The Steak ‘n Shake franchise has a new model where for only $10,000 you can operate your own Franchise and be guaranteed $100k in your first year! But is it too good to be true?
Steak ‘n Shake is a big name and have been since 1934, started by by Gus Belt. As of last year they had just over 600 locations, of which over 400 are corporately owned and about 200 are owned by franchisees. Steak ‘n Shake most famous for their Steakburger which was originally made from T bone, sirloin and round steaks. Back in the day they would show the steaks being ground up into burgers right in front of the customer.
Sounds like a great deal. Established company, guaranteed income, finally a chance to start your own business.
Its easy to let emotions guide you with visions of earning millions owning your own restaurant in this famous chain. But lets look at reasons that Steak ‘n Shake might not be the slam dunk.
#1 Company Financial Troubles. So Steak ‘n Shake changed hands a few time since Gus passed and and ultimately the company was sold to Biglari Holdings in 2008. They also own the steakhouse Western Sizzlin, Maxim men’s magazine, a few other companies, as well as about 15% of shares in Cracker Barrel. When Biglari first took over Steak n Shake the company had lost money for the past 3 and a half years and was losing $100,000 per day. Biglari made some big changes that for a period of time looked like Steak ‘n Shake was on the right track – but the success was short lived.
This year Steak n Shake had almost a $19 million operating loss in the first 3 months. They lost almost 11 million dollars in 2018. This can be attributed to the fact that customer visits are down 13 percent over the last three years and 7.7 percent just in the first 3 months of 2019. Also important to note is that Steak n Shake has a loan payment of $184 million due in March 2021. Some outlets suggest that Steak n Shake may not be around in the next few years,………………….. and that they may not make it.
Now hidden in the hundreds of pages of their disclosure documents is this paragraph in tiny print that is very revealing. It states “we decided to close 101 company operated units which are being designated for franchise partners. Our plan is for these company operated units to re-open under new franchise partner ownership. So let me ask you – do you think if these stores were making money they would just close them? Of course not. Chances are you will be walking into a store that has been closed for a period of time, which will be very hard to bring back to life. But closing the stores might be better than Steak n Shake corporate continuing to driving the brand reputation downward which they have been doing. That brings us to our next topic……..(cont’d in video)