Annual Report (Form 10-K), fiscal year 1994

ITEM 1. BUSINESS
Cracker Barrel Old Country Store, Inc. (the "Company" or "Cracker Barrel") was incorporated in October 1969 under the laws of the State of Tennessee. The Company owns and operates 191 full service "country store" restaurants which are located in the southeast, midwest, mid- atlantic and southwest United States along interstate highways, including 5 stores located at "tourist destinations". These family restaurants serve breakfast, lunch and dinner between the hours of 6:00 a.m. and 10:00 p.m. and feature home style country cooking prepared on the premises from the Company's own recipes using quality ingredients and emphasizing authenticity. Menu items are moderately priced and include country ham, chicken, fish, barbecue pork ribs, roast beef, beans, turnip greens, vegetable plates, sandwiches, pancakes, eggs, bacon, sausage and grits. The restaurants do not serve alcoholic beverages. The stores are constructed in a rustic, country store design and feature a separate gift shop area offering a wide variety of items specializing in hand-blown glassware, cast iron cookware, toys and wood crafts as well as various old fashioned candies, jellies and other foods. The Company considers its store operations to constitute an integrated, single line of business.
Operations
Store Format: The format of each of Cracker Barrel's stores consists of a rustic, country store style building. All stores are free standing buildings with adequate parking facilities and standard landscaping. Store interiors are subdivided into a dining area consisting of approximately 25% of the total interior store space, a gift shop area consisting of approximately 22% of such space, with the balance primarily consisting of kitchen and storage areas. All stores have wood-burning fireplaces and are decorated with antique-style furnishings and other authentic items of the past similar to those used and sold in original old country stores. The kitchen areas contain modern food preparation and storage equipment allowing for extensive flexibility in menu variation and development.
Products: Cracker Barrel's restaurants offer rural Southern cooking featuring the Company's own recipes. In keeping with the Company's emphasis on authenticity and quality, Cracker Barrel's restaurants prepare menu selections on the premises. The Company's restaurants offer breakfast, lunch and dinner from a moderately-priced menu. Most items may be ordered at any time throughout the day. Breakfast items include juices, eggs, pancakes, bacon, country ham, sausage, grits, and a variety of biscuit specialties, with prices for a breakfast meal ranging from $1.29 to $6.99. Lunch and dinner items include country ham, catfish, steak, barbecue pork ribs, chicken, vegetable plates, baked potatoes, salads, sandwiches, homemade soups and specialty items such as beef stew with muffins. Lunches and dinners range in price from $2.99 to $10.95. The Company from time to time increases its prices and increased its menu prices approximately 3% in February 1994.
The gift shops, which are decorated with antique signs, primitive tools and other memorabilia in a turn-of-the-century atmosphere, offer a wide variety of items consisting primarily of hand-blown glassware, cast iron cookware, old-fashioned crockery, handcrafted figurines, classic children's toys and various other gift items, as well as various candies, preserves, smoked sausage, syrups and other foodstuffs. Many of the candy items, smoked bacon, jellies and jams along with other high quality products are sold under the Cracker Barrel Old Country Store brand name.
Product Merchandising: Cracker Barrel maintains a quality control department which also develops new and improved menu items in response to shifts in customer preferences and changes in supply of ingredients used in the Company's menu items. Company merchandising specialists are involved on a continuing basis in selecting and positioning of merchandise in the gift shop areas. Management believes that the Company has adequate flexibility to meet future shifts in consumer preference on a timely basis.
Store Management: Store management typically consists of a general manager, four associate managers and a gift shop manager who are responsible for approximately 93 employees on two shifts. The relative complexity of operating a Cracker Barrel Old Country Store requires an effective management team at the individual store level. As a motivation to store managers to improve sales and operational efficiency, Cracker Barrel has a bonus plan designed to provide store management with an opportunity to share in the pre-tax profits of their store. To assure that individual stores are operated at a high level of quality, the Company emphasizes the selection and training of store managers and has a level of District Management to assist individual store managers.
