CRACKER BARREL OLD COUNTRY STORE, INC (CBRL)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. MD&A should be read in conjunction with the Consolidated Financial Statements and notes thereto. Readers should also carefully review the information presented under the section entitled “Risk Factors” and other cautionary statements in this report. All dollar amounts (other than per share amounts) reported or discussed in this MD&A are shown in thousands. References in MD&A to a year or quarter are to our fiscal year or quarter unless expressly noted or the context clearly indicates otherwise.

This overview summarizes the MD&A, which includes the following sections:

The following MD&A includes a discussion of 2024 and 2023 items and year-to-year comparisons between the years ended August 02, 2024 and July 28, 2023.  Discussion of 2022 items and year-to-year comparisons between the years ended July 28, 2023 and July 29, 2022 that are not included in this MD&A can be found in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the year ended July 28, 2023, filed with the SEC on September 26, 2023.

35

Table of Contents

EXECUTIVE OVERVIEW

Cracker Barrel Old Country Store, Inc. (the “Company,” “our” or “we”) is a publicly traded (Nasdaq: CBRL) company that, through its operations and those of certain subsidiaries, is principally engaged in the operation and development of the Cracker Barrel Old Country Store® (“Cracker Barrel”) concept. Each Cracker Barrel store consists of a restaurant with a gift shop. The restaurants serve breakfast, lunch and dinner. The gift shop offers a variety of decorative and functional items specializing in rocking chairs, holiday gifts, toys, apparel and foods. As of September 13, 2024, the Company operated 658 Cracker Barrel stores located in 44 states. The Company also owns Maple Street Biscuit Company (“MSBC”), a breakfast and lunch fast casual concept. As of September 13, 2024, the Company operated 68 MSBC locations in ten states.

Strategic Priorities

Management believes that the Cracker Barrel brand remains one of the strongest and most differentiated brands in the restaurant industry, and we plan to continue to leverage and build on that strength as a core competitive component of our business strategy.  Our long-term strategy is anchored on three overarching business imperatives: driving relevancy, delivering food and experiences guests love, and growing profitability.

We believe there are significant challenges in the macroeconomic outlook for the coming quarters, including continued inflationary pressures, higher interest rates, higher consumer debt levels and lower savings rates, as well as the potential uncertainty associated with the geopolitical environment and the U.S. presidential election, among other factors.  However, despite these challenges, we remain focused on delivering long-term growth and returns for shareholders.  On May 16, 2024, we announced details of our strategic transformation plan, which was already underway and is built on the following five pillars of our strategy:

The Board of Directors is committed to a balanced capital allocation approach focused on profitable growth. Investing in the business continues to be the top priority followed by returning cash to shareholders through a regular quarterly dividend.  In conjunction with its strategic transformation plan, the Board of Directors modified the Company’s capital allocation policy to increase investments in the business to drive organic growth and reduce the quarterly dividend to facilitate these investments. The Board of Directors declared a dividend of $0.25 per share that was subsequently paid on August 06, 2024 to shareholders of record on July 19, 2024.

36

Table of Contents

Key Performance Indicators

Management uses a number of key performance indicators to evaluate our operational and financial performance, including the following:

These performance indicators exclude the impact of new store openings and sales related to MSBC.

We use comparable store sales metrics as indicators of sales growth to evaluate how our established stores have performed over time. We use comparable restaurant guest traffic increase/(decrease) to evaluate how established stores have performed over time, excluding growth achieved through menu price and sales mix change. Finally, we use average check per guest to identify trends in guest preferences, as well as the effectiveness of menu changes. We believe these key performance indicators are useful for investors to provide a consistent comparison of sales results and trends across comparable periods within our core, established store base, unaffected by results of store openings, closings, and other transitional changes.

37

Table of Contents

Restaurant and Retail Industries

Our stores operate in both the restaurant and retail industries in the United States. The restaurant and retail industries are highly competitive with respect to quality, variety and price of the food products, availability of carryout and home delivery, internet and mobile ordering capabilities and retail merchandise offered. We compete with a significant number of national and regional restaurant and retail chains. Additionally, there are many segments within the restaurant industry, such as family dining, casual dining, full-service, fast casual and quick service, which often overlap and provide competition for widely diverse restaurant concepts. Cracker Barrel primarily operates in the full-service segment of the restaurant industry, and our growing MSBC concept operates in the fast casual segment. Competition also exists in securing prime real estate locations for new stores, in hiring qualified employees, in advertising, in the attractiveness of facilities and with competitors having similar menu offerings or convenience features. The restaurant and retail industries are often affected by changes in consumer taste and preference; national, regional or local economic conditions; demographic trends; traffic patterns; the type, number and location of competing restaurants and retailers; and consumers’ discretionary purchasing power.

Additionally, economic, seasonal and weather conditions affect the restaurant and retail industries. Adverse economic conditions, such as elevated and/or volatile rates of inflation and unemployment adversely affect consumer discretionary income and dining and shopping habits. Historically, interstate tourist traffic and the propensity to dine out have been much higher during the summer months, thereby contributing to higher profits in our fourth quarter. Retail sales, which are made substantially to our restaurant guests, are historically strongest in the second quarter, which includes the holiday shopping season.

Severe weather events such as hurricanes, floods, tornadoes, and winter storms may prevent or dissuade guests from visiting our stores, impair our ability to staff our stores or force us to temporarily close affected stores, adversely impacting our restaurant and retail sales. Additionally, severe drought conditions and associated restrictions on water use may impair restaurant operations or increase costs in locations affected by such conditions. Climate change, changing weather patterns or unpredictable weather patterns may increase the incidence of any of these events and otherwise also impact guest visitation patterns on a macro scale. In addition to its impact on store operations, severe weather may also disrupt our supply chain, both in distribution to ports and central warehouses and in distribution to local stores. In general, we believe that the geographic dispersion of our stores and multiple sources of distribution adequately mitigate the potential impact of severe weather and changing weather patterns on our stores, but the Board of Directors and management team continually monitor and reexamine these considerations in light of ongoing trends.

We are currently experiencing, and have in the past experienced, inflationary conditions with respect to a variety of costs, including the cost for food, ingredients, retail merchandise, transportation, distribution, labor and utilities. While we continue to partially offset the impact of these inflationary pressures with menu price increases and operational improvements, there can be no assurance that such conditions will not adversely affect consumer demand or our cost structure in ways that we may be unable to manage without diminishing our profitability.

38

Table of Contents

RESULTS OF OPERATIONS

The following table highlights operating results over the past two years:

​

The following table sets forth the change in the number of stores in operation for the past two years:

Total Revenue

The following table highlights the key components of revenue for the past two years:

​

39

Table of Contents

​

Total revenue in 2024 increased 0.8% as compared to 2023. Total revenue in 2024 benefited from the additional week of 2024, which resulted in an increase in revenue of $62,800. Our comparable store restaurant sales decrease in 2024 as compared to 2023 resulted primarily from the guest traffic decrease partially offset by the average check increase.  The average check increase included an average menu increase of 4.9%. Off-premise sales represented approximately 20% of restaurant sales volumes in 2024 and 2023.

Our retail sales are made primarily to our restaurant guests. The decrease in our comparable store retail sales in 2024 as compared to 2023 resulted primarily from the decrease in guest traffic.

Cost of Goods Sold (Exclusive of Depreciation and Rent)

The following table highlights the components of cost of goods sold in dollar amounts for the past two years:

​

The following table highlights restaurant cost of goods sold as a percentage of restaurant revenue for the past two years:

​

The decrease in restaurant cost of goods sold as a percentage of restaurant revenue in 2024 as compared to 2023 was primarily the result of our menu price increase referenced above. Commodity inflation was relatively flat in 2024. We presently expect the rate of commodity inflation to be approximately 2% to 3% in 2025.

The following table highlights retail cost of goods sold as a percentage of retail revenue for the past two years:

​

Retail cost of goods sold as a percentage of retail revenue remained relatively constant in 2024 as compared to 2023.

Labor and Other Related Expenses

Labor and other related expenses include all direct and indirect labor and related costs incurred in store operations. The following table highlights labor and other related expenses as a percentage of total revenue for the past two years:

​

40

Table of Contents

The year-to-year percentage change in 2024 as compared to 2023 resulted primarily from the following:

​

The increase in store hourly labor and store management compensation as a percentage of total revenue in 2024 as compared to 2023 resulted primarily from higher staffing levels and the investment of additional labor hours to improve the guest experience as well as wage inflation partially offset by higher average check.   We presently expect the rate of wage inflation to be approximately 3% to 4% in 2025.

The increase in employee health care expenses as a percentage of total revenue in 2024 as compared to 2023 resulted primarily from higher claims.

During 2024, we revised our employee benefits policy which resulted in a one-time reduction in other wages expense for 2024 as compared to 2023.

Other Store Operating Expenses

Other store operating expenses include all store-level operating costs, the major components of which are occupancy costs, operating supplies, advertising, third-party delivery fees, credit card and gift card fees, real and personal property taxes and general insurance. Occupancy costs include maintenance, utilities, depreciation and rent.

The following table highlights other store operating expenses as a percentage of total revenue for the past two years:

​

The increase in other store operating expenses as a percentage of total revenue in 2024 as compared to 2023 resulted primarily from the increase in advertising expense due to higher media spending and costs associated with our new customer loyalty program, Cracker Barrel Rewards.

We presently expect higher depreciation expense in 2025 due to higher capital expenditures driven by investments in our stores including our store remodeling program as well as other strategic initiatives.

General and Administrative Expenses

The following table highlights general and administrative expenses as a percentage of total revenue for the past two years:

​

​

41

Table of Contents

The year-to-year percentage change in 2024 as compared to 2023 resulted primarily from the following:

The increase in professional fees as a percentage of total revenue in 2024 as compared to 2023 resulted primarily from the costs associated with the Company’s strategic transformation plan.

The increase in payroll and related expense as a percentage of total revenue in 2024 as compared to 2023 resulted primarily from severance costs related to corporate restructuring and Chief Executive Officer transition costs incurred in 2024.

