DEFC14A: Cracker Barrel Faces Proxy Battle, Unveils Governance Reforms

Cracker Barrel Old Country Store, Inc. announces its 2025 Annual Meeting proposals, including director elections and bylaw amendments, amidst an ongoing proxy contest from Sardar Biglari.

Summary

• The 2025 Annual Meeting of Shareholders will be held virtually on Thursday, November 20, 2025, at 10:00 a.m. Central Time.
• Shareholders will vote on the election of ten directors, advisory approval of executive compensation, ratification of Deloitte & Touche LLP as auditor, approval of an amendment to the 2020 Omnibus Incentive Plan, and advisory ratification of three bylaw provisions (proxy access, director ineligibility, and mutual reimbursement).
• Entities affiliated with Sardar Biglari have initiated an eighth proxy contest, recommending votes against the re-election of Julie Masino and Gilbert Dvila, and against certain other proposals.
• The Board of Directors unanimously recommends voting FOR all its nominees and proposals using the WHITE proxy card, urging shareholders to disregard any GOLD proxy card from Biglari.
• Estimated proxy solicitation expenses related to the contest are approximately $5 million, with $500,000 incurred to date.
• CEO Julie Masino's 2025 bonus payout was modified to be 50% cash and 50% restricted stock (vesting September 30, 2026) due to an unanticipated adverse public reaction to logo modification and store remodel initiatives, which negatively impacted sales and reduced 2026 forecasts.
• The 2025 Annual Bonus Plan achieved approximately 107% of target, with 102% for the financial component (Adjusted EBITDA of $227.8 million) and 115% for the strategic component.
• The 2023 Long-Term Performance Plan (LTPP) awards paid out at approximately 31.5% of target, primarily due to the Company's Total Shareholder Return (TSR) falling within the bottom quartile of the S&P MidCap 400 Index over the three-year performance period (approximately -27%).
• The proposed amendment to the 2020 Omnibus Incentive Plan seeks to increase the number of shares available for issuance by 1,325,000 and extend the plan's term to November 20, 2035.

Sentiment

Score: 4

Explanation: While the company achieved its annual bonus targets and is implementing corporate governance reforms, the ongoing, costly proxy contest, the significant underperformance in TSR over the past three years, and the negative impact on sales and 2026 forecasts due to strategic missteps (logo/remodels) indicate underlying challenges and risks. The modification of the CEO's bonus due to these issues further highlights the negative sentiment.

Positives

• The Board of Directors is recommending a slate of ten qualified directors for re-election, emphasizing diverse experience and leadership.
• Shareholder support for 2024 executive compensation was approximately 93% (excluding Biglari votes), indicating broad satisfaction with compensation philosophies.
• The company maintains a strong pay-for-performance philosophy, with approximately 83% of the CEO's target total direct compensation and an average of 67% for other NEOs being at-risk in 2025.
• The 2025 Annual Bonus Plan achieved an overall payout of approximately 107% of target, reflecting strong performance against financial and strategic objectives.
• The introduction of stock options into the 2025 Long-Term Incentive program aims to provide additional performance incentives and further align executive interests with shareholders.
• The Board adopted significant corporate governance reforms, including a majority voting standard for director elections, a proxy access provision, a director ineligibility provision, and a mutual reimbursement provision, to enhance shareholder voice and mitigate costs from unproductive proxy contests.
• The proxy access provision allows eligible shareholders (3% ownership for 3 years) to nominate up to 20% of directors for inclusion in the company's proxy materials.
• The Mutual Reimbursement Provision offers a balanced approach to proxy contest costs, potentially reimbursing nominating shareholders up to $5 million if their non-Board-recommended nominee is elected.
• The company has robust stock ownership guidelines for executives and directors, anti-hedging/anti-pledging policies, and recoupment provisions for incentive compensation, aligning with best governance practices.
• GAAP Net Income increased to $46.379 million in FY2025 from $40.930 million in FY2024.
• Adjusted EBITDA increased to $227.838 million in FY2025 from $211.617 million in FY2024.

Negatives

• The company is engaged in an ongoing, costly proxy contest with Sardar Biglari, who has initiated an eighth contested solicitation, recommending votes against two incumbent directors and certain proposals.
• Estimated proxy solicitation expenses for the current contest are approximately $5 million, with $500,000 already incurred, adding to the $31 million spent on seven previous contests since 2011.
• An unanticipated, highly public adverse reaction to logo modification and store remodel initiatives negatively impacted the company's sales and led to reduced internal forecasts for 2026 performance.
• The negative impact from strategic missteps resulted in a modification of CEO Julie Masino's 2025 bonus, with 50% paid in restricted stock vesting in September 2026, rather than immediate cash.
• The 2023 Long-Term Performance Plan (LTPP) awards paid out at a significantly low 31.5% of target, primarily because the company's Total Shareholder Return (TSR) of approximately -27% fell within the bottom quartile of the S&P MidCap 400 Index over the three-year performance period.
• The approval of the amendment to the 2020 Omnibus Incentive Plan would increase the fully-diluted overhang (potential dilution) to approximately 9.45% from 4.29%.

