Cracker Barrel 2015 Annual Report Download - page 11

beginning of the year andare measured on comparable
calendar weeks.is measureexcludes the impactof new
store openings.
Retailconversion is the percentage of restaurant guest
trac that make a retail purchase. Management uses retail
conversion as its metric to analyzea store’s ability to convert
restaurant trac into a retail sales occasion.
Average check per guest is an indicatorwhich management
uses to analyzethe dollars spent per guest in our stores
on restaurant purchases. is measure aids management in
identifying trends in guest preferencesas well as the eective-
ness of menu price increases and other menu changes.
Store operating margins are dened as total revenueless
cost of goodssold(exclusiveof depreciation and rent),
labor and other related expenses and other store operating
expenses, allas a percentage of total revenue. Manage-
ment uses this indicatoras a primarymeasure of operating
protability.
Company Performancein 2015
Management believes that the Cracker Barrelbrand remains
one of the strongest and most dierentiatedbrands in
the restaurant industry. During 2015, we focused on four key
business prioritieswhich were basedon our previously
announced long-term strategy.
Our long-term strategy includes the following:
•Enhancing the core business by increasing our brand’s
relevance to customersin order to drive guest trac and
sales in both restaurant andretail, implementing geographic
pricing tiers to optimize average check and re-engineering
store processes to increase operating margins;
•Expanding the footprint through continued use of our
provensite selection tools,introducing a new and more
ecient building and equipment prototype and the
selective entry into new markets; and
•Extending the brandby building on the initialsuccess of our
licensing business, leveraging our brandstrengths into a
new fast casual concept and growing our retail business into
an omni-channel business.
Our four priorities for 2015 wereto:
1) Extendthe reach of the Cracker Barrelbrand to drive trac
andsales in both our restaurant and retail businesses.
During 2015, our ve seasonal menu promotions
continued to be well received by our guests. We believe
these promotions drive repeat visits by providing our
guestswith varietythrough limited-time oeringsthat
appeal to both our most frequent guestsand our lighter
users.To meet our guests’ desire for additional beer-for-
youmenu items,we continued the build-out of our
Wholesome Fixin’s menu category throughout 2015.
Our retail gishop continues to be an integralpart of the
Cracker Barrel experience. Our merchandising team
sourced themes that are designed to work acrossmultiple
demographics andresonatewith a range of guests, with
a focus on nostalgicand authenticitems that are uniquely
Cracker Barrel.Marketing and advertisingwere key
strategies to help drive restaurant andretail sales. In 2015,
we soughtto optimize our spend in these areas by
reallocating dollarsinto media channels including social,
digital, and our exclusive music program.We continued
our Handcraed by Cracker Barrel campaign with
television and new billboard creative content to drive
brand awareness. We ran national cableadvertising
during our rst, second,andfourth quarters of 2015.
During these on-air periods,we used a pulsing schedule
to stay engaged with our target guestsover a longer
period of time.
2) Optimize average guest check through the implemen-
tation of geographic pricing tiers. Using a rigorous
testing methodology that will be analyzed over multiple
purchase cycles,we beganour market level pricing test
in the rstquarterof 2015. We moved forwardwith our
second phase in the third quarterof 2015 and continue
to read the elasticity in eachmarket and use the ndings
to further expand the pricing variance between levels.
We believe that a geographic pricing structure will allow
us to increase our prices at a compound annual growth
rate of two to three percent perscal year over the next
few years.
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