Biglari plan promises bigger Cracker Barrel dividends

Board suitor would halt expansion push, seeks 'compelling, convincing' message from investors

Cracker Barrel Old Country Store should stop building new stores and focus on improving the profitability of its existing locations, its top investor has told shareholders as part of his bid to gain two board seats.

If he's elected, Sardar Biglari would push for just that — the strategy was one of the core tenets of his agenda during a failed board push last year — and then seek to hand over to shareholders the $155 million Cracker Barrel has earmarked for expansion over three years. Biglari says building more stores makes no sense because of the low returns he says the company is getting. Rather than the more than 16 percent Cracker Barrel says its new locations have generated in recent years, Biglari says properly taking into account depreciation, taxes and other items would cut that number by three-quarters.

"Our plan would call for distributing the aforesaid amount to shareholders as a result of placing a moratorium on new store expansion," Biglari wrote in an 11-page manifesto published three weeks ahead of an investor vote. "Shareholders deserve more attractive remunerative returns than the historical 3.7 percent rate of return."

Biglari's letter to shareholders — view it here — says support on Nov. 15 for his platform would send "a compelling, convincing message to the Company that Cracker Barrel shareholders desire engaged Board members with significant ownership interests" and restaurant industry knowledge. It also makes clear for the first time who he wants removed from the board to make way for himself and Phil Cooley, his lieutenant at Biglari Holdings. Not surprisingly, one of them is incoming Chairman Jim Bradford, whom Biglari has this month attacked for not correcting Cracker Barrel's erroneous characterizations of him as the former CEO of a public company.

The other is Richard Dobkin, a former Ernst & Young executive who has been a director since 2005 and chairs Cracker Barrel's audit committee. Dobkin should go, Biglari says, primarily because the audit committee should have pushed for better disclosures of the profitability of Cracker Barrel's restaurant and retail segments.

In defending itself against Biglari's charge, Cracker Barrel has in the past year and change said the boss of Steak n' Shake is out to assume control of the Lebanon-based chain without properly compensating other investors. More recently, CEO Sandy Cochran has pointed to the company's improved results and share price as evidence Biglari's board presence is not needed. Biglari in turn has said the improvements have been partly due to his efforts to overhaul the governance and strategy of the company and on Thursday wrote that those jobs are not yet done.

"We are vigorously interested in adding to the fundamental value of Cracker Barrel," Biglari writes. "We urge you not to base your decision on a one-year return, when, we believe, we had a part in the correction of the undervaluation."