Industry News | January 1, 2000

South Florida Welcomes Steak n Shake

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Category-crossover Steak n Shake is joining the battle for some of the nation's best locations.

By Paul Gereffi

The South Florida restaurant scene is about to get a new player, and it's one of the oldest eateries in the United States.

Steak n Shake, the Indianapolis-based restaurant chain founded in Illinois in 1934, has long been a fixture in the Midwest, the South, and central Florida. Now the chain has launched an aggressive expansion campaign to establish a presence in the tough South Florida market. The company joins a number of quick-service and casual-dining chains in the rush for good locations as it scouts out some twenty locations in Miami-Dade, Broward, and Palm Beach Counties. "Within five years, we expect the South Florida market to be one of our busiest," says Gary Smith, a division manager with the chain in Altamonte Springs, Florida. "We plan to grow 20 percent annually, and getting into this market will help us maintain that growth."

The first unit in South Florida opened on the fourth of August in Boynton Beach. Weekend nights have been so busy that customers use a sign-in sheet to wait for tables and the parking lot overflows into a surrounding field. "We've done very well," says store manager Dominic Ciallella through a haze of smoke as he pitches in and helps grill burgers in the busy kitchen. "It's not unusual to have a line out the front door at peak times."

Plans include a ninety-nine-seat, nearly four thousand square-foot restaurant on the northwest corner of Sunrise Boulevard and Flamingo Road, near Sawgrass Mills shopping mall in Sunrise, Florida. Other units will be at a site at US Hwy 441 and Wyles Road in Coral Springs and in Greenacres in West Palm Beach. All three projects are pending zoning and other approvals. "Finding suitable land is our biggest problem," says Smith. "Our overall strategy is to purchase the property. Florida is one of the most expensive areas to be in, but it's where we want to establish ourselves."

The company hopes the South Florida market will mirror the success it has found in central Florida, which accounts for 17 percent of Steak n Shake's total sales.

Steak n Shake, a subsidiary of Consolidated Products, currently has 315 locations, about sixty of which are in Florida. About 250 stores are company-owned, including all of the ones in Florida; the rest are franchised. Other cities under consideration for expansion include Boca Raton, Coral Springs, Sunrise, Pembroke Pines, Kendall, and Aventura. The chain's goal is to have six hundred units by 2003 and to grow using clustering strategy-lumping multiple locations in the same area to increase marketing efficiency and name recognition. The chain competes most effectively with casual-dining chains such as Chili's and TGI Friday's, in addition to quick-service chains like McDonald's and Burger King-the main office of which is in Miami.

"Steak n Shake is a quiet company that's really taken care of its brand," says Dennis Lombardi of Technomic, Inc., a Chicago-based restaurant consultancy. "The restaurants have a old-fashioned, nostalgic feel about them. I think they could do quite well in the South Florida market."

In July, the company announced revenues were up 22 percent and net earnings increased 15 percent. The company has reported earnings increases for 53 consecutive quarters. Same-store sales have increased for six consecutive quarters, up 4.2 percent in the last quarter. Systemwide sales are over $106 million.

"We think we have a nice niche in the market," says Smith. "People want choices, and that's what Steak n Shake offers them."