CEO: Steak n Shake poised for global growth

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The parent of Steak n Shake is planning to grow the Indianapolis-based burger chain through an aggressive franchising effort that ultimately could take the company global.

In his latest annual letter released to shareholders on Saturday, Sardar Biglari, CEO of San Antonio-Biglari Holdings Inc., said he has commitments for 110 more franchised units that could open within the next few years.

Steak n Shake currently operates 490 restaurants, of which the majority—413—are company owned within the chain’s 25-state footprint. But Biglari thinks Steak n Shake is poised to become a worldwide player in the restaurant industry.

“We have an ambitious plan: I believe Steak n Shake is a brand that will become global,” Biglari told shareholders. “To speed this idea into reality, franchising becomes integral to our growth.”

The revitalized Steak n Shake has been on a tear since Biglari began buying company shares in 2007 and took over as CEO just a year later.

He slammed the brakes on new store construction, arguing that the chain’s restaurant prototype cost too much to build and that the expansion was hurting shareholder value.

He also revamped store operations and the menu, halting a 14-quarter streak of declining same-store sales. The chain now has posted 16 straight quarterly increases in same-store sales.

For the fiscal quarter ended Sept. 28, same-store sales increased 5.3 percent. Same-store sales also improved 4.2 percent for the entire fiscal year.

In addition, Steak n Shake’s overall annual revenue in fiscal 2011 jumped 4 percent, to $689.3 million, while pretax profit increased 5 percent, to $39.6 million.

Biglari’s strategy to franchise more restaurants seems logical to Philip Whistler, a partner at Ice Miller LLP whose practice includes franchising.

“The basic formula is you’re growing your business using other people’s money and other people’s management expertise,” he said. “As a result of the bad economy the past few years, there are actually a lot of people who are looking for different career paths.”

The fragile economy, however, has made financing a lot tougher to obtain, Whistler said.

Investing in a Steak n Shake franchise takes a 20-year commitment and between $955,000 and $1.8 million in startup costs, according to the company’s website.

If that seems steep, Biglari unveiled a new concept in his letter that would enable franchisees to purchase a cheaper stake in the company.

Dubbed Steak n Shake Signature, the concept features a counter-only service model, rather than a restaurant with traditional seating. It offers a simple menu of core items such as steak burgers and milkshakes, and is ideally suited for shopping centers, Biglari said.

The first one is slated to open on Broadway in New York City on Jan. 12.

“For years I have said that Steak n Shake’s future lies in franchising,” Biglari said in his letter. “Well, the future is now.”

Biglari, whose firm also operates 94 Western Sizzlin restaurants, is seeking a seat on the board of Cracker Barrel Old Country Store Inc., based in Lebanon, Tenn.

Biglari has complained that Cracker Barrel isn't living up to its potential. The company is set to hold its annual meeting on Dec. 20.

Biglari Holdings began buying Cracker Barrel shares in June and has regulatory approval to buy a nearly 50-percent stake in the company.

In his letter to shareholders of Biglari Holdings, Biglari provided a glimpse of his investment strategy: “We are guided by logic to do what makes sense, not what is commonplace. Doing business differently from others invites criticism, to which we are extremely insensitive.”

Biglari Holdings earned $25.86 per share in its latest fiscal year, compared with $19.99 the previous year.
Company shares were up $6.59 in mid-morning trading and are fetching $363 each.


  • horrible work environment
    I have worked at Steak N Shake for about three years now and I actually looked up the CEO so i could in some way try to contact him to tell him that the treats the employees horribly plan and simple if you work at a Steak N Shake you know that you do well over the amount of work expected at other fast food and yet they start out at the same wage and since I have began working portions have reduced, and frankly the money that is being mad is probably because of the poor wages that Jim obviously doesnt understand because he DOES NOT work at a Steak N Shake
  • Haven't seen that, BigO
    I only frequent a couple of locations, but the ones I have been in haven't changed at all in terms of food, and if anything the service is better than it has been. The chili has never been my favorite menu item...it is a variation on Cincinnati chili, which for me is not the real thing...but I ate a 5-way not too long ago and it did not taste any different than the last time I ate it, which may have been 10 years before. The burgers and Ice Cream products are excellent, the only changes have been to add more options...everything else is adequate or better and they have added breakfast and value meals under Biglari's watch. Service in these places pretty much always comes down to in-store management...if they are good the service will be adequate to good, which is all you can expect in a place where your meal is under 10 bucks. I will still drive around about any other fast food place to go to S & S if there is one anywhere close, and my experience has been that the drive thru windows are well staffed, the help is pleasant, and my change is correct. Mr. Biglari may be controversial, and his management style and aggressive "take-over Cracker Barrel and the World" mentality may rankle, but 16 straight quarters of economic growth in this economy? What he has done with that chain is remarkable...it is not surprising that he has some critics from within, he has made changes, but the results are what they are and hard to argue with. The complaints BigO enumerates are not necessarily invalid...but they are more likely from poor management of an individual location or region, and the complaints of individual employees who did not like the changes made and the new standards. Not surprising...restaurants have never been the ideal work venue...the pay is low, customers are for the most part demanding and cheap...I don't know anyone working in a restaurant who does not want to get out. On balance, it is obvious that S & S is better than it ever has been. BigO, and any other person, is free to take his or her dollar elsewhere if they don't like it, or have had bad experiences.
  • Sales figures PROVE you wrong
    Sounds like they did well to ge rid of you !
  • Not enough Positives
    I used to go to Steak & Shack in the past but my recent visits have been far off the mark when it came to food, service and cleanliness. I also think there is not enough positive spin on this resturant any longer. The drive thru is very slow and the employees just don't have any positive thing to say about their work place. Their chili has become the joke of most resturants. The chili is Ketchup with spaghetti "really". I think before they reach for the stars they should do some serious menu roll back to the quality they had 10 plus years ago. They also need to do some internal employee training and a rewards program for good work and positive behaviour. The most I have heard about this company in recent times is they took away a percentage of tips paid on credit cards, the managers at some locations were deleting clock time from hourly employees and that if you don't have a coupon the prices are high for the quality of the product. I just don't see more then 10 years left for this company. They no longer care for the customer and they only have stayed this long because of late night service and maybe the shake product if you have time to wait.

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