If you are a potential investor interested in launching a new Biglari restaurant, you are at the right place. We make an in-depth breakdown of Steak n Shake initial investment cost, ongoing operating costs, and profit/salary that the owner of this franchised restaurant can expect to make per year.
- Steak ‘n Shake By Biglari is an American restaurant brand founded in 1939, which core business is to offer burgers and milkshakes on the food market.
- The launch of a new Steak’ n Shake franchise location has an initial investment cost between $155,970 and $1,720,895 with included Initial Fee of $25,000.
- The franchisees of this brand pay 7% of their restaurant gross sales for the costs associated with the ongoing franchisor licensing and marketing royalties.
- On average, Steak ‘n Shake franchises have a gross revenue sales level of $1,600,000 per restaurant per year, with a 10% profit margin.
- The Stake ‘n Shake owner of an average-earning franchise can expect to make a $160,000 profit in salary per year.
How Much Does The Steak’ n Shake Franchise Cost
The total investment necessary to launch a new Steak’ n Shake franchise is between $155,970 and $1,720,895; the precise estimation of the required capital depends primarily on the type of location that is started.
The available types of locations for purchase are:
- Freestanding: locations of space between 1,860 SF and 3,400 SF with over 50 seats with delivery, carryout, and drive-thru service.
- Non-Traditional: locations that operate in space between 400 SF and 2,400 SF, inside the food courts, universities, airports, arenas, etc.
- Roadside: freestanding drive-thru location of approximately 638 SF to 970 SF in size with a lot of land of about 13,000 to 26,000 square feet.
- Franchise Partners Location: certain qualified employees have the opportunity to acquire an existing Company-owned Restaurant that is temporarily closed by the franchisor.
The Steak ‘n Shake franchise cost by type of location:
- Launching a Freestanding Location has an investment cost of between $1,480,895 and $1,720,895.
- Launching Non-Traditional location demands starting capital between $316,000 and $715,000
- Roadside Format franchised location investment cost is between $705,000 and $1,199,497.
- The startup capital necessary to begin the operation of a Steak’ n Shake Restaurant under the “Franchise Partners” program ranges from $165,097 to $410,657, with a $10,000 to $20,000 Initial Fee.
The amount of capital fund necessary to start the Steak’ n Shake franchise will depend primarily on the size of the leased real estate and the necessary improvements the owner will need to make to equip the restaurant according to the franchisor’s specifications.
Table of initial costs:
- Initial Fee: $0 – $25,000
- Construction Management/ Fee: $3,000 – $35,000
- Site Improvements: $21,000 – $410,864
- Building or Leasehold Improvements: $35,840 – $660,508
- Furniture, Fixtures, Equipment, & Signage: $94,130 – $374,000
- Pre-Opening Expenses: $5,000 – $10,000
- Additional Funds: $0 – $20,000 Working Capital for the first three months
- Inventory and supplies for opening: $6,000 – $20,000
- Initial Training Expenses: $16,000 – $55,000
- Professional Fees & Permits: $0 – $85,000 (Architectural, Civil Engineering fees)
- Impact and Tap Fees: $0 – $95,000
- Grand Opening Marketing Expenses: $0 – $25,000
- Extension Fee: $0 – $10,000
- ESTIMATED TOTAL INVESTMENT COST: $155,970 – $1,720,895
Real Estate/Rent Lease is not included in the estimation above, so investors will need to add Landlord expenses to the list of pre-operating costs that must be covered before opening day!
What is the Cheapest Option to Start Steak and Shake Franchised Restaurant
The cheapest option to start Start Steak and Shake restaurant is to become this company’s “Franchise Partner”. Usually, these partners are employees of the current restaurant. However, in some cases, third-party investors get accepted by the franchisor for this program.
“Franchise Partners” is the program related to company-operated/owned restaurants that have been temporarily closed till the company finds interested investors who will reopen them under franchise agreement terms.
So if you are a current employee of this brand, or you know some location that recently has been closed, it is worth trying to apply for this kind of deal! These restaurants are already established, so initial investment costs are much lower than for locations started from scratch.
Options To Fund Steak and Shake Franchise Initial Investment Cost
This franchisor doesn’t directly finance its franchisees for any part of the initial investment costs. Still, in some cases, the company will provide investors with contact information of third parties funding sources.
This can be of great help to new franchise owners who need assistance in securing necessary startup capital. This franchisor, at no charge, will guide the franchisee in the right direction.
