IBJNews

Federal court to hear Steak n Shake franchisee appeal

Back to TopCommentsE-mailPrintBookmark and Share

A federal appeals court on Wednesday is set to hear oral arguments in a case involving an Illinois franchisee of Steak n Shake that successfully sued the restaurant chain over its mandatory menu and pricing policies.

Stuller Inc. filed its lawsuit in November 2010 against the Indianapolis-based chain after it said the company and its parent, Biglari Holdings Inc., adopted a policy forcing franchisees to follow set menu and pricing options.

Steak n Shake sent default notices to several restaurant owners—including the chain’s original franchisee, Springfield-based Stuller, which opened its first restaurant in 1939.

Stuller, which operates five Steak n Shake restaurants in central Illinois, argued to a federal court that the new policy violated long-standing company practices allowing franchisees to set their own prices.

The federal court agreed, saying Steak n Shake cannot force Stuller to use its pricing policy nor take action against the franchise for setting its own prices.

Steak n Shake appealed the decision, which will be considered by the federal appeals court in Chicago.

In its argument, Stuller said that in 2008, after the franchise adopted Steak n Shake's pricing policy, it lost $538,446 due to the new pricing, and higher fuel and food costs.

The franchisee increased prices 10 percent to make up for the shortfall, despite Steak n Shake’s recommendation not to do so, according to court documents.

Steak n Shake argued that the 48 franchised restaurants that adopted the policy in 2009 increased sales an average of 7 percent and customers an average of nearly 10 percent.

The company maintained that no franchise went out of business because of the policy.

The pricing policy coincided with Sardar Biglari’s arrival as Steak n Shake CEO. He began buying company shares in 2007 and took over 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. Since then, the chain has posted 17 straight quarterly increases in same-store sales.

Steak n Shake parent Biglari reported fiscal second-quarter earnings on Friday and posted a smaller profit of $4.5 million for the quarter ended April 13, compared with $5.6 million in the year-ago period.

Quarterly revenue grew 5 percent, to $221.7 million.

Steak n Shake’s same-store sales increased 4.8 percent on higher customer traffic. Profit for the Biglari subsidiary increased to $13 million from $9.5 million during the same period last year while revenue grew 5.2 percent, to $217.9 million.

Steak n Shake operates 493 restaurants, including 79 that are franchised.
 

ADVERTISEMENT

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. I am a Lyft driver who is a licensed CDL professional driver. ALL Lyft drivers take pride in providing quality service to the Indianapolis and surrounding areas, and we take the safety of our passengers and the public seriously.(passengers are required to put seat belts on when they get in our cars) We do go through background checks, driving records are checked as are the personal cars we drive, (these are OUR private cars we use) Unlike taxi cabs and their drivers Lyft (and yes Uber) provide passengers with a clean car inside and out, a friendly and courteous driver, and who is dressed appropriately and is groomed appropriately. I go so far as to offer mints, candy and/or small bottle of water to the my customers. It's a mutual respect between driver and passenger. With Best Regards

  2. to be the big fish in the little pond of IRL midwest racin' when yer up against Racin' Gardner

  3. In the first sentance "As a resident of one of these new Carmel Apartments the issue the local governments need to discuss are build quality & price." need a way to edit

  4. As a resident of one of these new Carmel Apartments the issue the local governments need to discuss is build quality & price. First none of these places is worth $1100 for a one bedroom. Downtown Carmel or Keystone at the Crossing in Indy. It doesn't matter. All require you to get in your car to get just about anywhere you need to go. I'm in one of the Carmel apartments now where after just 2.5 short years one of the kitchen cabinet doors is crooked and lawn and property maintenance seems to be lacking my old Indianapolis apartment which cost $300 less. This is one of the new star apartments. As they keep building throughout the area "deals" will start popping up creating shoppers. If your property is falling apart after year 3 what will it look like after year 5 or 10??? Why would one stay here if they could move to a new Broad Ripple in 2 to 3 years or another part of the Far Northside?? The complexes aren't going to let the "poor" move in without local permission so that's not that problem, but it the occupancy rate drops suddenly because the "Young" people moved back to Indy then look out.

  5. Why are you so concerned about Ace hardware? I don't understand why anyone goes there! Every time ive gone in the past, they don't have what I need and I end up going to the big box stores. I understand the service aspect and that they try to be helpful but if they are going to survive I think they might need to carry more specialty parts.

ADVERTISEMENT