Facing deepening sales and traffic declines and steep earnings declines, Steak ‘n Shake has closed more than 100 locations so far this year, according to federal securities filings Friday from parent company Biglari Holdings.
The burger chain has closed 103 locations “temporarily” since the beginning of the year as it waits for operators to take them over. The company wants single-store franchisees to run the restaurants for a $10,000 fee and a split of the stores’ profits.
The number suggests that Steak ‘n Shake has closed an additional 60 locations temporarily since the end of the first quarter—when the chain closed 43 restaurants.
The temporary closures, along with another three closures listed as permanent, account for more than a quarter of the 413 corporate locations Steak ‘n Shake operated at the end of 2018—and 17% of the company’s total unit count.
But the temporary closures also come amid deepening financial problems for the chain that are putting at risk the $183 million it has left on its loan—a loan that is not guaranteed by parent company Biglari Holdings.
Same-store sales in the second quarter ended June 30 declined 5.9%. Traffic, meanwhile, declined 9.2%.
The weak sales results are notable given that Steak ‘n Shake has likely closed many of its poorest-performing locations.
Even with closures seemingly easing financial issues, Steak ‘n Shake remains in the red. The chain had a $3 million operating loss in the quarter, compared with a $2.7 million profit in the same period a year earlier.
So far this year, Steak ‘n Shake has recorded $21 million in operating losses. The company’s financials prompted a credit downgrade from the S&P 500 last month.
In a federal securities filing on Friday, Steak ‘n Shake cited profitability as a reason for its shift to a franchise partnership program.
“Since 2017, Steak ‘n Shake has experienced sales declines, which is the primary reason for Steak ‘n Shake’s lower profitability,” the filing said. “To mitigate the sales declines and increase profitability, Steak ‘n Shake is emphasizing its franchise partnership program.”
The company said that it is “actively working to identify franchise partners for these closed stores.”
Biglari Holdings also acknowledged that it has settled a pair of class-action lawsuits filed by former company managers for $8.35 million. A federal court agreed to the settlement last month.
A federal judge earlier this year ordered Steak ‘n Shake to pay $7.7 million in a case involving St. Louis area managers. The second lawsuit covered managers at the chain’s locations outside of the St. Louis area.