At this time foropening remarks and introductions I would like to turn the call over to Mr. Michael Woodhouse Chairman President andChief Executive Officer. Please go ahead Mr. Woodhouse.

thankyou good morning everyone thanks for joining us this morning as usual I have LarryWhite our CFO with me. We’re here to talk about our first quarter. Asfar as the headliners go, we’re obviously in an environment where it’s gettingtougher and tougher for this industry. We’re very and we can see it in theindustry numbers is at a, we, and others report we’re very pleased to bemaintaining a healthy positive margin in traffic versus the industry. Wehad a little bit of a late start to the season in retail. But, both restaurantand retail have improved in November, which we’ll be reporting next week. Ourhourly labor and food costs in the quarter were in line with our expectations. Wehave some other cost prices especially from group health and maintenance andwe’ll be discussing those in more detail. Butwe’re confident we’re on the right track we’re going to talk in more detailabout all of this, over the next 30 minutes or so, so with that I’d like toturn the call over to Larry White for his financial review.

thanksMike and thank you to our listeners on the conference call on webcast for your interestand participation this morning. Our press release announcing our fiscal2008 first quarter results and updating our outlook for fiscal 2008 in totalwas released before the market opened this morning. We urge caution toour listeners and readers in considering the information on our expectationstrends and earnings guidance. We remind you that we don’t review orcomment on earnings estimates made by other parties. In addition, any guidancethat we give speaks only as of the date it is given. And we do not updateour own guidance or express continuing comfort with it except in broadly disseminateddisclosures such as this morning’s press release and this call. Butthe restaurant industry is highly competitive and trends and guidance aresubject to numerous factors and influences that can cause future actual resultsto differ materially from such trends and guidance. Manyof these factors are summarized in the cautionary description of risks anduncertainties found at the end of this morning’s press release, and aredescribed in detail in our filings that we make with the SEC, and we urge youto read this information carefully. The company disclaims any obligationto update disclosed information on trends or guidance and should we provide anyupdates after today they’ll be made only by broad dissemination such as pressreleases or in our filings with the SEC. Let’s review thefirst quarter fiscal 2008 information released this morning. Werecorded diluted income per share from continuing operations of 57 cents versus45 cents a year ago an, increase of 27%. Income per diluted share benefitedfrom a 32% reduction in diluted share count resulting from our successful recapitalizationefforts conducted over the past two years. After-taxincome from continuing operations of $14 million was lower than the prior yearquarter, primarily reflecting higher labor and other operating costs as well…

thanksLarry good morning again everyone it was just reported this week consumer confidenceis at the lowest level since September 2005. And we also know from industry datathat people are eating out less. But although the unemployment rateremains below 5%, a number of factors are weighing heavily on the minds ofconsumers relating to the economy and the discretionary incomes. Thelist includes declining home sales and home values rising energy prices wheregasoline prices are now averaging 85 cents higher than a year ago and the subprime credit crunch. On top of all that, the recent declinesin the stock market only add to the negative wealth effect. Whilewe’re not happy with our in store sales numbers in the first quarter we areahead of industry guess counts as Larry mentioned as reported by NapTrak. Andif we exclude the impact of having shorter and fewer porch sale events, whichhelp us in terms of markdowns and margin our retail same store sales, were flat. Andas we discussed in the release earlier today November restaurant sales and wehave just three daily days to go in the month our accounting period ends onFriday of this week restaurant sales in November are ahead of October and aheadof Q1 as a whole and our retail sales are slightly ahead of restaurant sales. Howeverif we look back at the first quarter our ability to protect market share and growrevenues didn’t translate into improved bottom line results as we would havewished. Cost pressures resulting from minimum wage increases implementedto into 2007 by a number of states especially those that raised the cash wage fortipped employees higher group health expense and higher commodity costs ingeneral were felt throughout the quarter. We took about a 2% price increase inmid August resulting in an average price increase for the quarter of approximately3½% over last year.…

(OperatorInstructions) And we’ll go firstto Matt DiFrisco with Thomas Weisel Partners.

