The leadership blind spot that kills businesses

Hey everyone,

Success can create bad habits.

Cracker Barrel proved this perfectly. And no, I’m not talking about the logo debacle — that’s just a symptom. 

For decades, they dominated highway dining with nostalgic comfort food plus gift shop impulse purchases. $3 billion in sales. Dining awards 19 years straight. Twice the revenue per square foot of competitors.

But now they’re hemorrhaging customers and burning $700 million on rebrand flip-flops that do nothing.

There are lessons here for every owner.

Let’s look at how they went wrong.

When your results are great, you stop questioning your fundamentals. 

Comfort food + Americana kitsch was a hit with baby boomer customers, so they kept doubling down. 

But good times now don’t tell you what’s going to happen tomorrow. And by the time your revenue starts dropping, you want to have your game plan already in place. 

How? 

By paying attention to your leading indicators.

Look at the data points that tell you what’s coming next. 

In my experience, the companies that survive generational shifts start adapting while they're still winning.

Build early warning systems into your business before you need them.

(This can be as simple as a single spreadsheet. Here’s my post about the hands-on KPI method I use at my companies.)

Cracker Barrel’s model is centered on huge, 10,000 sq ft restaurant-retail combos. Those things are crazy expensive to build, staff, and maintain. 

When things are working, there’s no problem. Each location can make a killing by serving a huge number of customers. 

But then traffic and so sales drop.

And sure, you can cut back on hourly labor, and spend less on ingredients. But your fixed costs stay the same: rent, utilities, salaried staff, even warehouse space for all this stuff.

The takeaway here? Understand what makes your business tick. 

What percentage of your expenses are fixed versus variable? If revenue dropped 20% tomorrow, how quickly could you cut costs to maintain profitability?

The more flexibility you can build into your model — modular operations, partnership structures, scalable staffing, etc — the better off you’ll be if you have to cut back.

The deeper issue at Cracker Barrel was cultural in nature. 

They had professional managers reporting KPIs to corporate instead of entrepreneurial operators with real skin in the game.

Compare that to Texas Roadhouse, where managers typically own 10% of their location. Those operators feel every customer complaint. Every competitor threat. Every shift in local preferences.

Because it hits their personal bottom line.

So structure your team's incentives to stay externally focused. 

Tie variable comp to those leading indicators I mentioned above.

Get decision-makers in front of customers regularly.

And when the market tells you something uncomfortable?

Resist the urge to shoot the messenger.

—

That’s my take, anyway. 

Sometimes the hardest thing in business is knowing when to evolve a winning formula. Even when (especially when) it feels like sacrilege.

It seems like Cracker Barrel is trying to rebrand its way out of fundamental business problems, instead of actually tackling its problems.

Changing their logo is like pulling the parachute cord when they’re 10 feet above the ground.

By the way: if you want to see my little field trip to Cracker Barrel, here’s the YouTube video!

What early warning systems do you have in your business? Hit reply and let me know.

Thanks for reading!

Michael

P.S. I’d love to see you for my open Q&A on Oct 8th. Bring your weirdest questions, and let’s have a good time. RSVP here.