Steak ‘n Shake was in the midst of a systemwide overhaul—on two fronts—when COVID-19 put 2020 plans into a blender. And the added burden didn’t help. Comparable traffic declined 54.2 percent in Q3, year-over-year, as Steak ‘n Shake permanently closed 13 restaurants (11 corporate and two franchises). For the fiscal year through November, the brand shuttered 82 restaurants.

Before coronavirus arrived, Steak ‘n Shake was working to refranchise company stores to single-unit owners and morph its fleet into quick-service restaurants to soften labor costs.

On this latter target, Steak ‘n Shake put 15 restaurants on the block in August. It said the transition would “require significant investments in equipment” and expected to fund these costs mainly by selling owned real estate “via an auction process.”

It added funds needed were “limited under its debt agreement,” and Biglari Holdings shared in a November filing it had $153 million in outstanding debt coming due in March, which the company would not guarantee.

The process brought forth conflict, according to The Wall Street Journal. The decision to put 15 locations up for sale sparked a fight with lenders, who said any proceeds from the sale had to be used to pay down debt and couldn’t be reinvested in the business (such as helping Steak ‘n Shake transform into a quick-service brand, for instance). The chain sued the lenders’ trustee, Wilmington Trust NA, in New York federal court in August but dropped the complaint last week, the WSJ said.

And now Steak ‘n Shake finds itself preparing for a possible financial restructuring, sources told the publication. It hired an advisory firm, FTI Consulting Inc., to evaluate options and plot a restructuring strategy. “People familiar with the matter,” pointed to the $153 million loan coming due in March—the one Steak ‘n Shake suggested it might not be able to refinance before maturity.

Law firm Latham & Watkins LLP, which handled the August litigation, continues to advise Biglari Holdings, the WSJ said. Lenders are being advised by Arnold Porter Kaye Scholer LLP and AlixPartners LLP.

According to WSJ sources, Steak ‘n Shake is exploring a possible out-of-court restructuring of its debt and lease obligations or a bankruptcy filing.


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The brand closed Q3 with 260 corporate units, 69 franchise-partner stores (the single-unit model that made headlines for its $10,000 price tag for operators), and 199 traditional franchises.

This continued a downward trend. On December 31, 2019, Steak ‘n Shake had 368 corporate restaurants, 29 franchise partner, and 213 traditional franchises. Over that span, it’s transitioned 41 locations to franchises and closed a net of 67 restaurants. Forty of those transitions became franchise-partner stores. One became a traditional franchise. Fifteen franchises net closed.

Steak ‘n Shake touted 411 corporate venues on December 31, 2018, two franchise-partner units, and 214 traditional franchises.

The brand, founded in 1934, closed the majority of its dining rooms by March 17 due to COVID, with the remainder going off line before the end of Q1. And temporary closures were already weighing down the system.

As of September 30, 37 of 260 company-run stores were temporarily closed. That time a year ago, 106 of 282 corporate venues were temporarily shuttered as Steak ‘n Shake searched for franchise partners.

Steak ‘n Shake tried to stem the pandemic tide by leaning into takeout, drive thru, drive in, and delivery. It also relaunched “Drive-In Service” over the summer, a throwback to the 1950s model where carhops deliver food on trays and attach it to open windows.

Yet the hit was monumental. The company reported $78.3 million in revenue in Q3, down from $141.4 million in the year-ago period. Over the first nine months of the year, the figure was $267.64 million compared to $467.5 million. Net sales in Q3 and the first nine months of 2020 were $67,617 and $241,832, respectively, representing a decrease of $69,034 (50.5 percent) and $214,512 (46.8 percent).

Switching to a counter-service footprint was no small undertaking. The chain deployed servers for its first 78 years. The initial quick-service iteration arrived in 2012 and targeted non-traditional growth, like universities, casinos, airports, and gas stations. At the end of 2018, there were 87 quick-service restaurants in Steak ‘n Shake’s system, including international.

Biglari Holdings said in February a combination of labor-intensive, slow production with high-cost table service sent the chain’s overall labor costs 6–8 percentage points higher than those incurred by competitors. And so it began to flip, and planned to reopen stores as quick-service concepts.

However, Steak ‘n Shake noted in Q3 it needed to make capital investments to complete these conversions. Lenders are blocking it from accessing the needed funding, the WSJ said. “In order to reopen the dining rooms profitably, Steak ‘n Shake will require funds for capital expenditures, which are limited under its current debt agreement,” the company said in Q3. “The purpose of the capital spending is to convert Steak ‘n Shake’s full-service model into a self-service one.”

Sales across all Steak ‘n Shake and Western Sizzlin locations (also owned by Biglari Holdings) were down 50.5 percent, year-over-year, in Q3.

Biglari Holdings directs Maxim Inc., Southern Oil Co., and a host of other businesses as well, It earned $21.1 million in Q3, or $60.07 per share, on $101.8 million in revenue. It’s up from a $17,000 loss last year thanks to lowered restaurant expenses from temporary closures and refranchising.

Fast Food, Finance, Story, Steak 'n Shake