Imight have missed this did you guys, mention how much how many shares wererepurchased in the quarter.

therewere no repurchases in the quarter Matt.

wasthere any restriction to that was there any reason why or.

no,I guess the key reason is the first quarter is a fiscal quarter is typically alow cash flow quarter and we decided not to make any repurchases during thequarter and borrow on our revolver to make those repurchases.

okayand then G&A as far as being down it looks like on absolute terms what’sthe outlook given your outlook for accruals on a year over year basis for the remainderof the year.

weexpect favorable performance for the balance of the year in G&A as well.

sofavorable meaning relative G&A leverage.

yes.

okayand then just looking at the cogs line it looked like it was a little bit higherthan what I had expected and I'm trying to figure out that was that is thereany effect happening with a lower U.S. Dollar. Iknow that a lot, of your toys are imported but I would just presume that mostof those toys are coming from countries that are pegged to the dollar is thereany adverse effect you're seeing as far as product margins at the retail store.

wellI don't think there’s anything material there related to the dollar that’ssomething we do kind of have an eye on but nothing really material there.

oranything any concerns going on with shipping costs or fuel costs in gettingthings to you during the Christmas time.

wellour Christmas product is all delivered at this point so that’s really not anissue.

okayand then lastly just on the value menu approach do you think there’s have youtested anything about that or maybe tried to look at your menu and if you lookat the success of the fast feeders which seem to be outpacing casual dining in thelast two years I guess the tiered menu strategy? Is there a way that maybe you could crossinto that line and also sort of bring an attention to your customer of more ofyour value oriented items on a price point to them.

wellwe we’ve done that in the test menu with the lunch items so we’re trying tofocus people on value items that also benefit the value in and of itself a lowprice. I guess in and of itself is not something that we want to focuson because our challenge is how do we, [inaudible] through at busy times we’realways on a wait. so we don’t want to give up margin beit just to have a lower price point we think our menu is a pretty good value comparedwith most others that we compete with and compete with in the customer’s mindso. I don't think we want to go chasing that we do want to do thingsfrom a promotional point of view that reinforce the fact that we overallrepresent very good value if you take into account the food and the experience andeverything else.

okayand then I guess is there one linchpin that you can point to that you think wouldbe something over the next 12 months that could accelerate the table turn orthe line flow or increase capacity of sales capacity during those high peaktimes that we should look for.

well. Ithink the main goal of the Best of the Barrel menu is to improve speed ofservice that is something that we think we can once we get it right we can rollout through the whole system. The other initiatives are having somebenefit they’re a little more complex. And I don't want to go into the detailsof what’s happening but we’re seeing some positive results in terms of speed inthe kitchen, which will help as well. But I think the menu is the number onepriority right now.

okayand then last question I remember what is the timeframe for Larry and are youin the process of seeing any candidates, internal external.

wehave a national search underway Larry’s departure will be the end of Januaryand we hope to be on track to have somebody aboard on or before that date.

okaythank you.

thankyou.

andwe’ll go next to JoeBuckley with Bear Stearns.

thankyou a couple of questions on the cost side you gave us the hourly wage rate inflationdoes that diminish as you lap election day or diminish as you lap maybe Januaryfirst because of some of the state initiatives from a year ago.

consumerprice indexes and that sort of thing. So I think that for the remainder of theyear we’re still going to see some high wage inflation.

okayas high as the first quarter Larry you think.

Imean we’re hoping that it’s going to be a little bit less than that Joe butit’s but we’re trying to manage it as well but I think that the exposure isstill there and that’s going to reflect in our risks and opportunities on thisprojection.

okayand a question on food costs I get the impression at the Analyst Meeting thatthings might be coming in a little bit better than you had expected at thatpoint. and now it seems like you're back to your original expectationsof four to 4½% food cost inflation was my impression right and did somethingchange to kind of kick it back up again a little bit.

wellI think the probably the biggest single item has been in produce. AndI think specifically in lemons if I recall I think things are volatile outthere in change. I we’re essentially in line with whatwe projected before and our expectation for the whole year is probably going tobe slightly favorable to what we expected before but we’re still talking about ahigh food cost inflation in the four to 4½% range.

okaythen a question on the Best of the Barrel menu. I guess at the [inaudible] meeting youwere testing it in four units and now it sounds like it’s been expanded to 30give us a sense of what how streamlined the menu is and what have you seen inthose stores in terms of service times.

themenu is streamlined Joe in the sense of we’ve taken some a number of slowmoving items off total item count we took off was a relatively large number. Butin terms of product mix, it was a well a pretty small number what we've seen inthe stores are higher some record dollar sales per hour. And that is reallythe goal now we have to translate those dollar sales per hour into highertraffic and if you think about the opportunity we have which is that we havewaits. And we have the people divided into two groups those who are willingto wait with any point in time for the quoted time and those that are not. It’lltake a while as we increase the throughput, which we are as mentioned by thosehigher dollar sales per hour for those that weren’t willing to wait to realize thatthe wait is shorter. So it’ll be a building process but Ithink that the it’s very encouraging that we’re seeing the hourly throughput atthe levels we are.

okayhas the expanded test been in place for any length of time or is that just startingnow.

itstarted at the beginning of the month beginning of November.

okaybut if all goes as planned you would think you'll, roll this out in April didyou say.

yeahbut I reserve the right to change that date we’re going to do it right so Aprilis the target but to the extent that we want to tweak something or check somethingwe’ll do it we’re not just going to blindly roll out a system wide menu.

allright, that sounds good thank you.

thanksJoe.

we’ll go next to Steven Rees with JP Morgan.

