IBJNews

More franchisees join revolt over Steak n Shake menu pricing

Back to TopCommentsE-mailPrintBookmark and Share

More Steak n Shake franchisees are revolting over the company’s policy that prohibits restaurants in the chain from setting their own menu prices.

Three franchise owners filed suit last month against Indianapolis-based Steak n Shake, including two on the same day—April 22—in U.S. District Court in Indianapolis.

They 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 that first challenged the practice.

“Steak n Shake’s royalties are calculated as a percentage of a franchisee’s revenue, not profits, which explains why Steak n Shake wants to increase customer volume through the sale of lower-priced food without concern as to whether franchisees actually make a reasonable profit,” the franchisees argue in their lawsuits.

Reached by phone, Steak n Shake lawyer Tonya Sallee declined to discuss the suits, citing company policy that prohibits commenting on pending litigation.

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 that date back 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 last August, the 7th Circuit Court of Appeals affirmed the Illinois federal court’s ruling in Stuller’s favor.

Yet, even after the failed appeal, the three franchisees suing Steak n Shake argue that the company “has held steadfast in its ongoing, and system-wide, breach of those [franchise] agreements by continuing to force its franchisees to abide by the policy.”

They argue in their suits that Steak n Shake’s executive leadership, led by CEO Sardar Biglari, decided that it would set menu prices contrary to existing language in the franchise agreements that says otherwise.

Steak n Shake shareholders elected Biglari CEO in 2008, and the company now is operated by San Antonio-based holding company Biglari Holdings Inc.

The three franchisees who filed suits last month against Steak n Shake 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 franchise for refusing to comply with the pricing policy. They also are suing for breach of contract and fraud.

One of the lawyers representing them, Richard Shevitz of Indianapolis-based Cohen & Malad LLP, said more lawsuits could be forthcoming.
 
Steak n Shake operates 501 restaurants, including 87 franchised locations.

In its fiscal first quarter ended Dec. 19, Steak n Shake reported revenue of $163.2 million, a 1.7-percent increase from the same time in 2011.

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 never thought I'd see the day when a Republican Mayor would lead the charge in attempting to raise every tax we have to pay. Now it's income taxes and property taxes that Ballard wants to increase. And to pay for a pre-K program? Many studies have shown that pre-K offer no long-term educational benefits whatsoever. And Ballard is pitching it as a way of fighting crime? Who is he kidding? It's about government provided day care. It's a shame that we elected a Republican who has turned out to be a huge big spending, big taxing, big borrowing liberal Democrat.

  2. Why do we blame the unions? They did not create the 11 different school districts that are the root of the problem.

  3. I was just watching an AOW race from cleveland in 1997...in addition to the 65K for the race, there were more people in boats watching that race from the lake than were IndyCar fans watching the 2014 IndyCar season finale in the Fontana grandstands. Just sayin...That's some resurgence modern IndyCar has going. Almost profitable, nobody in the grandstands and TV ratings dropping 61% at some tracks in the series. Business model..."CRAZY" as said by a NASCAR track general manager. Yup, this thing is purring like a cat! Sponsors...send them your cash, pronto!!! LOL, not a chance.

  4. I'm sure Indiana is paradise for the wealthy and affluent, but what about the rest of us? Over the last 40 years, conservatives and the business elite have run this country (and state)into the ground. The pendulum will swing back as more moderate voters get tired of Reaganomics and regressive social policies. Add to that the wave of minority voters coming up in the next 10 to 15 years and things will get better. unfortunately we have to suffer through 10 more years of gerrymandered districts and dispropionate representation.

  5. Funny thing....rich people telling poor people how bad the other rich people are wanting to cut benefits/school etc and that they should vote for those rich people that just did it. Just saying..............

ADVERTISEMENT