of one general manager, four associate managers and one retail manager. The relative complexity of operating one of our stores requires an effective management team at the individual store level. To motivate managers to improve sales and operational performance, we maintain bonus plans designed to provide managers with incentives to meet and exceed the operational targets of their store. Each store is assigned to both a restaurant and a retail district manager who each report to a regional vice president. Purchasing and Distribution : We negotiate directly with food vendors as to specification, price and other material terms of most food purchases. We have a contract with an unaffiliated distributor with custom distribution centers in Lebanon, Tennessee; McKinney, Texas; Gainesville, Florida; Elkton, Maryland; Kendallville, Indiana; Rock Hill, South Carolina; and Shafter, California. We purchase the majority of our food products and restaurant supplies on a cost‑plus basis through this unaffiliated distributor. The distributor is responsible for placing food orders, warehousing and delivering food products to our stores. Deliveries are generally made once per week to individual stores. Produce is purchased through a national program and is delivered two to three times a week through a network of approximately fifty independent produce suppliers. Fluid dairy is delivered two to three times a week through approximately fifty regional dairies, the majority of which are under the ownership of two separate companies. Beer and wine, currently in approximately 574 stores, are purchased and distributed through approximately 314 distributors with deliveries ranging from weekly to monthly. The following table highlights the five food categories which accounted for the largest shares of our food purchasing expense in 2022: Percentage of Food Purchases in 2022 Beef 15% Fruits and vegetables 12% Poultry 12% Pork 12% Dairy (including eggs) 11% Each of these categories includes several individual items. The single food item within these categories that accounted for the largest share of our food purchasing expense in 2022 was bacon at approximately 6% of total food purchases. Dairy, fruits and vegetables are purchased through numerous vendors, including local vendors. Eggs are purchased through five vendors. We purchase our pork through six vendors, poultry through twelve vendors and beef through seven vendors. Should any food items from a particular vendor become unavailable, we generally believe that these food items could be obtained, or alternative products substituted, in sufficient quantities from other sources at competitive prices to allow us to avoid any material adverse effects that could be caused by such unavailability. We purchase the majority of our retail items (approximately 80% in 2022) directly from domestic and international vendors and warehouse, or crossdock, such items at our retail distribution center in Lebanon, Tennessee, which we lease. The distribution center fulfills retail item orders generated by our automated replenishment system and generally ships the retail orders once a week to the individual stores by two third-party dedicated freight lines. Certain retail items, not centrally purchased and warehoused at the distribution center, are drop-shipped directly by our vendors to individual stores. Approximately one-third of our 2022 retail items were purchased directly from vendors in the People’s Republic of China. We have relationships with several foreign buying agencies to source product, monitor quality control and supplement product development. 7 Table of Contents Information Technology : We believe that an essential part of pleasing people is established through our ability to leverage technology. We use technology to enhance the experiences of our guests and our employees, and to assist management in all aspect of operating the business. Examples include a digital experience that effectively enables our off-premise business, allows for mobile payments in store, and provides guests with a digital waitlist. Our store employees use our recently upgraded point of sale system, our new food management and labor management systems, and our retail systems to manage inventory, labor, forecasting, and orders for retail and restaurants. In our distribution center, we manage retail merchandise planning, purchasing, warehousing, and distribution using various retail management solutions. We have recently migrated from an on-premise data storage and computing platform to a modern cloud-based data as a service platform providing advanced security and reliability features. Our data solutions provide management with daily reports used to operate stores in a cost-effective manner. Our service desk leverages technology solutions that enable an efficient and effective way to resolve technology concerns. We believe our technology is highly effective in supporting Cracker Barrel’s daily operations, and we continue to enhance this technology in line with our Company’s strategic vision. We continue to make investments in our cybersecurity program to protect and fortify our brands. From protecting guest information to ensuring systems are reliably available, data privacy and cybersecurity are organization-wide efforts that are incorporated into every technology and business decision at all our brands. Led by our Chief Information Officer and Director of Security, cybersecurity is