Just on thesequential acceleration that you saw in your same-store sales through November,was that consistent throughout the month, or did it accelerate towards the endof the month? Was there any particular day part or geographies where you sawmore improvement?

wellretail is markedly better beginning with Black Friday as Mike indicated andthere’s a lot of noise throughout the month other than that.

okayand then just on the retail margin you had talked for several quarters aboutimproving margins of retail are they still up year over year and what furtheropportunities do you see to improve the margins there from less markdowns.

continueto see fewer markdowns in the first half of the year, which is the remainder ofthis current quarter. And then when we get to the pointwhere we’re lacking the reduced port sales the opportunity will be apples toapples kind of basis so that we’ll continue to see it for a while. Andthen we’ll be at the new higher level and we’re doing a number of things thatare fairly detail level I talked about the BOGO so that we’re selling thingsthrough at less than the full markdown on our clearance apparel. forexample, we’re up and out where if you buy one you get a 40% you buy two youget 50% you buy three pieces you get 60%, which is better than obviouslyputting everything out there at 75% and that escalating percentage is a realsales driver. So we’re doing a lot of, things tomanage markdowns where we do take markdowns to be less of an impact in[inaudible] we’re just getting better at all of this stuff and the goal is tokeep the porch sales to a minimum going forward.

yeahI would say last year in the second half of the year, we had some pretty good retailgross margin numbers and I think we’ll probably see a little net pressure inthose in the second half of the year.

okaythanks and then just quickly on the table optimization program perhaps you can talkabout an update there how many stores have tables for two whether or not you’veseen expected traffic improvement there.

wellthe store is pretty much where it has been for a little while now on that butwe went through that process and that’s really getting the stakes set for allof these other initiatives that’ll actually help us improve throughput. Sowe have been optimized the opportunity wasn’t as big as we first had thought atfirst because a number of our operators had already got ahead of the programbecause they figured out the opportunity there. But I think right now we you'll see ona opportunistic store-by-store basis there may be some possibility but we’rereally looking to the menu and then these other initiatives to use thatplatform that we built with the table optimization.

okaygreat thank you very much.

thankyou.

andwe’ll go next to Chris O’Cull with SunTrust Bank. ChrisO’Cull – SunTrust Bank: goodmorning.

goodmorning. ChrisO’Cull – SunTrust Bank: MikeI believe you guys, monitor your price increases by comparing trends to acontrol group would you elaborate on the guest count trends of the controlgroup versus the rest of the system. Are you seeing any differences there?

no. ChrisO’Cull – SunTrust Bank: okaygreat.

andwe do it both ways we test ahead of time and then we do a holdback so we get a measureon both ends and we have not seen any meaningful traffic difference. Sowe’re pretty comfortable with the increase in August has stuck and we’recomfortable with running at 3½% total price I mean our traffic would suggestthat we’re not damaging ourselves by price.

wealso have as I think you probably know Chris an outside consultant that advisesus on product sensitivity to price and their evaluation of our most recentprice increase in August is that there’s no effect on traffic or adverse effecton mix either. ChrisO’Cull – SunTrust Bank: okaygreat and then Mike I understand the Best of the Barrel menu is a streamlinedmenu but does fewer items equate to a narrower range of prices.

no. ChrisO’Cull – SunTrust Bank: okay.

Ithink that the intent the presentation and the results are that the variety wesee no reduction in the perceived variety. Expect for those small number ofindividuals whose favorite product disappeared we certainly hear from them. ChrisO’Cull – SunTrust Bank: I’msure now and then just to make sure I understand the throughput benefits if youare able to decrease the meal duration period and increase your throughputduring peak periods unless the wait time stays consistent with what it was youwouldn’t see an increase in the sales is that fair. Well you, need thewait time to stay at least where it was.

wellwhat we do know is that at any given [inaudible] so presumably if the wait timegoes down those people will fill up and get back to where we were. ChrisO’Cull – SunTrust Bank: okaygreat.

