Steak n Shake preps for self-service transformation

Steak n Shake is aggressively pursuing a strategy to convert table-service locations to counter-service and drive-through only, like this store at 5360 N. Keystone Ave. (IBJ photo/Eric Learned)

Now that COVID-19 is lifting, Indianapolis-based Steak n Shake is beginning to reopen its dining rooms, most of which have been shuttered since the pandemic hit in March 2020.

The company disclosed the reopening plans in its first-quarter financial report filed Friday with the Securities and Exchange Commission. But if you are expecting the in-restaurant dining experience to be anything like it used to be, you are in for a big surprise.

The chain, which already had announced it would reduce costs by switching from table service to counter service, now says it will reduce expenses further through “a self-service model.”

Sardar Biglari—CEO of San Antonio-based Biglari Holdings, parent of Steak n Shake—foreshadowed the changes in his annual shareholder letter released in late February.

“We intend to equip units with advanced self-service. What will be most evident to our returning patrons is that instead of ordering at the table, or even at a counter with an attendant, our guests will now initiate their transaction at a kiosk,” Biglari wrote. “We are embracing efficiency and transitioning the service model to empower our guests to place and pick up their own orders.”

Steak n Shake has fought back to profitability during the pandemic by drastically cutting expenses. But the moves also have drastically cut sales.

In the first quarter of 2021, Steak n Shake earned $5.4 million on revenue of $68.3 million. That compares with a loss of $6.6 million on revenue of $111.1 million in the same quarter a year earlier.

Steak n Shake returned to profitability in the final quarter of 2020, earning $7.5 million. In the first three quarters of last year, it had lost $12.1 million.

Steak n Shake has 253 company-owned restaurants, 50 of which were temporarily closed as of March 31. It has 108 locations run by single-store “franchise partners” and 189 locations run by traditional franchisees.

The chain in February said it had unshackled itself from stifling debt, paying off the remainder of a $220 million loan that was set to come due March 19. In a March press release, Steak n Shake declared it now is “debt-free, making Steak n Shake one of the strongest companies in the restaurant industry.”

But later that month, Steak n Shake’s lenders sued the company, contending it still owes more than $8.5 million in fees and interest on the loan.

Steak n Shake has not responded to the suit, and Biglari Holdings did not respond to a request for comment from IBJ.

In his shareholder letter, Biglari suggested more changes are in the offing for Steak n Shake, which was founded in Normal, Illinois, in 1934 and moved its headquarters to Indianapolis in the 1970s.

“Steak n Shake is in an era of radical transformation,” he wrote.

He said the conversion to self-service and related dining-room remodelings will cost $100,000 to $200,000 per restaurant but will bolster the chain’s profitability long term.

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27 thoughts on “Steak n Shake preps for self-service transformation

  1. In other news, Levi’s has decided to stop selling jeans and Tiffany’s has embraced plastic.

    It’s hard to believe someone can miss the point of going to SnS so much. It is to sit down and be served, diner-like, food that is a cut above the usual fast-food places. Because the food is a cut above, it takes longer. Standing around to wait for food — longer than one would wait at a McDonald’s or Wendy’s — is not appealing to me. And I love the chili. Surely, there is someone who can buy this, get it’s branding on track, introduce efficiencies that won’t drive people away, and still serve up the chili 3-ways.

    1. Agree 💯 % the reason our local SnS is not frequent as many other we have visited over the last few years are they are dirty and with poor local a management where you wait to be seated and employees make eye contact and then still ignore you. Also their fries are great at sit down but do not survive take away. Owners who are Completely out of touch!

  2. I just got back from going through the drive through window as I often do for the $4.00 double cheeseburger and fries. It’s still one of my favorite burgers and is always hot off the grill. It has been years since I’ve gone inside to be served so I’m sure people will miss that experience, but you can’t beat their under $4.00 deals and the food is good no matter which one I go to. I never feel like I wait too long at lunch. For all the negative publicity they get on this board, I’m still a fan and would hate to see them close because I can’t afford all the elite burger places opening up.

    1. Jeff, the sit down table service experience this what the vast majority people think of when they hear Steak ‘n Shake.

      I just find it very hard to believe that Steak ‘n Shake is going to transform and not get their clock cleaned by Freddy’s or Culver’s or even Shake Shack. I mean, hell, those places at least have someone there to take your order! I get with Biglari is saying, he doesn’t want to pay for people so he’s going to automate everything as much as he can both front of house and back of house.

      How many diners are going to get fed up with these kiosks and say screw it and walk out the door and never come back… i’m guessing it’s going to be a very high percentage. I mean, what makes you think that Biglari’s going to be able to pull off the customer education program necessary to make these changes? They’ve been chasing customers off for years!