The increase in incentive compensation as a percentage of total revenue in 2024 as compared to 2023 resulted primarily from Chief Executive Officer (“CEO”) transition costs incurred in 2024.

We presently expect our general and administrative expenses will be higher in 2025 primarily due to the investments related to our strategic transformation initiatives and our proxy contest in connection with the Company’s upcoming 2024 Annual Meeting.

Impairment and Store Closing Costs

During 2024 and 2023, we recorded impairment charges of $17,448 and $11,692, respectively, as a result of the deterioration in operating performance of six Cracker Barrel locations and thirteen MSBC locations in 2024 and six Cracker Barrel locations in 2023. Additionally, during 2024 and 2023, we incurred costs of $5,494 and $2,307, respectively, in connection with the closure of four Cracker Barrel and two MSBC locations in 2024 and six Cracker Barrel and four MSBC locations in 2023 because of poor operating performance.

Impairment and store closing costs consisted of the following for the past two years:

​

Goodwill Impairment

During 2024, we recorded a goodwill impairment charge of $4,690 related to MSBC because of declining financial trends and changes in the macroeconomic environment, including interest rate and inflationary pressures.  This amount is recorded in the goodwill impairment line on the Consolidated Statements of Income.

​

Operating income

​

Operating income consisted of the following for the past two years:

​

As discussed above, the decrease in operating income in 2024 as compared to 2023 resulted primarily from the investments made in 2024 related to labor, advertising and strategic transformation initiatives.  We also incurred higher impairments costs based on performance and CEO transition costs in 2024. Operating income in 2024 benefited from lower commodity inflation.

42

Table of Contents

Interest Expense, Net

The following table highlights interest expense for the past two years:

​

The year-to-year increase in 2024 as compared to 2023 resulted primarily from higher weighted average debt levels and higher weighted average interest rates under our revolving credit facility.

Provision for Income Taxes (Income Tax Benefit)

The following table highlights the provision for income taxes as a percentage of income before income taxes (“effective tax rate”) for the past two years:

​

Our effective tax rate is lower than statutory rates primarily due to the benefit of tax credits. The decrease in our effective tax rate from 2023 to 2024 reflects the impact of tax credits on lower income before tax as well as favorable audit settlements.

We presently expect our effective tax rate for 2025 to be approximately (7%) to (11%).

Net Income

Net income consisted of the following for the past two years:

​

Our net income in 2024 decreased compared to 2023 primarily due to our decline in our operating income discussed above partially offset by our income tax benefit for 2024 discussed above.

We presently expect total revenue in 2025 to be relatively flat to 2024 and the investments in our strategic transformation plan discussed above to more than offset expected cost savings in 2025. The Company’s focus for 2025 is to execute its strategic transformation plan while simultaneously remaining focused on operational excellence in our day-to-day business.

LIQUIDITY AND CAPITAL RESOURCES

The following table presents a summary of our cash flows for the past two years:

​

43

Table of Contents

Our primary sources of liquidity are cash generated from our operations and our borrowing capacity under our revolving credit facility. Our cash generated from our operations, together with our borrowing capacity under our 2022 Revolving Credit Facility, were sufficient to finance all of our growth, dividend payments, working capital needs, interest payments on long-term debt obligations and other cash payment obligations in 2024. We believe that cash at August 02, 2024, along with cash expected to be generated from our operating activities and the borrowing capacity under our revolving credit facility, will be sufficient to finance our continuing operations, our strategic transformation initiative and continuing expansion plans, debt service, dividend payments, capital expenditures and working capital needs for the next twelve months and thereafter for the foreseeable future. Our ability to draw on our 2022 Revolving Credit Facility is subject to the satisfaction of the provisions of the credit facility, as amended, and we believe we will be able to refinance our Revolving Credit Facility and other debt instruments prior their maturity.

Cash Generated from Operations

The decrease in net cash flow provided by operating activities in 2024 as compared to 2023 resulted primarily from lower net income and a lower decrease in retail inventory levels.

Purchase Obligations

We enter into purchase orders for food and retail merchandise; purchase orders for capital expenditures, supplies, other operating needs and other services; and commitments under contracts for maintenance needs and other services in the normal course of business. Our estimate as of August 02, 2024, for these purchase obligations is $141,446, of which $107,485 is short-term.  This estimate of our purchase obligations (i) excludes contracts that do not contain minimum purchase obligations and long-term agreements for services and operating needs that can be cancelled within 60 days without penalty, and (ii) includes long-term agreements and certain retail purchase orders for services and operating needs that can be cancelled (A) with more than 60 days’ notice without penalty only through the term of the notice period and (B) only in the event of an uncured material breach or with a penalty through the entire term of the contract. Because of the uncertainties of seasonal demands and promotional calendar changes, our estimated usage for food, supplies and other operating needs and services is calculated ratably over either the termination notice period or the remaining life of the contract, as applicable, unless we had better information available at the time related to each contract.

Leases

As of August 02, 2024, the total present value of our lease expenses (including variable lease costs) under operating leases was $725,829, which had a weighted-average remaining lease term 15.88 years, of which $86,318 is short-term. As of August 02, 2024, we have entered into leases that have not yet commenced with future short-term and long-term lease payments of $12,615 that are not yet recorded on our Consolidated Balance Sheets. These leases are expected to commence in 2025 and 2026. For additional information regarding our operating leases, see Note 8 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Other Long-Term Obligations

At August 02, 2024, other long-term obligations include our Non-Qualified Savings Plan ($25,719, with a corresponding long-term asset to fund the liability; see Note 11 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K), Deferred Compensation Plan ($854) and our long-term incentive plans ($3,015).

​

44

Table of Contents

Taxes

At August 02, 2024, the entire liability of $15,317, for uncertain tax positions (including penalties and interest) is classified as a long-term liability.  At this time, we are unable to make a reasonably reliable estimate of the amounts and timing of payments in individual years because of uncertainties in the timing of the effective settlement of tax positions. See Note 12 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information on our uncertain tax positions.

Capital Expenditures and Proceeds from Sale of Property and Equipment

The following table presents our capital expenditures (purchase of property and equipment), net of proceeds from insurance recoveries, for the past two years:

​

Our capital expenditures consisted primarily of capital investments for existing stores, new store locations and strategic initiatives. The increase in capital expenditures in 2024 from 2023 resulted primarily from higher capital expenditures for strategic initiatives, including costs associated with our customer loyalty program, Cracker Barrel Rewards.

As part of our strategic transformation plan, we have modified our capital allocation policy and currently expect to increase our capital expenditures over the three-year period from 2025 to 2027 to approximately $600,000 to $700,000, of which $160,000 to $180,000 is estimated for 2025. This increase includes expansion of our maintenance and remodel initiatives as well as additional technology improvements.  This estimate also includes the acquisition of sites and construction costs of two new Cracker Barrel stores and three to four MSBC locations that we plan to open during 2025. We intend to fund our capital expenditures with cash generated by operations and cash on hand as the result of borrowings under our revolving credit facility, as necessary.

The following table presents our proceeds from sale of property and equipment for the past two years:

The increase in proceeds from sale of property and equipment in 2024 from 2023 resulted primarily from the sale of excess real property in 2024.

Borrowing Capacity, Debt Covenants and Notes

On June 17, 2022, we entered into a five-year $700,000 revolving credit facility (the “2022 Revolving Credit Facility”). The 2022 Revolving Credit Facility also contains an option for the Company to increase the revolving credit facility by $200,000. Using our weighted average interest rate of 7.19% at August 02, 2024 and the outstanding borrowings at August 02, 2024, we anticipate having interest payments of $13,080, in 2025.

The following table highlights our borrowing capacity and outstanding borrowings under the 2022 Revolving Credit Facility, our standby letters of credit and our borrowing availability under the 2022 Revolving Credit Facility as of August 02, 2024:

​

45

Table of Contents

*Our standby letters of credit relate to securing reserved claims under workers’ compensation insurance and securing certain sale and leaseback transactions. Our standby letters of credit reduce our borrowing availability under the 2022 Revolving Credit Facility.

During 2024, we borrowed $406,500 and repaid $346,500 under the 2022 Revolving Credit Facility. During 2023, we borrowed $180,000 and repaid $190,000 under the 2022 Revolving Credit Facility.

Our 2022 Revolving Credit Facility contains customary financial covenants, which include maintenance of a maximum consolidated total senior secured leverage ratio and a minimum consolidated interest coverage ratio. We were in compliance with the 2022 Revolving Credit Facility’s financial covenants at August 02, 2024, and we expect to be in compliance with the 2022 Revolving Credit Facility’s financial covenants for the remaining term of the facility.

Our $300,000 aggregate principal amount of 0.625% Convertible Senior Notes (the “Notes”) mature on June 15, 2026, unless earlier converted, repurchased or redeemed. The Notes are senior, unsecured obligations of the Company and bear cash interest at an annual rate of 0.625%, payable semi-annually in arrears on June 15 and December 15 of each year. For additional information regarding our 2022 Revolving Credit Facility and the Notes, see Note 4 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Dividends, Share Repurchases and Share-Based Compensation Awards

Our 2022 Revolving Credit Facility imposes restrictions on the amount of dividends we are permitted to pay and the amount of shares we are permitted to repurchase. Under the 2022 Revolving Credit Facility, provided there is no default existing and the total of our availability under the 2022 Revolving Credit Facility plus our cash and cash equivalents on hand is at least $100,000 (the “Cash Availability”), we may declare and pay cash dividends on shares of our common stock and repurchase shares of our common stock (1) in an unlimited amount if at the time the dividend or the repurchase is made our consolidated total senior secured leverage ratio is 2.75 to 1.00 or less and (2) in an aggregate amount not to exceed $100,000 in any fiscal year if our consolidated total leverage ratio is greater than 2.75 to 1.00 at the time the dividend or repurchase is made; notwithstanding (1) and (2), so long as immediately after giving effect to the payment of any such dividends, Cash Availability is at least $100,000, we may declare and pay cash dividends on shares of our common stock in an aggregate amount not to exceed in any fiscal year the product of the aggregate amount of dividends declared in the fourth quarter of the immediately preceding fiscal year multiplied by four.

