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    Who is Sardar Biglari?

  • The CEO of Steak ‘n Shake is using his unique style to try to reboot the company's operations.

    When Sardar Biglari moved with his family to the U.S. in 1984, Steak ‘n Shake was already a verified favorite on the quick-serve scene. In fact, the tried-and-true Midwestern chain was celebrating its 50th anniversary the year Biglari immigrated to San Antonio from Iran.

    Today, 28 years later, Biglari is chairman and CEO of Biglari Holdings, the parent company of Steak ‘n Shake, Western Sizzlin, and investment management firm Biglari Capital Corp., a group of subsidiary companies that together are worth hundreds of millions of dollars.

    And he’s only 34 years old.

    Since joining Steak ‘n Shake’s board of directors in March 2008 and then taking over as chairman and CEO in August of that year, Biglari has implemented a top-down overhaul of its operations. The overhaul has helped the company to 10 straight quarters of same-store sales growth, as of Q3 2011. Steak ‘n Shake also went from losing more than $100,000 a day in 2009 to making more than $100,000 a day in 2010, according to Biglari’s 2010 letter to shareholders.

    The man behind the success, however, can only be described as a mystery. His aggressive approach to taking control of businesses has put off some. And his move to standardize pricing and menus across Steak ‘n Shake’s system sparked a backlash from franchisees, some of whom even filed a lawsuit against him. He’s also known for playing close to the vest, as proven by his refusal to speak with media, including QSR.

    “Although we cheerfully will discuss our investment philosophy and operating catechism as we believe it necessary to clarify expectations for [our shareholders], we will not telegraph our interests in specific publicly traded companies, our rationale, or our plans,” Biglari said in his 2010 letter. “Outside of regulatory requirements, we will not air our investment ideas, particularly in a world of investment competitors. We leave the yammering to others.”

    The Sage of San Antonio

    In the investment community, there is no greater idol than Warren Buffett. The chairman and CEO of Omaha, Nebraska–based Berkshire Hathaway has made billions by turning a simple textile mill into a holding company that possesses the highest-valued stock on the New York Stock Exchange.

    Perhaps nobody respects Buffett quite like Biglari does. The young businessman reportedly was inspired to become an investor after reading a book about Buffett and discovering that the two shared a birthday. Rumor goes that he has Buffett-signed memorabilia in his office and follows Berkshire Hathaway’s progress carefully.

    Today, no article or investment analysis is written about Biglari without a comparison to Buffett. After all, it’s not lost on people that his San Antonio–based holding company is structured quite similarly to Buffett’s. Or that Biglari Holdings shares initials with Buffett’s Berkshire Hathaway, and until this article was written had a similar website to the Oracle of Omaha’s.

    Jim Gillies, a private investor and contractor for financial-services company The Motley Fool, has followed Biglari’s career since 2006 and is a Biglari Holdings shareholder.

    “I think [Biglari has] cultivated an image of trying to be another Buffett, and if some of the investment community ran a little too far with that analogy, that’s hardly his fault—although he did nothing to discourage it,” Gillies says.

    Biglari and his business partner Philip Cooley built a solid portfolio of investments between 2000 and 2005, when they purchased a share of Western Sizzlin, a Southeast-based chain of mostly franchised buffet restaurants.

    In early 2006, after purchasing more Western Sizzlin Corporation stock, Biglari became chairman of the board at the company. He then took an investor’s approach to Western Sizzlin by creating a holding company that broke the chain up by individual subsidiaries. Each subsidiary was treated as a separate business, and cash from each was redirected to the best investment within the holding company.

    Since taking control of Western Sizzlin (which Biglari Holdings fully acquired in 2010), Biglari has continued to pursue opportunities in the restaurant industry. This includes an attempted takeover of Friendly’s and at various points holding significant amounts of shares in Sonic and Red Robin (at press, Biglari was also involved in a proxy fight with Cracker Barrel).

    He refuses, however, to be considered a restaurant-focused company and has made moves to diversify his portfolio, including a failed attempt at acquiring an insurance company.

    “The critical point is that we could in one particular moment derive most of our earnings from one industry, such as restaurants, and then with a single large acquisition begin to derive most of our earnings from a different industry,” Biglari said in his 2010 letter. “Although capital allocation is a crucial element at most businesses, it is our business at BH.”

    When Biglari invested in Steak ‘n Shake in 2007, the company had been growing sales each year, but it was also spending too much on new stores and operations and not getting a return on investment.

    In addition, Gillies says, it was breaching its debt covenants and not taking advantage of millions in possible tax refunds.

    “[Biglari] was very critical of the prior management of Steak ‘n Shake for enriching themselves at the cost of the investor,” Gillies says. “I believe Steak ‘n Shake was probably on the very short course toward flirting with bankruptcy.”

    So after buying shares in the company, Biglari began complaining to management about its poor execution and lobbying to shareholders for a change. He asked for seats for himself and Cooley on the company’s board of directors and was denied. He then upped the campaign against Steak ‘n Shake’s management, launching a website that demanded change and even buying billboard space in the concept’s hometown of Indianapolis.

    In March 2008, he and Cooley were voted overwhelmingly onto the company’s board of directors by shareholders. By August, Biglari was CEO and chairman and was already working actively on turning the ship around—a ship from which many on the prior management team had already jumped.

    Gillies says Biglari is “not a restaurant guy” but that “he’s immersed himself in that world” so he can increase the return for his investors.