Steak ’n Shake has decided to freeze its menu prices in 2012, using a significantly different tactic from many of the industry’s biggest players who are testing or implementing menu price increases to offset commodity and labor inflation.
The Indianapolis-based, 490-unit chain is promoting the move with an offer for a free Orange Freeze beverage to any customer who orders a steakburger and fries through Jan. 5.
“Steak ’n Shake has an extremely strong value proposition that resonates with consumers,” said Sardar Biglari, chairman and chief executive of Steak n Shake parent company Biglari Holdings Inc. “During 2012, we have no intention of raising menu prices, especially because we are attempting to insulate our customers from inflation while continuing to provide the finest in burgers and shakes.”
Steak ’n Shake and its restaurant industry peers are this year expected to be exposed to an inflationary environment many economists predict to be volatile for commodities .
Many chains have already reported food basket inflation of 5 percent or more in 2011, and several brands expect commodity prices to rise anywhere between 3 percent and 9 percent this year, according to a research note from investment bank Barclays Capital. Barclays own projection for the restaurant industry’s year-over-year food cost inflation ranges between 3 percent and 5 percent.
According to the Barclays report, some casual-dining brands have already signaled the size of price increases they plan to take in 2012, including at least 2 percent at Buffalo Wild Wings, between 2 percent and 3 percent at Darden Restaurants, and a test of 2 percent at Texas Roadhouse.
Steak ’n Shake’s family-dining and quick-service competitors like Denny’s, Jack in the Box and Wendy’s have not disclosed plans to increase menu prices, but have projected commodity costs to rise anywhere from 3 percent to 6 percent. In 2011, chains like McDonald’s, Starbucks Coffee and Chipotle Mexican Grill reported that menu price hikes enacted did not significantly hurt traffic, and those brands have not indicated whether their pricing levels would stay put in 2012.
Biglari’s San Antonio-based Biglari Holdings also owns the 92-unit Western Sizzlin and several unrelated investment management entities. Since gaining control of Steak ’n Shake in 2008 as chairman and CEO after a prolonged proxy battle, the chain has posted positive same-store sales and traffic increases, driven largely part by value positioning with its “4 Meals Under $4” menu, the “1/2 Price Happy Hour”, “Kids Eat Free” on the weekends, and “$3.99 All You Can Eat Pancakes” during breakfast hours.
For the Sept. 28-ended fourth quarter , Biglari Holdings reported a 4.2-percent increase in same-store sales at Steak ’n Shake, as well as a 4.8-percent increase in traffic.