Showdown At Cracker Barrel Final Case Study Essay

2113 Words Feb 17th, 2015 9 Pages
SHOWDOWN AT CRACKER BARREL

FOREWARD

The perspective that will be adopted for the purpose of this case analysis will be that of an institutional shareholder of Cracker Barrel. The final recommendations of this report will focus on the anticipated vote to determine whether or not Sardar Biglari should be allowed to acquire a seat on the board of directors.

CURRENT SITUATION

The aggressive board challenges by Biglari have resulted in defensive moves by the current directors. Biglari has been vocal in his attempt to leverage his 10% stake in the company and desire to join the board of directors. In reaction to this move the board of directors has appointed additional like-minded directors to help move the company forward into an
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Only family restaurants without a primary focus on alcohol service were included in the peer analysis. We did not exclude restaurants that had alcohol on the menu, but we wanted to avoid comparing to bar or pub–style establishments, as they catered to an entirely different demographic.

Only restaurants in the low-moderate price point were considered. Higher-end restaurant chains were excluded, as customer demographic is sufficiently different.

Based on these criteria, Cracker Barrel’s peer group should include the following:

Biglari Holdings
Bob Evans Farms
CEC Entertainment
Cheesecake Factory
PF Chang
Ruby Tuesday
Texas Roadhouse

Detailed analysis of the peer group is included in Exhibit A. Overall, this analysis indicates that the peer group we selected is quite different than Biglari’s peer group. In fact, it is likely that Biglari selected this peer group in order serve his agenda of making the performance of Cracker Barrel appear worse than it actually is. For example, Cracker Barrel’s ROA (15.4%) seems quite low in comparison to Biglari’s peer group (33.9%), but relatively high compared to our peer group (11.8%).

A similar situation is observed when comparing 1 – 7 year returns. Biglari’s peer group earns a 235% return over this period, while our peer group actually loses 21%. Cracker Barrel’s 7-year return of 27% actually appears to be quite attractive in comparison to our peer group. The same phenomenon is observed when comparing Revenue

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