Yahoo Finance 6 Reasons Cracker Barrel Is Struggling
Since the pandemic, consumers and businesses have struggled to stay afloat. This is due to a wide combination of reasons, including rampant inflation and high operational costs. It turns out that even large chains are not immune to these struggles, because the popular and long-successful restaurant chain Cracker Barrel Country Store, has had an especially tough run the last several years. At one point, there was even a rumor that the store was closing permanently.
Cracker Barrel has made some drastic changes to combat its business issues. In 2023, Julie Masimo replaced the former Cracker Barrel CEO, Sandra Cochran. In addition, the restaurant chain has launched a new loyalty program based on the popular "peg game" that it is so well known for. In the program, customers can earn "pegs" when they spend money at both the Cracker Barrel restaurant and retail store. In a shareholder conference call in February 2024 (via Seeking Alpha), Masimo said, "Obviously, there is a lot of work to do and it will not be quick or easy, but I am excited and optimistic about the path we are on."
Meanwhile, it remains true that Cracker Barrel has a lot of work left to do, especially because there are so many reasons that the chain is not doing well. As the chain continues to fight an uphill battle to revitalize its brand and stay relevant in today's market, we have examined all the reasons that Cracker Barrel is struggling.
Read more: The Most Overrated Chain Restaurants In The US, According To The Mashed Staff
Higher Prices And Fewer Diners
It's not news that inflation is at an all-time high. Since the pandemic, consumers are tightening their budgets to survive. At the same time, restaurants need to raise their prices to keep up with inflation. All in all, it is not a pretty picture, and even cult classic restaurants like Cracker Barrel are not immune to the state of the economy. The restaurant, which has had to raise its prices by 8.7%, according to the Cracker Barrel website, has struggled to keep up the levels of traffic that it needs to succeed.
The price of restaurant food has risen by 5.1% in the last year as of February 2024, according to CNN. Perhaps this is why only 58% of consumers ate out at restaurants in June 2023, which was 9% less than in May of that same year. This drop is especially significant because it is usually the other way around; in general, restaurant traffic increases during the summer. This is something that Cracker Barrel was relying on in 2023; unfortunately, that just didn't happen. On a September 2023 call with investors, the then Cracker Barrel CEO Sandy Cochran said, "We had expected the traffic would improve in June and July with the onset of the summer travel season. Unfortunately, this didn't materialize," (via Seeking Alpha). If it is any solace for Cracker Barrel, they aren't the only chain struggling, at IHOP, the Cheesecake Factory, and Applebee's all saw downturns in their business last summer.
A Lack Of Proper Marketing
Cracker Barrel's summer traffic failure may have been due to more than just tight wallets. In a shareholder call, the company revealed that one reason that the restaurant is struggling so much is that its 2023 marketing and media strategy missed the mark (via Seeking Alpha). Then Cracker Barrel CEO Sandy Cochran explained in September of 2023, "The volume and substance of our marketing messages in the fourth quarter were not as effective as we wanted." Cochran explained the failed strategy further, explaining that the company had spent less on advertising during that period, "because we traditionally found advertising to be less impactful in the fourth quarter."
This did not turn out to be the right strategy, however, as the restaurant still struggled. Instead of investing in marketing, the restaurant spent its money on more staffing and labor, focusing on the value of the customer experience instead of marketing. The problem with that is that they simply didn't have enough traffic for that strategy to work. Cochran continued by expressing her disappointment that their marketing did not reach enough customers.
It is perhaps a testament to just how poorly their marketing strategy worked that the company's senior vice president and Chief Marketing Officer (CMO), Jennifer Tate, stepped down towards the end of the summer 2023 season. Apparently, it was to "pursue other professional opportunities," according to Nation's Restaurant News.
Their Guest Experience Isn't Good Enough
One of Cracker Barrel's biggest focuses as they try to find a foothold in today's economy is to improve their "guest experience." This focus on the guest experience is threefold. First, they are looking to redecorate some of their restaurants. In a recent shareholder call, Julie Masimo, Cracker Barrel's new CEO as of November 2023, said that the company has "begun testing changes to decor, lighting, paint, and fixtures." According to Masimo, these tests have suggested that the company can "update and brighten [its] interiors in a way that appeals to both core guests and people newer to the brand."
