Dive Brief:

• Cracker Barrel is launching a chicken and biscuits virtual brand test on Friday from its off-premise-only facility in Indianapolis, CEO Sandra Cochran said during its Q2 2020 earnings call Tuesday. The former Cracker Barrel restaurant was converted into a ghost kitchen last fall. 
• Cracker Barrel experienced a same-store sales decline of nearly 22% during its Q2 as the chain navigated the return of dine-in restrictions across the country. The company found a bright spot in its off-premise business, which grew 78% and generated approximately 30% of total restaurant sales on the quarter.
• In October 2019, Cracker Barrel acquired Maple Street Biscuit Company, a breakfast-and-lunch fast casual concept that counts chicken and biscuits as a signature item. During its earnings call, Cochran said Maple Street has “successfully managed” through the pandemic, generating several weeks of positive same-store sales and opening three stores to grow its footprint to over 40 locations.

Dive Insight:

Translating some of Maple Street’s menu to a delivery-only virtual brand could provide Cracker Barrel with plenty of learnings while the company plans further expansion of the concept. It could also provide an additional revenue stream without the significant costs of opening a brick-and-mortar location — one benefit provided by virtual concepts that a number of casual dining chains have taken advantage of during the pandemic as dine-in restrictions resurfaced in the fall.

Brinker International, Denny’s and Dine Brands have all explored virtual concepts in recent months, for example, with Brinker’s It’s Just Wings contributing to “near-normal” sales at the company. Launching delivery-only brands has been one way for casual dining chains to close the deep recovery gap between their segment and their quick-service peers.

Cracker Barrel will use the Indianapolis facility for more than just a virtual chicken and biscuits brand launch, however. Cochran also said the facility has the ability to provide Heat ‘n Serve offerings, which are especially high volume during the holidays and could provide a tailwind around Easter, as well as when catering volumes return to pre-pandemic levels.

“We’re continuing to test in there and understand the opportunities that we have there, especially when catering comes back to that market, how to dedicate a facility and how that might allow us to do additional offerings there to supplement the capacity we have in a market,” Cochran said during the earnings call.

The facility could also help with fulfillment when business itself returns to normalized levels. Cochran believes the company will maintain over 50% of the growth in its off-premise business.

“We think our catering channel is going to grow when people start doing gatherings. And we think our Heat ‘n Serve, we’re hoping it’s pretty solid. We've been doing a lot of work on the assortment there and we think that is a really interesting place for the brand to be," she said.

The company recently launched catering-style offerings, like its box meals, and expanded its catering menu to support those channels once things normalize.