In 2024, we paid regular dividends of $5.20 per share.  In connection with our strategic transformation program, we modified our capital allocation policy to support increased investments in our business to drive organic growth. As part of this shift to increase investment in our business, the Board of Directors reduced the quarterly dividend and declared a dividend of $0.25 per share that was subsequently paid on August 6, 2024 to shareholders of record on July 19, 2024. Additionally, during the first quarter of 2025, the Board declared a dividend of $0.25 per share payable on November 13, 2024 to shareholders of record as of October 18, 2024.

The following table highlights the dividends per share we paid for the past two years:

​

Our criteria for share repurchases are that they be accretive to expected net income per share and are within the limits imposed by our debt commitments. On June 02, 2023, the Board of Directors renewed our authorization to repurchase shares of the Company’s outstanding common stock at management’s discretion up to a total value of $200,000, for an additional year; this authorization has expired.  We did not repurchase any shares of our common stock in 2024. In 2023, the Company repurchased 171,792 shares of its common stock in the open market at an aggregate cost of $17,449.

46

Table of Contents

Working Capital

In the restaurant industry, substantially all payments received are made by credit card, debit card or cash.   Like many other restaurant companies, we are able to, and often do, operate with negative working capital. Restaurant inventories purchased through our principal food distributor are on terms of net zero days, while other restaurant inventories purchased locally are generally financed through trade credit at terms of 30 days or less. Because of our retail gift shop, which has a lower product turnover than the restaurant, we carry larger inventories than many other companies in the restaurant industry. Retail inventories are generally financed through trade credit at terms of 60 days or less. These various trade terms are aided by rapid turnover of the restaurant inventory. Employees generally are paid once every week or every two weeks except for bonuses that are paid either quarterly or annually in arrears. Many other operating expenses have normal trade terms and certain expenses such as certain taxes and some benefits are deferred for longer periods of time.

The change in working capital at August 02, 2024 compared to July 28, 2023 primarily reflected the decrease in our dividend payable as a result of our reduction of our quarterly dividend and the timing of payments for income taxes.

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements.

RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

See Note 1 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for a discussion of recent accounting guidance not yet adopted.  We are currently evaluating the impact of adopting the accounting guidance.

CRITICAL ACCOUNTING ESTIMATES

We prepare our Consolidated Financial Statements in conformity with GAAP. The preparation of these financial statements requires us to make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our estimates and judgments on historical experience, current trends, outside advice from parties believed to be experts in such matters and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. However, because future events and their effects cannot be determined with certainty, actual results could differ from those assumptions and estimates, and such differences could be material.

Our significant accounting policies are discussed in Note 1 to the Consolidated Financial Statements. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. Critical accounting estimates are those that:

47

Table of Contents

We consider the following accounting estimates to be most critical in understanding the judgments that are involved in preparing our Consolidated Financial Statements:

Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of the Board of Directors.

Impairment of Long-Lived Assets

We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets is measured by comparing the carrying value of the asset to the undiscounted future cash flows expected to be generated by the asset. If the total expected future cash flows are less than the carrying amount of the asset, the carrying value is written down, for an asset to be held and used, to the estimated fair value or, for an asset to be disposed of, to the fair value, net of estimated costs of disposal. Any loss resulting from impairment is recognized by a charge to income. Judgments and estimates that we make related to the expected useful lives of long-lived assets and future cash flows are affected by factors such as changes in economic conditions and changes in operating performance. The accuracy of such provisions can vary materially from original estimates and management regularly monitors the adequacy of the provisions until final disposition occurs.

We have not made any material changes in our methodology for assessing impairments during the past three years and we do not believe that there is a reasonable likelihood that there will be a material change in the estimates or assumptions used by us to assess impairment of long-lived assets. However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and fair values of long-lived assets, we may be exposed to losses that could be material. During 2024 and 2023, we recorded impairment charges of $15,616 and $11,692, respectively, for long-lived assets due to the deterioration in operating performance of six Cracker Barrel locations and thirteen MSBC locations in 2024 and six Cracker Barrel locations in 2023.  The impairment charges are included in the impairment and store closing costs line item on the Consolidated Statements of Income. See the Lease Accounting section below for information related to an impairment charge related to a right-of-use asset recorded in 2024.

Insurance Reserves

We self-insure a significant portion of our expected workers’ compensation and general liability programs. We purchase insurance for individual workers’ compensation claims that exceed $750 or $1,000 depending on the state in which the claim originated. We purchase insurance for individual general liability claims that exceed $500. We record a reserve for workers’ compensation and general liability for all unresolved claims and for an estimate of incurred but not reported (“IBNR”) claims. These reserves and estimates of IBNR claims are based upon a full scope actuarial study which is performed annually during the fourth quarter and is adjusted by the actuarially determined losses and actual claims payments made subsequent to this full scope actuarial study during the fourth quarter. Additionally, we perform limited scope actuarial studies on a quarterly basis to verify and/or modify our reserves. The reserves and losses in the actuarial study represent a range of possible outcomes within which no given estimate is more likely than any other estimate. As such, we record the losses in the lower half of that range and discount them to present value using a risk-free interest rate based on projected timing of payments. We also monitor actual claims development, including incurrence or settlement of individual large claims during the interim periods between actuarial studies as another means of estimating the adequacy of our reserves.

48

Table of Contents

Our group health plans combine the use of self-insured and fully-insured programs. Benefits for any individual (employee or dependents) in the self-insured group health program are limited. We record a liability for the self-insured portion of our group health program for all unpaid claims based upon a loss development analysis derived from actual group health claims payment experience. We also record a liability for unpaid prescription drug claims based on historical experience.

Our accounting policies regarding insurance reserves include certain actuarial assumptions and management judgments regarding economic conditions, the frequency and severity of claims and claim development history and settlement practices. We have not made any material changes in the methodology used to establish our insurance reserves during the past three years and do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions used to calculate the insurance reserves. However, changes in these actuarial assumptions or management judgments in the future may produce materially different amounts of expense that would be reported under these insurance programs.

Retail Inventory Valuation

Cost of goods sold includes the cost of retail merchandise sold at our stores utilizing the retail inventory method (“RIM”). Under RIM, the valuation of our retail inventories is determined by applying a cost-to-retail ratio to the retail value of our inventories. Inherent in the RIM calculation are certain inputs, including initial markons, markups, markdowns and shrinkage, which may significantly impact the gross margin calculation as well as the ending inventory valuation.

Inventory valuation provisions are included for retail inventory obsolescence and retail inventory shrinkage. Retail inventory is reviewed on a quarterly basis for obsolescence and adjusted as appropriate based on assumptions made by management and judgment regarding inventory aging and future promotional activities. Retail inventory also includes an estimate of shrinkage that is adjusted upon physical inventory counts. Annual physical inventory counts are conducted based upon a cyclical inventory schedule. An estimate of shrinkage is recorded for the time period between physical inventory counts by using a two-year average of the physical inventories’ results on a store-by-store basis.

We have not made any material changes in the methodologies, estimates or assumptions related to our merchandise inventories during the past three years and do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions in the future. However, actual obsolescence or shrinkage recorded may produce materially different amounts than we have estimated.

Lease Accounting

We have ground leases for our leased stores and office space leases that are recorded as operating leases under various non-cancellable operating leases. Additionally, we lease our retail distribution center, advertising billboards, vehicle fleets, and certain equipment under various non-cancellable operating leases.

We evaluate our leases at contract inception to determine whether we have the right to control use of the identified asset for a period of time in exchange for consideration. If we determine that we have the right to obtain substantially all of the economic benefit from use of the identified asset and the right to direct the use of the identified asset, we recognize a right-of-use asset and lease liability. Also, at contract inception, we evaluate our leases to estimate their expected term which includes renewal options that we are reasonably assured that we will exercise, and the classification of the lease as either an operating lease or a finance lease. Additionally, as our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the time of commencement or modification date in determining the present value of lease payments. Assumptions used in determining our incremental borrowing rate include our implied credit rating and an estimate of secured borrowing rates based on comparable market data. We assess the impairment of the right-of-use asset at the asset group level whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

49

Table of Contents

Changes in these assumptions and management judgments may produce materially different amounts in the recognition of the right-of-use assets and lease liabilities. Additionally, any loss resulting from an impairment of the right-of-use assets is recognized by a charge to income, which could be material. In 2024, we recorded an impairment charge of $1,832 related to a right-of-use asset for a Cracker Barrel location.  This amount is included in the impairment and store closing costs line item on the Consolidated Statement of Income.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides information which management believes is relevant to an assessment and
understanding of our consolidated results of operations and financial condition.  MD&A should be read in conjunction with the Consolidated Financial Statements and notes thereto.  Readers should also carefully review the information presented
under the section entitled “Risk Factors” and other cautionary statements in this report.  All dollar amounts (other than per share amounts) reported or discussed in this MD&A are shown in thousands.  References in MD&A to a year or quarter
are to our fiscal year or quarter unless expressly noted or the context clearly indicates otherwise.

This overview summarizes the MD&A, which includes the following sections:

EXECUTIVE OVERVIEW

Cracker Barrel Old Country Store, Inc. (the “Company,” “our” or “we”) is a publicly traded (Nasdaq: CBRL) company that, through its operations and those of certain subsidiaries, is principally
engaged in the operation and development of the Cracker Barrel Old Country Store® (“Cracker Barrel”) concept.  Each Cracker Barrel store consists of a restaurant with a gift shop.  The restaurants serve breakfast, lunch and dinner.  The gift shop
offers a variety of decorative and functional items specializing in rocking chairs, holiday gifts, toys, apparel and foods.  As of September 13, 2023, the Company operated 661 Cracker Barrel stores located in 45 states.  On October 19, 2019, the
Company acquired 100% ownership of Maple Street Biscuit Company (“MSBC”), a breakfast and lunch fast casual concept.  As of September 13, 2023, the Company operated 59 MSBC locations in ten states.

