The Simple Solution to Steak N' Shake's Woes

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The Simple Solution to Steak N' Shake's Woes

Casual Dining is Out; Go Back to Basics

(Richard Jordan / Contributor)

As a native Hoosier who grew up in the pre-Five Guys, pre-Shake Shack era, I have a special place in my heart for Steak N' Shake. My family enjoyed many a meal at the now-shuttered location at 71st & Binford Boulevard. Steakburgers, fries, and an "Oinge" Freeze, as my mother would call them, were all a staple of my diet in early adolescence. I probably still have half a dozen "Steak n' Shake" chef hats in my giant box of personal mementos from over the years.

As a kid, I was absolutely obsessed with pickles, and Steak n' Shake's pickles had a certain tang to them that you couldn't find anywhere else. When I was six or seven years old, I asked our waitress if I could have a small plate of them with my burger. She brought me the biggest pile of pickles you've ever seen in your entire life. I swear there were over 100 of them on that plate, and I ate them all - fast! Good memories...

I spent 15 years in Los Angeles where In-and-Out is king. Up until a few years ago, Steak n' Shake didn't exist West of the Mississippi, and when they finally opened a franchise in Aliso Viejo, CA, my wife and I piled into the car for a "steakburger run" that took us a little under four-hours round trip to complete. Yes, I'm married to a very compassionate and understanding woman. It helps that she's also from Indianapolis and 'gets' what Steak n' Shake is all about.

My wife and I returned to Indianapolis after the birth of our daughter, and I couldn't wait until she was old enough for her first trip to Steak n' Shake. The memories came flooding back, and placing that paper chef hat on her head was one of those "full-circle" moments as a parent that tugs at your heart. I might have teared up a little, but I'm a bit of cryer anyway.

The thing about Steak n' Shake is that quality and consistency were never their strong suit, and it didn't help that over the years, some of the guys working the grill looked like they were engaged in their own personal protest against that most oppressive of society's traditions: basic hygiene. 

When Steak n' Shake is at it's best and proper attention is given to the quality and presentation of the food, no other burger chain can compare. When it's bad, however, I wouldn't feed the stuff to my dog, and he's currently dying of cancer.

Steak n' Shake's Problem:

With a 3.7% unemployment rate and a booming economy, finding quality employees is a tall order, and Steak n' Shake is now fighting for customers in a market that includes competitors such as Five Guys and Shake Shack. Unfortunately, Biglari Holdings., the company that now owns Steak n' Shake and rescued it from oblivion in 2008, has chosen to ignore the very things that made those competing chains successful - the very same things that initially made Steak n' Shake a success - and chase an antiquated business model that may well result in the extinction of this beloved 85-year-old brand. What a shame.

A Review of What Went Wrong with Steak n' Shake:

The initial warnings of what was to come began when Biglari Holdings acquired the brand and began an aggressive expansion of Steak n' Shake locations rather than placing an intense focus on ensuring consistently high-quality food and service at existing locations.

Let's face it: many of the older Steak n' Shake restaurants are absolutely filthy, and with most featuring an open kitchen, you better make darn sure the cooks working the grill are obsessive about avoiding contamination when handling food.

Next came the menu expansion. The offerings at Steak n' Shake went from basic favorites to a mix of mediocre variations on existing items and the introduction of "Prime Burgers" (made with choice beef, no less), which were a complete departure from what made the brand successful and famous. Then came hot dogs, multiple sides, and bizarre variations of their famous french-fries.

And then the death knell: massive price cuts. Steak n' Shake began a race to the bottom in profitability with a price point for value meals and lunch specials that positioned them just below fast-food chains like McDonald's and Burger King. Thus, customers began to view and experience Steak n' Shake as a subpar fast-food joint, minus the speed and convenience. The quality of the food suffered further, as did the service.

Price cuts were so severe that it put several locations underwater, resulting in benefit cuts for long-time employees, and tipped employees could no longer earn a decent wage.

The result of all these "innovative and forward-thinking" attempts to revitalize the brand? Long-time employees fled, Steak n' Shake continued to lose market share to quick-service burger joints like Five Guys and Shake Shake, and Biglari Holdings was ultimately forced to close over 100 locations.

Biglari Holdings, however, is apparently not the type to abandon a losing strategy, even if it means losing millions of dollars and the evisceration of a much-loved 85-year-old brand. In fact, they reward it. In April of this year, it was announced that Sardar Biglari, who controls more than 50% of the company’s shares, will no longer have his salary capped at $10 million. In other words, he won't have any trouble affording one of those "$4 lunch" deals, provided he can find a Steak n' Shake location that's still open for business.

The Simple Solution to Steak n' Shake's Woes:

I'd been hearing about "Shake Shack" for the last several years, but I'd yet to try it. Shake Shack has several locations in Lexington, KY, and while I was there for a film shoot last month, I decided to find out for myself what Shake Shack was all about.

My impressions of Shake Shack? I don't get it. The food was okay, but not rave-worthy and certainly nowhere close to Steak n' Shake (when the quality is there anyway). The produce on the burgers was lousy, and the value for the price just wasn't there. Their crinkle cut fries are a big hit, but they're really no different than your average sack of fries at White Castle.

What makes Shake Shack a winner is the cleanliness of their facilities, the friendly professionalism of their staff, a basic and uncluttered menu, and customers order their food at the counter and fetch it themselves.

The growing preference for quick-service style dining versus casual dining is well-established. Former giants in the restaurant industry like Applebees, TGI Friday's, and Chili's are struggling to buck the trend, and they're losing.

The answer for Steak n' Shake is to go back to basics. Why continue to pursue an antiquated business model that is out of sync with today's marketplace? Do what works today - not what worked yesterday.

Steak n' Shake started with high-quality food, fair prices, a simple menu, and professional, friendly counter service. In other words, Five Guys and Shake Shack are gaining market share with the same business model that built Steak n' Shake into a highly successful brand that has endured for 85 years.

The roadmap for Steak n' Shake's return to profitability and long-term success exists in the company's roots, yet Biglari Holdings continues head-first into a disastrous strategy that's a losing hybrid of (lackluster) casual dining at fast-food prices at twice the wait time for an order at McDonald's. Good luck with that.

 

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