Steak ‘n Shake Franchise Fees
Steak ‘n Shake Initial Fee is $25,000 for investors who opt to open a traditional location, and those eligible to apply to the “Franchise Partner Program” pay $10,000 for this fee.
This franchisor only offers a discount on their Initial Fee to franchisees who opt to launch more than one restaurant. For every restaurant opened after the first, this licensing fee costs $20,000(-5,000 Discount).
Computer Equipment and Proprietary System Fee
Before the opening, the franchisor’s IT department provides the franchisees with a list of all required computer systems that must be installed on the restaurant premise.
Computer equipment and all kinds of other proprietary systems(digital menu boards, etc.) are not cheap, and investors must be aware that this will cost them between $19,000 and $77,123, depending on the type of location.
Ongoing Franchisor Royalties
Steak’ n Shake franchise owners pay from their restaurant’s gross revenue a total of 7% for the costs associated with the franchisor licensing and marketing royalties!
As a franchise applicant, you must be aware that franchisor royalties are ongoing operating costs that your business will have every month during the whole duration of the franchise agreement.
However, 7% of royalties are on the lower end if we compare how much similar food franchising systems charge their franchisees. In practice, this means that the franchise owner of this brand restaurant can benefit from higher profit margins.
The franchisor royalties we mentioned above are associated with Royalty Fee and Digital and Production Fund Fee. So we will now break down these fees so that a potential investor can clearly understand what this means in practice.
Steak’ n Shake Royalty Fee is 5.5% of the Gross Sales that restaurants make from offering and charging food and beverages to their customers.
The 4.5% of Royalty Fee is paid directly to the franchisor’s bank account for insight into the proven business system. The 1% of this fee is paid to the franchisor affiliate, Steak n Shake, LLC, for your use of this brand Trademark.
This is standard practice in the franchising industry; you, as a franchise owner, pay the franchisor for providing you with help and assistance for doing business the right way. Yes, it makes operating costs, but assistance can be especially beneficial for rookie entrepreneurs who are starting their first business venture.
Digital and Production Fund Fee
This expense is associated with advertising campaigns that the franchisor will launch locally or nationally. The Ad Fund Fee this franchising company charges is 1.5% of the gross sales.
Same as a Royalty Fee, this is an operating cost that is paid during the whole duration of the agreement.
Software Maintenance Fee
This franchisor charges its franchises $6,000 to $7,000 annually for costs associated with the IT help desk(POS, DT Timer, polling and reporting system, video surveillance system, etc.).
Every potential investor must know that this cost will occur and will be presented during the whole duration of the franchise agreement.
How Much Is Steak’ n Shake Franchise Profit
We will breakdown now this franchising system’s potential profit by revealing the average gross revenue and profit margin that the owner of this franchise can expect!
Steak’ n Shake Average Gross Revenue Per Year Per Franchise Location
Steak’ n Shake traditional franchise locations that are in business 18+ months, on average, produce to their owner’s a Net Sales of $1,618,238 per year.
However, franchise applicants must be aware that these results produce franchises that are approximately already two years presented on the market. In the first year, it is expected that gross sales will be much lower than this company’s average!
Also, these are gross sales that produce so-called “Traditional Restaurant Location” the particularity of these types of franchises is that they operate in high-space real estate. If the investor opts for operating in a smaller retail space, that will be reflected in a lower sales level.
Steak ‘n Shake Franchise Profit Margin
Steak ‘n Shake franchise owners can expect that their restaurant will deliver 10% of the profit margin from the location’s gross sales per year.
Although it can seem like a very low margin, investors must be aware that other better-known franchising systems usually deliver between 6% and 8% of profit margin. So this company provides better profit if we look only at this parameter!
This franchisor charges its royalties in lower amounts than is standard for the franchising food industry, so franchise owners of this brand restaurant benefit from higher margins.
How Much is Steak’ n Shake Franchise Owner Salary
The salary of the Steak ‘n Shake franchise owner, who operates an average gross selling location, is approximately $170,000 per year.
However, franchise applicants must be aware that in 2021, the highest-earning restaurant had $3,208,185, and the lowest-earning restaurant had $259,397 in gross sales; the average for all locations was $1,618,238.
So, the Steak’n Shake franchise owners can expect to make between $25,000 and $320,000 in salary per year! The salary per year depends primarily on the gross sales level that a particular location produces per year.
How We Estimate Steak and Shake Franchise Owner Salary Per Year
We estimate this brand franchise owner’s salary according to data from this franchisor Franchise Disclosure Document, Item 19. (Financial performance representations).