Strategic Priorities

Management believes that the Cracker Barrel brand remains one of the strongest and most differentiated brands in the restaurant industry, and we plan to continue to leverage and build on that
strength as a core component of our business strategy.

Our long-term strategy remains centered on driving sustainable sales growth, continued business model improvements, building profitable Cracker Barrel and MSBC stores, and ultimately driving
shareholder returns.

Our strategic priorities include the following:

Additionally, during 2023, we continued our focus on generating shareholder returns by paying $5.20 per share in dividends for fiscal 2023 and declaring a dividend of $1.30 per share that was
subsequently paid on August 8, 2023 to shareholders of record on July 21, 2023, totaling $144,302 dividends declared or paid in 2023, and repurchasing $17,449 in shares of our common stock.

31

Table of Contents

Key Performance Indicators

Management uses a number of key performance indicators to evaluate our operational and financial performance, including the following:

These performance indicators exclude the impact of new store openings and sales related to MSBC.

We use comparable store sales metrics as indicators of sales growth to evaluate how our established stores have performed over time.  We use comparable restaurant guest traffic increase/(decrease) to
evaluate how established stores have performed over time, excluding growth achieved through menu price and sales mix change.  Finally, we use average check per guest to identify trends in guest preferences, as well as the effectiveness of menu
changes.  We believe these key performance indicators are useful for investors to provide a consistent comparison of sales results and trends across comparable periods within our core, established store base, unaffected by results of store openings,
closings, and other transitional changes.

32

Table of Contents

Restaurant and Retail Industries

Our stores operate in both the restaurant and retail industries in the United States.  The restaurant and retail industries are highly competitive with respect to quality, variety and price of the
food products, availability of carryout and home delivery, internet and mobile ordering capabilities and retail merchandise offered.  We compete with a significant number of national and regional restaurant and retail chains.  Additionally, there are
many segments within the restaurant industry, such as family dining, casual dining, full-service, fast casual and quick service, which often overlap and provide competition for widely diverse restaurant concepts.  Cracker Barrel primarily operates in
the full-service segment of the restaurant industry, and our growing MSBC concept operates in the fast casual segment.  Competition also exists in securing prime real estate locations for new stores, in hiring qualified employees, in advertising, in
the attractiveness of facilities and with competitors having similar menu offerings or convenience features.  The restaurant and retail industries are often affected by changes in consumer taste and preference; national, regional or local economic
conditions; demographic trends; traffic patterns; the type, number and location of competing restaurants and retailers; and consumers’ discretionary purchasing power.

Additionally, economic, seasonal and weather conditions affect the restaurant and retail industries.  Adverse economic conditions, such as elevated inflation, and higher unemployment rates affect
consumer discretionary income and dining and shopping habits.  Historically, interstate tourist traffic and the propensity to dine out have been much higher during the summer months, thereby contributing to higher profits in our fourth quarter.
Retail sales, which are made substantially to our restaurant guests, are historically strongest in the second quarter, which includes the holiday shopping season.

Severe weather events such as hurricanes, floods, tornadoes, and winter storms may prevent or dissuade guests from visiting our stores, impair our ability to staff our stores or
force us to temporarily close affected stores, adversely impacting our restaurant and retail sales.  Additionally, severe drought conditions and associated restrictions on water use may impair restaurant operations or increase costs in locations
affected by such conditions.  Climate change, changing weather patterns or unpredictable weather patterns may increase the incidence of any of these events and otherwise also impact guest visitation patterns on a macro scale.  In addition to its
impact on store operations, severe weather may also disrupt our supply chain, both in distribution to ports and central warehouses and in distribution to local stores.  In general, we
believe that the geographic dispersion of our stores and multiple sources of distribution adequately mitigate the potential impact of severe weather and changing weather patterns on our stores, but our Board of Directors and management team
continually monitor and reexamine these considerations in light of ongoing trends.

External Impacts to Our Operating Environment

Our operating results have been impacted by the COVID-19 pandemic and other macroeconomic conditions.  During 2021, our business began recovering from the COVID-19 pandemic, but we continued to see
negative impacts on our sales and traffic as a result of both changes in consumer behavior and federal, state and local governmental authorities’ continuation of various restrictions on travel, group gatherings and dine-in services.  Dining room
service was operational to varying degrees, yet most locations were impacted at times by capacity restrictions, social distancing guidelines and decreased consumer demand for in-person dining.  In 2022, the Company continued to recover from the
COVID-19 pandemic; however, we believe outbreaks of new variants adversely impacted consumer demand in 2022.  While our dining rooms operated without COVID-related restrictions in 2023, it is possible that renewed outbreaks, increases in cases and/or
new variants of the disease, either as part of a national trend or on a more localized basis, could result in COVID-19-related restrictions including capacity restrictions or otherwise limit our dine-in services, or negatively affect consumer demand.
In 2023 and 2022, we experienced inflationary conditions with respect to the cost for food, ingredients, retail merchandise, transportation, distribution, labor and utilities resulting, in part, from economic pressures related to the COVID-19
pandemic.

33

Table of Contents

RESULTS OF OPERATIONS

The following table highlights operating results over the past three years:

Total Revenue

The following table highlights the key components of revenue for the past three years:

(1) Comparable store averages exclude MSBC.

(2) Average weekly sales are calculated by dividing net sales by operating weeks and include all stores except for MSBC.

(3) Comparable store sales and traffic consist of sales of stores open at least six full quarters at the beginning of the period and are
measured on comparable calendar weeks.  Comparable store sales and traffic exclude MSBC.

Total revenue benefited from the opening of two new Cracker Barrel and 12 new MSBC units in 2023, the opening of seven new MSBC units in 2022 and two new units for both Cracker Barrel and MSBC in
2021, partially offset by the closing of six Cracker Barrel and four MSBC units in 2023 and one Cracker Barrel unit in 2021. Additionally, in the fourth quarter of 2022, the Company acquired direct ownership of MSBC’s seven franchised units from
their respective franchisees.

34

Table of Contents

The following table highlights comparable store sales* results over the past two years:

*Comparable store sales consist of sales of stores open at least six full quarters at the beginning of the year, are measured on comparable calendar weeks and exclude MSBC.

Our comparable store restaurant sales increase in 2023 as compared to 2022 resulted from an average check increase of 9.8% (including an 8.6% average menu price increase) partially offset by a
decrease in guest traffic of 3.5%.  Off-premise sales represented approximately 20% of restaurant sales volumes in both 2023 and 2022.  Our comparable store restaurant sales increase in 2022 as compared to 2021 resulted from an average check increase
of 7.0% (including a 5.9% average menu price increase) and an increase in guest traffic of 8.0%.  Off-premise sales represented approximately 24% of restaurant sales volumes in 2021 when a large number of restaurants were operating with limitations
on or full prohibitions of dine-in services due to the COVID-19 pandemic.

Our retail sales are made primarily to our restaurant guests.  The decrease in our comparable store retail sales in 2023 as compared to 2022 resulted
primarily from the decrease in guest traffic partially offset by strong performance in the apparel merchandise category.  The increase in our comparable store retail sales in 2022 as compared to 2021 resulted primarily from the increase in guest
traffic and strong performance in the apparel and accessories, food and convenience, toys, décor, and bed and bath merchandise categories.

Cost of Goods Sold (Exclusive of Depreciation and Rent)

The following table highlights the components of cost of goods sold in dollar amounts for the past three years:

The following table highlights restaurant cost of goods sold as a percentage of restaurant revenue for the past three years:

The increase in restaurant cost of goods sold as a percentage of restaurant revenue in 2023 as compared to 2022 was primarily the result of higher cost menu items.  The increase in restaurant cost of
goods sold as a percentage of restaurant revenue in 2022 as compared to 2021 was primarily the result of commodity inflation of 13.1% partially offset by our menu price increase referenced above.

We presently expect the rate of commodity deflation to be approximately 1% to 2% in the first quarter of 2024.

The following table highlights retail cost of goods sold as a percentage of retail revenue for the past three years:

35

Table of Contents

The year-to-year percentage change in 2023 as compared to 2022 resulted primarily from the following:

The increase in retail cost of goods sold as a percentage of retail revenue in 2023 as compared to 2022 resulted primarily from higher markdowns and higher freight expense.

The year-to-year percentage change in 2022 as compared to 2021 resulted from the following:

The decrease in retail cost of goods sold as a percentage of retail revenue in 2022 as compared to 2021 resulted primarily from lower markdowns partially offset by the change in the provision for
obsolete inventory.

Labor and Other Related Expenses

Labor and other related expenses include all direct and indirect labor and related costs incurred in store operations.  The following table highlights labor and other related expenses as a percentage
of total revenue for the past three years:

The year-to-year percentage change in 2023 as compared to 2022 resulted from the following:

The decrease in employee health care expenses as a percentage of total revenue in 2023 as compared to 2022 resulted primarily from lower enrollment.

The decrease in store management compensation as a percentage of total revenue in 2023 as compared to 2022 was primarily driven by the increase in total revenue in 2023 partially offset by wage
inflation.

The increase in store hourly labor expense as a percentage of total revenue in 2023 as compared to 2022 resulted primarily from wage inflation exceeding menu price increases and investments in
additional labor hours to support the guest experience.  In addition to menu price increases, we continue to partially offset inflationary pressures through labor productivity initiatives, and we presently expect the rate of wage inflation to be
approximately 4.0% to 5.0% in the first quarter of 2024.

36

Table of Contents

The year-to-year percentage change in 2022 as compared to 2021 resulted from the following:

The increase in store hourly labor in 2022 as compared to 2021 as a percentage of total revenue resulted primarily from wage inflation exceeding menu price increases and lower productivity, i.e.,
fewer guests served per labor hours incurred.

The decrease in store management compensation as a percentage of total revenue in 2022 as compared to 2021 was primarily driven by lower bonus expense in 2022 and the increase in total revenue in
2022 partially offset by wage inflation.  The lower bonus expense resulted from lower performance against financial objectives for certain components of the incentive plan in 2022 as compared to 2021.

