Biglari shakes up Steak n Shake building format

October 23, 2010
Redesigned Steak n Shake, Georgia The first new-format location recently opened in Georgia. It has a more modern-looking dining room and less back-of-the-house space. (Ryan Smith/Rome News-Tribune)

The new prototype design for Steak n Shake restaurants will seem a bit familiar to patrons of 96th Street Steakburgers.

New locations will be smaller, featuring sections of floor-to-ceiling glass and an exterior that throws off a retro vibe, its signage attached to a protruding fin.

That’s pretty much the look of 96th Street Steakburgers, a 6-year-old local chain with just two locations that offers a simpler take on a menu pioneered by the 485-location Steak n Shake.

The 76-year-old burger chain unveiled the first of its new-format restaurants in Rome, Ga., in September. Parent company Biglari Holdings Inc. hopes to partner with franchisees to open more than 1,000 of them across the country.

CEO Sardar Biglari actually met with 96th Street Steakburgers owner Kevin Stitle about a partnership on development of the new Steak n Shake store format, but Stitle declined. He prefers being his own boss.

“Of course it’s a good concept,” Stitle said of Steak n Shake’s new format. “It’s what I’m doing on a little different scale.”

The newly redesigned Steak n Shake in Georgia. The new prototype for Steak n Shake costs $1.5 million to build, down from $2.2 million for the old model. It seats about the same number of people, 100. (Ryan Smith/Rome News-Tribune)

Steak n Shake has made minor tweaks to its restaurant design over the years, including adding more brick to the exterior of its newer locations. But the 3,200-square-foot concept store is the most dramatic redesign in at least 30 years for the brand founded in 1934 in Normal, Ill., said Michael Gallo, an analyst who covers Steak n Shake’s parent company for New York-based C.L. King & Associates Inc.

96th Street Steakburgers, Indianapolis Steak n Shake’s new design drew inspiration from 96th Street Steakburgers, which opened six years ago. The local restaurant also has an airport location. (IBJ Photo/ Perry Reichanadter)

The prototype, a reduction from the boxy 4,200-square-foot old model, costs about $1.5 million to build, down from $2.2 million. The restaurants still seat about 100 people.

The real key is the lower upfront investment for franchisees, which means they can start earning a return more quickly, Gallo said. Usually when you shrink costs, you also shrink the number of seats. Steak n Shake managed to keep the same customer capacity.

“We think it’s a very positive evolution for the concept that should draw a lot of franchisee interest,” Gallo said. “My initial take is it looks very good.”

The new model features a roofline that references the classic Steak n Shake folding hat, along with an open interior featuring a hamburger grill and milkshake stations more visible to customers. Gone are the black-and-white-striped awnings prominent on the old model. Signage features an updated logo.

Dining areas will be visible from outside thanks to floor-to-ceiling glass, while life-size classic photos showing Steak n Shake’s history will adorn the rest of the interior.

With the old-format stores, about 60 percent of the square footage was in the back of the house, including a large office and an employee lounge with lockers. The new version strips out those amenities.

Biglari did not respond to an IBJ request to discuss the company’s plans for the new store format, but in a video interview with the Rome News-Tribune he spoke about how the design will allow the brand to fit into markets large and small, in real estate ranging from in-line strip centers to free-standing outlots.

“This location exhibits how we’ve been overdesigning the facilities,” Biglari said. “The place looks fantastic, and the idea is we’re going to have 1,000 units domestically that look just like it.”

The chain is working on building a pipeline of restaurants that will use the new design but has not revealed a timetable for the rollout or any particular geographic focus, Gallo said.

At the company’s annual meeting in New York City in April, Biglari said deals are in the works for new franchise locations in Denver, Las Vegas and Richmond, Va. New company-owned stores are planned for San Antonio, where Biglari Holdings has its headquarters. The company plans to use the locations it opens in San Antonio to sell potential new franchisees.

Mature markets for Steak n Shake such as Indianapolis could be the last to see the new-format stores.

Most of Steak n Shake’s restaurants are owned by the company, but Biglari is hoping to grow the chain primarily through franchising. The thinking is that Steak n Shake can grow faster and return more to shareholders if much of the cost of its growth is borne by franchisees.

The restaurant operations of Steak n Shake remain headquartered in downtown’s Century Building.•


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