CRACKER BARREL OLD COUNTRY STORE, INC 10-K

ITEM 1. BUSINESS OVERVIEW Cracker Barrel Old Country Store, Inc. is principally engaged in the operation and development of the Cracker Barrel Old Country Store® concept (“Cracker Barrel”). Originally founded in 1969, we are headquartered in Lebanon, Tennessee and 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. As of September 13, 2024, we operated 658 Cracker Barrel stores in 44 states and 68 Maple Street Biscuit Company stores in 10 states. 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 Our Cracker Barrel 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. As of September 13, 2024, no Cracker Barrel stores were franchised. In 2024, we announced our strategic transformation plan. The strategic transformation plan is anchored on three overarching business imperatives: driving relevancy, delivering food and an experience guests love, and growing profitability. We have undertaken certain initiatives as part of these imperatives, including modifying capital allocation to support increased investment in the business to drive organic growth. We launched our loyalty program to leverage guest data to better understand consumer behavior and identify ways to drive frequency and engagement. As part of the plan, we are redefining our brand, including by improving our stores’ designs and atmosphere. We are currently testing store remodel prototypes. Our store remodel program includes two categories: full remodels and store refreshes. We expect that 25-30 stores will be fully remodeled and we expect to complete 25-30 store refreshes in 2025. 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, which are a popular item sold by the gift shops and which we invite guests to use while waiting for a table in our dining room or after enjoying a meal. 6 Table of Contents Products : Our restaurants, which generated approximately 80% of our total revenue in 2024, 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. Approximately 93%, of our Cracker Barrel restaurants serve an assortment of beer and wine as of the end of 2024. 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 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 2024 was $14.05, which represents a 5.1% increase over the prior year. We served an average of approximately 5,500 restaurant guests per week in a typical store in 2024. The following table highlights the price ranges for our meals in 2024: ​ ​ ​ ​ ​ Price Range Breakfast ​ $ 6.99 to $ 20.99 Lunch and Dinner ​ $ 5.19 to $ 25.19 ​ The following table highlights each day-part’s percentage of restaurant sales in 2024: ​ ​ ​ ​ ​ Percentage of ​ ​ Restaurant ​ Sales in 2024 Breakfast Day-Part (until 11:00 a.m.) ​ 25% Lunch Day-Part (11:00 a.m. to 4:00 p.m.) ​ 37% Dinner Day-Part (4:00 p.m. to close) 38% ​ We also offer for sale in our gift shops items that are featured on, or related to, the restaurant menu, such as pies, cornbread mix, coffee, syrups and pancake mix. 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 that accounted for the largest shares of our retail sales in 2024: ​ ​ ​ ​ ​ Percentage of ​ ​ Retail Sales in ​ 2024 Apparel and Accessories ​ 32% Food ​ 18% Décor 14% Toys 13% Media 7% ​ 7 Table of Contents Our typical gift shop features approximately 4,300 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 $515 per square foot in 2024) as compared to traditional retail 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 seasonal events or promotions. 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 both core and seasonal themes. Our seasonal themes are designed to create interest and excitement in our stores by providing our guests with additional choices that vary throughout the year. Store Management : At each store, our store management typically consists of one general manager, three to four associate managers and one retail manager. 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 unaffiliated companies. Beer and wine are purchased and distributed through approximately 630 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 2024: ​ ​ ​ ​ ​ Percentage of ​ ​ Food Purchases ​ in 2024 Fruits and vegetables 14% Poultry 13% Dairy (including eggs) 13% Beef 13% Pork 10% ​ 8 Table of Contents Each of these categories includes several individual items. Boneless chicken breast is the single food item within these categories that accounted for the largest share of our food purchasing expense in 2024 at approximately 5% 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 seven vendors, poultry through nine vendors and beef through six vendors. Should any food items from a particular vendor become unavailable, we generally believe that these food items could readily 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. The majority of our retail items (approximately 80% in 2024) are warehoused at our retail distribution center in Lebanon, Tennessee. 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. The remaining retail items are drop-shipped directly by our vendors to individual stores. Approximately one-third of our 2024 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. 