Other Store Operating Expenses

Other store operating expenses include all store-level operating costs, the major components of which are occupancy costs, operating supplies, advertising, third-party delivery fees, credit card and
gift card fees, real and personal property taxes and general insurance.  Occupancy costs include maintenance, utilities, depreciation and rent.

The following table highlights other store operating expenses as a percentage of total revenue for the past three years:

Other store operating expenses as a percentage of total revenue in 2023 as compared to 2022 remained flat at 23.2%.

The year-to-year percentage change in 2022 as compared to 2021 resulted primarily from the following:

The decreases in store occupancy costs and advertising expenses as a percentage of total revenue for 2022 as compared to 2021 were primarily driven by the increase in total revenue in 2022.
Additionally, the decrease in store occupancy costs was partially offset by higher maintenance expenditures, which were the result of increased repair costs associated with limited availability of replacement equipment.

The increase in other store expenses as a percentage of total revenue for 2022 as compared to the same period in the prior year resulted primarily from costs associated with the expansion of our
off-premise business.

General and Administrative Expenses

The following table highlights general and administrative expenses as a percentage of total revenue for the past three years:

37

Table of Contents

The year-to-year percentage change in 2023 as compared to 2022 resulted from higher corporate-level incentive compensation resulting from better performance against financial objectives in 2023 as
compared to 2022.

The year-to-year percentage change in 2022 as compared to 2021 resulted from lower incentive compensation.  The decrease in incentive compensation as a percentage of total revenue in 2022 as compared
to 2021 was primarily the result of lower performance against financial objectives in 2022 as compared to 2021.

Gain on Sale and Leaseback Transactions

On July 29, 2020, we entered into a sale and leaseback transaction involving 64 of our owned Cracker Barrel properties and recorded a gain of $69,954.  On August 4, 2020, we entered into a second
sale and leaseback transaction involving 62 of our owned Cracker Barrel stores and recorded a gain of $217,722.  See Note 8 to the Consolidated Financial Statements for additional information regarding these sale and leaseback transactions.

Impairment and Store Closing Costs

During 2023, we recorded impairment charges of $11,692 as a result of the deterioration in operating performance of six Cracker Barrel locations.  Additionally, during 2023, we incurred costs of
$2,307 in connection with the closure of six Cracker Barrel and four MSBC locations because of poor operating performance.

Impairment and store closing costs consisted of the following:

Interest Expense

The following table highlights interest expense for the past three years:

The year-to-year increase in 2023 as compared to 2022 resulted primarily from higher weighted average debt levels during 2023 and higher weighted average interest rates under our revolving credit
facility.

The year-to-year decrease in 2022 as compared to 2021 resulted primarily from lower weighted average debt levels, lower weighted average interest rates and the prior year including costs associated
with the termination of the Company’s interest rate swaps.

Provision for Income Taxes

The following table highlights the provision for income taxes as a percentage of income before income taxes (“effective tax rate”) for the past three years:

Our effective tax rate is lower than statutory rates primarily due to the benefit of tax credits.  The decreases in our effective tax rate in 2023 as compared to 2022 and in 2022 as compared to 2021 reflect the impact
of higher tax credits on lower income before income tax.

We presently expect our effective tax rate for 2024 to be approximately 6%.

38

Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

The following table presents a summary of our cash flows for the last three years:

Our primary sources of liquidity are cash generated from our operations and our borrowing capacity under our revolving credit facility.  Our internally generated cash, along with cash on hand at July
29, 2022 and borrowings under our revolving credit facility, were sufficient to finance all of our growth, share repurchases, dividend payments, working capital needs, interest payments on long-term debt obligations and other cash payment obligations
in 2023. We believe that cash at July 28, 2023, along with cash expected to be generated from our operating activities and the borrowing capacity under our revolving credit facility, will be sufficient to finance our continuing operations, our
continuing expansion plans, debt service, dividend payments and working capital needs for the next twelve months.  Furthermore, we believe that cash expected to be generated from our operating activities and the borrowing capacity under our revolving
credit facility will be sufficient to finance our continuing operations, capital expenditures, interest expense on long-term debt obligations, operating lease obligations, continuing expansion plans and working capital needs beyond the next twelve
months.

A summary of our contractual cash obligations and commitments as of July 28, 2023, is as follows:

39

Table of Contents

Cash Generated from Operations

The increase in net cash flow provided by operating activities in 2023 as compared to 2022 primarily reflected lower retail inventory partially offset by the timing of payments for accounts payable
and certain taxes.

The decrease in net cash flow provided by operating activities in 2022 as compared to 2021 primarily reflected higher retail inventory, the timing of payments for certain taxes and higher bonus
payments made in 2022 as a result of the prior year’s performance.  The higher retail inventory in 2022 as compared to 2021 was driven by unusually low retail inventory in 2021 resulting from market constraints on the availability of goods.

Capital Expenditures and Proceeds from Sale of Property and Equipment

The following table presents our capital expenditures (purchase of property and equipment), net of proceeds from insurance recoveries, for the last three years:

Our capital expenditures consisted primarily of capital investments for existing stores, new store locations and strategic initiatives.  The increase in capital expenditures in 2023 from 2022
resulted primarily from higher capital expenditures for existing stores and higher capital expenditures for strategic initiatives, including investments in digital and technology infrastructure and the development of a loyalty program.  The increase
in capital expenditures in 2022 from 2021 resulted primarily from higher capital expenditures for existing stores and an increase in the number of new store locations partially offset by lower capital expenditures for strategic initiatives.

We estimate that our capital expenditures during the first quarter of 2024 will be approximately $27,000 to $32,000.  This estimate includes existing store maintenance and aging equipment
replacement, the acquisition of sites and construction costs of one to two new Cracker Barrel stores and approximately four to five MSBC locations that we plan to open during the first quarter of 2024.  We intend to fund our capital expenditures with
cash generated by operations and cash on hand as the result of borrowings under our revolving credit facility, as necessary.

The following table presents our proceeds from sale of property and equipment for the last three years:

The increase in proceeds from sale of property and equipment in 2023 from 2022 resulted primarily from the sale of excess real property in 2023.  In 2021, we completed a sale and leaseback
transaction.  The decrease in proceeds from sale of property and equipment in 2022 from 2021 resulted from the sale and leaseback transaction in 2021.  See Note 8 to the Consolidated Financial Statements for additional information regarding the sale
and leaseback transaction.

Borrowing Capacity, Debt Covenants and Notes

On June 17, 2022, we entered into a five-year $700,000 revolving credit facility (the “2022 Revolving Credit Facility”) with substantially the same terms and financial covenants as our previous
amended $800,000 revolving credit facility (the “2019 Revolving Credit Facility”).  The 2022 Revolving Credit Facility also contains an option for the Company to increase the revolving credit facility by $200,000.

40

Table of Contents

The following table highlights our borrowing capacity and outstanding borrowings under the 2022 Revolving Credit Facility, our standby letters of credit and our borrowing availability under the 2022
Revolving Credit Facility as of July 28, 2023:

*Our standby letters of credit relate to securing reserved claims under workers’ compensation insurance and securing certain sale and leaseback transactions.  Our standby letters of credit reduce our borrowing
availability under the 2022 Revolving Credit Facility.

During 2023, we borrowed $180,000 and repaid $190,000 under the 2022 Revolving Credit Facility.  During 2022, in addition to the refinancing of the revolving credit facility, we borrowed $100,000 and
repaid $55,000 of borrowings under the 2019 Revolving Credit Facility.  During 2021, we repaid $924,395 under the 2019 Revolving Credit Facility and borrowed an additional $60,000 under the 2019 Revolving Credit Facility.

Our 2022 Revolving Credit Facility contains customary financial covenants, which include maintenance of a maximum consolidated total senior secured leverage ratio and a minimum consolidated interest
coverage ratio.  We were in compliance with the 2022 Revolving Credit Facility’s financial covenants at July 28, 2023, and we expect to be in compliance with the 2022 Revolving Credit Facility’s financial covenants for the remaining term of the
facility.

On June 18, 2021, the Company issued and sold $300,000 in aggregate principal amount of 0.625% Convertible Senior Notes due 2026.  The Notes are senior, unsecured obligations of the Company and
bear cash interest at a rate of 0.625% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2021.  The Notes mature on June 15, 2026, unless earlier converted, repurchased or redeemed.  Net
proceeds from the Notes were $291,125, after deducting the initial purchasers’ discounts and commissions and the Company’s offering fees and expenses.

In connection with the issuance of the Notes, the Company entered into privately negotiated convertible note hedge transactions (the “Convertible Note Hedge Transactions”) with certain of the
initial purchasers of the Notes  and/or their respective affiliates and other financial institutions (in this capacity, the “Hedge Counterparties”), which cover, subject to customary anti-dilution adjustments, the aggregate number of shares of the
Company’s common stock that initially underlie the Notes. Concurrently with the Company’s entry into the Convertible Note Hedge Transactions, the Company also entered into separate, privately negotiated warrant transactions with the Hedge
Counterparties collectively relating to the same number of shares of the Company’s common stock underlying the Notes, subject to customary anti-dilution adjustments, and for which the Company received premiums that partially offset the cost of
entering into the Convertible Note Hedge Transactions (the “Warrant Transactions”).  The portion of the net proceeds to the Company from the offering of the Notes that was used to pay the premium on the Convertible Note Hedge Transactions, net of
the proceeds to the Company from the Warrant Transactions, was approximately $30,300.

See Note 4 to our Consolidated Financial Statements for further information on our long-term debt.

Dividends, Share Repurchases and Share-Based Compensation Awards

Our 2022 Revolving Credit Facility imposes restrictions on the amount of dividends we are permitted to pay and the amount of shares we are permitted to repurchase.  Under the 2022 Revolving Credit
Facility, provided there is no default existing and the total of our availability under the 2022 Revolving Credit Facility plus our cash and cash equivalents on hand is at least $100,000 (the “Cash Availability”), we may declare and pay cash
dividends on shares of our common stock and repurchase shares of our common stock (1) in an unlimited amount if at the time the dividend or the repurchase is made our consolidated total senior secured leverage ratio is 2.75 to 1.00 or less and (2) in
an aggregate amount not to exceed $100,000 in any fiscal year if our consolidated total leverage ratio is greater than 2.75 to 1.00 at the time the dividend or repurchase is made; notwithstanding (1) and (2), so long as immediately after giving
effect to the payment of any such dividends, Cash Availability is at least $100,000, we may declare and pay cash dividends on shares of our common stock in an aggregate amount not to exceed in any fiscal year the product of the aggregate amount of
dividends declared in the fourth quarter of the immediately preceding fiscal year multiplied by four.

