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Cracker Barrel (CBRL) Acquires Maple Street for $36 Million

Zacks Equity Research

Cracker Barrel Old Country Store, Inc. CBRL acquired Maple Street Biscuit Company to strengthen presence in made-from-scratch food and hospitality space. Also, the company has plans to convert its Holler & Dash Biscuit House units into the newly-acquired Maple Street locations in the upcoming months. The deal was an all-cash transaction valued at $36 million.

Benefits from Maple Street Buyout

Maple Street Biscuit Company has 28 owned outlets and five franchised fast casual locations in seven states. It focuses on serving its communities through comfort food with a modern twist and enhanced service. Maple Street has expected average unit volumes of more than $1 million and store-level EBITDA margin of more than 17%. Meanwhile, Cracker Barrel anticipates no material impact in fiscal 2020 earnings apart from than acquisition and integration-related expenses.

Maple Street’s emphasis on made-from-scratch food and hospitality is expected to enhance Cracker Barrel’s presence in this category.

The company has been undertaking efforts to address challenges in the competitive restaurant industry and focus on brand’s differentiation. The latest buyout follows three months after Cracker Barrel revealed plans to invest up to $140 million into Punch Bowl and acquire previously-owned stakes of the private equity firm — L Catterton. Punch Bowl operates 17 locations in 12 states and is known for combining high-quality food with entertainment such as bowling and shuffleboard. The deal provides Cracker Barrel a noncontrolling stake in Punch Bowl. Moreover, the company has an option to buy the chain outright.

Such investments indicate Cracker Barrel’s inclination toward market diversification. Apart from brand differentiation, this Zacks Rank #2 (Buy) stock has also been undertaking extensive marketing efforts as well as focusing on the brand’s menu offering and value. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Notably, decline in traffic is a persistent concern for Cracker Barrel and other companies like Red Robin Gourmet Burgers, Inc RRGB, BJ's Restaurants, Inc BJRI and Brinker International, Inc EAT in the Zacks Retail – Restaurants industry. In fiscal 2019, Cracker Barrel’s traffic declined 0.7%.  

The company’s shares have underperformed its industry year to date. Higher labor costs stemming from increased wages and traffic woes are a concern. Cracker Barrel’s revenues of $787.1 million in the last reported quarter declined 3% from the prior-year quarter’s level. Now, initiatives to diversify its business are expected to drive the company’s top line during fiscal 2020.

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