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Biglari calls for the ouster of Steak n Shake’s CEO

SAN ANTONIO Texas Just ahead of Steak n Shake Co.’s annual shareholder meeting next month, activist investor Sardar Biglari called for the ouster of leadership at the 491-unit Steak n Shake brand and urged shareholders to elect him and a colleague to the troubled company’s board.

In a letter to Steak n Shake shareholders released Wednesday, Biglari, who through his investment affiliates owns more than 8-percent of Steak n Shake stock, reiterated his nomination for two seats on the Indianapolis-based restaurant company’s board of directors. He also outlined his plans for the company should shareholders elect him and his associate, Philip L. Cooley, to the company’s board. Biglari, 30, is chairman and chief executive of Western Sizzlin Corp., the Roanoke, Va.-based parent of a 129-unit steak-and-buffet chain.

“Our plan is to obtain two board seats at the next annual meeting and then call a special meeting to vote on replacing most of the board,” Biglari said in the letter, the latest in a series of communications to Steak n Shake shareholders.

Biglari blasted current Steak n Shake management, alleging that they had allowed expenses to rise, profits to fall and had pursued a costly strategy of developing corporate restaurants when return on capital hurdles were not met.

He specifically urged the replacement of Alan Gilman, chairman and interim chief executive of Steak n Shake, and director James Williamson Jr., former president and chief executive of Consolidated Products Inc.

“It is time to remove the checkbook from Mr. Gilman and the current leaders of the company,” Biglari said.

His plans for Steak n Shake include an immediate halting of new corporate-store development, reductions in corporate costs and more aggressive refranchising and franchising efforts.

“Unit economics must be attractive for the company and its franchisees,” he said. “We have been puzzled by the board’s approving the current strategic plan of opening restaurants when their return/risk profile has not been economically appealing. It’s far more lucrative to increase traffic at existing stores than to increase it by building new outlets.”

Biglari is founder of The Lion Fund LP, an investment group based in San Antonio. He had formerly owned an internet service provider, took control at Western Sizzlin after acquiring a large stake in the buffet company and as a shareholder has pushed for management changes at Friendly Ice Cream and Applebee’s.

For Steak n Shake’s latest fiscal year ended in September, net income dropped to $11.8 million from $28.0 million a year earlier. Annual revenues rose 2.4 percent to $654.1 million and full-year same-store sales at corporate locations dropped 3.8 percent.

Steak n Shake’s annual meeting, where all board members will be voted upon, is scheduled for the second week of February.

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