41

Table of Contents

In 2023, we paid regular dividends of $5.20 per share and declared a dividend of $1.30 per share that was subsequently paid on August 8, 2023 to shareholders of record on July 21, 2023.
Additionally, on August 29, 2023, our Board of Directors declared a dividend of $1.30 per share payable on November 7, 2023 to shareholders of record on October 20, 2023.  In 2022, we paid regular dividends of $4.90 per share and declared a dividend
of $1.30 per share that was subsequently paid on August 5, 2022 to shareholders of record on July 15, 2022.  In 2021, in order to preserve available cash during the COVID-19 pandemic and in light of the uncertainties as to its duration and economic
impact, we deferred the payment of the dividend of $1.30 per share declared in the third quarter of 2020 until the first quarter of 2021 and temporarily suspended future dividend payments.  In the fourth quarter of 2021, in light of the ongoing
recovery from the COVID-19 pandemic, our Board of Directors resumed our dividend program.

The following table highlights the dividends per share we paid for the last three years:

Our criteria for share repurchases are that they be accretive to expected net income per share and are within the limits imposed by our debt commitments.  Subject to the limits
imposed by our revolving credit facility, in September 2021, we were authorized by our Board of Directors to repurchase shares at the discretion of management up to $100,000.  In the fourth quarter of 2022, we were authorized by our Board of
Directors to repurchase shares of the Company’s outstanding common stock at management’s discretion up to a total value of $200,000 with such authorization to expire on June 2, 2023; this authorization replaced the previous unused portion of the
previous $100,000 authorization and expired on June 2, 2023.  On June 2, 2023, our Board of Directors extended this repurchase authorization for an additional year.

The following table highlights our share repurchases for the last three years:

Working Capital

In the restaurant industry, substantially all sales are either for cash or third-party credit card.  Like many other restaurant companies, we are able to, and often do, operate with negative working
capital.  Restaurant inventories purchased through our principal food distributor are on terms of net zero days, while other restaurant inventories purchased locally are generally financed through trade credit at terms of 30 days or less.  Because of
our gift shop, which has a lower product turnover than the restaurant, we carry larger inventories than many other companies in the restaurant industry.  Retail inventories are generally financed through trade credit at terms of 60 days or less.
These various trade terms are aided by rapid turnover of the restaurant inventory.  Employees generally are paid on weekly or semi-monthly schedules in arrears for hours worked except for bonuses that are paid either quarterly or annually in
arrears.  Many other operating expenses have normal trade terms and certain expenses such as certain taxes and some benefits are deferred for longer periods of time.

The following table highlights our working capital deficit:

The change in working capital at July 28, 2023 compared to July 29, 2022 primarily reflected the decrease in retail inventory levels and the decrease in cash partially offset by the timing of
payments for certain taxes.  The decrease in cash resulted primarily from share repurchases during 2023.

The change in working capital at July 29, 2022 compared to July 30, 2021 primarily reflected the decrease in cash, higher accounts payable and the timing of payments for income taxes partially offset
by higher inventory levels.   The decrease in cash resulted primarily from higher share repurchases partially offset by net borrowings under of revolving credit facility.

42

Table of Contents

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements.

CRITICAL ACCOUNTING ESTIMATES

We prepare our Consolidated Financial Statements in conformity with GAAP.  The preparation of these financial statements requires us to make estimates and assumptions about future events and apply
judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures.  We base our estimates and judgments on historical experience, current trends, outside advice from parties believed to be experts in such
matters and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other
sources.  However, because future events and their effects cannot be determined with certainty, actual results could differ from those assumptions and estimates, and such differences could be material.

Our significant accounting policies are discussed in Note 1 to the Consolidated Financial Statements.  Judgments and uncertainties affecting the application of those policies may result in materially
different amounts being reported under different conditions or using different assumptions.  Critical accounting estimates are those that:

We consider the following accounting estimates to be most critical in understanding the judgments that are involved in preparing our Consolidated Financial Statements:

Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.

Impairment of Long-Lived Assets

We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.  Recoverability of assets is measured by
comparing the carrying value of the asset to the undiscounted future cash flows expected to be generated by the asset.  If the total expected future cash flows are less than the carrying amount of the asset, the carrying value is written down, for an
asset to be held and used, to the estimated fair value or, for an asset to be disposed of, to the fair value, net of estimated costs of disposal.  Any loss resulting from impairment is recognized by a charge to income.  Judgments and estimates that
we make related to the expected useful lives of long-lived assets and future cash flows are affected by factors such as changes in economic conditions and changes in operating performance.  The accuracy of such provisions can vary materially from
original estimates and management regularly monitors the adequacy of the provisions until final disposition occurs.

We have not made any material changes in our methodology for assessing impairments during the past three years and we do not believe that there is a reasonable likelihood that there will be a
material change in the estimates or assumptions used by us to assess impairment of long-lived assets.  However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and fair values of long-lived
assets, we may be exposed to losses that could be material.  During 2023, we recorded impairment charges of $11,692 as a result of the deterioration in operating performance of six Cracker Barrel locations.

43

Table of Contents

Insurance Reserves

We self-insure a significant portion of our expected workers’ compensation and general liability programs.  We purchase insurance for individual workers’ compensation claims that exceed $750 or
$1,000 depending on the state in which the claim originated.  We purchase insurance for individual general liability claims that exceed $500.  We record a reserve for workers’ compensation and general liability for all unresolved claims and for an
estimate of incurred but not reported (“IBNR”) claims.  These reserves and estimates of IBNR claims are based upon a full scope actuarial study which is performed annually at the end of our third quarter and is adjusted by the actuarially determined
losses and actual claims payments for the fourth quarter.  Additionally, we perform limited scope actuarial studies on a quarterly basis to verify and/or modify our reserves.  The reserves and losses in the actuarial study represent a range of
possible outcomes within which no given estimate is more likely than any other estimate.  As such, we record the losses in the lower half of that range and discount them to present value using a risk-free interest rate based on projected timing of
payments.  We also monitor actual claims development, including incurrence or settlement of individual large claims during the interim periods between actuarial studies as another means of estimating the adequacy of our reserves.

Our group health plans combine the use of self-insured and fully-insured programs.  Benefits for any individual (employee or dependents) in the self-insured group health program are limited.  We
record a liability for the self-insured portion of our group health program for all unpaid claims based upon a loss development analysis derived from actual group health claims payment experience.  We also record a liability for unpaid prescription
drug claims based on historical experience.

Our accounting policies regarding insurance reserves include certain actuarial assumptions and management judgments regarding economic conditions, the frequency and severity of claims and claim
development history and settlement practices.  We have not made any material changes in the methodology used to establish our insurance reserves during the past three years and do not believe there is a reasonable likelihood that there will be a
material change in the estimates or assumptions used to calculate the insurance reserves.  However, changes in these actuarial assumptions or management judgments in the future may produce materially different amounts of expense that would be
reported under these insurance programs.

Retail Inventory Valuation

Cost of goods sold includes the cost of retail merchandise sold at our stores utilizing the retail inventory method (“RIM”).  Under RIM, the valuation of our retail inventories is determined by
applying a cost-to-retail ratio to the retail value of our inventories.  Inherent in the RIM calculation are certain inputs, including initial markons, markups, markdowns and shrinkage, which may significantly impact the gross margin calculation as
well as the ending inventory valuation.

Inventory valuation provisions are included for retail inventory obsolescence and retail inventory shrinkage.  Retail inventory is reviewed on a quarterly basis for obsolescence and adjusted as
appropriate based on assumptions made by management and judgment regarding inventory aging and future promotional activities.  Retail inventory also includes an estimate of shrinkage that is adjusted upon physical inventory counts.  Annual physical
inventory counts are conducted based upon a cyclical inventory schedule.  An estimate of shrinkage is recorded for the time period between physical inventory counts by using a two-year average of the physical inventories’ results on a store-by-store
basis.

We have not made any material changes in the methodologies, estimates or assumptions related to our merchandise inventories during the past three years and do not believe there is a reasonable
likelihood that there will be a material change in the estimates or assumptions in the future.  However, actual obsolescence or shrinkage recorded may produce materially different amounts than we have estimated.

Lease Accounting

We have ground leases for our leased stores and office space leases that are recorded as operating leases under various non-cancellable operating leases.  Additionally, we lease our retail
distribution center, advertising billboards, vehicle fleets, and certain equipment under various non-cancellable operating leases.

44

Table of Contents

We evaluate our leases at contract inception to determine whether we have the right to control use of the identified asset for a period of time in exchange for consideration.  If we determine that we
have the right to obtain substantially all of the economic benefit from use of the identified asset and the right to direct the use of the identified asset, we recognize a right-of-use asset and lease liability.  Also, at contract inception, we
evaluate our leases to estimate their expected term which includes renewal options that we are reasonably assured that we will exercise, and the classification of the lease as either an operating lease or a finance lease.  Additionally, as our leases
do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the time of commencement or modification date in determining the present value of lease payments.  Assumptions used in determining our
incremental borrowing rate include our implied credit rating and an estimate of secured borrowing rates based on comparable market data.  We assess the impairment of the right-of-use asset at the asset group level whenever events or changes in
circumstances indicate that the carrying value of the asset may not be recoverable.

