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How Profitable is a Steak n’ Shake Franchise? 2022 FDD Data

With close to 160 franchise stores across the US, Steak n’ Shake is fast growing and popular franchise opportunity in the quick-service restaurant space. But is this a good investment? Does the $1,346,322 average annual sales justify the hefty $815,626 investment cost you must pay?

In this article we’re looking at how profitable is a Steak ‘n Shake franchise. To do that, we’ll look at how much you can earn using the latest franchise disclosure document numbers, and whether this is a good investment. Let’s dive in!

Steak ‘n Shake: key figures

Franchise fee$25,000
Royalty fee5%
Marketing fee3%
Investment (mid-point)$815,626
Average annual sales$1,346,332
Sales to investment ratio1.7x
Investment payback*4.9 years (good)
Minimum net worth$1,500,000
Minimum liquid capital$500,000
* using 15% net profit margin

🔎 How does Steak ‘n Shake compare vs. other franchises? Check the ranking

Steak ‘n Shake: an introduction

Steak ‘n Shake is a leading American casual food chain restaurant with 600+ stores in 28 states in the U.S., Europe, Saudi Arabia, and Qatar.

Headquartered in Normal, Illinois, Steak ‘n Shake was founded in 1934 by Gus Belt, who pioneered the concept of premium burgers and milkshakes.

The Steak ‘n Shake franchise started in 1939 with a limited number of franchises. Steak ‘n Shake started offering general franchises in 1991, and by 2020, it had 159 franchise locations in addition to the 272 company-operated Steak ‘n Shake restaurants in the US.

The Steak ‘n Shake franchise is a wholly-owned subsidiary of Biglari Holdings. It offers various forms of franchise restaurants, such as freestanding quick service, in-line quick service, non-traditional, and roadside.

Steak ‘n Shake franchising: pros and cons

The pros

As a new franchisee, you expect to reap some good benefits from your new investment. A Steak ‘n Shake franchise has the following advantages:

  • Corporate support: The Steak ‘n Shake franchise provides would-be franchisees with tremendous corporate support. New franchises can consult with the field operations manager and management development programs on how to smoothly manage franchise operations
  • Thorough training: Starting a franchise can be daunting, even if you already have experience in the field. Steak ‘n Shake offers extensive training to newly launched franchise managers to get them underway. You get quality on-the-job training about day-to-day operations as well as proprietary operations tools
  • Marketing and advertising support: Marketing forms an important part of a franchise’s plan to promote its products. Steak ‘n Shake employs a robust marketing and advertising strategy consisting of television commercials, price-driven discounts, print marketing, and building brand loyalty. This helps new franchises attract new customers without much spending
  • Great growth potential: operating a Steak ‘n’ Shake franchise offers great growth potential. Steak ‘n Shake is one of the fastest-growing casual fast-food chains in the United States, with over 600 locations across 20 states. It has plans to add another 1,000 stores to cover all the states
  • Guaranteed first-year income of $100,000: Not many franchisors can guarantee prospective franchisees a profit in their first year of operation. However, the Steak ‘n’ Shake franchise does. So as a new franchisee, you are assured of an income of $100,000 in your first year

The cons

Operating a Steak ‘n Shake franchise has the following drawbacks:

  • No full franchise ownership: The Steak ‘n Shake franchise operates on a franchise partnership basis. What this means is that you co-own the restaurant with the parent company. As such, you get 50% of the profits
  • Not a passive investment: The Steak ‘n Shake franchise requires that franchisees be involved in the day-to-day management of the franchise. This means that you must work full-time in the restaurant as a new franchisee
  • Low profitability: In recent years, the profits posted by the once vibrant chain store have not been so promising. This acts as a deterrent to interested franchisees
  • Competition: Steak ‘n Shake faces stiff competition from McDonald’s, Shake Shack, and Burger King. This is because customers are getting quality options and the culinary landscape is changing

How much does it cost to open a Steak ‘n Shake franchise?