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 aspects of operating the business. Examples include a digital experience that drives our loyalty program, effectively enables our off-premise business, allows for mobile payments in store, and provides guests with a digital waitlist that can be accessed remotely through our own mobile application. Our in-store guest experience is supported by systems that manage the dining room seating, assist in facilitating customer orders of food and retail products, and routes food orders to our kitchen. Marketing uses digital technology to provide more relevancy in customer messaging. Our store employees use a range of 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. Our data solutions provide management with daily reports used to operate stores in a cost-effective manner and assist in analytics and decision-making. Our help 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. Off-Premise Business : Approximately 20% of our restaurant sales are generated through our off-premise channels. Our off-premise business consists of three channels: Individual To Go, Third-Party Delivery and Catering and Occasion. Individual To Go includes to go orders that guests pick up from our stores. Third-Party Delivery includes to go orders that are placed through an aggregator, e.g., Door Dash and Uber Eats, and delivered to guests by an employee of the aggregator. Catering and Occasion includes offerings for large party sizes, which includes our popular Heat n’ Serve offerings that are available for certain holidays. In 2024, Individual To Go, Third-Party Delivery and Catering and Occasion accounted for approximately 48%, 32% and 20% of total off-premise sales, respectively. 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. 9 Table of Contents 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 channels to reach and engage our guests. Outdoor advertising (e.g., billboards and state department of transportation signs) is one of our largest advertising vehicles we use to reach our traveling and local guests. In 2024, we had over 1,300 billboards and this expenditure accounted for approximately one-fourth 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 event activations drive awareness for the brand and build cultural relevance and affinity with our guests. Additionally, in the first quarter of 2024, we launched our customer loyalty program, Cracker Barrel Rewards. Store Development: We opened two new Cracker Barrel stores in 2024. Currently, we plan to open two new stores during 2025. As of September 13, 2024, approximately 83% of our stores are located along interstate highways. Our remaining stores are located off-interstate or near tourist destinations. Of the 658 stores open as of September 13, 2024, we own the land and buildings for 358, while the other 300 properties are either ground leases or ground and building leases. Building, site improvement, furniture, equipment and related development costs for stores opened during 2024 averaged approximately $5,700 and pre-opening costs averaged $835 per store in 2024. 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 We also operate Maple Street Biscuit Company (“MSBC”) locations. MSBC is a breakfast and lunch fast casual concept. 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 13, 2024, 68 MSBC locations were open, an increase from 59 at the same time last year — all are currently leased properties in Alabama, Florida, Georgia, Kentucky, Ohio, North Carolina, South Carolina, Tennessee, Texas and Virginia. As of September 13, 2024, no MSBC locations were franchised. We believe that MSBC will serve as a long-term growth vehicle that complements Cracker Barrel while providing increased exposure to urban and suburban markets. Currently, we plan to open three to four MSBC locations in 2025. HUMAN CAPITAL As of August 02, 2024, we employed approximately 77,600 people, of whom 350 were in advisory and supervisory capacities, 3,385 were in-store management positions and 45 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. 10 Table of Contents 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. 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. Also guiding our way is the sense of belonging we strive to deliver as part of our People Promise. 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 August 02, 2024, 34% of our employee population is racially and/or ethnically diverse and 70% of our employee population is female. 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 (“Hispanic Organization for Leadership and Advancement"): 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’ 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 are 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. 11 Table of Contents 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 and fostering a sense of belonging for all. 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. 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. Quality Assurance and Food Safety 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: ● Comprehensive food safety training for store employees and store managers; ● 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; ● Regular unannounced food safety audits conducted on all Cracker Barrel locations several times per year by a nationally recognized third party food safety organization; ● Ensuring a pest free environment in our locations though a stringent pest control process; ● Monitoring of all national and local food safety regulations pertaining to 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. 12 Table of Contents 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. RAW MATERIALS SOURCES AND AVAILABILITY Essential restaurant supplies and raw materials are generally available from a number of 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. 13 Table of Contents 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. Additionally, the fourth quarter of 2024 consisted of 14 weeks. 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 payments received on sales are made by credit card, debit card or cash. 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 shops, 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 once every week or every two weeks 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.