The Steak’ n Shake FDD reveals how much their traditional restaurants that have been open for 18+ months made in gross sales in 2021.
Gross sales of restaurants that have been in business for 18+ months:
- The average Net Sales across the Traditional Franchise Restaurants and Franchise Partner Restaurants was $1,618,238
- The Highest Net Sales across the Traditional Franchise Restaurants and Franchise Partner Restaurants were $3,622,926, and the Lowest Net Sales were $259,397
- 27 of 81 Traditional Franchise Restaurants (33%) met or exceeded the Traditional Franchise average.
- 18 of 81 Traditional Franchise Restaurants (22%) met or exceeded the Franchise Partner average.
By knowing this data, we have put an estimated profit margin of 10%, which is a standard one for the fast food industry, and according to this, we have calculated the franchise owner’s salary!
Requirements to Own Steak’ n Shake Franchise
The franchise applicants need to have at least $500,000 in Cash (Liquid Assets) that the franchisor approves their application. The investors who are eligible for the “Franchise Partner Program” need to have only $10,000 available in liquid assets.
Owner’s Participation Requirement
There is no special requirement under which franchise owners are obligated to also be day-to-day on-site managers of their franchised restaurants!
The franchisor’s only requirement is that the restaurant needs to be under the direct, on-premises supervision of managers who have completed the initial training program.
The franchisee will only need to inform the franchisor of the manager’s identity, and the business is ready to go.
Product and Services Purchases Requirement
Every franchise location must buy products and services from franchisor-designated and approved vendors whose items meet franchisor standards and specifications. Sometimes the franchisor sells these products and services, and sometimes providers are third parties.
In practice, this means that you, as a franchise owner, can’t buy raw food materials and other supplies from any food supplier. You will buy necessary working materials only from companies that are in partnership or affiliates of the franchisor!
Steak ‘n Shake Franchisee Training
The Stake’ n Shake initial training has a duration of approximately 250 hours in total. This training is designed to give fundamentals and equip managers and employees with knowledge of how to operate this kind of restaurant.
Participants of the initial training will learn about leadership, restaurant management skills, food safety, and other aspects of business operations from an instructor with a high experience in operating restaurants.
This franchisor does not charge its franchisees a special fee for the initial standard training. However, the franchise owner will need to pay the salary, payroll, travel, and living expenses of restaurant member staff participating in these courses!
Also, this franchisor provides at no cost the so-called “Opening Assistance Program,” which includes on-site representatives that assist franchise owners in the opening activities of the restaurant. This assistance will be especially beneficial for investors starting their first restaurant without experience in this type of business.
How Much Is Steak and Shake Franchise Agreement Duration
The length of the Steak’ n Shake franchise agreement is ten years. After that period pass, franchisees can renew it additional five years at no additional charge.
Are All Steak’ n Shake Franchises
61% of all Steak’ n Shake restaurants are franchises, and 39% of them are company-owned locations.
Currently, there are 497 of these restaurants presented in the U.S and
One hundred ninety-five of them are company-operated. However, this will change in the next few years because this franchisor offers company-operated locations to investors interested in acquiring them under a franchise agreement.
Who Owns Steak’ n Shake Franchise?
The Steak n Shake is a wholly-owned subsidiary of Biglari Holdings Inc., an Indiana corporation founded by Sardar Biglari, the company’s owner and CEO.
Steak n Shake, LLC owns all service marks, trade names, and other commercial symbols of this brand, so franchisees need to sign licensing agreement with this company to be able to use trademarks.
Biglari Holdings Inc also owns Western Sizzlin Steak & More Restaurants, Western Sizzlin Wood Grill Buffet Restaurants, Great American Buffet Restaurants, Western Sizzlin Express Restaurants, and Quincy’s Family Steakhouse Restaurants.
Is it Profitable to Own a Steak’ n Shake Restaurant?
Steak ‘n Shake restaurants have high gross sales, and because of that fact, they can be very profitable business ventures for their owners. However, the cost of starting this brand’s restaurant is not small, so the Return Of Investment time will not be quick.
The franchise owner can expect that it will need to pass 8 to 10 years before profits will cover their initial investment cost!
We have summarized in this text all facts about the Steak n Shake franchise cost and the potential profit that can expect the owner of the new restaurant who is operating under this brand trademark.
This franchising concept has advantages and disadvantages, so potential investors must do their due diligence to determine if this type of business is the right choice for them.