    2. Joe, your absolutely correct and yes he’s possibly misinterpreting his customer base that values the inside dining experience. I absolutely love Culvers and the others you mentioned, but don’t think that’s who their trying to compete with and still think SnS can possibly hang in there with the low end burger places which is what they seem to be trying to do. Maybe theirs just not a place at the table for them to survive, but between McD’s, BK and Wendy’s, I’ll take SnS any day.

    3. Jeff, that’s what I simply don’t understand. He had his market niche all to himself… Why is he chasing after the low-end market when he owned the segment he was in, with 80 years of branding and customer loyalty? What he’s doing makes as much sense to me as St. Elmo’s closing their dining room so they could compete with Culver’s.

      I would’ve understood if he had started a new brand that never had table service. I mean, places do that all the time. And I understood the idea of making Steak and Shake operate more efficiently. It’s the pivot from that to … automating everything as much as possible, paying people as little as possible, and operating each location with as few human beings as possible that I don’t understand.

  3. The sit-down experience of SnS left a lot to be desired. You get ushered to a table where it was obvious a family with little kids once was, evident by the fries still on the floor and the sticky floor tiles from the half-cleaned up soda. Plus the sticky/greasy seat cushions. The servers were over-worked and some had an “I don’t care” attitude. The food itself is delicious, but their model needs to morph completely in order to survive. And I agree with the posts above: Freddy’s and Culvers are amazing!

    1. Putting Bigliar out of our misery is easy — as I used to say on some Internet discussion lists, “teach him how to fetch, then throw a ball into the street during rush hour”.
      .
      I was focusing on traffic, but I could swear the S&S sign on 86th – the one in contention to become a Crew Car Wash – has (in script) at the bottom of the sign, “By Biglari”. Oh, to be in college again because we’d have changed it by now to say “By Bigliar” and would send a picture to him. Definitely more fun than when we used to swipe key letters from the XXX Drive-in theater marquis, then put Bible verses up every few weeks.

  4. He’s by far the worst thing that has ever happened to S&S! Stifled franchise profits by setting ridiculous low prices and trying to change the identity from an Iconic Spot to a cheap burger joint! Let’s hope he doesn’t do the same thing to Cracker Barrel! I wish he’d sell S&S to someone with a different Vision than Cheap, Cheap, Cheap!

    1. Ah, but guessing at his personality, he believes *WE* are the problem – *Bigliar* is doing everything right. If we’d just kwitcherbitchin and buy into his vision, all would be well. –Not!–
      .
      It’s no different than SUN buying Marsh…they knew more about grocery management and customer psychology than the actual customers…and we saw recently that they flew that plane much higher than it was rated for, then pointed the nose downward, and revved the engine, driving it deep…to the tune of $340M(?).
      .
      I’m all but sure SUN went to the same school as Bigliar — believing *we* are the problem, not them. We just won’t go along with these people who are coming in and trying to “improve” our way of life.
      .
      Curiosity question: does anyone have an idea what’s being erected in the Northern section of 86th/Ditch Marsh’s parking lot?

    2. I can answer my own question (Marsh at 86th/Ditch) – there’s a sign out front. They’re wedging a Chez Ronald in the parking lot.

  5. SnS could be as strong as all the hot chains right now like Freddy’s, IN n Out, Shake Shack, etc. To compete they need to go to counter service, cut their menu by 50-75%, and deploy strict quality control measures. WHEN PREPARED CORRECTLY, I would rate their burgers, shakes, and fries as good or better than any of those others. In fact, in my opinion SnS is the only one that nails all three.

  6. I’m surprised so many people are upset over steak and shake. It’s been awful for decades at this point. Culver’s and Freddy’s seem to be over praised too. Never had Shake Shack, but In n Out and Whataburger aren’t all that. Guess it speaks to the low standard for quality nowdays.

    1. Culver’s has their moments. I shouldn’t have hit their drive thru for supper Friday but I did it anyway. I gave them the order, told them both sandwiches should be fixed the same, they repeated it, (and got it right), then gave me two sandwiches (which not only weren’t the same but were both wrong). Tomato? A slice the size of a quarter. Onion? Two scrawny strings on each. No cheese…yadda yadda – I shouldn’t have to dissect sandwiches and hold up the line to make sure they can get it right. They tried to foist small root beers with full cups of ice upon me — everyone knows they have to run carbonated beverages across a cold plate to keep it in solution. Ice is nothing more than a way of serving you less of a drink.
      .
      Shake Shack? It’s almost always got a line running around the building in the Fishers Monstrosity, I mean, District.

  7. A fundamental error in assessing his demographics. The people who love to patronize SnS don’t want another iPad or tablet to have to input something into. I’m hard pressed to find a single reason to eat there again.

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