Andso there’s a, refilling the queue. And that’s one of the ways that thetable optimization plays into this, because at the beginning of the rush at anypoint in time we can seat more people to begin with. so that so but the [inaudible]of wait only goes down if we’re fast with putting out throughput on thosepeople who’ve already seated so it’s kind of a whole bunch of things have tohappen at the same time here. ChrisO’Cull – SunTrust Bank: soyou won't have as many turnaways people leaving.

you'recorrect. ChrisO’Cull – SunTrust Bank: andpotentially if the advertising starts to create awareness in trial that should help,build the wait as well.

correct. ChrisO’Cull – SunTrust Bank: okayand then Larry I believe last year in the second quarter retail sales benefitedfrom the pre Christmas markdowns which negatively impacted the cost of salescan you give us some year over year modeling advice in the second quarter basedon this year’s [inaudible]

[Inaudible]margins for the second quarter to be flat to very slightly improved, not asmuch improved as in the first, quarter. ChrisO’Cull – SunTrust Bank: okayand then what was the impact of higher group health plan payments during thequarter you said you expected it to get better through the year.

wellit was in the first quarter year over year it was about 50 basis points. andso it was a big number and as we look at the trend of where our group healthran last year and the to the relative comparisons we’re going to have we’regoing to see that pressure mitigate quite a bit over the course of the remainingcourse of the year. ChrisO’Cull – SunTrust Bank: greatand my last question is the stock compensation expense during the quarter canyou tell us how much was in G&A.

wellall of the I don't, have the dollar amount. And but I will say that it fullyaccounted for the change year over year. I think we had let me think. ChrisO’Cull – SunTrust Bank: iswhat’s on the cash flow statement what’s in G&A.?

yeahthere’s stock expense and stock option expense I think year over year we hadabout a $5 million and also bonus expense we had about a $5 million benefit inG&A. ChrisO’Cull – SunTrust Bank: greatthanks.

thankyou.

andwe’ll go next to Robert Derrington with Morgan Keegan.

yeahthank you. mike could you give us a little bit ofcolor on the TV advertising for a minute what did you learn as you tested haveyou found that consumers found the shots or the production interesting but themessage didn’t necessarily drive traffic and so now you're moving to food isit, based on…

yeahit is driving traffic. It didn’t on day one. Imean it was a build which we expected because it’s a brand awareness campaignand just interestingly on Thanksgiving day which is always a very special dayfor us because we’re one of the few restaurants open and we have theThanksgiving dinner offering the TV markets were up by the same amount as themost recent overall week. So clearly, there’s some trafficbuilding going on. we decided to put some product informationin to see if we can stimulate building on the brand awareness piece to stimulatefurther traffic because we’d like the traffic to be higher if you’ve I don'tknow if you’ve seen them with their new form but it’s really it’s using theexisting creative and blending in the product shots.

howshould we think about the impact on the operating expense line as you goforward with the your advertising spend through the balance of this year.

wellit’s built into our guidance first of all.

okay.

soI think that’s the best way to think about it.

okayall right.

theunusual thing of the first quarter was that we had the production expense,which was a little over a million dollars. But then we’ll also have some level ofadvertising in the future so [inaudible] a little lighter than the initial flightbut we’ll have it throughout more of the quarter.

youshowed us a lot of different food creativity at your analyst meeting earlier thisyear are some of those newer items yet to be folded into the plan as we gothrough the course of this year.

oneway of saying this is not all of those things that you saw have been folded in yet. There’ssome real opportunities there. And but we are focusing back onto newfood. We’ve been focusing on restructuring the menu to generate all thebenefits we talked about in terms of speed and margin. we’ve also had theproduct development folks working on some of the back of the house kitchen processesimprovements that we've been talking about now we’re back fully focused on ournew products so our goal is to have more new product excitement going on thanwe’ve had in the past.

okayvery good thank you.

thankyou.

andwe’ll go next to Bryan Elliot with Raymond James.

goodafternoon just or good morning wanted to check on help me think, about Larry sortof countervailing cost of goods line things that are happening. You’vegot retail margin improving. but to a lesser rate we got 4½% or sofood inflation and the price increase that you quantified for us first of all wassort of first quarter reflective fully of the price increase. Remindme when that went in and are you on a fiscal year contract or at I think youmight be more on a calendar year contract with some things. andis with the receding of the benefit from the porch sales etcetera are we goingto see essentially a widening of the cost of goods pressure as we move through theyear that’s essentially my question.

okaythere were a lot of pieces to that we have about 3½% pricing the first quarterand that’s consistent with what we’re looking at for the year so might be some smallfluctuations by quarter. but it’s about what we’re looking atthe remainder of the year I do expect to see some net pressure on gross margin overthe remainder of the year but I don’t expect it to be flat.

flatwith the pressure being flat with the pressure we saw in Q1 or flat year onyear.

yearon year, year on year.