Changes in these assumptions and management judgments may produce materially different amounts in the recognition of the right-of-use assets and lease liabilities.  Additionally, any loss resulting
from an impairment of the right-of-use assets is recognized by a charge to income, which could be material.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides information which management believes is relevant to an assessment and
understanding of our consolidated results of operations and financial condition.  MD&A should be read in conjunction with the Consolidated Financial Statements and notes thereto.  Readers should also carefully review the information presented
under the section entitled “Risk Factors” and other cautionary statements in this report.  All dollar amounts (other than per share amounts) reported or discussed in this MD&A are shown in thousands.  References in MD&A to a year or quarter
are to our fiscal year or quarter unless expressly noted or the context clearly indicates otherwise.

This overview summarizes the MD&A, which includes the following sections:

30

Table of Contents

EXECUTIVE OVERVIEW

Cracker Barrel Old Country Store, Inc. (the “Company,” “our” or “we”) is a publicly traded (Nasdaq: CBRL) company that, through its operations and those of certain subsidiaries, is principally
engaged in the operation and development of the Cracker Barrel Old Country Store® (“Cracker Barrel”) concept.  Each Cracker Barrel store consists of a restaurant with a gift shop.  The restaurants serve breakfast, lunch and dinner.  The gift shop
offers a variety of decorative and functional items specializing in rocking chairs, holiday gifts, toys, apparel and foods.  As of September 14, 2022, the Company operated 664 Cracker Barrel stores located in 45 states.  Effective October 19, 2019,
the Company acquired 100% ownership of Maple Street Biscuit Company (“MSBC”), a breakfast and lunch fast casual concept.  As of September 14, 2022, the Company operated 53 MSBC locations in nine states, none of which are franchised.

Company Performance in 2022

Management believes that the Cracker Barrel brand remains one of the strongest and most differentiated brands in the restaurant industry, and we plan to continue to leverage and build on that
strength as a core component of our business strategy.

Our long-term strategy remains centered on driving sustainable sales growth, continued business model improvements, building profitable Cracker Barrel and MSBC stores, and ultimately driving
shareholder returns.

Fiscal 2022 included challenges from historically high commodity and wage inflation, COVID-19 case count resurgences and record gas prices in the second half of the fiscal year (adversely impacting
consumers’ discretionary income).  While navigating these challenges, we focused our efforts on maintaining a strong value proposition, continued growth in our off-premise business, delivering continued strong retail sales, marketing and culinary
innovation to grow average check through introduction of add-ons and menu enhancements, thoughtful expansion of MSBC, and store-level operational excellence.

While our overall performance was not where we expected at the outset of the fiscal year, and macro challenges worsened as the year progressed, we made significant progress on many of our key
business initiatives, and we continued our focus on generating shareholder returns by paying $4.90 per share in dividends for fiscal 2022 and declaring a dividend of $1.30 per share that was subsequently paid on August 5, 2022 to shareholders of
record on July 15, 2022, totaling $143,744 dividends declared or paid in 2022, and repurchasing $131,542 in shares of our common stock.

Key Performance Indicators

Management uses a number of key performance measures to evaluate our operational and financial performance, including the following:

31

Table of Contents

These performance indicators exclude the impact of new store openings and sales related to MSBC and Holler & Dash Biscuit HouseTM (“Holler & Dash”), since we acquired MSBC in the first quarter of 2020 and converted our Holler & Dash locations into MSBC locations.

We use comparable store sales metrics as indicators of sales growth to evaluate how our established stores have performed over time. We use comparable restaurant guest traffic increase/(decrease)
to evaluate how established stores have performed over time, excluding growth achieved through menu price and sales mix change. Finally, we use average check per guest to identify trends in guest preferences, as well as the effectiveness of menu
changes. We believe these performance indicators are useful for investors to provide a consistent comparison of sales results and trends across comparable periods within our core, established store base, unaffected by results of store openings,
closings, and other transitional changes.

COVID-19 Impact and Company Response

During 2022, the Company continued to recover from the COVID-19 pandemic (notwithstanding new variant outbreaks), and all dining rooms were open to some extent during 2022.  While all our dining
rooms are currently operating without COVID-19-related restrictions, it is possible that renewed outbreaks or increases in cases and/or further new variants of the disease, either as part of a national trend or on a more localized basis, could
result in COVID-19-related restrictions including capacity restrictions or otherwise limit our dine-in services, or negatively affect consumer demand.

In response to the COVID-19 pandemic, we instituted operational protocols to comply with applicable regulatory requirements to protect the health and safety of employees and guests, and we
implemented and continually adapted a number of strategies to support the recovery of our business and navigate through the uncertain environment.  We continue to focus on growing our off-premise business and investing in our digital infrastructure
to improve the guest experience in the face of these ongoing challenges.

32

Table of Contents

Restaurant and Retail Industries

Our stores operate in both the restaurant and retail industries in the United States.  The restaurant and retail industries are highly competitive with respect to quality, variety and price of the
food products, availability of carryout and home delivery, internet and mobile ordering capabilities and retail merchandise offered.  We compete with a significant number of national and regional restaurant and retail chains.  Additionally, there
are many segments within the restaurant industry, such as family dining, casual dining, full-service, fast casual and quick service, which often overlap and provide competition for widely diverse restaurant concepts.  Cracker Barrel primarily
operates in the full-service segment of the restaurant industry, and our growing MSBC concept operates in the fast casual segment.  Competition also exists in securing prime real estate locations for new stores, in hiring qualified employees, in
advertising, in the attractiveness of facilities and with competitors having similar menu offerings or convenience features.  The restaurant and retail industries are often affected by changes in consumer taste and preference; national, regional or
local economic conditions; demographic trends; traffic patterns; the type, number and location of competing restaurants and retailers; and consumers’ discretionary purchasing power.

Additionally, economic, seasonal and weather conditions affect the restaurant and retail industries.  Adverse economic conditions and unemployment rates affect consumer discretionary income and
dining and shopping habits.  Historically, interstate tourist traffic and the propensity to dine out have been much higher during the summer months, thereby contributing to higher profits in our fourth quarter.  Retail sales, which are made
substantially to our restaurant guests, are historically strongest in the second quarter, which includes the holiday shopping season.

Severe weather events such as hurricanes, floods, tornadoes, and winter storms may prevent or dissuade guests from visiting our stores, impair our ability to staff our stores
or force us to temporarily close affected stores, adversely impacting our restaurant and retail sales.  Additionally, severe drought conditions (such as the severe drought affecting much of the southwestern United States) and associated
restrictions on water use may impair restaurant operations or increase costs in locations affected by such conditions. Climate change, changing weather patterns or unpredictable weather patterns may increase the incidence of any of these events and
otherwise also impact guest visitation patterns on a macro scale. In addition to its impact on store operations, severe weather may also disrupt our supply chain, both in distribution to ports and central warehouses and in distribution to local
stores.  In general, we believe that the geographic dispersion of our stores and multiple sources of distribution adequately mitigate the potential impact of severe weather and changing
weather patterns on our stores, but our board of directors and management team continually monitor and reexamine these considerations in light of ongoing trends.

RESULTS OF OPERATIONS

The following table highlights operating results over the past three years:

33

Table of Contents

Total Revenue

The following table highlights the key components of revenue for the past three years:

(1) Comparable store averages exclude MSBC and Holler & Dash.

(2) Average weekly sales are calculated by dividing net sales by operating weeks and include all stores except for MSBC and Holler & Dash.

(3) Comparable store sales and traffic consist of sales of stores open at least six full quarters at the beginning of the period and
are measured on comparable calendar weeks.  Comparable store sales and traffic exclude MSBC and Holler & Dash.

Total revenue benefited from the opening of seven new MSBC units in 2022, two new units for both Cracker Barrel and MSBC in 2021, and four new Cracker Barrel units and one new MSBC unit in 2020,
partially offset by the closing of one Cracker Barrel unit in 2021 and one unit each for Cracker Barrel and Holler & Dash in 2020.   Additionally, in the fourth quarter of 2022, the Company acquired direct ownership of MSBC’s seven franchised
units from their respective franchisees.

During 2020 and 2021, the COVID-19 pandemic negatively impacted our sales and traffic as a result of both changes in consumer behavior and federal, state and local governmental authorities’
continuation of various restrictions on travel, group gatherings and dine-in services.  Dining room service was operational to varying degrees, yet most locations were impacted at times by capacity restrictions, social distancing guidelines, and
decreased consumer demand for in-person dining.  In 2022, the Company continued to recover from the COVID-19 pandemic; however, we believe outbreaks of new variants adversely impacted consumer demand in 2022.    All dining rooms were open to some
extent during 2022 and most dining rooms operated with few, if any, restrictions.  Going forward it is possible that renewed outbreaks, increases in cases and/or new variants of the disease, either as part of a national trend or on a more localized
basis, could result in COVID-19-related restrictions including capacity restrictions or otherwise limit our dine-in services, or negatively affect consumer demand.

The following table highlights comparable store sales* results over the past two years:

*Comparable store sales consist of sales of stores open at least six full quarters at the beginning of the year, are measured on comparable calendar weeks and exclude MSBC and Holler & Dash.

34

Table of Contents

Our comparable store restaurant sales increase in 2022 as compared to 2021 resulted from an average check increase of 7.0% (including a 5.9% average menu price increase) and an increase in guest
traffic of 8.0%.

Our comparable store restaurant sales increase in 2021 as compared to 2020 resulted from an average check increase of 3.1% (including a 2.1% average menu price increase) and an increase in guest
traffic of 5.3%.

Our retail sales are made substantially to our restaurant guests.  The increase in our comparable store retail sales in 2022 as compared to 2021 resulted primarily from the guest traffic increase
and strong performance in the apparel and accessories, food and convenience, toys, décor, and bed and bath merchandise categories. The increase in our comparable store retail sales in 2021 as compared to 2020 resulted primarily from the guest
traffic increase and strong performance in the toys, apparel and accessories, food and convenience and décor merchandise categories.

Cost of Goods Sold (Exclusive of Depreciation and Rent)

The following table highlights the components of cost of goods sold in dollar amounts for the past three years:

The following table highlights restaurant cost of goods sold as a percentage of restaurant revenue for the past three years:

The increase in restaurant cost of goods sold as a percentage of restaurant revenue in 2022 as compared to 2021 was primarily the result of commodity inflation of 13.1% partially offset by our menu
price increase referenced above.

