Steak n Shake closed fewer stores in the first three months of 2020 and managed to do something it hadn’t done much in the past couple of years: Make a profit.
The burger chain, which was barely kept out of bankruptcy earlier this year when its parent company paid off its $153 million in debt, helped parent Biglari Holdings’ restaurant operations generate a $4.1 million profit in the first three months of 2021.
That came despite a steep decline in total revenues. Revenues fell by 38.5% in the first quarter, to just under $70 million, from $114 million in the same period a year ago. The data also include numbers from Biglari Holdings’ considerably smaller Western Sizzlin brand.
Steak n Shake’s revenue decline came from a variety of sources. For one thing, it operates fewer stores either because it closed restaurants or sold them off.
Steak n Shake operates 253 of the company’s 550 locations, for instance. In the same period a year ago it operated 306. And 50 of Steak n Shake’s 250 company locations currently are temporarily closed. The chain permanently closed one location in the period.
Traditional franchisees closed five locations and operate 189. But franchise partners, operating partners who pay $10,000 and share in the profits with the company, operate 108 of the chain’s locations after taking control of another 22 from Steak n Shake in the first three quarters of the year.
Steak n Shake has been steadily shrinking for the past three years, though how many locations are actually open has varied considerably from one quarter to the other as the chain temporarily closed units, ostensibly to get them ready for operating partners. Officially, the chain has shuttered 12% of the locations it operated at the end of 2018.
Much of the company’s newfound profitability came because it was closing fewer locations and therefore didn’t take as many writeoffs—Steak n Shake had just $298,000 in impairments in the first quarter, compared to $10.3 million in the same period a year ago.
Exactly how Steak n Shake’s restaurants are performing is uncertain, however, because the company has stopped providing any data on comparable-store sales or traffic. But the chain’s same-store sales had been declining for much of the past three years, which prompted the operating losses and put the company at risk of a bankruptcy filing earlier this year.
It’s possible, for instance, that the company’s same-store sales rebounded this year along with much of the rest of the industry—buoyed by consumers’ growing use of dine-in service and continued use of drive-thrus. Yet parent Biglari Holdings does not provide that data. Nor does the company report data on the performance of franchisees or of operating partners.
Steak n Shake is now undertaking a pair of complex operations changes at once. In one, it is transferring all of its restaurants to operating partners, similar to the model employed by Chick-fil-A. In the other, it is converting locations to counter service, shifting away from the full-service family dining model it had used for its entire history.