Okayso in other words the slight increase here in Q1 based on what you know today. Andthese countervailing trends you’ve talked about that’s a reasonably should bereasonably consistent through the year as you see it right now is that what youmean.

I'mnot exactly sure what you're saying Bryanbut let me take a crack at it here.

yeahlet me help you, you were up 5% [inaudible] in Q1, and I think I heard you saythat’s a good number to use for the rest of the year through the year.

forour menu-pricing yes.

givenmenu pricing retail etcetera.

yeahwhat I said was and I think what you had asked me was what was the situation onpricing in the first quarter, and the remainder of the year as I had pointedout we had 3½% menu pricing the first quarter. That’s about consistent with what weexpect for the year there could be some minor fluctuations quarter by quarterbut that’s about what we expect. I do expect and we had flat grossmargins in the first quarter year over year I don’t expect flat I expect theremight be some net pressure on gross margins over the remaining course of the year.

allright thank you.

thankyou.

andwe’ll go next to Conrad Lyon with FTN Midwest.

yeahgood morning let me slip back to the advertising for a minute one of the thingsyou had mentioned on your investor data is that you really wanted to try to refocusfolks and know your brand more so as a kind of a roadside stop. andtry to get them to think of it as more a stop during a typical outing how’sthat evolving or is that going to change with your new advertising or are you changingyour advertising a little bit here.

wellthe overall goal is to improve [inaudible] awareness. We think the opportunityis that we have a lot of people who travel use us when they travel do not use uswhen they're at home. But if the awareness is stimulated loveCracker Barrel and we think that stimulating that awareness will cause them touse us, more the adding of the product piece is we think that will be an addedplus to the reminder of what Cracker Barrel is all about. Plus oh by the waycome in and get our kind of promotion will. So the goal has not changed as I saidbefore the we are seeing some traffic growth we don’t have a measure on whetherthat’s local folks or travel folks that’s a very difficult thing to measureobviously and we’ll see what happens in the second flight.

okayand in terms of when you may go into new markets when might that be again or expandyour advertising.

thatwill be next fiscal year.

okay. Soeven if you see say some better than expected results you wouldn’t grow yourexposure this year.

ourguidance doesn't reflect us going in to additional markets for this fiscal yearand we can be nimble if we see something that causes us to do differently.

okaygreat let me shift gears here just for a second we all know about some of the pumpprices from regular gasoline and recently diesel’s been going up have you guysreally ever tired to gauge how many truckers use your concept.

truckersas in 18-wheelers.

yeah.

theycertainly don’t show up with their 18-wheelers.

okayfair enough that’s all thanks.

thanks.

andwe’ll go next to Mike Smith with Oppenheimer.

goodmorning.

goodmorning.

acouple of things one this tax rate you indicated was going to be for the full year. 31½ 32% I believe that these have got to comein considerably lower than in the second half of the year why would that be.

underFIN48 as you have discreet events happening you, record the effect of thosediscreet events on your tax rate under prior accounting for income taxes youalways used your expected full year tax rate now you look at the changes incircumstances related to discreet events and we expect to see some pickup laterin the year.

whatare those discreet events?

theyrelate to some of the assumptions that we have about uncertainty and becomingmore certain as the year proceeds.

okayin the advertising, you spent 1.8 million in the first quarter of which amillion was production.

alittle over a million.

andwould you anticipate that your ad spending going forward then would be about amillion dollars quarterly.

that’sI think getting a little finer than we than we really want to get in ourguidance. But as we said, we will have continuedmedia relative to what we had last year.

thankyou with no further questions in the queue I’d like to turn the conference backover to Mr. Woodhouse for any additionalor closing remarks.

thankyou well thanks everyone for joining us. I hope we've conveyed the fact that weare as the rest of the industry in some tough times but that we know wherewe’re going and how we’re going to get there and we look forward to talking to youat the end of next quarter thank you.

thankseveryone.

thankyou, we appreciate your participation that does conclude today’s conferencecall you may disconnect at this time.