IBJNews

Steak n Shake dispute with franchisees reaches to Denver

Back to TopCommentsE-mailPrintBookmark and Share

An ongoing dispute between Indianapolis-based Steak n Shake and some of its franchisees over company pricing policies has stretched to a federal court in Colorado.

The hamburger chain filed suit July 3 to stop a Denver restaurant owner from operating under its logo after the franchisee refused to follow a corporate policy prohibiting restaurants from setting their own menu prices.

The latest salvo from Steak n Shake follows three lawsuits brought by franchise owners in U.S. District Court in Indianapolis earlier this year.

The three suits argue the company continues to force its franchisees to abide by the menu policy even after a federal appeals court sided last year with a fellow franchise owner who challenged the practice.

In the Colorado dispute, the Denver franchisee filed a countersuit Aug. 1 against Steak n Shake, hoping to stop the chain from terminating franchise agreements for its two locations in the Denver area.

Larry and Christopher Baerns of Aurora, Colo., say in their counterclaim that they should be able to set their own prices because food costs are higher in the Denver area than in other parts of the country where Steak n Shake operates. They further claim that the prices they charge and the menu items they offer have been approved by Steak n Shake.

“Steak n Shake’s lawsuit and its attempt to terminate the Denver area franchise agreements is clearly retaliation against the Denver owners for daring to raise questions about the fairness of the corporate policies, and whether what was promised as a measure for success could ever actually be achieved,” attorneys for the franchisee said in a prepared statement.

Steak n Shake policy prohibits commenting on pending litigation. The three other suits are pending in federal court in Indianapolis.

The three franchisees who brought the complaints against Steak n Shake in April are Georgia-based People Sales & Profit Co., Missouri-based Druco Restaurants Inc. and Pennsylvania-based Scott’s S&S Inc. In total, they operate eight Steak n Shake restaurants in the three states.   

They’re seeking a permanent injunction to bar Steak n Shake from mandating company-wide menu prices, and from terminating their franchises for refusing to comply with the pricing policy. They also are suing for breach of contract and fraud.

The dispute over pricing started in 2010, when Springfield, Ill.-based Stuller Inc. brought its complaint against Steak n Shake in a federal court in Illinois. Stuller operates five Illinois Steak n Shake restaurants under franchise agreements with predecessors dating to 1939, making it the oldest Steak n Shake franchise in the country.

The court granted Stuller a preliminary injunction to stop Steak n Shake from forcing menu prices on franchisees.

Steak n Shake appealed. But in August 2012, the 7th Circuit Court of Appeals affirmed the Illinois federal court’s ruling in Stuller’s favor.

Steak n Shake operates 508 restaurants, including 94 franchised locations. The chain is operated by San Antonio-based holding company Biglari Holdings Inc.

In its fiscal first quarter ended April 10, Steak n Shake reported revenue of $219.1 million, an increase of less than 1 percent from the same quarter in 2012.

 
 

ADVERTISEMENT

  • Just bring the fish sandwich back...
    I really don't care about the pricing. Just bring the fish sandwich back and I'm happy.

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. By Mr. Lee's own admission, he basically ran pro-bono ads on the billboard. Paying advertisers didn't want ads on a controversial, ugly billboard that turned off customers. At least one of Mr. Lee's free advertisers dropped out early because they found that Mr. Lee's advertising was having negative impact. So Mr. Lee is disingenous to say the city now owes him for lost revenue. Mr. Lee quickly realized his monstrosity had a dim future and is trying to get the city to bail him out. And that's why the billboard came down so quickly.

  2. Merchants Square is back. The small strip center to the south of 116th is 100% leased, McAlister’s is doing well in the outlot building. The former O’Charleys is leased but is going through permitting with the State and the town of Carmel. Mac Grill is closing all of their Indy locations (not just Merchants) and this will allow for a new restaurant concept to backfill both of their locations. As for the north side of 116th a new dinner movie theater and brewery is under construction to fill most of the vacancy left by Hobby Lobby and Old Navy.

  3. Yes it does have an ethics commission which enforce the law which prohibits 12 specific items. google it

  4. Thanks for reading and replying. If you want to see the differentiation for research, speaking and consulting, check out the spreadsheet I linked to at the bottom of the post; it is broken out exactly that way. I can only include so much detail in a blog post before it becomes something other than a blog post.

  5. 1. There is no allegation of corruption, Marty, to imply otherwise if false. 2. Is the "State Rule" a law? I suspect not. 3. Is Mr. Woodruff obligated via an employment agreement (contractual obligation) to not work with the engineering firm? 4. In many states a right to earn a living will trump non-competes and other contractual obligations, does Mr. Woodruff's personal right to earn a living trump any contractual obligations that might or might not be out there. 5. Lawyers in state government routinely go work for law firms they were formally working with in their regulatory actions. You can see a steady stream to firms like B&D from state government. It would be interesting for IBJ to do a review of current lawyers and find out how their past decisions affected the law firms clients. Since there is a buffer between regulated company and the regulator working for a law firm technically is not in violation of ethics but you have to wonder if decisions were made in favor of certain firms and quid pro quo jobs resulted. Start with the DOI in this review. Very interesting.

ADVERTISEMENT