The store management recruiting and training program begins with an evaluation and screening program. In addition to multiple interviews and background and experience verification, the Company conducts testing which it believes is important in selecting those applicants best suited to manage store operations. Those candidates who successfully pass this screening process are then required to complete a 10-week training program conducted at the Company's Lebanon, Tennessee facility. This program allows new managers the opportunity to become familiar with the Company's operations, management objectives, controls and evaluation criteria before assuming management responsibility.
Purchasing and Distribution: Cracker Barrel negotiates directly with food vendors as to price and other material terms of most food purchases. The Company purchases the majority of its food products and restaurant supplies on a cost-plus basis through a distributor in Lebanon, Tennessee. The distributor is responsible for placing food orders and warehousing and delivering food products to the Company's stores. Certain perishable food items are purchased locally by the Company's stores.
The majority of gift shop items are purchased directly by Cracker Barrel, warehoused at its Lebanon warehouse and shipped to the stores.
The single food category accounting for the largest share (approximately 21%) of the Company's food purchasing expense is pork. The single food item within the pork category accounting for the largest share (approximately 5%) of the Company's food purchasing expense is country ham. The Company presently purchases its pork food items through twelve vendors and its country ham through three vendors. Should any pork items from these vendors become unavailable for any reason, management is of the opinion that these food items could be obtained in sufficient quantities from other sources at competitive prices.
Quality, Cost and Inventory Controls: Costs are monitored by management to determine if any material variances in food cost or operating expenses have occurred. The Company's computer system is used to analyze store operating information by providing management reports for continual monitoring of sales mix and detailed operational cost data. This system is also used in the development of budget analyses and planning.
Marketing: New store locations generally are not advertised in the media until several weeks after they have been opened in order to give the staff time to adjust to local customer habits and traffic volume. To effectively reach consumers in the primary trade area for each Cracker Barrel store and also interstate travelers and tourists, outdoor advertising is the primary advertising media utilized, accounting for approximately 54% of advertising expenditures. Advertising costs are approximately 2% of annual sales.
Seasonal Aspects: The profits of the Company historically have been lower in the Company's second fiscal quarter than its first and third, while profits of the Company historically have been highest in the Company's fourth fiscal quarter. Management attributes these variations primarily to the decrease in interstate tourist traffic during the winter months and the increase in interstate tourist traffic during the summer months.
Working Capital: Since substantially all sales in the restaurant industry are for cash, the Company, like most other restaurant companies, is able and may from time to time operate with a negative working capital. Inventories are generally financed from normal trade credit aided by rapid turnover of the restaurant inventory.
Expansion
The Company's primary customer is the interstate traveler. Therefore, the Company's major emphasis in the opening of new stores will continue to be locating stores at interstate highway locations. In addition, specific major tourist destinations will be targeted as potential locations for new units.
The Company opened thirty new stores in fiscal 1994. Five of the stores are located on Interstate 35 in Round Rock, Texas, Norman, Oklahoma, Liberty, Missouri, Lakeville, Minnesota, and Lacy Lakeview, Texas; three are on Interstate 75 in Flint, Michigan, Gainesville, Florida, and Middletown, Ohio; three are located on Interstate 80 in Austintown, Ohio, Davenport, Iowa, and Tinley Park, Illinois; two are located on Interstate 10 in Baytown, Texas and Lafayette, Louisiana; two are on Interstate 40 in Knoxville, Tennessee and Oklahoma City, Oklahoma; there is one store each on Interstate 4 in Sanford, Florida, U.S. Highway 17 in North Myrtle Beach, South Carolina, Interstate 20 in Augusta, Georgia, U.S. Highway 41 in Germantown, Wisconsin, Interstate 44 in Joplin, Missouri, Interstate 55 in Horn Lake, Mississippi, Interstate 64 in Newport News, Virginia, Interstate 70 in Columbus, Ohio, Interstate 77 in Akron, Ohio, Interstate 81 in Winchester, Virginia, Interstate 94 in Battle Creek, Michigan, Interstate 96 in Walker, Michigan, Interstate 470 in Topeka, Kansas, Interstate 635 in Mesquite, Texas and Interstate 694 in Brooklyn Center, Minnesota.
