This article was updated on Nov. 13, 2014.
Some restaurants have a cult-like following. As I learned at the end of last year with this article, Cracker Barrel Old Country Store (CBRL 5.18%) is one of them. With this in mind, I scoured the company's financial documents to uncover a handful of things that even the most dedicated customers probably didn't know about the Tennessee-based restaurant chain.
1. Retail sales account for a fifth of total revenue
While Cracker Barrel's main business is food service, which accounts for roughly 80% of total revenue, a not-insignificant portion comes from retail sales. The waiting area in each of the chain's 633 locations consists of a retail store with an assortment of apparel, branded food, music, and toys and games, among other things.
Image source: Cracker Barrel.
The move is ingenious because it solves the biggest problem facing stand-alone retail stores: getting people in the front door. On top of this, because it's the waiting area of a restaurant, Cracker Barrel has little to no competition for its customers' attention. Waiting diners have essentially no choice but to peruse the merchandise.
The net result is that Cracker Barrel generates $2.7 billion in annual revenue from its retail business. That equates to $415 of sales per square foot, which is in line with retail giant Wal-Mart.
2. Its best-selling item has nothing to do with food
Now that you know about Cracker Barrel's ingenious method of leveraging its customers' wait time, what do you think its best-selling item is? It must be something small, right? Maybe a jar of jam or a Duck Dynasty T-shirt?
As the subheading suggests, all of these guesses are wrong. It turns out that Cracker Barrel's best-selling item is a rocking chair.
3. Travelers are Cracker Barrel's core customer base
Every restaurant has a core customer base. People go to McDonald's in search of a fast and inexpensive meal. If you want something that's almost as fast but better quality, Chipotle Mexican Grill or Noodles & Co. fit the bill.
At Cracker Barrel, however, it looks to a specific niche of customers to fill its coffers: travelers. According to a presentation to analysts and investors, travelers make up approximately 40% of its business.
It's for this reason that 83% of its stores are located along interstate highways, with the remainder located "off-interstate or near tourist destinations."
4. It's among the top billboard advertiser in the restaurant industry
How does a company that caters to travelers advertise? Billboards, of course.
"Outdoor advertising (i.e., billboards and state department of transportation signs) is the largest advertising vehicle we use to reach our traveling and local guests," states the company's latest annual report. "In 2014, we had over 1,600 billboards and this expenditure accounted for 44% of our total advertising spend."
In fact, Cracker Barrel relies on billboards so much that it claims to be "among the top billboard advertisers in the restaurant industry." Now that's not something you hear every day.
5. The government shutdown really stung
When the government shutdown last year due to a political impasse over spending and the debt limit, you'd be excused for concluding that such an event would only impact the likes of, say, Lockheed Martin or Boeing, both of which generate significant revenue from the federal government.
Surprisingly, however, Cracker Barrel fell victim to the political stalemate as well. As CEO Sandra Cochran reminded analysts on a conference call at the time:
I'll start by, maybe, reminding everybody that 40% of our business, overall, is related to travel visits. But that has particular areas where there is concentration. So -- and one of those happens to be during fall break. So the shutdown, for us, not only affected us in the areas where people maybe weren't working, but perhaps, more importantly, it affected the travel occasion.
So, for example, we have a store in Pigeon Forge, Tennessee, right at the base of the Smoky Mountain National Park. Well, the park was closed so people didn't want to really visit that whole area. An awful lot of our guests during that time of the year travel up and down the eastern seaboard, looking at the fall foliage, and many trips evidently end in Washington, D.C. to see the monuments. So that kind of travel was disrupted.
So we did see an impact relating to the shutdown. It probably affected us because of our travel emphasis, more than other concepts. And we did see that when it -- the shutdown was over, that there was an improvement.
Summing up Cracker Barrel's success
Whether you knew any of these things or not, it's impossible to ignore that a handful of them go a long way toward explaining why Cracker Barrel has been so successful over the years. By zeroing in on a captive customer base, marketing in an inexpensive but effective manner, and leveraging its customers' time in the waiting area, Cracker Barrel has proven that its business acumen is far removed from its simple but pleasing down-home country cooking.
