IBJOpinion

Cracker Barrel battling to keep Biglari at bay

Back to TopCommentsE-mailPrintBookmark and Share
Greg Andrews

Cracker Barrel is a welcoming place. Guests can sit in rocking chairs and play checkers as they wait for a friendly greeter to guide them to a table. Or they can meander through the country store stocked with rustic bric-a-brac.

Sardar Biglari mug Biglari

But the Tennessee-based chain isn’t extending any of its folksy, down-home hospitality to Sardar Biglari, the Texas hedge fund investor who this spring scarfed up so many shares he became the company’s largest shareholder.

Since then, Cracker Barrel Old Country Store Inc. has rejected Biglari’s request that directors appoint him and business partner Phil Cooley to the board. It also has rolled out a “poison pill” plan that would deter outside investors from taking over the business without negotiating with the board first.

No one who followed Biglari’s pursuit of Indianapolis-based Steak n Shake Co. a few years ago should be surprised what happened next. The slender executive girded for battle, rolling out the activist website enhancecrackerbarrel.com and launching a proxy fight aimed at electing him and Cooley to the company’s board at its Dec. 20 annual meeting.

Biglari, 34, knows this game well, and plays it with aplomb. At Steak n Shake, he began buying shares in 2007 and rose to CEO scarcely a year later. Now, the locally based Steak n Shake chain is the centerpiece of Biglari Holdings Inc., the publicly traded firm he runs out of San Antonio.

In a September press release, Cracker Barrel argued that appointing Biglari to the board “would create serious and inappropriate business conflicts of interest,” given that he leads Steak n Shake, a competing restaurant chain. Further, the board expressed misgivings about his background and qualifications and “uncertainty over Mr. Biglari’s ultimate agenda.”

You can understand why Biglari would make board members nervous. He initially called for greater transparency, asking that the company break out its retail and restaurant sales separately.

Since then, he’s turned up the heat, attacking board members for spending barely $250,000 to buy shares on the open market since 2003, a pittance compared with the $100 million he and affiliates spent to amass a 9.3-percent stake.

“Our concern over Cracker Barrel’s leadership stems from its poor strategy, poor operating performance, poor financial disclosure and lack of ownership, which, if left uncorrected ... will lead to poor shareholder returns,” he said in a Sept. 13 letter to shareholders.

Biglari swooped in because Cracker Barrel is a little banged up these days. The stock is trading at around $41.50, down 28 percent since November. Unlike many restaurant rivals, the company has avoided using heavy discounting to pull in customers. Even so, rising commodity prices have squeezed profit.

Biglari—who couldn’t be reached for comment—no doubt will trumpet his success at Steak n Shake to help win over Cracker Barrel shareholders. After taking Steak n Shake’s helm, he slashed expenses and rolled out $4 value meals. The strategy helped halt a 14-quarter slide in same-store sales. The chain now has reported rising same-store results for 15 straight quarters.

Even so, analysts doubt Biglari will stir up enough Cracker Barrel shareholders to win a spot on its board. But they say he probably won’t have to to achieve his ultimate goal—pocket a handsome profit on his investment.

Analysts think the stock could spring higher and is unlikely to slip further—in part because of the pressure Biglari is applying to boost results.

It also helps that the 600-restaurant chain is more insulated from competition than many other eateries—thanks to locations off interstates in small towns and rural areas, where Cracker Barrels often are the only full-service option.

Even more significant: Because Cracker Barrel shares are depressed, the company’s stock market value is just $1 billion—barely more than the real estate value of the 400 locations the company owns, Raymond James analyst Bryan Elliott estimated in a report. He said that means investors are valuing the restaurant operations at only around $200 million.

In his Sept. 13 missive to shareholders, Biglari said he has the drive and savvy to help turns things around—and get investors excited about the company again.

