Can beef tallow save Steak n Shake?
The Indianapolis-based burger chain, owned by Biglari Holdings, has been basking in the attention given to its recent decision to cook its fries in beef tallow.
Robert F. Kennedy Jr., the secretary of health and human services, highlighted the decision. Steak n Shake’s chief operations officer told Fox News that the company's fries would be “RFK’d.”
ALL STEAK 'N SHAKE LOCATIONS ARE NOW COOKING OUR FRIES IN 100% ALL-NATURAL BEEF TALLOW
— Steak 'n Shake (@SteaknShake) March 1, 2025
(No preservatives, no chemicals, no additives) pic.twitter.com/rj4t0vrpii
The burger chain could use the publicity. Steak n Shake has been shrinking for years and is coming off a particularly challenging 2024.
Operating earnings last year declined 23% to $20.1 million, according to Biglari Holdings Chairman Sardar Biglari’s annual letter to shareholders over the weekend.
In the letter, Biglari acknowledged that the brand did not meet its goals last year, leading to an overhaul of management. “We failed to maintain operating margins despite growing same-store sales,” Biglari wrote. “We replaced the executives in charge of operations, finance, traditional franchising and supply chain.”
Steak n Shake continued shedding locations last year. The chain closed a net of 31 locations in 2024, according to the letter, and has now shrunk by 200 locations, one third, since 2018. Most notably, the closures are happening across different ownership groups: Steak n Shake closed two company locations, 21 traditional franchisee locations and eight “franchise partner units.”
Those franchise partner units have been key to the chain’s ownership strategy in recent years. Those “partners” pay a $10,000 fee plus up to 15% of sales as a fee and then split the profits with the company.
There are 173 such locations run by franchise partners, down from 181 last year. The average franchise partner has made $132,000 per year through the program over the past five years, Biglari wrote.
Steak n Shake’s ultimate plan is to transfer ownership of each of its company-run locations to these partners. But, Biglari wrote, “The combination of low profits at the remaining company-operated units and our tightened eligibility standards has made it a challenge to transition the balance of these restaurants. We are continuing to improve the performance of these units, which will make them more attractive to our prospective partners.”
Traditional franchising has been in decline for far longer. Steak n Shake had focused most of its growth on franchising from 2010 through 2018, when it grew from 71 franchised locations in 2013 to 2013 by 2019. But that number has shrunk each year since, to 107 last year, its lowest number of franchisee-owned units since 2013.
Biglari in his letter blamed the decline on “franchisees who failed to follow in our transformational footsteps.”
Steak n Shake for years deployed a discount-heavy strategy, which often stressed profitability as costs increased.
In recent years, however, it has changed its business model entirely, changing from a 24-hour, full-service family-dining brand into a counter-service, fast-food burger chain. The company added self-order kiosks to many of its locations.
The model is more efficient, Biglari wrote. Its restaurants are open 14 hours, rather than 24. And though sales-per-unit has fallen, sales-per-employee has doubled from $64,000 in 2019 to $137,000 in 2024. “The gain in productivity over a five-year period has translated into a trifecta of higher wages, higher quality and higher profits,” Biglari said.
But apparently not enough profits to prevent a management overhaul.
Biglari continues to say Steak n Shake will grow through traditional franchisees. “Because Steak n Shake underwent a radical change in its business model, it will take some time to spur traditional franchise growth,” he wrote. “The traditional franchise business is an important dimension of Steak n Shake because the funding necessary to expand the brand is borne by third parties. We have fixed the business model and are primed for franchise growth.”
And Steak n Shake, which spent so many years boasting how many meals it served that cost $4 or less, is now deploying a quality-focused strategy, buttressed by technology.
“While some competitors have reduced portion size and quality in recent years, we have increased the size of our beef patties by 9%, the quantity of mix-ins for milkshakes and the amount of homemade whipped cream we serve,” Biglari wrote.
“We have also changed the way we cook our fries, in 100% beef tallow instead of vegetable oil. Any one of our actions may go unnoticed by our customers but cumulatively they should strengthen our competitive position.”