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Steak ‘n Shake reopens one of its restaurants

The burger chain, which had been closing dozens of locations, has reopened a St. Louis store under its new refranchising initiative.
Photograph courtesy of Steak 'n Shake

Steak ‘n Shake said Friday that it reopened one of its St. Louis restaurants under the company’s franchise partnership program.

The Indianapolis-based burger chain was able to refranchise the restaurant under Linda Metz, who reopened the location Monday. The location has set a “grand reopening” celebration for Tuesday.

“Steak ‘n Shake has been a staple in St. Louis for many years, and I am so thrilled to continue the brand’s legacy while fulfilling my dream of owning my own restaurant,” Metz said in a statement.

The reopening is an important sign for Steak ‘n Shake, which is owned by investment firm Biglari Holdings.

The chain operates about two-thirds of its 600 locations. But it’s undertaking a complicated and rare initiative to refranchise those 400 company-owned restaurants.

It plans to sell all of those restaurants to single-store operators who pay $10,000 and then split the profits with the franchisor—after they go through a lengthy and rigorous training regimen.

Traditionally, restaurant chains refranchise with multiunit operators. In this instance, Steak ‘n Shake is trying to shift from a mostly company-run operation into a fully franchised system under a model similar to uber-popular Atlanta-based chicken chain Chick-fil-A.

But with losses mounting at its restaurants, Steak ‘n Shake has been closing locations, saying the closures are meant to prepare the locations for operators to take them over. The company said in May that it had closed 46 locations earlier this year, 44 of which were listed as “temporary” closures.

Reports since have suggested closures total at least 60. Sardar Biglari, CEO of Biglari Holdings, reportedly said at the company’s annual meeting earlier this year that there could be more closures.

It’s rare for restaurants that are on the market for a resale to be closed, even temporarily, outside of major remodel projects. But the company maintained that they would be reopened once franchise partners were ready to take over the store.

The St. Louis reopening is the first reported reopening of one of the closed restaurants. But the company has refranchised at least four locations before this.

Metz told a St. Louis TV station in March that there were four other stores in that market close to achieving “gold” status, meaning the operator could take over the store.

Nevertheless, the closures and refranchising initiative come as the brand has seen steep declines in same-store sales and traffic, and as operating losses mount. 

Biglari Holdings’ restaurant operations lost $13.3 million in the first three months of the year. Same-store sales declined 7.9% in the first quarter, while traffic declined 7.7%.

“We are very pleased to reopen our restaurant in St. Louis under Linda’s leadership,” said Tom Murray, chief financial officer of franchise operations for Steak ‘n Shake, in a statement.

“The franchise partnership program gives operators like Linda the opportunity to live the American dream of business ownership and to serve our guests in the most hospitable manner.”

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