As a franchisee, you would invest an average of $815,626 to open a Steak ‘n Shake franchise restaurant.

In addition to the initial franchise fee, you will also pay for other costs like: training expenses, site improvements, leasehold improvements, furniture, equipment, opening inventory and supplies, grand opening marketing expenses, etc.

Here’s a summary of the different costs you should pay for:

CostInvestment amount
Initial Franchise Fee$25,000
Formation costs$435,515 – $671,060
Operating expenses$212,079 – $312,597
Total$647,594 – $983,657
Source: FDD 2021

These numbers are averages though. As per the latest FDD, the investment varies based on the type of restaurant you go for, they are:

Freestanding$1,208,000 – $1,687,000
In-line$454,000 – $1,371,000
Non-Traditional$316,000 – $715,000
Roadside$705,000 – $1,199,497
Classic to QuickService$155,970 – $344790

What’s the average revenue for a Steak ‘n Shake?

A Steak ‘n Shake franchise makes $1,346,332 in sales per year on average

This number represents the median annual net sales for the 159 franchised Steak ‘n Shake Restaurants operated in 2020. The highest net sales were $2,826,778 vs. $524,382 for the lowest.

How profitable is a Steak ‘n Shake franchise?

As per our analysis and the data included in its latest FDD, Steak ‘n Shake franchises have an average adjusted EBITDA of 30%, that’s a high-end of similar fast food restaurant franchises.

Unfortunately, Steak ‘n Shake doesn’t disclose much financial information in its FDD. For example, costs like COGS, labor and rent aren’t included. Therefore, in order for us to calculate the adjusted EBITDA below, we used industry averages instead.

Profit-and-lossAmount ($)As % of sales
Royalty + marketing fees$(114,438)14.25%
Adjusted EBITDA$397,168~30%
* industry average

How much does a Steak ‘n Shake franchisee earns on average?

In order to look at how much a franchisee earns on average, we must look at net profit instead: the profit margin after all expenses have been paid for. That’s the total profits available to be paid to shareholders and the franchisee.

Now, if we were to estimate net profits, for which the FDD doesn’t give any details, we could use an average net profit margin of 15%. This means that a Steak ‘n Shake franchisee makes on average $200,000 per year.

Is a Steak ‘n Shake a good investment?

Despite being a profitable venture, assessing Steak ‘n Shake’s profits alone don’t tell us much about whether this is a good investment or not.

In order to answer this question, we need to look at the payback period instead: the number of years it takes franchisees and their investors to recoup their original investment.

To do so, we divide the initial investment ($815,626) by net profits ($200,000) which gives us 4.9 years.

So it takes almost 5 years for franchisees and their investors to recoup their investment: this is a good number. Indeed, after only 5 years you start making profits on your original investment.

Therefore, we would argue Steak n’ Shake is a good investment from a financial perspective. Indeed, the $200,000 net profits per year justify the $800,000 franchise investment cost upfront.

Download the Steak ‘n Shake business plan and get your franchise funded

Including a 5-year financial plan built with the latest Franchise Disclosure Document numbers

How does Steak ‘n Shake compare vs. other franchises?

