Top 250 Franchise by Entrepreneur – Rank no.150 – Steak n Shake Enterprises Inc. – US
Products & Services: Steakburgers & milkshakes
Number of Locations: 497
Total Investment: $672K – 1.84M
Began Franchising: 1945
About Steak n Shake Enterprises Inc.
Gus Belt opened the first Steak n Shake in 1934 in the town of Normal, Illinois. Franchising began in 1945. The menu consists of the company’s signature steakburgers (which Belt used to grind from round, sirloin and T-bone steaks right in front of his customers) and hand-dipped milk shakes, along with sandwiches, hot dogs, salads and sides.
Startup Costs, Ongoing Fees and Financing
Franchise Fee: $25,000 – $40,000
Ongoing Royalty Fee: 5.5%
Term of Franchise Agreement: 20 years, renewable
Net Worth: $1,500,000
Liquid Cash Available: $500,000
94% of all franchisees own more than one unit. Number of employees needed to run franchised unit: 60 – 80. Absentee ownership of franchise is NOT allowed. (100% of current franchisees are owner/operators).
How This Franchise Supports Franchisees
Franchise Ranking History
Steak ‘n Shake is a diner-style restaurant chain located primarily in the Midwestern, Southern, and Eastern states. It is headquartered in Indianapolis, Indiana. There are approximately 400 company-owned Steak ‘n Shakes and another 100 or so that are franchised. Typical restaurant locations have both drive-thru and front-window service, resulting in a hybrid of fast-food to-go service and diner-style sit-down service. Many Steak ‘n Shake restaurants are open 24 hours a day. Steak ‘n Shake’s prices had been comparable to diners and other sit-down food establishments, which were generally higher than fast food restaurants, but recently the company has lowered its prices.
The corporation’s slogan “Famous for Steakburgers” refers to its most prominent food item, the “Steakburger”, so called because it was originally made from a mixture that included T-bone, sirloin, and round steaks. Today’s “Steakburger” is a “100% pure beef patty”, a USDA ground beef product category ranked inferior to hamburger.
Steak ‘n Shake restaurants are operated by Steak ‘n Shake Operations, Inc., a wholly owned subsidiary of Biglari Holdings Inc., located in San Antonio, Texas. The company currently operates 487 (as of December 2010) restaurants in 22 states, including 75 franchised locations. Bulgari Holdings plans to aggressively increase the number of franchises, hoping to add as many as 1500 more franchise locations in the nextfew years.
Gus Belt founded Steak ‘n Shake in Normal, Illinois, in February 1934, after serving 4 years in the United States Marine Corps. He converted the combination gas station and chicken restaurant that he owned (Shell’s Chicken) into a hamburger stand. The original building at the intersection of Main and West Virginia avenue was damaged by a fire in the early 1960s, but it was repaired and its dining room expanded. In the late 1990s, Steak ‘n Shake sold this building to the Monical’s Pizza company. Steak ‘n Shake’s slogan “In Sight It Must Be Right” originally referred to Belt’s practice of grinding the beef that he used in his Steakburgers in the public area of his restaurant and in the sight of the customers. This practice was intended to reassure customers of the wholesomeness of the product. (At that time, ground beef was still viewed with some skepticism by the general public, based on the likelihood of its having deliberate impurities introduced into it). This practice of grinding the beef in public also helped assure his customers of the veracity of Belt’s “Steakburger” claim because they could see for themselves that he was grinding steaks into the hamburger meat. Later, patrons were assured that Steakburgers were still made from these ingredients “at our own commissary” for shipment to the restaurants, where the open grill line remains “in sight” to customers.
Following the success of the original restaurant, Belt purchased a chain of “Goal Post” restaurants throughout Central Illinois, converting them into Steak ‘n Shake restaurants. He also added curb service at this point.
After Gus Belt
Steak ‘n Shake continued to expand throughout Illinois following the death of its creator in 1954, with ownership passing through many hands, including: Gus’s wife Edith Belt (who ran the chain until 1969), Longchamps, Inc. (an east coast steakhouse company that owned the chain from 1969 to 1971) and the Franklin Corporation, led by Robert Cronin, author of Selling Steakburgers: The Growth of a Corporate Culture. In 1981, Steak ‘n Shake was sold by Franklin to E. W. Kelley and Associates, whose chairman, E. W. “Ed” Kelley was considered largely responsible for the growth of the restaurant until his death on July 4, 2003. The brand had been declining during the late 1970s, and in 1984 was in the red. Around that time the headquarters had been transferred from Bloomington, Illinois, to Indianapolis, Indiana. Kelley hired the former head of Circle K to turn the business around. Steak ‘n Shake rapidly improved and expanded throughout the 1990s and into 2000. In early November 2004, The Steak ‘n Shake Company entered into an agreement to buy out its largest franchisee, Kelley Restaurants, Inc. (owned by the late Mr. Kelley’s family). KRI’s 16 sites will be purchased for about $1 million each; they are mainly in Georgia and North Carolina.
In 2008, there was a shake-up in the company’s Board of Directors. Value investors Sardar Biglari and Phillip Cooley were elected to the Board with well over 70% of the votes cast. As a result, Biglari was selected Chairman of the company.
Franchise pricing lawsuits
In 2012 and 2013, Steak ‘n Shake became involved in lawsuits with several of its franchisees concerning mandatory menu prices and mandatory food sourcing. As of August 2013, 5 lawsuits had been filed. The first lawsuit began in 2010 and is by Stuller, Inc., the Illinois franchisee that is the oldest franchisee in Steak ‘n Shake’s history: Stuller won a preliminary injunction that went to the 7th Circuit Court of Appeals in August of 2012. Three more franchisees filed suit in April 2013: Druco Restaurants based in St. Louis, People Sales & Profit Co. based in Georgia, and Scott’s S&S Inc. in Pennsylvania.Steak ‘n Shake filed suit against Denver franchisees Larry and Christopher Baerns in July 2013 over the same issues, with a counterclaim soon after. The complaints by the franchisees also question whether Steak ‘n Shake promised franchise results that could never actually be achieved under its policies.
Steak ‘n Shake restaurants are currently[when?] located in Alabama, Arkansas, Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Nevada, New Jersey, New York, North Carolina, Oklahoma, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and West Virginia.
In 2011, Steak ‘n Shake expanded again with new locations in San Antonio, Houston, and Austin, Texas, and Covington, Louisiana. In January 2012, they opened their first location in New York City. Indiana native David Letterman is a longtime fan of the chain; on the January 12, 2012 episode of the Late Show with David Letterman, Letterman featured the newly opened Steak ‘n Shake Signature beside the Ed Sullivan Theater in New York City.
Steak ‘n Shake has also opened a location inside the South Point Casino in Las Vegas, Nevada.
In October 2012, Steak ‘n Shake announced its first international expansion agreement with plans to open forty locations in the United Arab Emirates. The first of these locations is expected to open in Dubai in 2013.
On December 6, 2002, the company restated its financial statements to reflect a new accounting, which called for cash proceeds from some transactions to be accounted for as a “finance obligation”.On May 16, 2005, The Steak n Shake Company announced its revenues and earnings for the second quarter 2005 ended April 13, 2005. These results were presented on a basis consistent with a restatement for lease accounting.