How Beef Tallow and Bitcoin Boosted Sales at Steak ‘n Shake

Steak n Shake’s Bold Strategy: Beef Tallow Fries Leading to Sales Growth

Steak n Shake has made a notable mark in the fast-food landscape by introducing beef tallow fries, a decision that has not only attracted customers but also signaled a noteworthy shift in its operational strategy. The company, known for its burgers and shakes, has begun reporting same-store sales after a five-year hiatus, showcasing a revitalized footprint in the industry.

Impressive Sales Growth

Biglari Holdings, the parent company of Steak n Shake, disclosed in a federal securities filing that same-store sales surged by an impressive 10.7% in the second quarter. This increase can be largely attributed to the introduction of beef tallow for frying their fries, a change that began in February when they switched from using vegetable oil to this richer alternative. It’s worth noting that while fries are still par-baked in vegetable oil by suppliers, the introduction of beef tallow has clearly resonated with patrons.

A Strategic Marketing Approach

Steak n Shake’s aggressive marketing campaign surrounding the beef tallow fries has played a crucial role in driving sales. This not only signals its intention to reclaim market share but also serves as a comeback story following years of declining sales, closures, and operational challenges.

Challenges and Changes in the Business Model

The company faced a series of substantial hurdles in the past. It stopped reporting same-store sales during the pandemic after experiencing a decline in this metric starting in 2017. Traditionally, Steak n Shake operated as a full-service family dining chain specializing in burgers but adopted a heavy discounting model under the leadership of Sardar Biglari, chairman of Biglari Holdings. However, service issues, quality concerns, and increased competition led to declining sales, resulting in store closures and brushes with bankruptcy, particularly a near miss in 2021.

Transitioning to Counter-Service Model

Since the pandemic, Steak n Shake has taken decisive steps to restructure its business model. Many locations have transitioned to a counter-service format, complete with modern ordering kiosks, enabling faster service and reducing labor costs. The company has also introduced a franchising program akin to the successful model used by Chick-fil-A. Under this new structure, franchisees pay a nominal fee of $10,000 to operate a restaurant and then share profits with the company, creating a new revenue stream and potential for expansion.

Ongoing Closures and Location Management

Despite these strategic changes, Steak n Shake continues to close locations. Records indicate that the chain has shuttered 27 restaurants in the past year, including eight franchise partner locations and 20 traditional franchise locations, with seven closures occurring in the first half of this year. Today, Steak n Shake operates 417 locations, a significant drop from approximately 600 before the pandemic.

Embracing Health Trends and Innovative Payment Options

In an effort to stay relevant in the evolving market, Steak n Shake has begun aligning itself with health movements, such as the Make America Healthy Again (MAHA) initiative led by U.S. Health and Human Services Secretary Robert F. Kennedy, Jr. This initiative has garnered significant attention in conservative media, helping to bolster the brand’s image.

Moreover, in May, Steak n Shake started accepting Bitcoin as a form of payment, which the company touts as a “game changer.” This move demonstrates their willingness to adapt to technological advancements and shifting consumer preferences, making it easier for customers to make purchases.

Boosting Social Media Presence

Another facet of Steak n Shake’s revitalized strategy involves ramping up social media engagement. The company’s social media presence, particularly on the platform X, has become significantly more active this year, resulting in a marked increase in impressions and customer engagement. By leveraging this digital medium, Steak n Shake hopes to attract a younger demographic while reconnecting with loyal customers.

Financial Standpoint and Future Outlook

Despite the challenges faced by the restaurant industry at large, Steak n Shake’s robust same-store sales in the second quarter stand out during a challenging economic period. Many competitors within the fast-food space are struggling to maintain sales as low-income consumers cut back on discretionary spending. Nevertheless, Biglari Holdings reported a 12% increase in restaurant operations revenue last quarter, leading to a total revenue growth of 10.4%. The company turned a net profit of $50.9 million, a remarkable turnaround from a loss of $48.2 million the previous year, predominantly driven by improved profitability and gains from investment partnerships.

As the industry evolves, Steak n Shake appears committed to navigating its hurdles through innovation, marketing, and strategic operational changes. While challenges remain, the recent uptick in same-store sales may very well herald a new era for the brand.

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