Return to Classic Values Paves Way for Steak ‘n Shake’s Impressive Revival
Earlier this week, Biglari Holdings Inc., which owns the Steak ‘n Shake brand, announced that the restaurant chain has achieved six consecutive years of same-store sales and customer growth with peak growth rates in 2014 of 27.3 percent and 37.8 percent, respectively. During this unmatched period of growth, Steak ‘n Shake outgrew its competitors in same-store sales by nearly 20 percent without significantly raising prices. This is a dramatic turnaround for the nearly 80 year old chain, which was on the brink of insolvency during the height of the economic recession. The franchise network now spans 550 locations across the country, and shows no sign of slowing down.
The secret to Steak ‘n Shake’s success? A change in leadership and a fundamental shift of focus.
“When present management took over the reins in August of 2008, Steak ‘n Shake was generating negative cash flows from its core operations, was out of compliance with its debt covenants, and was within 90 days from insolvency,” explained Sardar Biglari, Chairman and Chief Executive Officer of Biglari Holdings, “The situation was so dire that we were taking measures such as paying some of our vendors with company shares to stay afloat. We quickly succeeded in turning around the chain because of our entrepreneurial culture, by placing the customer first, and in doing so we have been on an impressive growth streak. All of our approximately 23,000 employees, especially those who weathered the most perilous times in our history, ought to be proud of their achievements. I am most grateful for their efforts.”
This renewed focus on customer relationships impacts every aspect of the restaurants’ operations. Steak ‘n Shake invested in high quality ingredients for its menu items, including 100 percent beef, free from preservatives or artificial ingredients, along with fresh produce. Furthermore, its meals are now made-to-order.
The dramatic increase in standards has not gone unnoticed. Since Biglari took leadership of the brand, Steak ‘n Shake has been honored repeatedly by consumer and industry groups. In 2010, Steak ‘n Shake received the Nation’s Restaurant News Golden Chain Award. Zagat later recognized the brand for creating the best Milkshake in 2012, and Consumer Reports has ranked Steak ‘n Shake’s hamburgers as among the Top 10 finest-tasting in the country.
Premium steak burgers and hand-dipped milkshakes now have universal appeal, and the restaurant chain has expanded to meet growing customer demand with new restaurant formats. Steak ‘n Shake franchises can now be found in universities, casinos, airports, on turnpikes, in convenience stores, gas stations, and shopping centers across the country.
Not only has Steak ‘n Shake achieved great success in the United States, but customers around the globe have come to recognize and respect the company and its hard-working franchisees. 2013 saw the opening of Dubai’s first Steak ‘n Shake location. Dozens of new locations have been built or are being developed across the globe.
The key to the franchise business model’s strength is cooperation and collaboration. Franchisors set and maintain brand standards across the entire network, while franchisees manage their individual locations and respond to unique customer needs. Steak ‘n Shake is a great example of how a fundamental shift in perspective and strategy can turn a brand in decline into a global success story. Even better, thanks to the franchise model, this success benefits not only the national chain, but also local, independent small business owners and the tens of thousands of people they employ.