Saving Steak n Shake

November 12, 2007
Back to TopCommentsE-mailPrintBookmark and Share
Lots of Hoosiers have warm-and-fuzzy feelings for Steak n Shake. Wall Street's feelings are an entirely different matter.

As the company readies to announce fiscal fourth quarter financial results this Thursday, investors are exasperated. The company has reported eight straight quarters of declining same-store sales. CEO Peter Dunn stepped down in August, and 76-year-old Chairman Alan Gilman took over. The board then tapped Merrill Lynch to help it review strategy.

Now a Texas investment group that owns more than 5 percent of the stock, Lion Fund, plans to plaster Steak n Shakeâ??s hometown of Indianapolis with billboards calling on shareholders to elect two of its principals to the board.

Does the chain has a future as an independent company?
ADVERTISEMENT
  • Steak n Shake definitely has a market...but they have to pay attention to what their customers want, to what their competition is doing and to technology. I cannot speak for everyone, but as a customer, whether going through the drive-thru or dining in, I would like my order quickly and for it to be correct. I've not had a problem with the accuracy, but the drive-thru times could be improved. The competition is offering some low-price items...dollar menu, etc. that would likely attract more customers. Some healthy options are available, but the selection could be expanded. One competitor has bucked the trend and offered super unhealthy items...this too could be an option for taste, but maybe tempered by some sort of healthy approach...whole grain buns, etc. Coffee House/Bakery style breakfast options. Technology could aid in making the experience better...ordering/paying on-line for express service, modernized equipment to speed up labor intensive processes...like the milk shakes and fountain drinks, food prep. etc.
  • Steak n Shake definitely has a market...but they have to pay attention to what their customers want, to what their competition is doing and to technology. I cannot speak for everyone, but as a customer, whether going through the drive-thru or dining in, I would like my order quickly and for it to be correct. I've not had a problem with the accuracy, but the drive-thru times could be improved. The competition is offering some low-price items...dollar menu, etc. that would likely attract more customers. S n S has some healthy options available, but the selection could be expanded. One competitor has bucked the trend and offered super unhealthy items...this too could be an option for taste, but maybe tempered by some sort of healthy approach...whole grain buns, etc. Also, S n S could adopt a coffee house/bakery style approach to expand their breakfast options. Technology could aid in making the experience better...ordering/paying on-line for express service, modernized equipment to speed up labor intensive processes...like the milk shakes and fountain drinks, food prep. etc.
  • Steak'n'Shake should probably drop the drivethrough ... because it cooks each order and makes each shake individually, which takes time. Our one experience at a SNS drivethrough was excrutiatingly long, so we vowed never to do that again. Aside from that, SNS is a terrific restaurant operation.

    Whether SNS has a market, or is a well-run operation, is almost irrelevant to the question of whether the company remains independent. SNS is 82% owned by institutional investors, whose operators need to make their quarterly bonus. If they think they can make a buck, they'll sell the company faster than you or I can turn off the light switch.

    Texas investors are placing billboards around town trashing the company. The proper response, I think, is for the company to take care of its operational issues -- and to launch a full-blown campaign (with billboards) to preserve SNS's unique restaurant concept.

    As for me, I'll vote against the Texas wheeler-dealers, and against any sale of the company.
  • I've got to say I disagree with dropping the drive through. Steak'n'Shake would lose 99% of my business if they did so. If you like the food, and you know what to expect, the drive through is not a problem. Not to say it can't be improved, just saying they shouldn't drop it.....or I'll stop dropping my loot on the Frisco Melt Platter!
  • At times, I want something from Steak n' Shake and I don't want to stop and sit. The Drive-Thru has been a great item for when I have been on-the-go. Granted, it takes a little while, but it is worth it.

    As for the Texas investors, they ovbiously do not know how to conduct business. If you have a problem with a company (and your a are a big investor like the ones in Texas), you would need to voice your concerns with the company directly. IF there is no compliance, mututal understanding, or if the investing company refuses to listen to investors, YOU do not have to invest. Announcing it to the world through Billboard does not help the situation (unless that is the ONLY means of communication to them).

    Granted, the prices of SNS are high, but I don't go for the price, I go for the food (and sometimes experience of a REST-aruant and not a WORK-aruant)

    I will continue to support SNS through purchasing food at their restaruant, but I feel that if there are problems (like 2 full years of losses), maybe it is past time to look at what is going on. It is now time to act on change to bring people back. Another thing is, Yes now they are losing for 2 years, but what were the financial records stating prior to these losses. Was it the highest ever? Were they just steadly on the rise until 2 years ago? What about change? Not change completly but enough to bring people back. Listen to the customers and Investors.
  • Hey, I have an idea. Why don't we ask Indy investor Tim Durham to come to the rescue!

    Oh, that's right. The only companies he seems to know to buy are the ones affiliated with his business partner, Dan Laikin.
  • Culver's serves a far better product, and the restaurants are much cleaner.

    As for the billboard issue, apparently The Lion Fund used the same Billboard tactic for its Western Sizzler deal. That worked.

    Unfortunately for SNS, it is a great Indiana institution (although founded in Illinois), but had an elitist Harvard CEO who had no restaurant experience and utilized a poor strategy of playing a pricing game (raising prices) to compete in the Burger industry. Eventually, this crumbled as the same-store-sales and earnings dropped because people can goto McDonald's, BK, Hardee's, even Culver's for a lower price point.

    Arguably, Mc, BK, and Hardee's are not in the same category as SNS because of service and quality of products, but still most people will sacrifice quality for a lower price Burger....
  • In response to the post from the guy named Support (who said , the Texas investors should voice their concerns directly with the company and that they shouldn't have invested if they weren't willing to keep the objections private) - this is naive.

    It's quite routine for value investors to buy into a company that has lots of promise that's struggling then force changes to reap a large profit. Sometimes management is isolated and entrenched and need to have very public ridicule to force changes.

    This is a VERY good thing for not just the value investor but ALL of the stockholders who have been hanging on waiting for some decent results. The only losers are the old, ineffective management team that's forced out by the new/reinvigorated board.
  • Go Big Larry go! Hopefully the Lion Fund will bring some discipline to this company.

Post a comment to this blog

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
  1. With Pence running the ship good luck with a new government building on the site. He does everything on the cheap except unnecessary roads line a new beltway( like we need that). Things like state of the art office buildings and light rail will never be seen as an asset to these types. They don't get that these are the things that help a city prosper.

  2. Does the $100,000,000,000 include salaries for members of Congress?

  3. "But that doesn't change how the piece plays to most of the people who will see it." If it stands out so little during the day as you seem to suggest maybe most of the people who actually see it will be those present when it is dark enough to experience its full effects.

  4. That's the mentality of most retail marketers. In this case Leo was asked to build the brand. HHG then had a bad sales quarter and rather than stay the course, now want to go back to the schlock that Zimmerman provides (at a considerable cut in price.) And while HHG salesmen are, by far, the pushiest salesmen I have ever experienced, I believe they are NOT paid on commission. But that doesn't mean they aren't trained to be aggressive.

  5. The reason HHG's sales team hits you from the moment you walk through the door is the same reason car salesmen do the same thing: Commission. HHG's folks are paid by commission they and need to hit sales targets or get cut, while BB does not. The sales figures are aggressive, so turnover rate is high. Electronics are the largest commission earners along with non-needed warranties, service plans etc, known in the industry as 'cheese'. The wholesale base price is listed on the cryptic price tag in the string of numbers near the bar code. Know how to decipher it and you get things at cost, with little to no commission to the sales persons. Whether or not this is fair, is more of a moral question than a financial one.

ADVERTISEMENT