The letter was written by Sardar Biglari, a San Antonio hedge fund manager whose investment group owns 8 percent of Indianapolis-based Steak n Shake.
Biglari, 30, previously had announced that he and another member of his group would stand for election as directors when the company holds its annual meeting in the coming months.
In today's letter, Biglari went further, saying that after election, the pair would call a special meeting to vote on replacing most of the board-which he said had done a terrible job as stewards of shareholders' money.
"Unfortunately, the leaders of Steak n Shake have destroyed shareholder value," the letter said. "Plainly, it is time to change the current board-our first priority-to avoid further destruction."
The letter criticized management for allowing expenses to rise and for pursuing expansion of company-owned restaurants, a strategy Biglari contends has been a poor use of capital.
Instead, he wrote, "The future of Steak n Shake lies in franchising," which currently is a small part of the company's business. "Growth through franchising is a high-return and lower-risk endeavor."
A Steak n Shake official this morning declined to comment.
Steak n Shake has stumbled badly of late. It now has posted 10 straight quarters of declining same-store sales. The company's shares were trading this morning at about $7.60, flat on the day. They're down nearly two-thirds from their 2006 high.