The Company plans to open thirty-six new stores by the end of fiscal 1995. Nine of the stores are already open; there is one each on Interstate 70 in Independence, Missouri, Interstate 35 in Lewisville, Texas, Interstate 45 in League City, Texas, Interstate 83 in York, Pennsyvania, Interstate 24 in Chattanooga, Tennessee, Interstate 4 in Lakeland, Florida, Interstate 494 in Woodbury, Minnesota, Interstate 88 in Napierville, Illinois and Interstate 10 in Pensacola, Florida.
Prior to committing to a new location, the Company performs extensive reviews of various available sites, gathering approximate cost, demographic and traffic data. The Company utilizes in-house engineers to consult on architectural plans, to develop engineering plans and to oversee new construction. The Company is currently engaged in the process of seeking and selecting new sites, negotiating purchase or lease terms and developing chosen sites.
It is the Company's preference to own its restaurants. The Company presently owns 174 of its 191 stores. Currently, average cost for a new store is approximately $600,000 for land and $1,800,000 for site work, building and equipment. The current store size is approximately 9,700 square feet with 176 seats in the restaurant.
Employees
As of July 29, 1994, Cracker Barrel employed 21,796 people, of whom 127 were in advisory and supervisory capacities, 1,121 were in store management positions and 12 were officers of the Company. Most of the restaurant personnel are employed on a full-time basis. The Company has an incentive plan for its hourly employees which is intended to lower turnover and to increase productivity by providing a defined career path through testing and ranking of employees. The Company's employees are not represented by any union, and management considers its employee relations to be good.
Competition
The restaurant business is highly competitive and is often affected by changes in the taste and eating habits of the public, local and national economic conditions affecting spending habits, and population and traffic patterns. The principal basis of competition in the industry is the quality and price of the food products offered. Site selection, quality and speed of service, advertising and the attractiveness of facilities are also important.
There are a large number of restaurants catering to the public, including several franchised operations in the family segment of the restaurant industry, which are substantially larger and have greater financial and marketing resources than those of the Company and which compete directly and indirectly in all areas in which the Company operates.
Trademarks
The Company owns certain registered copyrights, patents and trademarks relating to the name "Cracker Barrel Old Country Store," its logo, menu, design of building, and other aspects of its operations. The Company believes that the use of this name has some value in maintaining the atmosphere and public acceptance of its mode of operations.
Research and Development
While research and development are important to the Company, these expenditures have not been material.
Compliance With Environmental Protection Requirements
Compliance with federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment should have no material effect upon capital expenditures, earnings, or the competitive position of the Company.
ITEM 2.



ITEM 2. PROPERTIES
The Company's present corporate headquarters and warehouse facilities are situated on approximately 120 acres of land owned by the Company in Lebanon, Tennessee.
In addition to the corporate facilities, the Company owns or leases the following properties:
See "Business-Operations" and "Business-Expansion" for additional information on the Company's stores.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any material pending legal proceedings.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General Instruction G(3) to Form 10-K, the following information is included in Part I of this Form 10-K.
Executive Officers of the Registrant
The following table sets forth certain information concerning the executive officers of the Company as of September 26, 1994:
As of the end of fiscal 1994, no executive officer had been employed less than five years.
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since the initial public offering of the Company's common stock in November 1981, the Company's common stock has been traded on The Nasdaq Stock Market (National Market) with the symbol CBRL. There were 15,667 shareholders of record as of September 26, 1994.
The following table indicates the high and low sales prices of the Company's common stock as reported on The Nasdaq Stock Market (National Market) during the periods indicated.
In September 1983 the Board of Directors of the Company initiated a policy of declaring dividends on a quarterly basis. Prior to such date the Board followed a policy of declaring annual dividends during the first fiscal quarter. Quarterly dividends of $.00417 per share were paid for the first two quarters of fiscal 1993. Dividends of $.00500 per share were paid for the last two quarters of fiscal 1993 and all four quarters of fiscal 1994. The Company forsees paying comparable cash dividends per share in the future.
The stock prices and dividends per share have been adjusted to reflect the three-for-two stock split in the form of 50% stock dividends distributed to stockholders on March 19, 1993.