a top priority that is reviewed by our Audit Committee on a quarterly basis. Our program is designed to monitor, assess, and manage cyber-risk with a continuous improvement mindset. Our cybersecurity program is aligned with the National Institute of Standards and Technology (NIST) Cybersecurity Framework. Every year we have a third-party organization assess and measure the maturity of our program. We also perform regular technical assessments, including annual penetration testing of our online systems and internal networks. Feedback from our maturity and technical assessments is incorporated into our actions to further improve our security posture. Guest Satisfaction : We are committed to providing our guests a home-style, country-cooked meal, and a variety of retail merchandise served and sold with genuine hospitality in a comfortable environment. Our commitment to offering guests a quality experience begins with our employees. Our mission statement, “Pleasing People,” embraces guests and employees alike, and our employees are trained on the importance of that mission in a culture of mutual respect. We also are committed to staffing each store with an experienced management team to ensure attentive guest service and consistent food quality. Through the regular use of guest surveys and store visits by district managers and operational vice presidents, management receives valuable feedback that is used in our ongoing efforts to improve the stores and to demonstrate our continuing commitment to pleasing our guests. We have a guest-relations call center that takes comments and suggestions from guests and forwards them to operations or other management for information and follow up. We use internet and interactive voice response systems to monitor operational performance and guest satisfaction at all stores on an ongoing basis. We have public notices in our menus, on our website and posted in our stores informing customers and employees about how to contact us by internet or toll-free telephone number with questions, complaints or concerns regarding services or products. We conduct training on how to gather information and investigate and resolve customer concerns. This is accompanied by comprehensive training for all store employees on our public accommodations policy and commitment to “Pleasing People.” Marketing : We employ multiple media to reach and engage our guests. Outdoor advertising (i.e., billboards and state department of transportation signs) is the largest advertising vehicle we use to reach our traveling and local guests. In 2022, we had over 1,500 billboards and this expenditure accounted for approximately one-third of our total advertising spend for the year. We continue to optimize our non-billboard advertising mix which includes television (increasingly digital), digital display and video, mobile, social media, and search marketing. Our digital marketing efforts have also expanded to focus on improving brand preference, guest engagement and sales. We have a presence on multiple social media sites and several food delivery apps, an e-commerce platform that integrates individual-to-go and catering shopping, and a customer relationship management (CRM) program that employs email, text messages, push notifications and personalization. Our exclusive holiday music program drives awareness for the brand and builds cultural relevance and affinity with our guests. Store Development: While we did not open any new Cracker Barrel stores in 2022, we plan to open three to four new stores during 2023. As of September 14, 2022, approximately 83% of our stores are located along interstate highways. Our remaining stores are located off-interstate or near tourist destinations. Of the 664 stores open as of September 14, 2022, we own the land and buildings for 360, while the other 304 properties are either ground leases or ground and building leases. Building, site improvement, furniture, equipment and related development costs for stores opened during 2021 averaged approximately $4,900 and pre-opening costs averaged $428 per store in 2021, the most recent period in which we opened new Cracker Barrel stores. 8 Table of Contents Our current store prototype is approximately 8,900 square feet, including approximately 1,900 square feet of retail selling space and dining room seating for approximately 170 guests. Our capital investment in new stores may differ in the future due to changes in our store prototype, building design specifications, site location and site characteristics. Maple Street Biscuit Company Effective October 10, 2019, we acquired 100% ownership of Maple Street Biscuit Company (“MSBC”), a breakfast and lunch fast casual concept as we believe this to be an attractive category within the restaurant space. Like Cracker Barrel, MSBC values genuine hospitality and made-from-scratch cooking including biscuit-inspired entrées as well as freshly roasted coffee with a proprietary blend and a limited selection of beer and wine in certain locations. MSBC operates in a smaller footprint than our Cracker Barrel Old Country Store concept and has operating hours limited to the breakfast and lunch day parts. As of September 14, 2022, 53 MSBC locations were open, an increase from 44 at the same time last year (seven of which were franchised at that time) -— all are currently leased properties in Alabama, Florida, Georgia, Kentucky, North Carolina, South Carolina, Tennessee, Texas and