The first Steak ‘n Shake opened 85 years ago in the town of Normal, Illinois, in a space that had previously been a combination gas station-and-chicken restaurant. In an attempt to show his new customers how fresh his steakburgers were, founder Gus Belt apparently had a habit of bringing a “barrel of steaks” into the dining area, and grinding the meat in front of the delighted (?!?) guests. As a result, one of the chain’s slogans was “In Sight It Must Be Right.”
That tradition was abandoned somewhere in the last century but, according to the chain’s current CEO, another part of the restaurant’s history could be on the way out too: the cherries on Steak ‘n Shake’s signature milkshakes. According to a scathing post on investment website Seeking Alpha, top exec Sardar Biglari told shareholders that the flailing chain could save up to a million dollars every year, if it just stopped with that whole cherry-on-top thing.
It’s fair to say that Steak ‘n Shake is struggling. The chain reported an $18.9 million loss in the first quarter of this year, on top of the $10.7 million loss that it accumulated during 2018. The Indianapolis Business Journal reports that customer traffic has dropped 13 percent over the last three years, and it was down 7.7 percent in the first quarter of this year. (Guys, they don’t grind the meat at the tables anymore! It’s OK!) It has temporarily closed 60 of its company-owned locations as it attempts to transition them into franchisee-owned restaurants and, on top of that, in May, a federal judge in Missouri ordered the chain to pay $7.7 million in damages after it allegedly failed to pay overtime to 286 St. Louis-area restaurant managers.
Steak ‘n Shake is currently owned by the 41-year-old Biglari’s own Biglari Holdings, which also owns the Western Sizzlin’ steakhouse chain, First Guard insurance, and Maxim magazine, which is somehow still a thing. Although Biglari has a lot to deal with at the moment, he seems to be really focused on those milkshakes. At the recent Biglari Holdings shareholders’ meeting, Biglari said that part of the plan to turn the company around included making homemade ice cream on-site, implementing his own new milkshake-making process, and installing new milkshake-making machines, which could cost upwards of $40 million.
“He is literally inventing a new milkshake-making process—he said at the meeting that this was going to be a patented process—and that is going to speed up service,” one shareholder told the Indianapolis Business Journal. “The shareholders seemed to think this was ridiculous—and I would tend to agree—to think that Sardar, with all his free time, is going to be able to invent a milkshake process to turn the whole chain around.”
At the meeting, one shareholder reportedly reminded Biglari that this time last year, his plan to save the chain was “thicker cheese and better bacon,” but customer numbers still fell. And the year before that, it was the launch of a new menu—but that didn’t help either. “Why was this year’s turnaround plan—new milkshake processes and homemade ice cream—going to work when the last few did not?,” the Seeking Alpha writer, who attended the meeting, wondered. “[Biglari] said, because they have to get Steak ‘n Shake turned around. He said he has been through uncertainty with businesses in the past and it has always worked out. He is comfortable with uncertainty. He said something like he doesn’t worry.”
Well, he does worry—but about the cost of cherries, telling shareholders that he would “love to get rid of” the $1 million in annual cherry expenditures. That statement was reportedly challenged by three different shareholders, who each pointed out that there might be better ways to save money that didn’t involve skimping on milkshake toppings.
It sounds like there are a lot of issues at Steak ‘n Shake right now. Maybe they should go back to that whole ‘watch us grind this big pile of meat’ thing. It can’t possibly make things worse.