The covenants relating to the $30,000,000 of 9.53% Senior Notes restrict the payment of cash dividends and the purchase of treasury stock. Retained earnings not restricted under the covenants were approximately $260,000,000 at July 29, 1994.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
The table "Selected Financial Data" on page 17 of the Company's Annual Report to Shareholders for the year ended July 29, 1994 (the "1994 Annual Report") is incorporated herein by reference.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following portions of the 1994 Annual Report are incorporated herein by reference:
Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 18 and 19.
ITEM 8.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following portions of the 1994 Annual Report are incorporated herein by reference:
Financial Statements and Independent Auditors' Report on pages 20 through 30.
Quarterly Financial Data (Unaudited) on page 29.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10.



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to directors of the Company is incorporated herein by reference to the section entitled "Election of Directors" in the Company's definitive proxy statement for its 1994 Annual Meeting of Shareholders (the "1994 Proxy Statement"). The information required by this item with respect to executive officers of the Company is set forth in Part I of this Form 10-K.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference to the section entitled "Executive Compensation" in the Company's 1994 Proxy Statement.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference to the section entitled "Security Ownership of Management" in the Company's 1994 Proxy Statement.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference to the section entitled "Transactions with Management" in the Company's 1994 Proxy Statement.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A. List of documents filed as part of this report:
1. The following Financial Statements and the Report of Deloitte & Touche LLP on pages 20 through 30 of the 1994 Annual Report are incorporated herein by reference:
Independent Auditor's Report dated September 7, 1994
Balance Sheets as of July 29, 1994 and July 30, 1993
Statements of Income for each of the three fiscal years ended July 29, 1994, July 30, 1993 and July 31, 1992
Statements of Changes in Stockholders' Equity for each of the three fiscal years ended July 29, 1994, July 30, 1993 and July 31, 1992
Statements of Cash Flows for each of the three fiscal years ended July 29, 1994, July 30, 1993 and July 31, 1992
Notes to Financial Statements
2. The following supplemental schedules as of July 29, 1994, July 30, 1993 and July 31, 1992 and for each of the three fiscal years ended July 29, 1994, July 30, 1993 and July 31, 1992 are included as required by Item 8 of Form 10-K.
Schedule I Short-term and Long-term Investments
Schedule V Property and Equipment
Schedule VI Accumulated Depreciation and Amortization of Property and Equipment
Schedule X Supplementary Income Statement Information
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are not applicable and therefore have been omitted.
3. The exhibits listed in the accompanying Index to Exhibits on page 18 are filed as part of this annual report
B. Reports on Form 8-K:
There were no reports filed on Form 8-K during the fourth quarter of the fiscal year ended July 29, 1994.
INDEPENDENT AUDITORS' REPORT
Cracker Barrel Old Country Store, Inc.:
We have audited the financial statements of Cracker Barrel Old Country Store, Inc. (the "Company") as of July 29, 1994 and July 30, 1993, and for each of the three fiscal years in the period ended July 29, 1994, and have issued our report thereon dated September 7, 1994; such financial statements and report are included in your 1994 Annual Report to shareholders and are incorporated herein by reference. Our audits also included the financial statement schedules of Cracker Barrel Old Country Store, Inc., listed in Item 14. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
Deloitte & Touche LLP Nashville, Tennessee
September 7, 1994
CRACKER BARREL OLD COUNTRY STORE, INC. SUPPLEMENTAL SCHEDULE I
SHORT-TERM AND LONG-TERM INVESTMENTS
CRACKER BARREL OLD COUNTRY STORE, INC. SUPPLEMENTAL SCHEDULE V
PROPERTY AND EQUIPMENT
CRACKER BARREL OLD COUNTRY STORE, INC. SUPPLEMENTAL SCHEDULE VI
ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT
CRACKER BARREL OLD COUNTRY STORE, INC. SUPPLEMENTAL SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
All other supplemental income statement information is not required under the related instructions or is not applicable and therefore has been omitted.
(A) Advertising costs include sign rentals for outdoor advertising.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Cracker Barrel Old Country Store, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CRACKER BARREL OLD COUNTRY STORE, INC.
Date: October 24, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Company and in the capacities and on the dates indicated.
INDEX TO EXHIBITS
Exhibit