Steak ‘n’ Shake isn’t fooling around with its refranchising plans. The company announced August 13 it’s looking to deal its 400-plus company units (there were 401 in 2017), to “would-be entrepreneurs who want to be hands-on, single-unit owner-operators” for a paltry initial investment of $10,000. For comparison, the initial franchise fee for a Taco Bell operator is $45,000. It’s $30,000 at Blaze Pizza. Per franchise disclosure documents, the initial investment for a classic Steak 'n' Shake runs between $1.6–$2.6 million.
“I started my company with $15,000 and built a thriving enterprise,” said Sardar Biglari, CEO of Biglari Holdings, owner of Steak ‘n Shake, 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.”
Steak ‘n’ Shake added that the offering to buy into the company as a franchise partner requires operators to successfully complete a six-month training program. The franchise partner would then get 50 percent of the restaurant's profits. This is a partnership, shared-profit deal similar to the system Chick-fil-A deploys.
Steak ‘n’ Shake is looking to quickly shift its business model from a heavy corporate-owned structure to a system run mostly by single-unit franchisees. The company said this would “achieve operational uniformity by marshaling the efforts and strengths of entrepreneurs.”
Founded in 1934 in Normal, Illinois, Steak ‘n Shake had 173 franchised domestic units and 412 company-run stores in 2017, which was a total increase of 17 from the previous year. The company posted average-unit volumes of $1,839.51 (in thousands) and had total systemwide sales of $939.99 (in millions).
The year before, Steak ‘n’ Shake had 568 total domestic units (415 company-run) after adding 17 restaurants from the previous year. It had higher AUV ($1.9M) and increased systemwide sales of $1,027 (in millions).