This article is based on its most recent FDD.
Steak And Shake franchise (also known as Steak ‘n Shake) is a classic American brand serving premium burgers and milkshakes.
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The mission at Steak n Shake is to serve customers the highest quality burgers and shakes along with extending them great service at the lowest possible prices
In 1939, Steak ‘n Shake began offering a limited number of franchises for Steak ‘n Shake restaurants, but it did not make a general offering to sell franchises until 1991. As of December 30, 2020 (“FY20”) there were 159 franchise locations and 272 company-operated Steak ‘n Shake restaurants within the U.S. Steak n Shake offers franchises for restaurants with various operating formats: Freestanding Quick Service Format, In-line Quick Service, Non-traditional, and roadside.
The Steak ‘n Shake Company is a wholly-owned subsidiary of Biglari Holdings Inc. (“Biglari Holdings”), an Indiana corporation founded by Sardar Biglari. Biglari Holdings’ common stock is quoted under the symbols “BH.A” and “BH” on the New York Stock Exchange. Sardar Biglari is the Founder, Chairman and Chief Executive Officer of Biglari Holdings.
How Much is a Steak And Shake Franchise?
The Steak and Shake franchise fee is $25,000. This is the upfront fee that must be paid when opening a Steak n Shake franchise. However, there is a way to own part of a Steak n Shake for less…
New: Steak And Shake Franchising Company-Operated Restaurants
For a total investment of $10,000 selected franchisees (who are called Franchise Partners) are granted the rights necessary to operate a franchised Steak ‘n Shake restaurant.
This Opportunity as a Franchise Partner:
Become a Franchise Partner with a $10,000 investment
Earn 50% of restaurant profits
Unlimited earning potential
Steak And Shake Franchise Cost
The estimated total investment necessary to begin operation of a traditional Steak n Shake free-standing Quick Service restaurant ranges from $1,208,000 – $1,687,000.
Steak n Shake also offers various operating formats and their costs are different from the traditional free standing restaurant.
In-Line Quick Service Format: $454,000 – $1,371,000
Non-Traditional: $316,000 – $715,000
Roadside Format: $705,000 – $1,199,497
Additional Cost Breakdown
The following costs are part of the upfront costs included in the initial investment. Many of these are one-time fees that are needed to launch the franchise.
Additional Cost Breakdown
| Construction Management / Fee | $0 – $35,000 |
| Site Improvements | $172,500 |
| Building or Leasehold Improvements | $621,000 – $762,860 |
| Furniture & Fixtures, Equipment & Signage | $303,500 – $400,640 |
| Pre-Opening Expenses | $5,000 – $10,000 |
| Inventory and Supplies for Opening | $10,000 – $15,000 |
| Training Expenses | $16,000 – $55,000 |
| Architectural, Civil Engineering & Other Professional Fees | $35,000 – $78,000 |
| Impact and Tap Fees | $5,000 – $78,000 |
| Grand Opening Marketing Expenses | $0 – $25,000 |
| Extension Fee | $0 – $10,000 |
| Additional Funds for 3 months | $15,000 – $20,000 |
| Total | $1,208,000 – $1,687,000 |
Ongoing Costs and Fees
Royalty and System Fee & License Fee: 5.5% of Gross Receipts weekly.
Marketing Fee: 3% of Gross Receipts weekly and can be waived for nontraditional locations.
How Much Do Franchise Owners Make?
Steak ‘n Shake Franchise Sales Figures
The historical financial performance representations in this section include results for: The 12 month period ended December 23, 2020 (“FY20”) for 192 company-operated and 84 traditional franchise Restaurants which had been in continuous operation for at least 18 consecutive months.
FY20 Annual Net Sales
Traditional Franchise Restaurants
Average Net Sales: $1,403,587
Median: $1,346,332
Highest Net Sales: $2,826,778
Lowest Net Sales: $524,382
Company-Operated Restaurants
Average Net Sales: $1,233,146
Median: $1,235,112
Highest Net Sales: $2,190,628
Lowest Net Sales: $678,503
Based on 192 company-operated and 84 traditional franchise Restaurants used for this data, it shows that Traditional Franchise Restaurants have higher average net sales and median sales than company-operated restaurants.
Steak And Shake Income Statement (Franchisor)
Steak And Shake Consolidated Statements of Earnings (Dollars in thousands)
| 2020 | 2019 | 2018 | |
|---|---|---|---|
| Revenues | $ 343,699 | $ 594,446 | $ 759,918 |
| Cost and Expenses | |||
| Restaurant cost of sales | $ 240,253 | $ 489,058 | $ 624,898 |
| Selling, general and administrative | $ 59,671 | $ 80,224 | $ 121,111 |
| Impaiments | $ 23,646 | $ 8,186 | $ 5,677 |
| Depreciation and amortization | $ 18,675 | $ 20,379 | $ 18,045 |
| Interest expense | $ 15,711 | $ 20,999 | $ 19,551 |
| $ 357,956 | $ 618,846 | $ 789,282 | |
| Investment partnership gains (losses) | $ (17,202) | $ 12,640 | $ (39,750) |
| Earnings (loss) before income taxes | $ (31,459) | $ (11,760) | $ (69,114) |
| Income tax benefit | $ (6,860) | $ (5,127) | $ (22,159) |
| Net earnings (loss) | $ (24,599) | $ (6,633) | $ (46,955) |
Steak And Shake Consolidated Statements of Comprehensive Income (Dollars in thousands)
| 2020 | 2019 | 2018 | |
|---|---|---|---|
| Net earnings (loss) | $ (24,599) | $ (6,633) | $ (46,955) |
| Other comprehensive income (loss): | |||
| Foreign currency translation | 1,263 | (287) | (1,047) |
| Total comprehensive income (Loss) | $ (23,336) | $ (6,930) | $ (48,002) |
Steak ‘n Shake Income Statement Key Insights
Overall, Steak ‘n Shake is not a profitable business, with a net earnings loss of $24.6 million in 2020. This has been a trend in both 2019 and 2018 as in these respective years there were recording losses of $ 6.6 million and $46.9.
