When most people think of Cracker Barrel Old Country Store (NASDAQ: CBRL ) , they conjure up images of down home southern cooking. Biscuits and Gravy. Chicken-fried steak. Mashed Potatoes. The furthest thing from one's mind is furniture. Yet that's exactly what Cracker Barrel claims to sell the most of: rocking chairs.
The layout of a typical Cracker Barrel restaurant is ingenious. In the front -- that is, the waiting area -- is a retail store that carries everything from apparel to perishable food items to, you guessed it, the rocking chairs that grace each location's front patio.
By successfully capturing its customers' attention while they wait for a table, Cracker Barrel has leveraged its restaurant franchise into something far more than that. In the most recent quarter, the 625-unit chain derived 20% of its total revenue from retail sales alone.
The power of this setup becomes apparent when you consider that an estimated 215 million people visit Cracker Barrel locations each year. And many of them are traveling -- 40% of them to be precise -- which implies a greater willingness to open up the checkbook and spend freely.
These forces add $2.6 billion in annual revenue to Cracker Barrel's top line, equating to sales per square foot of approximately $400, which is roughly in line with Wal-Mart's productivity, and gross margins of around 50%.
It's impossible to deny that this has translated into an enormous coup for both Cracker Barrel and its shareholders. Since the beginning of this year, shares in the Tennessee-based restaurant chain have gained 65%, or almost triple that of the S&P 500 (SNPINDEX: ^GSPC ) which is up by only 23% over the same time period.
It's worth pointing out as well that Cracker Barrel continues to pay a generous dividend, yielding 2.6% relative to the 1.98% average for the S&P 500. That's a considerable premium for income-seeking investors.
The lesson here is a simple one. Whatever you may think of Cracker Barrel Old Country Store, its creativity in appeasing and leveraging its customer base has served both it and its shareholders well over the years.
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