Management says it has the formula figured out for rejuvenating the brand. | Photo: Shutterstock
More mud is flying this week in the war of words between Cracker Barrel Old Country Stores and its terrier of a shareholder, the chronically disgruntled Sardar Biglari.
The family-dining chain released a 55-slide argument yesterday for why investors should shut down the Warren Buffett disciple’s seventh attempt to wrangle control of the operation, this time via an outright proxy fight. Organized as a self-navigable financial presentation, it’s intended to sway more shareholders to vote against Biglari’s renegade slate of directors in the lead-in to the company’s annual meeting next month.
The communication to investors is an apparent response to the 122-slide presentation Biglari issued last week to support his contention that the company’s current board has to go. He’s demanded that he and two allies, Milena Alberti-Perez and Michael Godwin, be given seats, a retreat from the five directorships he initially claimed should be awarded his camp.
With one proxy already on the board because of a past concession to Biglari’s demands, the investor and his allies would have controlled six of the board’s 10 seats.
He gave no reason for tempering his request, though failures in six previous attempts to grab the reins may have been a factor.
Cracker Barrel stressed in the presentation released yesterday that it had met several times with Biglari, who controls about 9% of the company’s stock. It also pointed out that directors had considered Biglari’s nominees and concluded Godwin would bring considerable technology smarts to the board from his time with the pet supplies retailer Petsmart. The board agreed to recommend him for election to a seat.
But it dismissed Alberti-Perez as an unsuitable candidate because she’s never been in the restaurant business and lacks any connection to Cracker Barrel, presumably not even as a customer.
The slide deck’s real venom was aimed at Biglari himself.
“Biglari offers no substantive solutions to Cracker Barrel’s challenges,” it states. “He has demonstrated a shallow and outdated understanding of our guests, our operations, our industry, and the work we are doing.”
It also disparages his track record. Since taking over the Steak ‘n Shake family-dining chain, a slide notes, same-store sales for the brand have dropped 20.6%, and the investor’s other restaurant holding, family chain Western Sizzlin’, has lost 50% of its systemwide sales. The latter has shrunk to 33 units from the 140 restaurants that were open when Biglari’s stewardship began.
In response to the presentation Cracker Barrel released yesterday, Biglari posted his argument for revising the board on EnhanceCrackerBarrel.com, the website he set’s up as an information center for other disgruntled shareholders. It had been filed with the SEC about a week ago.
The new round of bickering between the company and the shareholder who’s been pestering it since 2011 comes at a critical time for Cracker Barrel. The brand has been losing traffic and sales at a significant clip, a trend attributed by the brand’s new management to a failure by past regimes to refresh the menu, the look of the concept and how it operates.
The company has embarked on a massive, $700 million-plus effort to rejuvenate the 55-year-old brand. Biglari has dismissed that effort as misdirected, arguing that the money going into that quest should go to shareholders. Among the demands he’s aired is halting expansion of the Cracker Barrel chain and selling off its secondary operation, Maple Street Biscuit Co.
Cracker Barrel offered its counterargument to those assertions in yesterday’s presentation.
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