FranchiseInvestment ($)Sales ($)S/I RatioPayback (years)Min. net worth ($)Min. liquid capital ($)
Dunkin' Donuts,0001,056,5211.44.9500,000250,000
Krispy Kreme,0003,400,0004.11.62,000,000300,000
Little Caesars,022,850798,1130.88.5350,000150,000
Steak 'n Shake, Milshakes815,6261,346,3321.74.01,500,000500,000
Crumbl Cookies,2241,582,0903.12.1300,000150,000
Taco Bell,4131,650,0003.61.91,500,000750,000
Smoothie King,108573,2690.88.0300,000100,000
Jersey Mike's,3231,220,5862.14.7300,000100,000
Nothing Bundt Cakes,6501,307,2802.42.7600,000150,000
Jimmy John's,650874,8451.73.9300,00080,000
Texas Roadhouse,209,5002,955,5340.79.5n.a.200,000
Kung Fu Tea tea250,125353,2371.44.7n.a.25,000
Burger King,242,9501,215,9701.06.81,500,000500,000
Sonic Drive-In,467,0831,617,0001.16.01,000,000500,000
Panera Bread,290,5002,599,4321.15.97,500,0003,000,000
Pizza Hut,575906,9111.06.9700,000350,000
Dairy Queen Cream1,404,2201,143,1800.88.2750,000400,000
Jack in the Box,195,8001,755,5030.812.51,000,000250,000
Papa John’s,6951,101,1273.12.1750,000250,000
Five Guys,2251,203,3662.42.8500,000250,000
Carl’s Jr.,860,3351,419,5160.88.71,000,000500,000
Baskin-Robbins Cream465,100316,8150.79.8250,000125,000
Applebee’s American5,137,9662,356,9650.514.51,000,000500,000
Denny's American3,785,4591,639,5490.415.41,000,000500,000
Papa Murphy's,174580,4411.35.0275,000125,000
Auntie Anne's,692343,1351.55.6300,000100,000
Firehouse Subs,186888,3561.44.6350,000100,000
Tropical Smoothie Cafe,500961,9692.23.0350,000125,000
Marco’s Pizza,625895,5232.03.3400,000100,000
Cold Stone Creamery Cream310,956417,5881.35.0250,000100,000
Church’s Chicken,195,1471,395,0881.25.71,000,000300,000
Moe’s Southwest Grill,3701,013,3611.35.21,000,000100,000
Tim Hortons,242,7501,188,2401.07.0500,000100,000
Checkers & Rally's,8471,039,7731.25.4750,000250,000
Charleys Philly Steaks,806786,2331.54.3500,000100,000
Buffalo Wild Wings,546,9002,534,1480.79.31,500,000750,000
Rita's Ice Cream215,839248,3401.25.8300,000100,000
A&W Restaurants,750851,2121.16.2350,000150,000
Hungry Howie’s Pizza,682806,8991.93.5750,000200,000
McAlister’s Deli,424,9631,865,8611.35.11,000,000500,000
Round Table Pizza,2501,037,8161.35.0500,000200,000
Qdoba Mexican Eats,250972,9621.54.5
Taco John’s,119,0001,124,9801.06.61,000,000400,000
Scooter’s Coffee,143,250797,1010.79.6500,000200,000
Einstein Bros. Bagels,075885,0111.25.71,000,000536,500
Great American Cookies,275452,7711.25.7250,000100,000
Wienerschnitzel dogs873,300880,9801.06.6600,000250,000
Blaze Pizza,4501,096,4321.37.9500,000300,000
Wetzel's Pretzels,571748,8572.03.4300,00050,000
Pizza Ranch,268,3001,174,0880.418.61,000,000297,000
Del Taco,406,8501,345,3411.07.02,000,000500,000
Schlotzsky’s, Salads1,102,9331,053,3330.322.21,000,000300,000
Captain D’s,7781,067,8160.419.01,000,000350,000
Biggby Coffee,575648,3520.320.0300,000100,000
Which Wich,375281,8860.322.2500,000150,000
Marble Slab Creamery Cream407,360251,0520.416.7250,000100,000
Mountain Mike's Pizza,900865,7130.320.0300,000100,000
Huddle House,743712,4280.513.3600,000300,000
L&L Hawaiian Barbecue,350612,9210.333.3500,000150,000
Chicken Salad Chick, Salads651,0001,202,0200.320.0750,000250,000
Golden Chick,975917,6092.52.62,000,000425,000
Waba Grill,000466,5361.06.51,000,000250,000
Bruster’s Ice Cream Cream663,925466,6960.79.5375,000150,000