Biglari Holdings' profit soars in 2010

Company cites Steak n Shake sales, Western Sizzlin acquisition

Biglari Holdings Inc. more than quadrupled profit for fiscal 2010 on the acquisition of Western Sizzlin and strong sales at Steak n Shake.

The San Antonio-based Biglari Holdings, which also owns Biglari Capital Corp., posted profit of $28.1 million, or $19.99 per share, for the year ended Sept. 29, compared with $6 million, or $4.20 per share. Total revenue rose 7.2 percent to $673.8 million in 2010 from $628.7 million last year, which the company credited to Steak n Shake’s same-store sales increases.

For the fourth quarter, Steak n Shake saw same-store sale rise 6.8 percent, marking the seventh consecutive quarter of positive gains, Biglari Holdings said. Customer traffic was 8.6 percent in the quarter.

Biglari Holdings also owns and franchises the 96-unit Western Sizzlin chain, which it acquired in a $23 million deal in March.

Sardar Biglari, chairman and chief executive of Biglari Holdings, said in a letter to shareholders that Steak n Shake "had a banner year,” noting that the chain started 2009 losing nearly $100,000 per day and ended the most recent fiscal year making more than $100,00 per day.

Biglari said Steak n Shake, which opened its first franchised unit in 1939, would be expanding its franchise base. Currently, 71 of Steak n Shake's 483 restaurants are franchised.

“Over the last 71 years, the company has produced an average of one franchised unit per year," Biglari said in his letter. "That is not the kind of pace to which I am accustomed. This segment of the business requires a truly entrepreneurial approach because, though 71 years in existence, it
now resembles a start-up.”

He added that Steak n Shake is recruiting and filling “vital positions” to expand franchise operations.

The company has redesigned the Steak n Shake prototype [3], reducing it from 4,200 square feet to 3,200 square feet while maintaining the same number of seats. Biglari said the redesign has cut the cost to open a new restaurant from $2.2 million to $1.5 million. He added that average unit volumes are around $1.5 million.

“My projection is that revenues emanating from each unit will doubtless
surpass the $1.5 million mark, which combined with our current operating margin would yield an attractive return on investment for the franchisee,” he said. “The former model was simply inefficiently designed.”

The first new Steak n Shake unit was built in Rome, Ga., three others have been added and the fifth is scheduled to open Dec. 16 at the South Point Casino in Las Vegas.

With the Western Sizzlin acquisition, Biglari has five corporate units and 91 franchised stores, including Western Sizzlin, Wood Grill Buffet and Great American Steak & Buffet.

In that deal, Biglari Holdings acquired 23 acres of San Antonio land, which Biglari said is “nearly ready for development” and would soon be home to a new corporate Steak n Shake.

Contact Ron Ruggless at [email protected]