Virginia. As of September 14, 2022, no locations were franchised. MSBC will serve as a long-term growth vehicle that complements Cracker Barrel while providing increased exposure to urban and suburban markets. We anticipate accelerating unit growth in the coming years. COVID-19 Impact During 2022, the Company continued to recover from the COVID-19 pandemic (notwithstanding new variant outbreaks), and all dining rooms were open to some extent during 2022. While all of our dining rooms are currently operating without COVID-19-related restrictions, it is possible that renewed outbreaks or increases in cases and/or further new variants of the disease, either as part of a national trend or on a more localized basis, could result in COVID-19-related restrictions including capacity restrictions or otherwise limit our dine-in services, or negatively affect consumer demand. In response to the COVID-19 pandemic, we instituted operational protocols to comply with applicable regulatory requirements to protect the health and safety of employees and guests, and we implemented and continually adapted a number of strategies to support the recovery of our business and navigate through the uncertain environment. We continue to focus on growing our off-premise business and investing in our digital infrastructure to improve the guest experience in the face of these ongoing challenges. HUMAN CAPITAL As of July 29, 2022, we employed approximately 73,000 people (as compared to approximately 70,000 people as of July 30, 2021), of whom approximately 361 were in advisory and supervisory capacities, approximately 3,215 were in-store management positions and 47 were officers. Many store personnel are employed on a part-time basis. Our employees are not represented by any union, and management considers its employee relations to be good. People are at the core of our business and an essential part of our Company. Diversity, Equity & Inclusion Since 1969, our corporate mission has been Pleasing People. As an organization, we have a responsibility to live up to our mission of Pleasing People each day, ensuring that every member of our team and every guest feels at home, feels cared for like family, and feels like they belong. Also guiding our way is the sense of belonging we strive to deliver as part of our People Promise. Our teams work hard to create a culture of hospitality that’s welcoming, respectful and inclusive to everyone who walks through our doors – whether as an employee or as a guest. This includes embracing openness for all people, ideas, and perspectives. Our food and décor celebrate warm memories of the past, and we believe our inclusive culture and beliefs are vital to reinforcing these positive feelings in our employees and guests, and are thus critical to the strength of our brand and our corporate strategy. Our firmly held organization-wide policy is that discrimination, overt or through unconscious bias, has no place at Cracker Barrel Old Country Store. As of July 29, 2022, more than 33% of our employee population is comprised of racial and ethnic minorities and approximately 67% of our employee population is female. 9 Table of Contents We provide opportunities for our employees to drive our Diversity, Equity & Inclusion strategy by creating programs that raise awareness and allow for a more inclusive culture. Our Business Resource Groups allow employees to come together with common interests, perspectives, and experiences around topics such as race, ethnicity, gender identity, and other special interests. These employee-led organizations provide opportunities to network, to obtain and develop leadership skills, and to inform and influence on all aspects of the Cracker Barrel brand. Currently, there are seven Business Resource Groups in Cracker Barrel: - AMPT (“Advancing Modern Professionals for Tomorrow”): Aims to connect and empower modern professionals by promoting a community of inclusive, ambitious, and diverse members that unify through Cracker Barrel to equip our community and leaders for the future; - Be Bold: Cultivates and develops Black Leaders within the Cracker Barrel organization utilizing allyship, mentorship, and education to create a path to continued excellence as well as a vibrant and diverse community; - B-WELL: Improving the employee experience by sponsoring health and wellness activities that nurture employees’ physical, emotional, financial and intellectual wellbeing; - HOLA: Promoting Hispanic and Latino culture through hiring, developing and retaining talent within Cracker Barrel; - LGBTQ+ Alliance: Promoting LGBTQ+ Awareness and Building Workplace Inclusion; - SERVE: Advocating for leadership and development opportunities for Veterans, fostering an environment of networking and volunteerism and focusing on recruitment, retention and advancement; and - Women’s Connect : Inspiring Women Leaders. Employee Development / Training Because of the importance of our employees to our ability to deliver the service levels that are a vital part of the hospitality that drives our brand appeal to guests, we emphasize employee development and training. To ensure that individual stores operate at a high level of quality, we focus significant attention on the training of store managers. We believe that our training programs are key in developing our managers’ leadership skills and commitment to operational excellence, which we believe is important to delivering a positive employee