Green’s Dictionary of Slang

(US) a psychiatric institution.

1977		J. Rebeta-Burditt [bk title] The Cracker Factory.
1980		B.E. Lott Becoming a Woman 335: In The Cracker Factory, referred to earlier, Cassie is [...] an alcoholic and depressed housewife being treated in a private ‘psychiatric rehabilitation facility’.
1982		F.S. Clarke Cinefantastique 58: Walter has escaped from the cracker factory with revenge on his warped mind.
1996		C. Hart Charmed 41: You belong in the cracker factory in a rubber room and a strait- jacket!