Cracker Barrel 2006 Annual Report Download - page 34

CBRL GROUP, INC.
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The following discussion and analysis provides infor-
mation which management believes is relevant to an
assessment and understanding of the Company’s
consolidated results of operations and financial condition.
The discussion should be read in conjunction with the
Consolidated Financial Statements and notes thereto.
All dollar amounts reported or discussed in
Management’s Discussion and Analysis of Financial
Condition and Results of Operations are shown in
thousands. References in Management’s Discussion and
Analysis of Financial Condition and Results of
Operations to a year or quarter are to the Company’s
fiscal year or quarter unless otherwise noted.
EXECUTIVE OVERVIEW
CBRL Group, Inc. (the “Company,” “our” or “we”) is a
publicly traded (Nasdaq: CBRL) holding company that,
through certain subsidiaries, is engaged in the opera-
tion and development of the Cracker Barrel Old Country
Store®(“Cracker Barrel”) and Logan’s Roadhouse®
(“Logan’s”) restaurant and retail concepts. The Company
was organized under the laws of the state of Tennessee
in August 1998 and maintains an Internet website at
cbrlgroup.com.
We are in the business of delivering excellent guest
dining experiences, and we strive to do that in
41 states at more than 684 company-owned and 25
franchised units. While each restaurant concept
offers its own unique atmosphere and an array of distinct
menu items, both are committed to executing
outstanding guest service while focusing on delivery of
high quality products at affordable prices.
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,
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 securing
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 condi-
tions also affect the restaurant business. Historically,
interstate tourist traffic and the propensity 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. Increases in
gasoline and energy prices that began in 2004,
continued in 2005 and 2006, among other things,
appear 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 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.
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations