BREAKING: Steak n Shake drops Y&L

November 11, 2008

The 18-year relationship between Indianapolis-based Steak n Shake Co. and its hometown ad agency has fizzled out.

At an investor conference this afternoon at the Marriott Hotel downtown, the restaurant chain said it is terminating its contract with Young & Laramore and will hire another agency of record.

Young & Laramore leaders got the news last week, shop CEO Paul Knapp said. The deal that's now being axed was signed in mid-June, just before Sardar Biglari took over as chairman of the fledgling restaurant chain, vowing to turn it around after 11 consecutive quarters of declining same-store sales. Yesterday, it reported another $9.2 million loss in its fiscal fourth quarter.

"We're very proud of the work we have done for the company and the brand for 18 years," Knapp said. "Although we obviously are disappointed they're going in a different direction, that's certainly their prerogative."

The move wasn't a surprise to some observers, who predicted this summer that the advertising deal could be in jeopardy. Still, the loss is a blow to the 66-employee firm, which has counted Steak n Shake among its three biggest accounts. Young & Laramore officials have declined to say how much of their business Steak n Shake represents, but local industry experts estimated it is one of the 10 biggest accounts in the state, likely bringing in a mid- to high-seven-figure sum annually for the agency.

Knapp said Y&L will wind down its activity on the account over the next 90 days. Agency leaders are in the process of "working through the adjustments we'll need to make right now," he said.

Although the faltering economy has affected business, Y&L has been holding its own, reducing its staff from 70-plus through attrition. "We have had no layoffs to this point," Knapp said.

Steak n Shake has not selected another agency, but wants to feature customers in a new advertising campaign targeting the 18- to 24-year-old demographic.

Y&L's ad campaign - especially its television ads for Steak n Shake - has become almost as iconic as the restaurant itself. Ads featuring sharp-tongued servers grilling hamburger patties and serving hand-dipped milkshakes have netted the ad agency several local and national awards. Over the years, the campaign has been cited as representing some of the best work in the industry by such publications as The New York Times, US Ad Review and Nation's Restaurant News.

Also at the investor conference today, Biglari introduced new executives from Burger King, Krystal and Friendly's. He said Steak n Shake is eyeing growth through franchising as many as 2,000 stores.

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