Cracker Barrel Old Country Store Inc. lead investor Sardar Biglari Thursday continued his campaign to alter management of the family-restaurant company by sending a letter urging fellow shareholders to join him in a bid to oust four of its 11 board members, including executive chairman Michael Woodhouse.
The management team of Lebanon, Tenn.-based Cracker Barrel responded to Biglari’s letter Thursday by stating it was looking forward to providing shareholders with “a comprehensive review of the progress it is making on its strategic initiatives to build shareholder value” at its annual meeting for securities analysts and institutional investors, to be held on April 26.
Biglari is chief executive of San Antonio, Texas-based Biglari Holdings Inc., parent to the Steak 'n Shake and Western Sizzlin restaurant chains.
Since 2011, entities controlled by Biglari have increased their collective ownership stake in 612-unit Cracker Barrel to 17 percent, effectively making him the single largest shareholder in that company. In response, Cracker Barrel management earlier this month introduced a new shareholder rights plan, or poison pill, to hinder a takeover of the company that would take effect if any shareholder accumulated a 20-percent stake in the chain.
In a letter to Cracker Barrel shareholders posted Thursday at the www.enhancecrackerbarrel.com website, Biglari said that after meeting with Cracker Barrel’s management team he was “convinced we would not see big returns until more substantive leadership changes became imminent.” That is so, he wrote, because “for years the company’s fundamentals have been declining,” particularly in the areas of customer traffic and per-store profit.
“Our goal has been to join the board in order to help avert the trend towards decline and, more significantly, to magnify the value of the company,” Biglari wrote. “In the final analysis, Mr. Woodhouse has failed in his attempts to grow traffic profitably. It is clear to us Mr. Woodhouse must go,” he continued.
Referring to his failed bid in 2011 to win a single seat on the Cracker Barrel board of directors, Biglari added, “In the second round, we intend to raise the stakes: We no longer seek only one board seat. We demand that Michael Woodhouse, Charles Jones, Robert Dale, and Jack Lowery go off the board.”
Cracker Barrel shareholders rejected Biglari’s bid for a board seat last year after a contentious proxy fight that Biglari said was motivated by his desire to see Cracker Barrel better managed for improved returns for investors. At the same time, however, shareholders also rejected a 10-percent poison pill that the board had approved.
“Because the value of our current investment is over $210 million in Cracker Barrel, we cannot just wait and hope for matters to improve; hope is not a winning strategy,” Biglari wrote Thursday. “Time is clearly ripe for shareholders to demand that management institute clear performance goals.”
He said that in his view, traffic should grow annually by a minimum of 3 percent with a target of 5 percent after seven-plus years of declines.
Sandra B. Cochran, Cracker Barrel’s president and chief executive, responded to Biglari in a written statement Thursday.
“We are eager for the opportunity afforded by our investor day next week to discuss with our shareholders our ongoing initiatives to enhance growth in same-store sales and traffic, reduce costs and expenses, and grow profitability in ways that are sustainable over the long term and will preserve the strength of our brand and return increased value to our shareholders,” she said. “Although Sardar Biglari appears committed to a perpetual proxy fight, we continue to focus and make progress on improving the business of Cracker Barrel."