Is Steak N' Shake Still In Trouble Since Its Internal 'Shake Up'?

Red Lobster made headlines in 2024 when it was announced that the beloved restaurant chain was facing bankruptcy. This marked a shift in the conversation around the landscape of popular restaurant chains in America and whether they would be able to survive the changing economic climate in the country. While Red Lobster has since exited Chapter 11 bankruptcy as of early September, unfortunately another popular restaurant chain may be taking its place in the headlines, as it faces a similar situation that could potentially lead to bankruptcy.

Steak n' Shake is a widely popular burger joint that has been an American staple since its first location opened its doors in 1934, 6 years before the first McDonald's location opened in 1940. However, while the restaurant known for its renowned Steakburgers may be super popular, it may also be in financial trouble. Despite the fact that the restaurant chain has brought in a large number of enthusiastic patrons over the years, it may not be enough to keep the business thriving. That being said, let's take a look at the complicated internal "shake up" that could potentially lead to the financial demise of Steak n' Shake.

Steak n' Shake, which is a subsidiary of Bilgari Holdings, is not new to financial problems. In 2008, during the great financial recession, the company was losing around $100,000 daily with a colossal debt burden of $27 million. Around mid-2008 it decided to change management for obvious reasons, and by the end of the next year, 2009, the company was back in profit making $100,000 daily. However, while the restaurant chain fared relatively well for the next roughly 10 years, by 2018 the tables started turning against its favor.

From the years between 2016 and 2018, Steak n' Shake started noticing a decrease in annual sales, but it wasn't until the end of the latter year that things became critical. At the end of 2018, the restaurant chain had losses totaling up to over $10 million, with same-store sales down 5.1% in that year alone. By the time 2019 came around, it was clear things had to change. This is because those $10 million in losses from 2018 flipped to almost $19 million in losses by the first quarter 2019 alone. Steak n' Shake could not keep going on like this, but what exactly was the reason behind these losses? According to the owner, Sardar Bilgari, it was a customer service issue.

Over the years, Steak n' Shake had relied on a business model based on on selling menu items for low prices at a high frequency. The problem with this was that over the years since the big turn around in 2009, the restaurant chain had failed to update the technology within individual restaurants to keep up with increased demand. This inevitably led to employees having to work significantly harder in an attempt to get menu items out to customers fast enough, but largely failing in the process. This ultimately made the service slower at restaurants, causing customers to become less likely to frequent the restaurants due to the longer wait times for their food.

Now because Steak n' Shake had historically relied on the aforementioned low-cost, high output service model, the company also refused to let Steak n' Shake franchise owners raise prices at their restaurants amidst this whole fiasco. This obviously caused franchise owners to lose significant amounts of money, which led to instances like a Steak n' Shake franchise in Virginia suing the company in 2019 for not allowing them to raise prices as well as not updating any of the technology. However, the lawsuits didn't end there. Thousands of Steak n' Shake managers throughout the country began suing the company that same year for refusing them overtime pay. It certainly seemed like the bad news was never going to end for Steak n' Shake during 2019.

Despite the numerous issues that Steak n' Shake's CEO Sardar Bilgari faced in 2019, by the end of the year he had a plan to fix the company. However, this plan wasn't exactly revolutionary. It involved certain nickel and diming aspects of cost cutting like removing the cherries from milkshakes, taking a significant chunk out of his salary, and getting rid of employees to instead focus more on implementing self-service kiosks. Regardless, in 2020 the company began to implement some of these changes rapidly due to the changing economic environment for restaurants caused by the COVID-19 Pandemic.

During 2020 Steak n' Shake spent $50 million on new renovations to improve the business. The company attempted to largely replace human servers with self-service kiosks as well as remove a handful of menu items and limiting their operating hours, among other things like renovations to different locations. Now the big question obviously is, as of today, did any of this work for Steak n' Shake? Not really. From 2020 to 2022, Steak n' Shake saw a decrease in revenue from $344 million to $231 million. However, in the first six months of 2023, Steak n' Shake made roughly $5 million more in earnings than the entire previous year. So while there has been a slight improvement in earnings for the restaurant chain, it's still nowhere near the success it was seeing between 2009 and 2018.