Steak__n_Shake_exterior_shot.png Steak ‘n Shake

Steak ‘n Shake offers franchise partner deal

Brand works to pare company-owned units with $10,000 training-fee offer

Steak ‘n Shake Inc., which has been moving toward becoming a more franchised model, is launching a training program offer for prospective restaurant franchise partners.

The 621-unit Indianapolis, Ind.-based brand is offering potential franchise partners who pay $10,000 and commit to a six-month training program the opportunity to own what is now a company-operated Steak ‘n Shake unit.

“We are seeking owners to operate restaurants,” said Judy Kadylak, Steak ‘n Shake’s vice president of marketing, in response to emailed questions. “A single-unit operator will be singularly focused on running his or her restaurant.”

Shake ‘n Shake, which is a subsidiary of San Antonio, Texas-based Biglari Holdings Inc., owns and operates 415 of its restaurants, with 412 of those in the U.S. and three abroad. The brand also franchises 175 U.S. units and 31 internationally. Biglari also owns the 66-unit Western Sizzlin brand, of which all but four are franchised.

“Our prospects in franchise operations — domestic and international — look bright,” said Sardar Biglari, CEO of Biglari Holdings, in his February 2018 annual letter to shareholders.

Of the new ownership-training program, Biglari added in a statement: “I want to provide an opportunity to other entrepreneurs who are highly motivated to excel but lack the financial means. What will be important to become a franchisee is not great capital but great ability. We are seeking to harness the power of entrepreneurs and to create a company of owners.”

Kadylak said the $10,000 would be paid by franchise partner applicants upfront and cover training costs.

“We are seeking only those who can achieve the gold standard in execution,” she said. “It takes ability not money to be granted a franchise.”

The program is similar to that of Atlanta-based Chick-fil-A Inc., which requires an initial fee of $10,000 to select franchisees. Chick-fil-A will pay for land, construction and equipment and then rent it to the franchisee for 15 percent of sales plus 50 percent of pre-tax profit.

Steak ‘n Shake’s program, Kadylak said, will have royalty rates assessed up to 15 percent as well.

“The new franchisees will have full ownership of their business, while earning 50 percent of the restaurant profits,” she said, “This opportunity requires that the individual be free of any other active business ventures and operate the restaurant on a full-time hands-on basis.”

Kadylak said current company-owned Steak ‘n Shake units are on both owned and leased property, and negotiated leases will be passed through to the franchisees.

She added that “no current franchisee has raised any issues or concerns.”

The franchise partner offer comes in the wake of a challenging 2017, when the full-service Steak ‘n Shake concept faced revenue and traffic hurdles.

In his 2017 year-end letter, Biglari said Steak ‘n Shake revenue fell to $792.8 million in 2017 from $804.4 million in the prior year, and earnings fell to $431,000 from $34.7 million in the prior year. Customer counts were down 1.8 percent.

Steak ‘n Shake first franchised in 1939, five years after the concept was founded, but only grew franchised units at about one a year until 2010.

“Over the last seven years we have added, net of closures, 129 franchised units, or an average of about 18 units per year,” Biglari said. “For the period 2011 through 2015, the franchising business operated at a loss, but intrinsic value advanced. In 2017, franchise operations generated a profit of $4 million, despite net unit growth falling short of our expectations.”

The company has seen franchised growth in non-traditional Steak ‘n Shake locations, such as universities, casinos, airports, sports arenas and gas stations, he said.

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

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