Cracker Barrel Sees Consumer Belt-Tightening Impede Summer Dining Bump

Typically, restaurants see sales rise during the summer, but as consumers’ financial challenges persist, Cracker Barrel is seeing its customers continue to pull back.

On a call with analysts Wednesday (Sept. 13) discussing its fourth-quarter fiscal 2023 financial results, the retail and full-service restaurant (FSR) chain, which has more than 660 locations in addition to dozens of fast-casual subsidiary Maple Street Biscuit Company’s stores, spoke to its ongoing challenges.

“We had expected the traffic would improve in June and July with the onset of the summer travel season. Unfortunately, this didn’t materialize,” Cracker Barrel CEO Sandy Cochran said, attributing this to both “a challenged consumer environment” and to missteps in the brand’s marketing.

Indeed, PYMNTS Intelligence confirms that consumers were pulling back on restaurant dining in June. Surveys of thousands of consumers carried out for PYMNTS’ “Connected Dining” report noted that 58% of consumers made restaurant purchases in June, representing a 9 percentage point drop from May — the most pronounced decrease in monthly purchase percentages since last November. Also in June, average spend per restaurant purchase was down to $24.30 from $26.20 just the month before.

Plus, consumer budgets are facing mounting pressures. PYMNTS’ recent report “New Reality Check: The Paycheck-to-Paycheck Report – The Nonessential Spending Deep Dive Edition,” created in collaboration with LendingClub, for which we surveyed more than 3,400 U.S. consumers, reveals that the share of the population living paycheck-to-paycheck with issues paying bills is up relative to last year.

Still, the vast majority of consumers across financial lifestyles continue to spring for restaurant meals at least occasionally, even when they are having difficulty making ends meet. Eighty-three percent of those having issues paying bills reported that they had made a purchase from a bar or restaurant in the previous 30 days. Still, many diners are making difficult tradeoffs.

“We do believe there is a reaction from consumers to just general generally higher prices in casual dining and full-service dining more broadly,” Cracker Barrel CFO Craig Pommells observed.

In fact, FSR inflation is slightly lower than food inflation overall. Bureau of Labor Statistics (BLS) data reported Wednesday (Sept. 13) reveal that, in August, restaurant prices were up 6.5% overall, with full-service dining prices rising 5.2%. Overall, restaurant prices have continued to creep upward every month this year.

Notably, Cracker Barrel has been seeing these challenges more with middle-income customers than with those earning less.

“[With] income level, our traffic declines were actually larger in the 60,000 to 80,000 and plus cohorts, the lower income cohorts held up better,” Cochran said.

Across the casual dining industry, major brands have seen traffic take a hit. Last month, casual dining giant Dine Brands shared on its earnings call that both Applebee’s and IHOP saw a “modest slowdown in traffic,” per CEO John Peyton. Plus, The Cheesecake Factory saw a 3.7% decline.

Overall, a PYMNTS survey of more than 2,300 U.S. restaurant customers late last year revealed that roughly a third of consumers have been making purchases from restaurants less frequently amid inflation.