Cracker Barrel 2005 Annual Report Download - page 37

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We are in the business of delivering excellent guest
dining experiences, and we strive to do that in 41 states
at more than 650 company-owned and 23 franchised
units. While each restaurant concept offers its own
unique atmosphere and an array of distinct menu items,
both are equally committed to executing outstanding
guest service while focusing on delivery of high quality
products at affordable prices. During 2005 we served
approximately 212 million meals in Cracker Barrel and
approximately 30 million meals in Logan’s.
Restaurant Industry
Our businesses operate in the full-service segment of
the restaurant industry in the United States. The
restaurant business is highly competitive with respect
to quality, variety and price of the food products
offered. The industry is often affected by changes in
the taste and eating habits of the public, local and
national economic conditions affecting spending habits,
and population and traffic patterns. There are many
segments within the restaurant industry, which overlap
and often provide competition for widely diverse
restaurant concepts. Competition also exists in secur-
ing prime real estate locations for new restaurants,
in hiring qualified employees, in advertising, in the
attractiveness of facilities and among competitors
with similar menu offerings or convenience.
Additionally, seasonal, economic and weather
conditions also affect the restaurant business.
Historically, interstate tourist traffic and the propen-
sity to dine out have been much higher during the
summer months, thereby attributing to higher profits
in our fourth quarter. While retail sales in Cracker
Barrel are made substantially to restaurant customers,
such sales are strongest in the second quarter, which
includes the Christmas holiday shopping season.
A rapid increase in gasoline and energy prices that
began in 2004, continued in 2005, and apparently
exacerbated by disruptions from hurricanes in 2006,
appears to have affected consumer discretionary
income and dining out habits. Severe weather can and
has affected sales adversely from time to time.
Key Performance Indicators
Management uses a number of key performance
measures to evaluate the Company’s operational and
financial performance, including the following:
Comparable store sales and traffic consist of sales
and calculated number of guests, respectively, of units
open six full quarters at the beginning of the year;
and are measured on comparable calendar weeks. This
measure highlights performance of existing stores as
the impact of new store openings is excluded.
Percentage of restaurant sales by day-part assists
management in identifying the breakdown of sales
provided by meals served for breakfast, lunch or dinner.
This measure not only provides a financial measure of
revenues by type of meal, but also assists operational
management in analyzing staffing levels needed
throughout the day.
Percentage of retail sales to total sales indicates
the relative proportion of spending by guests on retail
product at Cracker Barrel stores and helps identify
overall effectiveness of our retail operations and initia-
tives. Management uses this measure to analyze a
store’s ability to convert restaurant traffic into retail
sales since the substantial majority of our retail
guests are also restaurant guests.
Average check per person is an indicator which
management uses to analyze the dollars spent in our
stores per guest. This measure aids management in
identifying trends in guest preferences as well as the
effectiveness of menu price increases and other
menu changes.
Turnover rates are considered separately for both
hourly turnover and managerial turnover. These
indicators help management to anticipate future train-
ing needs and costs, as well as helping management
to recognize trends in staffing levels that would
potentially affect operating performance.
Store Operating Margins are defined as total revenue
less cost of goods sold, labor and other related
expenses and other store operating expenses, all as a
percent of restaurant sales. Management uses this
indicator as a primary measure of operating profitability.
RESULTS OF OPERATIONS
The following table highlights operating results over
the past three years: