Made from Scratch By Jim Taylor

Made
from Scratch
By Jim Taylor
In the summer of 1969, Dan Evins came up with his old
country store idea while driving his family down to the Atlanta
(Georgia) Zoo. The drive from middle Tennessee usually took five
hours, and Evins had some time to think...at least until the kids
started repeating, “Are we there yet?” As a Shell Oil jobber, Evins
was always interested in finding new ways to sell gasoline. He
thought about the old country stores that he remembered as a
child, where honest men in overalls stood around a barrel full
of saltine crackers. These stores were a community’s unofficial
meeting place where folks visited with friends and traded
common sense wisdom. Evins thought, “Why not bring this old
country store out to the interstate? Why not open a business
where travelers could stop for gas, eat a good meal, enjoy some
penny candy, play checkers, and simply take a relaxing break from
the road?”
52
Thirty-five years later, more than 500 Cracker Barrel Old
Country Store units line the interstate and busy highways
in forty-one states. Cracker Barrel has built a reputation of
providing both quality meals and retail products at a fair
price, no matter which location you visit.
In fiscal year 2004, Cracker Barrel generated more
than two billion dollars in revenue with more than 23
percent coming from retail sales. That combination of a
restaurant and retail store creates a unique loss prevention
environment.
University of Florida professor Richard Hollinger, who is
well known in the loss prevention industry for his research
on workplace dishonesty, knows the Cracker Barrel model
quite well [see “An Academic Approach to LP” page 30]. He
often visits the Cracker Barrel location in Gainesville where
his son once worked.
“The essential struggle for loss prevention in America is
how do you have security without offending the customer?”
says Dr. Hollinger. “Cameras, electronic article surveillance,
and security are the antithesis of the Cracker Barrel
atmosphere. They treat their customers like neighbors.
Neighbors watch out for each other and trust each other.”
January – February 2005
LossPreventionMagazine.com
LP Department PROFILE #1003
Cracker Barrel
Cracker Barrel Old Country Store, Inc. is a wholly owned
subsidiary of the publicly held CBRL Group, Inc. (Nasdaq: CBRL).
Cracker Barrel was established in 1969 in Lebanon, Tennessee.
Each Cracker Barrel Old Country Store unit is modeled after a
1900-era country store, featuring old photographs, authentic
antiques, memorabilia, and a real wood-burning fireplace with
a stone hearth to add a warm, cozy touch to the dining room.
The restaurant serves classic comfort foods, such as meatloaf
and homemade chicken n’ dumplins, as well as made-fromscratch biscuits using an old family recipe. The retail store has
more than 2,700 gift items, including accessories for the home,
old-fashioned candies, books on audio, nostalgic items, and
children’s games and puzzles, including classic favorites such as
Raggedy Ann & Andy™ and Slinky®. Cracker Barrel Old Country
Store, Inc. operates 514 company-owned locations in forty-one
states. Every Cracker Barrel unit is open seven days a week.
For more information, visit www.crackerbarrel.com.
The food at Cracker Barrel
Old Country Store and the
company’s LP team have
a lot in common.
Dr. Hollinger notes the employees have that same neighborly
approach. He’s on a first-name basis with the managers and
several employees who know him for buying Mary Jane Taffy
candy and peanut brittle.
“My son Charlie worked here a few summers ago,” says
Dr. Hollinger. “Mark, the manager who hired him, is still there and
often asks about Charlie, even though he hasn’t worked there in two
years. I can sense the camaraderie there. These people work hard
and have a good time at it. There’s a relatively low turnover among
staff, and what’s the best predictor of shrinkage—high turnover.”
Growing Pains
In the early days, Cracker Barrel handled employee and
customer theft through its security department and focused
primarily on food cost. In 1995, new corporate leadership
dissolved the security department and expected local operators
to control shrink issues. That decision proved to be a costly
mistake. For five years, Cracker Barrel operated without a loss
prevention unit. Shrink rose to nearly 5 percent while the
company lost its operational focus. The turning point came in
1999, when executive Donald M. Turner returned to Cracker
Barrel as president and chief operating officer. Turner had retired
LossPrevention
a few years earlier, but returned to the company to restore its
operational focus.
“Every company needs a loss prevention team because the
unfortunate reality is there are some dishonest people out
there,” says Turner. “These dishonest people can be a direct
drain on profit. Their actions affect the safety of our guests
and employees, the benefits we offer, and the return for our
shareholders. Our loss prevention investigators help our
managers keep an eye on their business, and I don’t know how
any company can be successful without them.”
Turner, who just retired from the company, was known for
personally responding to every case resolved by the Cracker
Barrel LP team. “It’s great knowing the company president
pays attention to our efforts,” says Diane Tucker, a regional
investigator based in Atlanta. “We closed nearly 300 cases last
year and each time Don would pass along thank-you notes and
other words of encouragement.”
As a Cracker Barrel veteran, Turner understood the
importance of rebuilding a loss prevention team that would
respect the company’s culture. He agreed that Joe Hardman
was the right man for the job. Hardman, a twenty-seven-year
loss prevention veteran with experience at Rich’s, Parisian, and
January – February 2005
53
Books-A-Million, could tell Cracker Barrel
was strikingly different from his previous
employers.
“First of all, we’re a loyalty brand,”
says Hardman. “Our guests are very loyal
to Cracker Barrel. Consider how we do
business. Our guests come through the
retail store to get to the dining room.
They enjoy a meal and then head back
to the retail store to pay their restaurant
check.
“We’re unique in how guests pay the
bill. They will often shop before paying
for their meal. Sometimes, those folks
walk out the door forgetting to pay. An
hour later, or sixty miles later, they call
to apologize and promise to put a check
in the mail or offer to pay the bill at the
next Cracker Barrel they find on the road.
How’s that for brand loyalty?”
To create the loyalty, Cracker Barrel
focuses on guest service and comfort
foods like chicken and dumplings,
meatloaf, and cornbread. More than
600,000 guests come to Cracker Barrel
every day. Some interesting facts about
Cracker Barrel include that each year the
company serves 127 million eggs and
guests consume 6 percent of the world’s
pure maple syrup supply. Talk about made
from scratch—the cooks in each Cracker
Barrel kitchen use about 140 pounds of
flour each day in their recipes for biscuits
and dumplings.
“Shrink at Cracker Barrel comes from
both sides of the building,” says Hardman.
“We serve more than 200 million meals
per year on the restaurant side and sell
more than 500 million dollars worth of
retail product. The dynamic of tracking
both components can be mind-boggling
when described to my colleagues outside
the company.”
Gary Alford, a nineteen-year Cracker
Barrel veteran, had originally been in
the company’s security department, but
moved into training after the security
department was dissolved in 1995. He’s
now the company’s corporate manager
of loss prevention. Known for his direct,
no-nonsense approach, Alford describes
how loss prevention created its own
image within the company. “We wanted
our managers and employees to get a
quick response when they called us,”
says Alford. “If the store is calling loss
prevention, they’re calling for a reason
and we need to answer the phone.”
Loss prevention started small at
Cracker Barrel and used small victories
to build support within the company.
Hardman and his team rolled out a
program called “Focus 50,” an effort that
closely monitored the activities and trends
at the fifty stores that had the highest
levels of shrink.
“We didn’t have the staff to fight the
whole company’s shrink, so we tackled
the fifty stores where our shrink was the
highest,” says Dave Shugan, manager of
investigations who came to Cracker Barrel
when loss prevention was getting back on
track. “Those stores were our opportunity
to learn what would work throughout the
company because it was so important to
build trust with the operators.”
Focus 50 started in August 2000 and a
direct impact on shrink was quickly seen.
A better focus on training contributed to
the reduction. Within the first year, shrink
totals in those stores dropped 66 percent.
Throughout that first year, loss prevention
realized that few employees understood
the magnitude of the problem because
managers did not share that information
with employees.
“How could you solve a problem if
you don’t talk about it?” was the question
Hardman posed to store managers. “We
broke the numbers down to show how
much it cost a store per day and per
hour. When employees understood the
problem, they wanted to be part of the
answer.”
Four years later, Focus 50 is still a
major component in loss prevention’s
overall plan to reduce shrink. The
company opens approximately twenty-five
new units per year and employees are
constantly being hired at both new and
existing units. It’s crucial to provide loss
prevention training to the next generation
of Cracker Barrel employees.
Employees in Focus 50 stores are
certainly disappointed when learning their
store is on the list, but loss prevention
investigators are encouraged by how
employees take it personally. Shugan
regularly conducts training meetings
that are proactive and educational. “The
employees take pride in their work, and
they want their store off that list,” says
Shugan. “We get them to understand how
Starting from Scratch
“I learned from my first days here
that Cracker Barrel was committed to its
mission statement of ‘pleasing people,’”
says Hardman. “So it was important
to build a team that shared that same
commitment. We needed people who
thought of themselves as Cracker Barrel
employees first and loss prevention
investigators second.”
54
The Cracker Barrel loss prevention team presents company president
Donald M. Turner a Posse Award for his continued support of LP efforts.
Seated (left to right) is Turner, Sean McDermott, Jackie Cato, and Joe Hardman.
Standing (left to right) is David Shugan, Diane Tucker, Gary Alford, Lori Lopez,
Anthony Gravina, Todd Jenkins, Cary Jones, and Janice Blanton.
January – February 2005
LossPreventionMagazine.com
their attitudes can change habits.”
With Focus 50 making strides in
reducing shrink, loss prevention saw
the opportunity to introduce new
technology to the Cracker Barrel culture.
“I remember hearing how Cracker Barrel
would never have security cameras, do
background checks, or use electronic
article surveillance. But those early
victories created partnerships with other
departments and those partnerships
gave us the momentum to make gradual
changes. Some of those changes are still
being made.”
Half Restaurant, Half Store,
All Country
“I had never even
considered the
intricacies of food cost
before coming here.
All my time was spent
on the retail side, and
I was surprised how
much of our work
involved the restaurant’s
food cost.”
Dave Shugan, Manager
of Investigations
As the company’s billboard messages
suggest, Cracker Barrel likes being
known as the country store that offers
quality food and products at a fair price.
The unique combination of restaurant
and retail poses a challenge for any loss
prevention investigator who is used to
working in one environment and not the
other. As the loss prevention department
grew, Hardman and his team had to
learn both components of this unique
business model.
“I had never even considered the
intricacies of food cost before coming
here,” says Shugan. “All my time was
spent on the retail side, and I was
surprised how much of our work
involved the restaurant’s food cost.”
Investigator Cary Jones also had
to learn food cost when he came to
Cracker Barrel. Based in his home state
of Arkansas, Jones now understands that
food doesn’t have to be stolen to come
up missing. “It’s a lot more than stopping
someone from carrying a case of steaks
out the back door,” explains Jones. “We
track things like production, yields, and
recipe measurements so at the end of
the night, I can look at our production
chart to see where we stand. Using a
one-ounce ladle instead of a half-ounce
ladle seems minor, but it can cause a
major increase in your overall food cost
and end up looking like shrink.”
“We noticed a lot of our Focus 50
stores have similar problems with
food cost,” says Jackie Cato, a regional
loss prevention investigator based in
Florida. “Food cost often comes back to
operational issues, like not following the
recipe or serving up portions that are too
big. When I do store meetings, I explain
to the cooks how these factors affect
their food cost. Many of these issues are
corrected through training.”
Michigan-based loss prevention
investigator Anthony Gravina came to
Cracker Barrel from another restaurant
company. He understood the basics of
controlling food cost, but the challenge
has become comprehending the volume
of product that’s delivered each week.
“Before, I would track several cases of
a few products. Now it’s thousands of
pounds rolling off the truck every week,”
says Gravina. “Plus I’ve had to learn the
retail component. I’ve been mentored
well and have even attended some
national conferences to understand it all.”
LossPrevention
January – February 2005
Part of the Family
All loss prevention investigators have
attended the company’s mandatory
manager training program. Since each
store is corporately owned and all
managers follow the same guidelines
in operating their stores, the only way
to understand the intricacies of the
operation is to experience it.
“You have to immerse yourself in the
culture in order to appreciate it,” says
Hardman. “The investigators will fail
if they don’t recognize the challenges
our managers face. Plus, we want
the managers to consider us as their
resource. We’re constantly spending time
in the stores so managers get to know us,
and more importantly, trust us.”
Shugan adds, “We made even more
inroads by forging partnerships with
training and the company’s internal
employee assistance program (EAP).
We would find employee theft cases in
which the employee would reveal an
addiction or emotional problem. When
those situations came up, we turned to
EAP because the employee needed help.
We can handle the theft recovery after
that person’s health situation gets the
attention it needs.
Initially, covering the large number of
stores with a small staff was a challenge.
“Before we added people, we learned
how effective telephone interviews
could be,” says Shugan. “We turned to
telephone interviews because we didn’t
have enough staff to cover the caseload.
But it worked out really well. Our travel
costs went down, our suspect admissions
and prosecution rates went up. Our
investigators were much more productive
because they cut way back on the time
spent staring through a windshield or
waiting for connecting flights.”
Even though staff has been added
over the last few years, Cracker Barrel
loss prevention investigators continue
to rely on telephone interviews. They
expect to handle approximately 1,000
telephone interviews this year. The time
management also gives investigators
more presence in various markets while
increasing their own quality of life issues
by decreasing travel time.
“We tried to make our telephone
interviews more like conversations,”
says Shugan. “We wanted this process
to reflect our culture. That means
remembering these are people on the
other end of the line, not case files.
All of our investigators have received
training from Wicklander-Zulawski, and
we blended those techniques into our
culture.”
Another benefit of telephone
interviews turned out to be loss
prevention investigators working as a
team, rather than as individuals focusing
solely on their own stores. “We like to
call it ‘regions without fences,’” says
Shugan. “Our investigators see the big
55
picture, rather than just viewing Cracker
Barrel through a telescope. They see how
individual cases affect the entire company,
and not just their region.”
New Technology
Better use of technology also showed
loss prevention where it could improve.
Investigators now analyze data to identify
instances of shrink before those issues
transform into thousands of dollars
walking out the door.
In February 2000, loss prevention
started looking for computer programs
that would help track both restaurant and
retail operations. Loss prevention found
several exception-reporting programs
that would work for one component of
the company, but not the other. Vendors
talked with the company’s information
services (IS) team to work through
programming challenges. After hearing
from several vendors, IS came to loss
prevention and offered to create the
program internally.
The partnership with IS led to the
development of the company’s Sleuth
system. Sleuth tracks critical information
involving every transaction and the
employees who have access to the
point-of-sale device. The program took
six months to develop, but is constantly
upgraded. With the ability to process
fifty-one individual inquiries at any given
time, Sleuth tracks every transaction,
every employee, and all facets of food
and retail sales. What started off as
a loss prevention tool has evolved
into a program that benefits several
departments, including merchandising,
financial planning, legal, and employee
relations.
Sleuth now comes under the guidance
of loss prevention manager Lori Lopez.
Starting with Cracker Barrel fifteen years
ago, Lopez moved from the training
department to loss prevention in 2001.
Hardman calls it another instance of
finding the best fit for the team, a
person who brings new experiences and
knowledge to the table.
In her role as a trainer, Lopez helped
incoming managers understand point-
56
“I learned from my first
days here that Cracker
Barrel was committed
to its mission statement
of ‘pleasing people.’ So
it was important to build
a team that shared that
same commitment. We
needed people who
thought of themselves
as Cracker Barrel
employees first and
loss prevention
investigators second.”
Joe Hardman, Director
of Loss Prevention
of-sale and effective ways to eliminate
mistakes. She’s also been instrumental in
providing the feedback that helps other
departments benefit from the wealth of
information that Sleuth generates. “Lori
trained our sales audit people to think
like investigators,” says Hardman. “She’s
done a great job in helping us understand
the program’s potential.”
“When the check is created at the
store, we know the time the order
was placed and how it was paid for,
or not paid for,” says Lopez. “Sleuth is
programmed to email us any exceptions.
Sleuth not only shines light on dishonest
employees, but it also shows us the
employees who make honest mistakes.
We can correct those issues through
training.”
Cracker Barrel has developed specific
systems that track manager meals,
employee discount cards, gold cards,
unresolved tickets, and the shipping of all
retail products to every store.
“Naturally, most mistakes occur with
new employees,” says Lopez. “One of our
marketing initiatives involves Gold Cards.
These are paper certificates about the
size of a credit card that can be redeemed
for complimentary meals. Gold Cards
can only be redeemed for food, not retail
items. Sleuth shows us when employees
place retail merchandise on a Gold Card
January – February 2005
transaction. That’s one instance that’s
easy to correct.”
Tracking Retail
Approximately 70 percent of the
retail merchandise sold at Cracker Barrel
gets shipped from the company’s sole
distribution center. Trucks are sent on
more than one hundred delivery routes
each week. In 2003, more than 62
million items of inventory were shipped
to Cracker Barrel units throughout the
country.
Todd Jenkins coordinates all loss
prevention activities at the distribution
center. He focuses his efforts on
warehouse security, employee access,
truck seals, delivery discrepancies, and
employee safety.
“Just like in the restaurant and retail
sections of our company, we constantly
train employees,” says Jenkins. “Our new
hires quickly understand the importance
of shipping accuracy and billing.
Otherwise, you get the wrong products
going to the wrong places.”
Another aspect of overall safety
considered by Cracker Barrel was the
decision to participate in the U.S.
government’s Customs-Trade Partnership
Against Terrorism (C-TPAT) program.
Designed to review and tighten security
procedures involving imported goods,
C-TPAT has prompted Cracker Barrel to
ensure complete security throughout
the entire supply chain. In 2002, Cracker
Barrel voluntarily joined C-TPAT and has
completed the required internal security
review.
“After 9/11, the possibility of terrorism
through ocean containers became a
reality,” says Jenkins. “Joining C-TPAT
helps us better protect our employees
and business interests.”
Results Strengthened
by Awareness
Increased staff and better technology
have helped Cracker Barrel record its
lowest shrink totals in years. The loss
prevention department resolved the
most internal theft cases in its history in
fiscal year 2004. Training continues to be
a focus because internal statistics show
continued on page 58
LossPreventionMagazine.com
Made from Scratch
continued from page 56
most employee-theft cases involve new
hires. Those new hires quickly see the
emphasis Cracker Barrel places on loss
prevention. In the last fiscal year, more
than half of the employees terminated
for dishonesty had been working for the
company for less than one year.
Regional Investigator Diane Tucker
stresses awareness in all her training
sessions. “The same principles we use in
the restaurant can be applied in retail,”
says Tucker. “We know greeting guests
when they walk in the door greatly
reduces the chances that person will steal
from you.”
To get the awareness message
across, loss prevention uses a variety of
communication tools. One of the most
unique avenues comes in the form of
a cartoon storyboard. “We introduced
L.P. Carnes as a colorful teaching tool to
emphasize retail and food shrink,” says
Alford. “The employees enjoy the creative
storylines and before they realize it, they
have learned another way to reduce
shrink.”
L.P. Carnes has covered topics such as
robberies, internal theft, and inventory
shrinkage. Recent issues feature L.P.
Carnes getting a new partner and even a
“to be continued” storyline. “I got more
responses when L.P. got stuck in a jam,
and the story was continued to the next
issue,” says Alford. “It reminded me of
those old Batman TV shows when the
announcer says ‘Tune in next week...same
bat time, same bat channel.’”
Loss prevention also features posters
on every store’s employee awareness
center. It holds twelve posters in addition
to brochures on health insurance,
employee assistance programs, and other
topical issues.
“One of our most important
partnerships involves our internal
communications team,” says Hardman.
“Their creativity gets our messages across
in posters and brochures. We will profile
To educate and increase employees’ awareness of shrink and safety issues,
loss prevention uses a variety of communication tools, including a
cartoon series featuring a character known as L.P. Carnes.
theft cases because employees always like
to read how others have stolen from the
company.”
Loss prevention has also made strong
connections through Barreltalk, the
company’s interactive electronic message
board available to all employees through
the Internet.
“Barreltalk is loaded with employees
who are absolutely committed to high
standards of quality and service. So
they are really receptive to our efforts,”
says Hardman. “We’ve had interactive
chat sessions about all aspects of loss
prevention, what they can do to support
Cracker Barrel, our reward program, and
our confidential line. It’s amazing how the
employees on Barreltalk are so committed
to getting things right.”
Another awareness tool is handing out
a “Posse Award” to deserving employees
who have assisted loss prevention in
solving cases or other courageous acts of
service. Keeping the company’s country
theme, the Posse Award is given to
approximately forty employees each year.
“All these awareness tools help us
get our name out there,” says Sean
McDermott, a regional investigator
JIM TAYLOR is in corporate communications at Cracker Barrel. He can be reached
at 615-235-4082 or jim.taylor@crackerbarrel.com.
58
January – February 2005
based in North Carolina. “Managers and
employees know about us because of
all the interactions we have with them.
Whether it’s a poster or a personal visit,
they know we’re around all the time, and
not just when someone’s in trouble.”
Our Own Development
Cracker Barrel loss prevention
investigators also work to have good
relationships with local law enforcement.
Credibility is key in these circles,
especially when investigators bring cases
to the judicial system. Three of the
company’s loss prevention investigators
are certified forensic interviewers (CFI).
“We had a pretty small department
when I arrived at Cracker Barrel,” says
Shugan. “But the company made sure that
we were not only trained in Cracker Barrel
operations, but were at the forefront of
the industry in training.”
Loss prevention investigators have
also taken ownership in the department’s
future. Cracker Barrel plans to have
nearly 530 locations open by mid-2005.
Therefore, loss prevention will need to
grow as well.
“When we hire someone, we look
for things we don’t currently have,” says
Hardman. “We try to hire folks who are
smarter than us. We’ve learned how to
do things pretty well around here, but we
certainly don’t know it all.”
LossPreventionMagazine.com