The second way in which Cracker Barrel is attempting to improve the customer experience is through cheap but high-quality food, something that the brand has been known for in the past. Masimo said in February, "It goes without saying that we must provide delicious, craveable food and unique retail product, and we must deliver an improved experience that keeps guests coming back time and time again." This improved experience includes innovative menu changes, as well as Cracker Barrel's new rewards program, which was launched in 2023.
The final aspect of improving Cracker Barrel's customer experience has to do with labor. The company is making an effort to focus on staff following Cracker Barrel rules, as well as retaining any staff that they do have for longer periods. As ex-CEO Sandy Cochran said in September 2023, these aspects are "linchpins for sustainable traffic."
A Lack Of Young Fans
Part of the reason why Cracker Barrel is struggling is that it is going through a bit of an identity crisis. The store and restaurant is historically beloved by an older population of Americans; 43% of Cracker Barrel customers are 55 years or older (via The Wall Street Journal). On the other hand, only 23% of customers are below 34 years of age. This presents a serious problem because as loyal customers continue to age, Cracker Barrel will steadily lose a large percentage of its fan base, especially as a cautious older generation refrains from dining out.
To combat this, Cracker Barrel is attempting to appeal to younger audiences in a way that won't alienate their older customers. In a February 2024 shareholder meeting, Cracker Barrel CEO Julie Masimo said of the matter, "Cracker Barrel is a timeless brand, but even timeless brands must evolve as consumer preferences change, which means evolving our brand positioning, our stores, our menu, and our messaging."
One way the brand has attempted to evolve is that it has begun serving alcohol. Another is that Cracker Barrel has launched a new loyalty program on their mobile app, which aims to bring in a whole new fan base of loyal customers. The restaurant has also attempted some new marketing strategies, including several paid TikTok campaigns, based on an internet trend of visitors leaving photos around the restaurant, aimed at drawing in a young crowd of social media users.
Older Fans Are Still Staying Away From Restaurants Post-Pandemic
It is no secret that Cracker Barrel is beloved by the Baby Boomer generation. More than a quarter of guests at Cracker Barrel's flagship store are over 65. Unfortunately for Cracker Barrel, it is exactly this generation of consumers that has not yet recovered from the effects of the pandemic. In a 2023 shareholder call, former CEO Sandra Cochran explained that one factor in Cracker Barrel's low revenue number is that the restaurant simply doesn't have the traffic that it did pre-pandemic. "The over-65 group is particularly value-conscious," Cochran said, "We just haven't seen the recovery of that group."
One way that Cracker Barrel is trying to combat this decline in traffic is to provide offers that this value-conscious group of consumers simply can't say no to. In February of 2024, Cracker Barrel launched an early dinner deals menu, which is undoubtedly targeted towards an older crowd of consumers. The menu, which is available Monday-Friday from 4:00 to 6:00 p.m., starts at $8.99. In a February shareholder call, CEO Julie Masimo explained, "We believe this menu will resonate with our more price-conscious guests and that it will drive incremental traffic during a non-peak period to our most challenged day part."
Too Many Competitors
The culprit that lies behind many of the issues that Cracker Barrel has faced over the last several years is their competition. The restaurant chain is losing out to some very stiff competition, be that because their advertising is more effective, their deals are better, or their food is tastier. On top of that, as a restaurant that serves both breakfast and dinner, Cracker Barrel effectively doubles its competition; for breakfast, the chain is competing with places like Denny's and IHOP, whereas for dinner, it competes with restaurants like Olive Garden and the Cheesecake Factory.
Cracker Barrel executives have spoken clearly about their concerns on their competitors. In the summer of 2023, when Cracker Barrel struggled with its marketing strategy, then-CEO Sandra Cochran said their marketing was less effective than they wanted, especially "against the backdrop of a highly competitive and promotional marketplace." She also noted that "many of the competitors are not only getting sharp in the price point, but they also increased their level of advertising." It is this highly competitive world that Cracker Barrel must navigate, using its new strategies to find a level of pre-pandemic profit if it wants to succeed.
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