“I believe the power of the brand has covered up board missteps,” he wrote. “This … proxy contest centers on placing a real owner on the board of a company with an A+ brand that has failed to produce A+ performance. We blame the board for mediocrity.”•

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. Good Day I am Mr (Victoria Wright) from United state of America, i stayed in NEW YORK, and i have a broke up business, until i found this company email who help me to gain a loan for business,, and now i want to used this short medium to congratulate the below company for the fast and safe money they loan to me without any form of collateral, i loan 500,000USD from the company to save my business and lots more, i saw their mail on the internet, everyone always give testimony for what they did, so i quickly contacted them and they all did everything for me without stress and my money was sent to my account just 3 days later, i was surprise and i feel so glad, now i have a standard business control agent who help me, now i will advice those who need urgent loan to contact him at the bellow email:zenithfirm12@gmail.com

  2. NOTICE:This is to inform the general public that Vampires are real. My name is James Franklyn.,am an agent of vampire,am here to introduce our new world trend to you,a world of vampire where life get easier,we have made so many persons vampires and have turned them rich,you will be assured long life and prosperity,you shall be made to be very sensitive to mental alertness,stronger and also very fast,you will not be restricted to walking at night only even at the very middle of broad day light you will be made to walk.In case you are wildly oppressed by some unscrupulous persons we can still help you fight them.Your protection is assured immediately you join.Just contact the bellow email if you are interested we are here to attend to you anytime you want us. Contact the bellow email for more details. Email:vampirescreed@hotmail.com Sincerely: James Franklyn.

  3. Bravo! Someone else that is willing to speak the truth! Bravo!_____NBCSN is available in almost 2 MILLION more homes than just a few years ago, but Indycar STILL gets less total viewers than it did just a few years ago when NBC took over Versus. Attendance and ratings cratered with the end of season races (just when the title battle got "interesting" HAH!__________And now...new race in Basilia, where Miles celebrated the "rich history" of Indycar racing there. Rich history? What, 7 events in the 100 years of AOW? Yep, some history. Well, at least its an oval. It's not??? Are you kidding me??? Gosh darn road racin furriners.

  4. PURITY RAY LOAN OFFER........ Have you been denied by your banks,or are you in need of of an urgent loan to pay of your bills we are capable of giving loans @ cheaper rate to interested individuals, student, companies and members of the public in need of finance to settle bills, we do offer considerable loans which you can count on. For more information on our various types of loan,then you will have to contact PURITY RAY LOAN FIRM, to help you achieve your desire LOAN APPLICATION FORM TO BE FILLED BORROWERS INFORMATION * Full name:………………………. * SEX * ……………………………. * Country………………………….. * State:……………………………. * Land:…………………………….. * Occupation:…………………….. * phone number:…………………. * Telephone: ………………………….. * Age:………………………………. * Amount needed as loan:……… * Loan Duration:………………….. * Propose of Loan:……………….. * Annual revenue:………………… * Monthly Income:……………….. * Guarantee:………………………. * Payment: monthly or annually Email.....purityrayloanfirm@gmail.com Thank you and God bless Mr Purity Ray PURITY RAY LOAN FIRM we tend to serve you better

  5. Problem: most of the people responding to this article don't know about this service AT ALL! Why? Lack of awareness. This isn't IndyGo. This is CIRTA: might as well be the mattress company because they are asleep at the wheel - something like 3 directors over the last year? Playing with federal grant money is great! This "region" wants commuter rail service, has spent MILLIONS on Transportation studies yet can't even support a commuter bus line? This is largely for suburban riders to get to downtown - not for "service people to work in our hotels and restaurants" ! Get your head out of your backside!! These are professionals, students etc. that don't want to fight traffic, save some money on parking, gas, stress.... if CIRTA would put their federal money into widely promoting the sevive to Greenwood, Fishers & Carmel instead of finding directors and studies - this would be a successful service. Our family uses(d) it daily for the last several years - but the recent uncertainty & now unreliability due to cuts from Carmel has been a problem. Now, costs us an additional $350/month for gas & parking ( $4200/year) plus vehicle wear, service, environmental impact ... YES - this REGION needs this this type of service in order to keep growing and getting the people it needs to fill skilled positions in downtown Indianapolis. Think outside of your own car !!!

ADVERTISEMENT