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Steak ‘n Shake same-store sales plunge as more restaurants close

The chain has temporarily closed 44 locations amid ongoing sales and cost challenges.
Photograph courtesy of Steak 'n Shake

Steak ‘n Shake’s same-store sales and traffic deteriorated in the first quarter as the burger chain continued to temporarily close company-owned restaurants.

The company has closed 46 corporate locations in the quarter ended March 31, 44 of which are listed as “temporarily” closed.

Steak ‘n Shake had been temporarily closing restaurants, saying that they had been closed to get them ready to sell to franchisees as part of the chain’s refranchising initiative. Such temporary closures are rare in refranchising, however, because it’s traditionally more difficult to reopen closed locations.

And the closures are coming as the chain’s sales and traffic appear to be worsening.

Same-store sales fell 7.9% in the first quarter, including a 7.7% decline in same-store traffic.

The key metric, which measures sales progress at existing locations, has been down for 10 straight quarters and 11 of the past 12.

On a two-year, stacked basis, same-store sales were down 9.6% in the first quarter. Same-store traffic was down almost 15% over two years.

The closures represent more than 10% of Steak ‘n Shake’s 413 company-operated locations as of Dec. 31, and more than 7% of the 626 locations the chain operated at the end of the year, including 213 franchised units.

Revenue for parent company Biglari Holdings’ restaurant operations declined 10% to $174 million in the first quarter, according to Securities and Exchange Commission filings.

The company’s restaurant operations division, which also includes the mostly franchised, 59-unit Western Sizzlin’, lost $13.3 million in the first quarter.

Steak ‘n Shake’s restaurant operators were plagued by rising costs in the first quarter. Operating costs as a percent of sales were 56.3% in the period, up from 52.7% a year ago. The company blamed “higher wages and benefits” for the increase.

A representative for Steak ‘n Shake did not respond to a request for comment Monday morning.

Steak ‘n Shake has been undertaking a complicated refranchising strategy, using a managing partner-type model similar to the one employed by Chick-fil-A. In this case, high-performing managers that meet certain metrics pay $10,000 for the right to own one of the chain’s restaurants and then share in the profits with the franchisor.

It’s uncertain how many locations have been refranchised. Ten franchised locations were opened in the first three months of the year, but 10 locations were closed over that period. Franchisees operate 213 restaurants, 12 more than a year ago.

“The essence of our program is to simultaneously achieve standardization while unleashing the entrepreneurial spirit of the operators,” Biglari Holdings Chairman Sardar Biglari said in his annual letter to shareholders earlier this year. “We expect the combination to reinvent Steak ‘n Shake as the best quick-service restaurant company in the burger segment of the industry.”

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