Risks

• Ongoing proxy contest with Sardar Biglari poses a risk of continued significant financial and management resource drain, with estimated costs of $5 million for the current contest and $31 million across previous contests.
• Adverse public reaction to strategic initiatives (logo modification, store remodels) has negatively impacted sales and reduced 2026 forecasts, indicating brand and operational execution risks.
• Underperformance in Total Shareholder Return (TSR) over the past three years (-27%), placing the company in the bottom quartile of its benchmark index, highlights market and competitive risks.
• Potential shareholder dilution from the proposed amendment to the 2020 Omnibus Incentive Plan, increasing fully-diluted overhang to 9.45%.
• The Ineligibility Provision and Mutual Reimbursement Provision, while intended to deter serial proxy contests, could be perceived as entrenchment mechanisms by some shareholders, potentially exacerbating shareholder activism.
• The Audit Committee's oversight includes cybersecurity and technology risks, indicating these are ongoing concerns for the company.
• The company's reliance on its brand strength means any negative public perception or operational missteps can significantly impact financial performance.

Future Outlook

The company has reduced its internal forecasts for 2026 performance following an unanticipated, highly public adverse reaction to its logo modification and store remodel initiatives. The Board believes that increasing the share reserve under the 2020 Omnibus Incentive Plan and extending its term is crucial for attracting, retaining, and motivating key personnel to remain competitive. The company intends to continue implementing its multi-year strategic plan, focusing on Adjusted EPS and positive quarterly store traffic as key metrics for long-term value creation.

Management Comments

• We strongly urge you to read the accompanying proxy statement carefully and vote (i) FOR each of our Board of Directors nominees and (ii) in accordance with our Board of Directors recommendations on the other proposals by using the enclosed WHITE proxy card.
• Please do not vote AGAINST Julie Masino or Gilbert Dvila for re-election or AGAINST any other proposal.
• Our Board of Directors is recommending you vote FOR each of the nominees for election and FOR all other proposals.
• We are not responsible for the accuracy of any information provided by or relating to Biglari or its nominees contained in any proxy solicitation materials filed or disseminated by, or on behalf of, Biglari or any other statements that Biglari may otherwise make.
• If you have previously signed a proxy card marked AGAINST any nominees or proposals, our Board of Directors encourages you to exercise your right to change your vote by Internet, by telephone or by following the instructions to vote FOR each of our Board of Directors nominees and proposals on the WHITE proxy card, or by signing, dating and returning the enclosed WHITE proxy card to vote FOR each of our Board of Directors nominees and proposals in the postage-paid envelope provided.
• PLEASE DO NOT VOTE AGAINST ANY OF THE BOARDS NOMINEES OR PROPOSALS OR RETURN A GOLD PROXY CARD FROM BIGLARI.
• Our central compensation objective is to drive long-term total return to our shareholders and build a better Company by implementing compensation programs that: Reward both Company-wide and individual performance, Align our executives interests with those of our shareholders, Allow us to attract and retain talented executives, and Appropriately incentivize management without exposing the Company to undue levels of risk.
• We believe that this level of support [93% for 2024 executive compensation] – particularly given the heightened level of engagement and scrutiny of our executive compensation philosophies, programs and practices during last year’s proxy contest – demonstrates substantial shareholder satisfaction with these philosophies, programs and practices.
• The Board of Directors and management believe that being able to offer equity awards as one element of our total compensation to such eligible individuals serves as an effective incentive for aligning their interests more directly with the interests of our shareholders.
• We believe that our compensation practices are competitive and consistent with market practices and that our historical share utilization has been responsible and mindful of shareholder interests.

Industry Context

Cracker Barrel operates in the highly competitive U.S. restaurant and retail sectors, encompassing its Cracker Barrel Old Country Store and Maple Street Biscuit Company concepts. The company's executive compensation peer group includes major players in the casual dining and fast-casual segments, such as Darden Restaurants, Chipotle Mexican Grill, and Papa Johns International, reflecting intense competition for both market share and executive talent. Recent strategic initiatives, like logo modifications and store remodels, are common industry practices to refresh brand image and attract customers, but the adverse public reaction experienced by Cracker Barrel highlights the significant risks associated with such changes in a consumer-facing industry. The focus on Adjusted EPS and store traffic growth as key long-term incentive metrics aligns with critical performance indicators for the restaurant industry.

