Steak n’ Shake Franchise Costs $156K – $2.3M (+ 2024 Profits)

Steak ‘n Shake, a quintessential part of the American dining landscape, was founded in February 1934 in Normal, Illinois by Gus Belt. Known for its pioneering concept of premium “steakburgers” and hand-dipped milkshakes, the brand’s name reflects its heritage: “steak” symbolizing its burger quality, made from genuine steak cuts right in front of customers, and “shake” representing its classic milkshakes. 

Now headquartered under the Biglari Holdings umbrella, Steak ‘n Shake has grown significantly over its 89-year history, emphasizing its people-first philosophy and a mission to deliver high-quality burgers and shakes at the best value.

The franchise model of Steak ‘n Shake has evolved to offer a progressive approach to potential franchisees, with options for both traditional franchising and a unique franchise partnership model.

Steak ‘n Shake distinguishes itself in the competitive fast-food industry by adhering to its roots while embracing modernization. It’s recognized for the quality of its steakburgers, made from 100% beef, and milkshakes crafted the old-fashioned way with real ice cream and indulgent toppings. 

Type of Expenditure	Amount (Freestanding)
Franchise Fee	$25,000
Construction Management/Fee	$0 – $35,000
Site Improvements	$355,902 – $574,036
Building or Leasehold Improvements	$572,151 – $922,824
FF&E, Signage and Technology	$305,365 – $492,525
Pre-Opening Expenses	$5,000 – $10,000
Additional Funds for three (3) months	$15,000 – $20,000
Inventory and supplies for opening	$10,000 – $15,000
Training Expenses (travel, meals & lodging only-wages excluded)	$16,000 – $55,000
Architectural, Civil Engineering & Other Professional Fees & Permits	$35,000 – $78,000
Impact and Tap Fees	$5,000 – $78,000
Grand Opening Marketing Expenses	$0 – $25,000
Extension Fee	$0 – $10,000
Total Estimated Initial Investment	$1,344,419 – $2,340,385

Note: The table above provides a snapshot of the main costs associated with starting the most common franchise format (as disclosed in the Item 7 of the Franchise Disclosure Document). For a complete overview of all the expenses involved with the various formats offered by the franchisor, please consult the Franchise Disclosure Document.

Initial Franchise Fee

The Initial Franchise Fee is $25,000, payable in one lump sum at the signing of the Franchise Agreement. The Franchise Fee is non-refundable unless a location is not agreed upon within a certain timeframe, in which case seventy-five percent (75%) of the fee may be refunded, with the remaining twenty-five percent (25%) retained as compensation for services provided.

Royalty and System Fee & License Fee

The Royalty and System Fee is 5 1/2% of Gross Receipts, payable weekly on Friday. This fee covers the use of the system as provided in the Franchise Agreement. The License Fee, paid to an affiliate for the use of the Marks, is included within the Royalty and System Fee or may be separately defined.

Digital and Production Fund Fee

The Digital and Production Fund Fee is 1% of Gross Receipts, also due weekly on Friday. This fee supports digital and production-related expenses.

Additional Opening Support

For additional support during the opening, fees range from $100 to $300 per day, plus travel, lodging, and meals, billed 30 days after the service.

Operating Assistance

Operating assistance is available at a cost of $4,000 per month, in addition to payroll, travel, lodging, and meal expenses, with billing occurring 30 days after.

Transfer Fee

A Transfer Fee of $5,000 is applicable for the approved transfer of a franchise to another entity, payable at the time of the transfer.

Renewal Fee

The Renewal Fee, for extending the franchise agreement, is set at 50% of the then-current Franchise Fee, which would be $12,500 based on the current Franchise Fee of $25,000.

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 to apply

Opening a Steak 'n Shake franchise involves several steps, designed to ensure you are a good fit for the franchise. Here are the main steps to follow to open a Steak 'n Shake franchise.

1. Explore the Franchise Models

• Understand the Options: Steak ‘n Shake offers two main franchising models: the Traditional Franchising and the Franchise Partnership.
• Evaluate Your Investment: Consider the Traditional Franchising if you’re interested in single-unit or multi-unit options with investments typically ranging from $1.34M to $2.34M. For a lower entry point, the Franchise Partnership requires only a $10,000 total investment.

2. Conduct Thorough Research

• Review the Brand: Familiarize yourself with Steak ‘n Shake’s history, mission, and values. Understand what makes it a classic American brand and its place in the market.
• Understand the Commitment: Assess the level of involvement required, including time, financial investment, and adherence to brand standards.

3. Submit an Inquiry

• Initial Contact: Visit the official Steak ‘n Shake franchise website and submit an inquiry form to express your interest in the franchise opportunity.
• Provide Information: You may need to provide basic information about yourself, your business background, and your financial capabilities.

4. Participate in Discovery Day

• Attend Discovery Day: Steak ‘n Shake might invite potential franchisees to a Discovery Day event, where you can learn more about the franchise, meet with corporate representatives, and ask questions.
• Evaluate the Fit: Use this opportunity to determine if the Steak ‘n Shake franchise aligns with your business goals and expectations.

5. Review the Franchise Disclosure Document (FDD)

• Obtain the FDD: After initial approval, you’ll receive the Franchise Disclosure Document that outlines detailed information about the franchise, including fees, obligations, and performance expectations.
• Seek Legal Advice: It’s advisable to consult with a franchise attorney to review the FDD and understand your rights and obligations.

6. Secure Financing

• Assess Your Financial Needs: Based on the franchising model you choose, assess the total investment required, including franchise fees, startup costs, and working capital.
• Explore Financing Options: Consider various financing options, such as bank loans, SBA loans, or leveraging personal assets.

7. Sign the Franchise Agreement

• Finalize the Agreement: Once you’ve decided to proceed, you’ll sign the franchise agreement, which formalizes your commitment to owning and operating a Steak ‘n Shake franchise.
• Understand Your Commitment: Ensure you fully understand the terms, conditions, and expectations outlined in the franchise agreement.

8. Complete Training and Preparation

• Undergo Training: Participate in Steak ‘n Shake’s comprehensive training program, which covers operational procedures, customer service, and business management.
• Prepare Your Location: Work with the Steak ‘n Shake team to identify a suitable location, design your restaurant, and prepare for opening.

Disclaimer

Disclaimer: This content has been made for informational and educational purposes only. We do not make any representation or warranties with respect to the accuracy, applicability, fitness, or completeness of the information presented in the article. You should not construe any such information or other material as legal, tax, investment, financial, or other professional advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, advertisement, or offer to buy or sell any franchises, securities, or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the franchise and/or securities laws of such jurisdiction.

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