Steak n Shake turns a profit and its CEO compares himself to Michelangelo

The burger chain generated a profit for the first time in four years last year thanks to its move to counter service, eliciting Sardar Biglari’s comparison to the Italian sculptor.
Steak n Shake earnings
Photograph: Shutterstock

Steak n Shake generated a profit for the first time in four years, parent company Biglari Holdings said on Monday, as the company’s shift to a counter-service model enabled the burger concept to take advantage of a takeout-centric consumer.

Biglari Holdings’ restaurants' division, which also includes the small buffet concept Western Sizzlin, generated $11.3 million in net earnings. It’s the first time the division has turned any sort of profit since 2017.

Sardar Biglari, CEO of Biglari Holdings, was apparently thrilled at the performance and likened the chain’s revitalization efforts to the work done by 16th-century Italian sculptor and painter Michelangelo.

He noted that the chain opted to go away from its full-service family-dining model to focus on its burgers, fries and shakes—turning it into a fast-food concept. The company invested $40 million into the effort, including the installation of self-order kiosks at many of the chain’s company-operated locations.

“Since its birth in 1934, Steak n Shake has had a pairing customers love: the Steakburger and milkshake,” Bigiari wrote over the weekend in his annual letter to shareholders. “We needed to discard any elements that prevented us from delivering our famous burgers and shakes with fast, hospitable service at a great value.

“Michelangelo is quoted as saying, ‘The sculpture is already complete within the marble block before I start my work. I just have to chisel away the superfluous material.’ Likewise, we removed the superfluous elements, from breakfast items and chicken sandwiches to silverware and table service, to name a few, in order to sculpt a better business model. We Michelangelo’ed Steak n Shake.”

While it may have Michelangelo’ed Steak n Shake, at least part of the improvement in profitability came from the fact that the company simply didn’t have to write off as many stores as it did a year ago. The company recorded $4.6 million in “impairments” in 2021. That was $19 million less than the amount of impairments in 2020.

Steak n Shake does not report same-store sales data and revenue figures are difficult to compare given that the company has sold many of its corporate restaurants to franchisees—and has temporarily closed several others. That makes it difficult to know how much the company’s sales improved in 2021.

The brand had struggled in recent years amid operations challenges and falling same-store sales—they’d been declining for several straight quarters before the company stopped reporting them. The financial problems nearly put the brand into bankruptcy before Biglari Holdings stepped in at the last minute to pay off its debt.

The struggles prompted a massive overhaul on multiple levels, along with store closures both temporary and permanent.

First, the company is putting its company locations into the hands of operating partners who pay $10,000 and split the profits with the brand after paying a 15% fee. Steak n Shake has sold 159 of the more than 400 company locations it operated in 2018 to such operators. It calls such operators “franchise partners.”

Biglari in his letter said that the company has had 52,000 applications from candidates, for an “acceptance rate of 0.31%.” “The franchise opportunity cannot be purchased, only earned,” he said. “Our program is designed for those long on ability but short on capital. Motivated men and women are making a difference at Steak n Shake.”

But Steak n Shake and many of its traditional franchisees have closed stores. The company operates 199 locations, but 42 of them are closed. The company has reopened 50 locations that had been temporarily closed and said it plans to refranchise most of its restaurants.

Franchisees have also closed stores, including 16 last year and 20 the year before. As a result, between the company and its operators, Steak n Shake has closed 90 locations since 2018, giving the brand 536 units.

But the remaining company-owned and franchise-partner restaurants are being converted into counter service restaurants. Steak n Shake for its entire history operated something of a hybrid model, with full-service family dining and drive-thrus. Biglari in his letter says the model is more productive. “Under the old model, annual sales per employee, measured on a full-time equivalent basis, were about $64,000,” he wrote. “Now they are nearly $118,000. The resultant cost savings have largely been passed onto customers through low prices and to associates through higher wages.”

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