Comparison to Industry Standards

• **Executive Compensation Peer Group**: The company benchmarks its executive compensation against a peer group of 15 publicly-traded restaurant and retail companies, including BJs Restaurants, Inc., Darden Restaurants, Inc., Jack-in-the-Box, Inc., Bloomin Brands, Inc., Dave & Busters Entertainment, Inc., Papa Johns International, Inc., Brinker International, Inc., Dennys Corporation, Red Robin Gourmet Burgers, Inc., Cheesecake Factory, Inc., Dine Brands Global, Inc., Texas Roadhouse, Inc., Chipotle Mexican Grill, Inc., Dominos Pizza, Inc., and The Wendys Company. This group is used to ensure competitive compensation levels at the market median.
• **Director Compensation**: Director compensation is reviewed annually in consultation with an independent compensation consultant (Frederic W. Cook & Co.) against restaurant and retail industry peer companies and similarly sized general industry companies, and was determined to be competitive and appropriate in 2025.
• **Total Shareholder Return (TSR)**: The company's TSR of approximately -27% for the three-year period ending FY2025 fell within the bottom quartile of the S&P MidCap 400 Index, indicating significant underperformance relative to a broad market benchmark.
• **Corporate Governance**: The adoption of a majority voting standard, proxy access, director ineligibility, and mutual reimbursement provisions aligns with evolving corporate governance best practices among U.S. public companies, particularly in response to shareholder feedback and repeated proxy contests, aiming to enhance shareholder rights and reduce unproductive costs.
• **Equity Compensation Burn Rate**: The company's three-year average burn rate for equity awards was 1.20% for fiscal years 2023 through 2025, a metric commonly compared to industry averages to assess the rate of share issuance and potential dilution.
• **Equity Compensation Overhang**: The current fully-diluted overhang of 4.29%, projected to increase to 9.45% if the 2020 Omnibus Incentive Plan amendment is approved, is a key metric for assessing potential dilution relative to industry peers.

Management Changes

Corporate Governance

Legal Proceedings

• The company is currently involved in an eighth contested solicitation of proxies initiated by entities affiliated with Sardar Biglari, which is a form of legal/governance dispute.
• The Adjusted EBITDA reconciliation table includes 'expenses associated with proxy contests and proxy contest settlements' and 'legal settlement' as adjustments, indicating past and ongoing legal-related costs, though specific details of the legal settlement are not provided.

Related Party Transactions

• During 2025, there were no transactions or business relationships in which the company was a participant and in which any executive officers, directors, or director nominees had a material interest requiring disclosure under applicable SEC regulations, and no such transactions are currently proposed.

Stakeholder Impact

• **Shareholders**: Will vote on key proposals, including director elections and corporate governance changes, directly influencing company leadership and strategic direction. They face potential dilution from the proposed increase in the Omnibus Incentive Plan share reserve. The ongoing proxy contest and associated costs represent a drain on shareholder value, but new governance reforms aim to enhance shareholder voice and reduce future unproductive contest expenses. The negative TSR performance impacts shareholder returns.
• **Employees (Executive Officers, Management, and other employees)**: Executive compensation programs are designed to attract, retain, and motivate talent, with a significant portion of pay tied to performance. The expansion of share-based long-term incentives to a broader management group aims to align their interests with shareholders. However, strategic missteps and their impact on company performance can affect compensation outcomes, as seen with the CEO's bonus modification.
• **Customers**: The adverse public reaction to recent strategic initiatives (logo modification, store remodels) has negatively impacted sales, indicating a direct effect on customer perception and engagement.
• **Board of Directors**: The Board is actively engaged in navigating a proxy contest and implementing significant corporate governance reforms, requiring substantial time and effort. Their oversight responsibilities, particularly in risk management and strategic direction, are critical during this period of change and challenge.

Next Steps

• Shareholders are urged to vote on the proposals for the Annual Meeting by November 19, 2025, at 10:00 a.m. Central Time, by pre-registering for the virtual meeting.
• The Board of Directors (or a committee thereof) will review and act upon any director resignations tendered due to failure to receive the required vote within ninety (90) days following the certification of election results.
• The company will include the voting results in a Current Report on Form 8-K, filed with the SEC no later than four business days following the completion of the Annual Meeting.
• The Compensation Committee will consider the advisory vote on executive compensation when making future compensation decisions for Named Executive Officers.
• If the First Amendment to the 2020 Omnibus Incentive Plan is approved by shareholders, the additional shares available for issuance will be registered pursuant to a registration statement on Form S-8 promptly.
• Shareholders wishing to submit proposals for inclusion in the 2026 Annual Meeting proxy statement must do so by June 9, 2026.
• Shareholders intending to solicit proxies for proposed nominees other than the Board's nominees for the 2026 Annual Meeting must provide notice by September 21, 2026.

Key Dates

Recommendation

The company is currently navigating a complex environment characterized by an ongoing, costly proxy contest and recent strategic missteps that have negatively impacted sales and future forecasts. While management is implementing corporate governance reforms and has a stated commitment to pay-for-performance, the significant underperformance in Total Shareholder Return (-27% over three years) and the adverse public reaction to recent initiatives raise concerns about execution and market perception. The increase in Adjusted EBITDA for FY2025 is a positive, but the overall picture suggests a company in transition with notable headwinds. A 'Hold' recommendation is appropriate as investors should monitor the outcome of the proxy contest, the effectiveness of the new governance provisions, and the company's ability to recover from recent operational challenges and improve its TSR before considering further investment.

Keywords

Cracker Barrel, CBRL, Proxy Contest, Shareholder Vote, Corporate Governance, Executive Compensation, Omnibus Incentive Plan, Bylaw Amendments, Restaurant Industry, Retail, Adjusted EBITDA, Total Shareholder Return, Risk Management, Sardar Biglari, Director Election, Proxy Access, Dilution