Revenues also have seen a decline YoY. In 2018 revenues were $760 million but in 2019 revenues declined 21% to $594 million and further declined another 42% to $343 million in 2020.
Steak And Shake Franchisor Cash Flow Statement
Steak ‘n Shake Franchisor Consolidated Statement Cash Flows (Dollars in thousands)
| 2020 | 2019 | 2018 | |
|---|---|---|---|
| Operating activities | |||
| Net earnings (loss) | $ (24,599) | $ (6,633) | $ (46,955) |
| Adjustments to reconcile net earnings (loss) to operating cash flows: | |||
| Depreciation and amortization | $ 18,675 | $ 20,379 | $ 18,045 |
| Provision for deferred income taxes | $ (3,453) | $ (9,340) | $ (13,513) |
| Asset impairments and other non-cash expenses | $ 24,636 | $ 9,113 | $ 6,610 |
| (Gain) toss on disposal | $ (951) | $ 578 | $ 1,069 |
| Investment partnership (gains) losses | $ 17,202 | $ (12,640) | $ 39,750 |
| Distributions from investment partnerships | $ 51,250 | $ 11,241 | $ 2,400 |
| Changes in receivables and inventories | $ (70) | $ 3,425 | $ (179) |
| Other changes in assets | $ (2,298) | $ 9,735 | $ (88) |
| Changes in accounts payable and accrued expenses | $ (23,360) | $ (27,732) | $ (5,376) |
Net cash provided by (used In) operating activities |
$ 57,032 | $ (1,874) | $ 1,763 |
| Investing activities | |||
| Capital expenditures | $ (17,852) | $ (9,951) | $ (17,982) |
| Purchases of perpetual lease rights | – | – | $ (2,503) |
| Proceeds from property and equipment disposals | $ 2,147 | $ 2,876 | $ 853 |
| Distributions from investment partnerships | – | $ 40,000 | $ 61,000 |
Net cash provided by (used in) investing activities |
$ (15,705) | $ 32,925 | $ 44,368 |
| Financing activities | |||
| Principal payments on long-term debt | $ (23,279) | $ (2,200) | $ (2,200) |
| Loan from Biglari Holdings | $ (11,700) | $ 11,700 | – |
| Principal payments on direct financing lease obligations | – | $ (41,241) | $ (61,000) |
Net cash used In financing activities |
$ (5,571) | $ (5,685) | $ (5,049) |
| Effect of exchange rate changes on cash | $ 10 | $ (5) | $ (78) |
| Increase (decrease) in cash, cash equivalents and restricted cash. | $ 787 | $ (6,380) | $ (22,196) |
| Cash, cash equivalents and restricted cash at beginning of year | $ 12,601 | $ 18,981 | $ 41,177 |
| Restricted cash at end of year, cash and cash equivalents | $ 13,388 | $ 12,601 | $ 18,981 |
| Cash and cash equivalent | $ 10,750 | $ 9,702 | $ 12,553 |
| Restricted cash included in other long-term assets | $ 2,638 | $ 2,899 | $ 6,428 |
| Cash, cash equivalents and restricted cash | $ 13,388 | $ 12,601 | $ 18,981 |
Cash Flow Statement Key Insights
In 2020, Steak ‘n Shake had a net income of ($24.6) million, but their cash, cash equivalents and restricted cash were $13.4 million at the end of 2020. The company in 2018 and 2019 had large distributions to Biglari Holdings in 2018 and 2019 amounting to $61 million and $41 million those respective years but had no distributions in 2020.
In 2020 there was $57 million provided by operating activities compared to 2019 which had $1.8 million used for operating activities.
How many Steak And Shake units have opened/closed?
Systemwide Outlet Summary
| Outlet type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Traditional Franchised | FY18 | 173 | 173 | +12 |
| FY19 | 185 | 185 | -2 | |
| FY20 | 183 | 183 | -24 | |
| Company-Owned | FY18 | 412 | 412 | -2 |
| FY19 | 410 | 410 | -45 | |
| 2020 | 365 | 365 | -93 | |
| Total Outlets | FY18 | 585 | 595 | +10 |
| FY19 | 595 | 548 | -47 | |
| FY20 | 548 | 431 | -117 |
As seen in the table above both Steak ‘n Shake franchise locations and company operated locations have declined over the past two years. In 2020 there was a significant decline of 97 closed company operated restaurants and 24 closed franchise locations. These numbers are concerning indicating the business overall is in decline or downsizing phase
Conclusion
Steak ‘n Shake is a fast casual service restaurant that boasts its American brand serving premium burgers and milkshakes. However, the business has not seen profitability over the last three years and restaurant closings have increased over the last three years.
Steak n Shake is in a very crowded market competing with brands like Shake Shack, Five Guys, and the standard fast food companies like McDonalds, and Burger King.
As seen in the Annual Net Sales data, traditional franchise restaurant locations have an average revenue of around $1.4 million which compares to the average McDonald’s restaurant that has around $2.7 million a year in sales.
We strongly recommend you speak to at least 5 Steak ‘n Shake franchisees to better understand the financials (see questions to ask).
Think Steak n Shake is the right franchise for you, or are you interested in other franchise opportunities in the food and beverage industry? Check out our listings page on the Vetted Biz website for thousands of franchises available for your investment.