The increase in restaurant cost of goods sold as a percentage of restaurant revenue in 2021 as compared to 2020 was primarily the result of commodity inflation of 2.4% partially offset by lower
food waste and a decrease in employee discounts. Lower food waste and the decrease in employee discounts both accounted for decreases of 0.1%.

We continue to partially offset inflationary pressures through menu price increases and operational improvements, and we presently expect the rate of commodity inflation to be approximately 8% in
2023 as compared to 13.1% in 2022.

The following table highlights retail cost of goods sold as a percentage of retail revenue for the past three years:

The decrease in retail cost of goods sold as a percentage of retail revenue in 2022 as compared to 2021 resulted primarily from lower markdowns partially offset by the change in the provision for
obsolete inventory.

35

Table of Contents

The decrease in retail cost of goods sold as a percentage of retail revenue in 2021 as compared to 2020 resulted from lower markdowns, higher initial margin, lower freight expense, the change in
the provision for obsolete inventory and lower inventory shrinkage partially offset by an increase in discounts and allowances.

Labor and Other Related Expenses

Labor and other related expenses include all direct and indirect labor and related costs incurred in store operations.  The following table highlights labor and other related expenses as a
percentage of total revenue for the past three years:

The year-to-year percentage change in 2022 as compared to 2021 resulted from the following:

The increase in store hourly labor in 2022 as compared to 2021 as a percentage of total revenue resulted primarily from wage inflation exceeding menu price increases and lower productivity, i.e.,
fewer guests served per labor hours incurred.   In addition to menu price increases, we continue to partially offset inflationary pressures through labor productivity initiatives, and we presently expect the rate of wage inflation to be
approximately 5% in 2023.

The decrease in store management expenses as a percentage of total revenue in 2022 as compared to 2021 was primarily driven by lower bonus expense in 2022 and the increase in total revenue in 2022
partially offset by wage inflation.  The lower bonus expense resulted from lower performance against financial objectives for certain components of the incentive plan in 2022 as compared to 2021.

The year-to-year percentage change in 2021 as compared to 2020 resulted primarily from the following:

In general, during 2021 as compared to 2020, certain expenses as a percentage of total revenue materially decreased as a function of the significant increase in total revenue and increased
operations. In particular, the decreases in store management compensation, miscellaneous wages, and store bonus expense as a percentage of total revenue in 2021 as compared to 2020 were primarily driven by the increases in total revenue in 2021.

36

Table of Contents

Lower employee health care expenses as a percentage of total revenue in 2021 as compared to 2020 resulted primarily from both lower claims activity and the increase in total revenue in 2021.

The increase in store hourly labor in 2021 as compared to 2020 as a percentage of total revenue resulted primarily from wage inflation exceeding menu price increases.

Other Store Operating Expenses

Other store operating expenses include all store-level operating costs, the major components of which are operating supplies, repairs and maintenance, utilities, depreciation and amortization,
advertising, rent, credit card and gift card fees, real and personal property taxes and general insurance.  The following table highlights other store operating expenses as a percentage of total revenue for the past three years:

The year-to-year percentage change in 2022 as compared to 2021 resulted primarily from the following:

The decreases in depreciation expense, rent and advertising expenses as a percentage of total revenue for 2022 as compared to 2021 were primarily driven by the increase in total revenue in 2022.

The increase in maintenance expense as a percentage of total revenue for 2022 as compared to 2021 resulted primarily from higher expenditures, which were the result of increased repair costs
associated with limited availability of replacement equipment.

The increase in other store expenses as a percentage of total revenue for 2022 as compared to the same period in the prior year resulted primarily from costs associated with the expansion of our
off-premise business.

The year-to-year percentage change from 2021 as compared to 2020 resulted from the following:

In general, during 2021 as compared to 2020, certain expenses as a percentage of total revenue materially decreased by the significant increase in total revenue and increased operations. In
particular, the decreases in depreciation expense, real and personal property taxes, and advertising expense as a percentage of total revenue for 2021 as compared to 2020 were primarily driven by the increase in total revenue in 2021.

The decrease in utilities expense as a percentage of total revenue for 2021 as compared to 2020 was primarily driven by the increase in total revenue in 2021 partially offset by higher natural gas,
electricity, and water rates.

37

Table of Contents

The decrease in pre-opening expenses as a percentage of total revenue for 2021 as compared to 2020 resulted primarily from the timing of new store openings.

The decrease in loss on asset disposition as a percentage of total revenue for 2021 as compared to 2020 resulted primarily from increased repair and maintenance activity for equipment as opposed to
asset disposal.

The increase in rent expense as a percentage of total revenue for 2021 as compared to 2020 resulted primarily from the sale and leaseback transaction involving 62 of our owned Cracker Barrel stores
completed on August 4, 2020.  The aggregate initial annual rent payment for these properties is approximately $10,393.  Additionally, the related rent expense includes $12,735 recorded in 2021 for the non-cash amortization of the asset recognized
from the gain on the Company’s sale and leaseback transactions. See Note 9 to the Consolidated Financial Statements for additional information regarding the Company’s sale and leaseback transactions.

General and Administrative Expenses

The following table highlights general and administrative expenses as a percentage of total revenue for the past three years:

The year-to-year percentage change in 2022 as compared to 2021 resulted from lower incentive compensation.  The decrease in incentive compensation as a percentage of total revenue in 2022 as
compared to 2021 was primarily the result of lower performance against financial objectives in 2022 as compared to 2021.

The year-to-year percentage change in 2021 as compared to 2020 resulted from the following:

The decreases in payroll and related expense and travel expense as a percentage of total revenue in 2021 as compared to 2020 were primarily driven by cost savings initiatives implemented in
response to the COVID-19 pandemic and the increase in total revenue in 2021.

The decrease in professional fees as a percentage of total revenue in 2021 as compared to 2020 was primarily driven by lower fees related to sale and leaseback transactions partially offset by
additional proxy expenses related to the proxy contest initiated by affiliates of Sardar Biglari in connection with the Company’s 2020 annual shareholders meeting held on November 19, 2020. The reduction in total professional fees as a percentage
of total revenue in 2021 was the result of higher fees associated with the initial sale and leaseback transaction in the fourth quarter of 2020, when compared to the 2021 sale and leaseback transactions and additional professional fees related to
the proxy contest in connection with the 2020 annual meeting of shareholders (held in the second fiscal quarter of 2021).

The decrease in depreciation expense as a percentage of total revenue in 2021 as compared to 2020 was primarily driven by the increase in total revenue in 2021.

The increase in incentive compensation as a percentage of total revenue in 2021 as compared to 2020 was primarily driven by better performance against financial objectives in 2021 as compared to
2020.

38

Table of Contents

Gain on Sale and Leaseback Transactions

On July 29, 2020, we entered into a sale and leaseback transaction involving 64 of our owned Cracker Barrel properties and recorded a gain of $69,954.  On August 4, 2020, we entered into a second
sale and leaseback transaction involving 62 of our owned Cracker Barrel stores and recorded a gain of $217,722. See Note 9 to the Consolidated Financial Statements for additional information regarding these sale and leaseback transactions.

Impairment

During the third and fourth quarters of 2020, we determined that certain Cracker Barrel and MSBC locations were impaired, resulting in impairment charges of $22,496.  These locations were impaired
because of declining operating performance and resulting negative cash flow projections as a result of the impact of the COVID-19 pandemic.  The Company did not incur similar impairment charges in 2022 or 2021.  It is possible that we may recognize
future additional impairment charges as a result of the unknown impacts of the COVID-19 pandemic and our response or for other business reasons.

Interest Expense

The following table highlights interest expense for the past three years:

The year-to-year decrease in 2022 as compared to 2021 resulted primarily from lower weighted average debt levels, lower weighted average interest rates and the prior year including costs associated with the termination
of the Company’s interest rate swaps.

The year-to-year increase in 2021 as compared to 2020 resulted primarily from the costs associated with termination of interest rate swaps, higher weighted average debt levels caused by our
borrowing under our 2019 Revolving Credit Facility in response to the COVID-19 pandemic, higher weighted average interest rates, and the cessation of interest income on Punch Bowl Social (“PBS”) promissory notes written off in the third quarter of
2020.  Additionally, as part of our amendment to the 2019 Revolving Credit Facility in the third quarter of 2021, we incurred additional interest expense of $452 related to the write-off of deferred financing costs and we incurred interest expense
of $768 related to the amortization of the original issue discount on our Notes.

Provision for Income Taxes (Income Tax Benefit)

The following table highlights the provision for income taxes (income tax benefit) as a percentage of income before income taxes (“effective tax rate”) for the past three years:

The decrease in our effective tax rate in 2022 as compared to 2021 is primarily the result of the decrease in income before income tax and the benefit of higher income tax credits.  The increase in
our effective tax rate in 2021 as compared to 2020 is primarily the result of the increase in income before income tax.

We presently expect our effective tax rate for 2023 to be approximately 10% to 15%.

LIQUIDITY AND CAPITAL RESOURCES

The following table presents a summary of our cash flows for the last three years:

39

Table of Contents

Our primary sources of liquidity are cash generated from our operations and our borrowing capacity under our revolving credit facility. Our internally generated cash, along with cash on hand at
July 30, 2021 and borrowings under our revolving credit facility, were sufficient to finance all of our growth, share repurchases, dividend payments, working capital needs, interest payments on long-term debt obligations and other cash payment
obligations in 2022. We believe that cash at July 29, 2022, along with cash expected to be generated from our operating activities and the borrowing capacity under our revolving credit facility, will be sufficient to finance our continuing
operations, our continuing expansion plans, debt service, dividend payments, share repurchases and working capital needs for the next twelve months.  Furthermore, we believe that cash expected to be generated from our operating activities and the
borrowing capacity under our revolving credit facility will be sufficient to finance our continuing operations, capital expenditures, interest expense on long-term debt obligations, operating lease obligations, continuing expansion plans, share
repurchases and working capital needs beyond the next twelve months.

A summary of our contractual cash obligations and commitments as of July 29, 2022, is as follows: