Steak n Shake woos real estate pros

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At the retail real estate industry's biggest deal-making event, restaurant and retail chains jockey for attention from the brokers and developers who hold the keys to their expansion at the best possible sites.

Attendees of the International Council of Shopping Centers convention in Las Vegas have a handful of free sub-sandwich options, including Jimmy John's, Quiznos and Jersey Mike's. They can pick up a smoothie sample from McDonald's or an Auntie Anne's pretzel.

But this year there was a new champion for the longest line and most buzz: Steak n Shake milkshakes.

The Indianapolis-based chain debuted a new booth—one of the largest for a restaurant chain at the show—that's modeled after its new Signature store concept, the first of which opened in January in New York's Times Square next door to the Ed Sullivan Theater. The booth included a milkshake station serving full-size shakes and a large deal-making room in the back.

Steak n Shake has pinned its growth plans on franchising, and if its sales pitch at the booth is any indication, it sees good site selection as a vital part of that formula: A glossy brochure about the Signature concept shows a rendering of a Steak n Shake next door to an Apple electronics store.

The line for shakes snaked by several other booths, and it took about 15 minutes to reach the gaggle of Steak n Shake employees making each shake from scratch. An employes said they were on track to serve more than 5,000 milkshakes during the three-day show.

"It's probably the best thing here," observed Brian Weber, who brokers retail deals in Dallas but knows Steak n Shake from growing up in St. Louis.

He was waiting in line Tuesday to get a chocolate shake after trying the strawberry version on Monday. He vowed to research possible sites for the chain upon his return.

"I'll try to help them," he said.

Steak n Shake, a subsidiary of San Antonio-based Biglari Holdings Inc., is betting the smaller-format, counter-service prototype—designed for spaces within strip centers rather than outlot spaces—will help it grow faster, in more markets, though it still is offering franchisees a more capital-intensive "Classic" store format designed for standalone sites.

The sleek and modern "Signature" prototype also touts a USDA organic Steakburger and hand-cut fries, and a grill and shake station within view of customers.

Biglari discussed the franchising strategy in his letter to shareholders in December. He said the chain has reached deals with franchisees committed to opening 110 restaurants.

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

The chain's aggressive growth plan is no sure thing. The burger-and-shake market is competitive, and Steak n Shake is not a household name in many of the markets targeted for expansion. And as Steak n Shake tries to sell new franchisees on the concept, it continues to feud in court with the original Steak n Shake franchisee.

At issue: A move by Steak n Shake to force franchisees to adopt uniform pricing. The 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 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.

Biglari Holdings reported fiscal second-quarter earnings on May 18 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 a year ago, while revenue grew 5.2 percent, to $217.9 million.

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


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  1. How can any company that has the cash and other assets be allowed to simply foreclose and not pay the debt? Simon, pay the debt and sell the property yourself. Don't just stiff the bank with the loan and require them to find a buyer.

  2. If you only knew....

  3. The proposal is structured in such a way that a private company (who has competitors in the marketplace) has struck a deal to get "financing" through utility ratepayers via IPL. Competitors to BlueIndy are at disadvantage now. The story isn't "how green can we be" but how creative "financing" through captive ratepayers benefits a company whose proposal should sink or float in the competitive marketplace without customer funding. If it was a great idea there would be financing available. IBJ needs to be doing a story on the utility ratemaking piece of this (which is pretty complicated) but instead it suggests that folks are whining about paying for being green.

  4. The facts contained in your post make your position so much more credible than those based on sheer emotion. Thanks for enlightening us.

  5. Please consider a couple of economic realities: First, retail is more consolidated now than it was when malls like this were built. There used to be many department stores. Now, in essence, there is one--Macy's. Right off, you've eliminated the need for multiple anchor stores in malls. And in-line retailers have consolidated or folded or have stopped building new stores because so much of their business is now online. The Limited, for example, Next, malls are closing all over the country, even some of the former gems are now derelict.Times change. And finally, as the income level of any particular area declines, so do the retail offerings. Sad, but true.