and guest experience. We provide our managers and hourly employees with ongoing training through various development courses taught through a blended learning approach, including a mix of hands-on, traditional classroom, written and cloud-based training. Each store is equipped with dedicated training computers and cloud-based proprietary eLearning instruction programs. Additionally, each store typically has an employee training coordinator who oversees the training of the store’s hourly employees. We are increasing our focus on leadership development and mentorship programs to better secure strong, diverse talents across all facets of our organization. This commitment is exemplified by our D.E.L.T.A program (“Diverse Employee Leadership Talent Advancement”). This leadership program identifies diverse managers who have exhibited all the skills we value in our top-performing managers, brings them together to learn from each other, positions them to advance to their next role, while continuing to advance our business and strategic goals in the process. Our new, robust diversity training includes education throughout all levels of the Company about unconscious and implicit bias and focuses on creating an inclusive culture. Employee Benefits / Compensation Cracker Barrel is committed to providing comprehensive and competitive benefits to meet our employees’ needs. We offer a robust set of benefits to help our employees and their families stay healthy and effectively manage spend related to health and financial well-being. These benefits include programs such as medical, dental, vision, prescription drug, and life insurance coverage, as well as short and long term disability insurance coverage. Additionally, Cracker Barrel is pleased to offer our Employee Assistance Program to all employees and family members. This confidential program is available 24/7 for personal or professional consultations. In addition, we provide all of our employees with access to paid parental leave and adoption benefits, a 401(k) savings plan, an employee discount policy at our Cracker Barrel stores, an employee stock purchase plan, and a competitive vacation policy. 10 Table of Contents Our compensation and performance evaluation systems are carefully designed to maintain pay equity by focusing pay decisions on experience and performance to ensure the Company retains a highly productive workforce to operate our business while providing a high level of service to our guests. Health & Safety Since the beginning of the COVID-19 pandemic, our teams have maintained close contact with applicable regulatory agencies, from the Centers for Disease Control and Prevention (“CDC”) and the U.S. Food and Drug Administration to state and local regulatory agencies and health authorities, to ensure we are following the latest recommended practices and procedures to protect the health of employees and guests. We instituted operational changes and enhancements to safety protocols to ensure that both our guests and employees experience a clean and safe environment. These enhanced processes were added to the already rigorous food safety and sanitation standards that we continuously follow and are verified by a third-party firm. Cracker Barrel incorporates robust quality assurance and food safety processes to ensure the safety of all our food and retail products delivered to our guests including the following: • Extensive requirements for food supplier approval: • Ongoing third-party food safety audits of food production and distribution centers: • Periodic food product audits conducted by Cracker Barrel quality assurance team: • Rigid processes to ensure new or alternative source suppliers deliver food products to exact specifications: • Third-party testing of retail non-food products to ensure compliance with all specifications and Federal regulations: • Food safety audits conducted on all Cracker Barrel locations three times per year: • Ensuring a pest free environment in our locations though a stringent pest control process: • Monitoring of all national and local food safety regulations pertaining both food products and store operations: • Monitoring of all health department inspections of all Cracker Barrel locations: and • Monitoring and responding to: o Food borne illness outbreaks, o Food and product recalls, and o Pandemic situations, e.g., COVID-19. COMPETITION The restaurant and retail industries are intensely competitive with respect to the type and quality of food, retail merchandise, price, service, location, personnel, concept, attractiveness of facilities, availability of carryout and home delivery, internet and mobile ordering capabilities and effectiveness of advertising and marketing. We compete with a significant number of national and regional restaurant and retail chains, some of which have greater resources than us, as well as locally owned restaurants and retail stores. We also face growing competition from the supermarket industry, which offers “convenient meals” in the form of improved entrées and side dishes from the deli section; fast casual restaurants; quick-service restaurants; and highly promotional casual and family dining restaurants. In addition, improving product offerings at fast casual restaurants and quick-service restaurants and expansion of home delivery services, together with negative economic conditions, could cause consumers to choose less expensive alternatives. We expect competition