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Steak n Shake plans to reopen more locations

The chain, which at one point had temporarily closed more than 100 locations, plans to bring all of its locations back on line.
Photograph: Shutterstock

Steak n Shake, the family dining restaurant turned fast-food burger chain, is reopening many of the locations it temporarily closed at the outset of the pandemic.

The Indianapolis-based chain, which at one point had more than 100 locations listed as temporarily closed, reopened 33 locations in the fourth quarter, according to federal-securities filings and a company press release.

Parent company Biglari Holdings’ annual report said that 57 of its 276 company-operated locations were closed as of Dec. 31, following the reopening of the 33 units. The report indicated that it would ultimately reopen those locations.

“Throughout 2020, it became increasingly clear that the problems leading to the operational shortfalls of certain restaurants could be fixed, thereby enabling those restaurants to produce a satisfactory return on investment,” the report said.

In a rare press release on Tuesday, Steak n Shake said that the previously closed restaurants “did not deliver excellent customer service.”

The company also said it plans to continue transferring restaurants to operating partners who pay $10,000 for the right to operate the restaurant and split profits with Steak n Shake following initial payment.

The company said that operators make $161,000 in their first year on average.

Steak n Shake is hoping that these partners can bolster sales coming out of the pandemic. The chain’s same-store sales have struggled in the past four years, which led to temporary and permanent closures and had it on the brink of bankruptcy before a last-minute rescue from Biglari Holdings.

Operating partners are also central to the company’s strategy to shift to an all-franchised model.

Steak n Shake had 276 company-operated locations at the end of 2020. That’s down from 413 at the end of 2018.

Much of that reduction had come through the “transfer” of restaurants to operating partners, who ran 86 locations at the end of 2020, according to securities filings. Steak n Shake transferred 57 of those restaurants to partners last year.

Meanwhile, traditional franchisees operated 194 locations—though that was down by 19 locations last year as the pandemic led to a high rate of closures. Over the past two years, Steak n Shake has shrunk by 69 locations, including 50 permanent closures of company-operated locations. Overall, Steak n Shake operates 556 locations.

The closures, coupled with the transfer of locations to partners and the same-store sales declines, have hammered revenues. Biglari Holdings' restaurant revenues are less than half of what they were two years ago.

Biglari Holdings’ payoff of the chain’s debt, which was somewhat unexpected, has eliminated the specter of a bankruptcy filing that likely would have resulted in a sale of the restaurant chain. But it’s also given the chain an opportunity to put money into its restaurants—Steak n Shake plans to convert its restaurants to a kiosk-driven counter-service model and will fund the conversion of its operating partner units and company-run stores.

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