Wednesday, August 24, 2011

Biglari and Cracker Barrel.

Here, Sardar Biglari talks about the reporting of Cracker Barrel... Here, Cracker Barrel responds.

I will say that it is fortunate for all parties involved that Cracker Barrel took the high road, and didn't personally attack Biglari, saying something to the effect of "the allegations are baseless, and he is a corporate raider... blah blah blah..."

Instead, CBRL addressed the issue at hand in a civil way. Except for one thing... They didn't address the company's CEO offering to disclose the inside information to Biglari and not the other shareholders.

Personally, I am shocked that the company would offer to show the information to Biglari, but not the rest of the shareholders (as long as Biglari's accusation is true, which, I have no reason to think it isn't). And honestly, I think that Biglari has a good case for why the info should be disclosed. What I will add, though, is that while more info is a great thing, I do wonder what the ultimate intent is. Is this an effort to get the company to lower the footprint of the retail store? What about expanding it? I think that will prove to be a hard mix to mess with, as, I don't believe that you can look at margins and revenue figures, and figure out how they interact with one another... It almost seems like a take it or leave it scenario. Let me explain...

Having frequented the company's locations virtually my whole life- whenever on family vacations and such, I can't imagine the locations being much different than they already are... My family generally loves going through the retail store as much as they like the food (and, I have watched them do it at multiple CBRL's in the same day!). All this said, I don't see how having a larger retail area would help operations (for existing units), and I don't see how a smaller one would do much either. Though, I may be missing something; which more reporting could let us know... I have a feeling that the mix is what makes the company so attractive to consumers, though. While my family is kind of weird, I can't imagine that we are so different that an observation of CBRL's mixed operations isn't viable... Furthermore, if a new concept CBRL was build, and it was markedly different from the others (say, with no retail space), I would imagine a lot of disappointment on the motorist's part.

Despite my disdain for touristy merchant crap, if it weren't for the retail store, I would imagine that my family, and a lot of other southerners, would be a lot more likely to eat at Bob Evan's, rather than Cracker Barrel. But, that is merely a guess. One interesting scenario, which, I don't know the practicality of, would involve the spinning of the retail assets, and effectively leasing 1/2 or so of the restaurants to the other entity... Far fetched (and, I fully admit, is unlikely), but, an interesting concept to think of the logistics of.

With all of this said, I won't be a bit surprised if Biglari has a set of board seats in the next year... Even if he doesn't, the cash flows that the company is capable of generating are impressive, to say the least.

Disclosure: I have no positions in or against any of the securities mentioned. This is not advice of any kind. This is not a recommendation of any kind. I have received nothing to write/post these notes. Always do a ton of your own research in regard to anything that I say, do, write, or so much as even think about.


Ravi Nagarajan said...

It is pretty shocking that selective disclosure would have been offered to Biglari since I think it is not legal based on regulation FD. Biglari was right to reject that offer.

Anonymous said...

I've heard of managements offering to make investors insiders before in exchange for information. However, you become restricted like an insider and can't trade until the information is made public. Guessing that's what CBRL was doing here.