To Our Shareholders:

As we look back over our 38 years of operation, there is no doubt that Fiscal 2007 was a major milestone year for CBRL Group. Over the years, however, our strategic intent to grow shareholder value has remained unchanged. So, we are pleased to report that in fiscal 2007 despite a tough operating environment, we not only delivered solid financial results, we successfully completed the strategic initiatives that we began in fiscal 2006. We completed the sale of our Logan’s Roadhouse Inc. subsidiary to private equity investors for consideration of approximately $485 million, exceeding most expectations, including our own. We repurchased shares and reduced debt with the proceeds and refinanced the 3.0% zero-coupon convertible senior notes, removing the 4.6 million share dilutive effect of the notes. With these actions, the total reduction in weighted average diluted shares over the past six quarters was 26.8 million, or 52 percent. We believe these accomplishments set the stage for our opportunity to deliver greater shareholder value in the future by focusing us on our strong Cracker Barrel Old Country Store® brand and using the underlying financial strength of the business to leverage results for our continuing shareholders.

For nearly four decades, our goal has been to build lifelong customer relationships by delivering on our mission of “Pleasing People.” Now, as a company with a single concept, Cracker Barrel, we are well positioned to increase restaurant traffic and retail sales by delivering the experience that our guests expect and finding innovative ways to further leverage our exceptionally strong brand. We are relentless in our quest to continue to understand the needs of our guests better and how to improve their experience in our restaurants and retail shops.

We’ve believed for some time that the appeal and the strong emotional attachment that our guests feel towards Cracker Barrel are all about the overall experience. So we were pleased that we made the “most-desired” list in the Kanbay Research Institute study on the Restaurant and Beverage Industry for 2007 released at the National Restaurant Show in May. Starbucks and Cracker Barrel were the only restaurants to make the most-desired list, and Cracker Barrel topped the full-service dining list. The study commented that we excel in “providing an experience, not just a meal, and for remaining consistent to a business strategy that appropriately blends restaurant and retail.”

Other awards this year confirmed the positive opinion our guests have of Cracker Barrel. For the 17th consecutive year, Restaurants & Institutions magazine ranked Cracker Barrel as the “Best Family Dining Chain.” We were also rated as the most RV-friendly sit-down restaurant in America and the “Best Restaurant Chain for Groups” again. Also in May, Zagat®, the renowned restaurant guide company, conducted a survey of Today Show viewers on quick-service and full-service restaurants. The viewers voted Cracker Barrel tops in facilities and service – areas of focus for us every single day.

And, as an indication of our reputation in the business community, we finished third in Fortune’s Most Admired Company food service classification, behind Starbucks and McDonald’s. We were first overall among full service restaurants and second in the quality of products and services – right behind Starbucks.

We believe that these awards validate the strength and high degree of differentiation of the Cracker Barrel Old Country Store brand and demonstrate an opportunity to further leverage the brand by devoting all of our resources and efforts on a single restaurant concept. Our strategy is to simplify operations and proactively focus on building the equity in the Cracker Barrel Old Country Store brand.

Revenue from continuing operations (excluding the Logan’s divestiture) grew 6 percent to $2.35 billion as we opened 19 new Cracker Barrel Old Country Store locations, had positive comparable store restaurant and retail sales, and had the benefit of a 53rd week in fiscal 2007 that added $46 million of sales. Diluted income from continuing operations per share of $2.52 was up 21.7 percent from income per share from continuing operations in fiscal 2006. This increase only partially reflects the benefit of our recapitalization because the full effect didn’t begin to be realized until the completion of our convertible debt refinancing late in the year.

Net cash from operating activities was $96.9 million, which contributed cash for $96.5 million of capital expenditures. Included in net cash generated from operating activities were outlays related to the restructuring and recapitalization efforts (i.e., cash uses that won’t occur in the future) of approximately $96 million for taxes and payment of original issue discount accretion on the convertible debt. So, excluding these unusual items, cash from operating activities was almost twice as large, continuing our trend of generating operating cash flow in excess of our capital expenditure and dividend outlays, or what we call “free cash flow.”

We returned capital to shareholders by declaring $0.56 per share in dividends and repurchasing $405 million of shares, adding substantially to our ongoing strategy of returning capital to our shareholders through share repurchases and ongoing dividends. In the first quarter of fiscal 2008, we increased the quarterly dividend nearly 30 percent.

The overall impact of commodity prices on cost of goods was slightly deflationary in the first half of fiscal 2007, but heightened global demand for corn and other grains caused higher pricing for dairy products and poultry during the second half of fiscal 2007. In addition, while overall increases in minimum wage do not affect our labor costs significantly, the increases in the cash wage for tipped employees enacted by a number of states in 2007 had a substantial negative impact on labor costs. We met the pressures from increases in labor and food costs by increases in menu pricing.

Consumers continue to face pressure on their discretionary income due to high gasoline prices and rising interest rates on home mortgages and credit cards. Protecting market share is imperative as these consumer pressures mount and consumers are faced with the tough choice to reduce their dining out occasions. So, although traffic was below fiscal 2006 levels, we were pleased to perform better throughout the year than the composite traffic statistics published by the industry-monitoring Knapp-Track™ report. We view this as further evidence of the strong appeal of the brand.

Speed of service and margin improvements are top of mind as we think about our restaurant operations. Restaurant initiatives in 2007 focused on improving through-put by increasing the number of tables seating two people in our restaurants and understanding how we can improve the time between customers being seated and receiving their meals. We realized that we needed to simplify our menus and kitchen processes. We are in the process of testing a “Best of the Barrel” menu in fiscal 2008. The streamlined menu is designed to offer our guests’ favorites while yielding increased speed in the kitchen and higher margins. Kitchen process simplification efforts include reviews of product ingredients, recipes, preparation methods and food delivery systems.