to continue in all of these areas. The restaurant and retail businesses are also often affected by changes in consumer taste and preference; national, regional or local economic conditions; demographic trends; traffic and weather patterns; the type, number and location of competing restaurants and retailers; and consumers’ discretionary purchasing power. Factors such as inflation, increased food, labor and benefits costs and the lack of experienced management and hourly employees may adversely affect the restaurant and retail industries in general and our stores in particular. We believe we compete effectively and have successfully differentiated ourselves from many of our competitors in the restaurant and retail industries through a unique brand and guest experience, which offers a diversified full=service menu and a large variety of nostalgic and unique retail items. For further information regarding competition, see Item 1A. Risk Factors. 11 Table of Contents RAW MATERIALS SOURCES AND AVAILABILITY Essential restaurant supplies and raw materials are generally available from several sources. Generally, we are not dependent upon single sources of supplies or raw materials. However, in our stores, certain branded items are single source products or product lines. Our ability to maintain consistent quality throughout our store system depends in part upon our ability to acquire food products and related items from reliable sources. When the supply of certain products is uncertain or prices are expected to rise significantly, we may enter into purchase contracts or purchase bulk quantities for future use. Adequate alternative sources of supply, as well as the ability to adjust menus if needed, are believed to exist for substantially all of our restaurant products. Our retail supply chain generally involves longer lead-times and, often, more remote sources of product, including the People’s Republic of China, and most of our retail product is distributed to our stores through a single distribution center. Although disruption of our retail supply chain could be difficult to overcome, we continuously evaluate the potential for disruptions and ways to mitigate such disruptions should they occur. GOVERNMENT REGULATION We are subject to various federal, state and local laws affecting our business, including areas of food safety, minimum wage increases, health care, zoning requirements, preparation and sale, among others, of food and alcoholic beverages, information security, and environmental matters. Each of our stores must comply with licensing requirements and regulations by a number of governmental authorities and we have not been significantly affected by any delay in obtaining these licenses. Federal, state and local environmental laws and regulations have not historically had a significant impact on our operations; however, we cannot predict the effect of possible future environmental legislation or regulations on our operations. TRADEMARKS We deem the various Cracker Barrel and MSBC trademarks and service marks that we own to be of substantial value. Our policy is to obtain federal registration of trademarks and other intellectual property whenever possible and to pursue vigorously any infringement of our trademarks and service marks. RESEARCH AND DEVELOPMENT While research and development is important to us, these expenditures have not been material due to the nature of the restaurant and retail industries. SEASONAL ASPECTS Historically, our revenue and profits have been lower in the first and third fiscal quarters and higher in the second and fourth fiscal quarters. We attribute these variations primarily to the holiday shopping season and the summer vacation and travel season. Our gift shop sales, which are made substantially to our restaurant guests, historically have been highest in our second quarter, which includes the holiday shopping season. Historically, interstate tourist traffic and the propensity to dine out have been much higher during the summer months, thereby generally contributing to higher profits in the Company’s fourth quarter. We also generally open additional new stores throughout the year. Therefore, the results of operations for any interim period cannot be considered indicative of the operating results for an entire year. WORKING CAPITAL In the restaurant industry, substantially all sales are either for cash or third-party credit card. Therefore, like many restaurant companies, we are able to, and often do operate with negative working capital. Restaurant inventories purchased through our principal food distributor are on terms of net zero days, while other restaurant inventories purchased locally generally are financed through trade credit at terms of 30 days or less. Because of our gift shop, which have a lower product turnover than our restaurants, we carry larger inventories than many other companies in the restaurant industry. Retail inventories are generally financed through trade credit at terms of 60 days or less. These various trade terms are aided by rapid product turnover of the restaurant inventory. Employees generally are paid on weekly or semi-monthly schedules in arrears of hours worked except for bonuses that are paid either quarterly or annually in arrears. Many other operating expenses have normal trade terms and certain expenses, such as certain taxes and some benefits, are deferred for longer periods of time. 12 Table of Contents