Steak ‘n Shake Franchise in 2024: Costs, Fee & FDD
Explore the ins and outs of investing in a Steak ‘n Shake franchise—costs, fees, financial performance, and potential challenges. Get an in-depth look at whether this iconic brand is the right investment for you.
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Steak ‘n Shake, founded in 1934 by Gus Belt in Normal, Illinois, is a pioneer in the fast-casual dining space. It began with a simple concept: serve high-quality, hand-crafted steakburgers and milkshakes in a friendly, diner-like atmosphere. Belt’s commitment to quality—grinding steak into burgers in full view of customers—set the brand apart from its competitors and cemented its place as an iconic American brand.
The franchise’s core offerings revolve around its famous Steakburgers, which are made from 100% beef, and hand-dipped milkshakes. These signature items are complemented by a range of diner-style meals, including chili, hot dogs, and breakfast options. The brand primarily caters to families, late-night diners, and individuals seeking a nostalgic yet affordable dining experience. Steak n Shake has successfully maintained its classic charm while adapting to modern tastes, making it a popular choice across various demographics.
Today, Steak ‘n Shake boasts over 500 locations, primarily in the United States, with a presence in several countries worldwide, including Europe and the Middle East. The franchise serves millions of customers annually, with a daily customer base that reflects its widespread popularity. Despite facing some challenges in recent years, Steak ‘n Shake remains a significant player in the fast-casual dining industry, with a loyal customer base and a recognizable brand.
For potential franchisees, Steak ‘n Shake offers a comprehensive support system, including initial training programs that cover everything from restaurant management to operational procedures. The franchise also provides ongoing support, marketing assistance, and regular updates to ensure that franchisees are well-equipped to succeed. The brand’s commitment to its franchisees is evident in its structured approach to training and support, making it an attractive option for those looking to invest in a proven, iconic brand.
Steak ‘n Shake Franchise Insights
- Steak ‘n Shake has been serving its famous Steakburgers and milkshakes for over 90 years, making it one of the oldest continuously operating burger chains in the U.S.
- With over 500 locations worldwide, Steak ‘n Shake operates in countries like France, Saudi Arabia, and Italy, showcasing its appeal beyond American borders.
- Steak ‘n Shake ‘s hand-dipped milkshakes have earned numerous awards, further enhancing its brand reputation and drawing in dessert lovers.
Steak ‘n Shake Franchise Key indicators
Growth YOY (%)
-15%
vs industry 1%
Total U.S. Franchised Units
111
3-Year Failure Rate
55%
vs industry 11%
Sales-to-Investment ratio
1.1:1
How much does it cost to open a Steak ‘n Shake franchise?
Understanding the potential investment size and capital requirements is crucial when considering opening a Steak ‘n Shake franchise. These financial commitments, including initial franchise fees, equipment costs, and ongoing operational expenses, impact the feasibility and profitability of the venture. Thoroughly evaluating these factors ensures that potential franchisees are prepared for the financial responsibilities and can make informed decisions about their ability to sustain and grow the business, ultimately contributing to long-term success.
Min & Max Investment
Opening a Steak ‘n Shake franchise involves several key costs, which are outlined in Item 7 of the Franchise Disclosure Document (FDD). You can see a breakdown of the costs to open a Steak ‘n Shake below from the most recent Item 7 below:
| Type of Expenditure | Minimum Investment | Maximum Investment |
|---|---|---|
| Franchise Fee | $25,000 | $25,000 |
| Construction Management/Fee | $0 | $35,000 |
| Site Improvements | $355,902 | $574,036 |
| Building or Leasehold Improvements | $572,151 | $922,824 |
| Furniture, Fixtures, Equipment, & Signage | $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 | $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 |
Item 7 in the Franchise Disclosure Document (FDD) is the “Estimated Initial Investment” section. It outlines the total costs a franchisee can expect to incur when starting a franchise, including the initial franchise fee, equipment, inventory, real estate, and other startup expenses. This section is crucial because it provides potential franchisees with a detailed understanding of the financial commitment required, helping them assess affordability and plan their investment strategy effectively.
Required Capital
To open a Steak ‘n Shake franchise, the required capital involves both the initial investment costs and a net worth requirement set by Steak ‘n Shake. Let’s take a closer look below:
- Initial Investment The total estimated initial investment for a Steak ‘n Shake franchise ranges from approximately $1.34 million to $2.34 million. This includes all startup costs such as the franchise fee, real estate, construction, equipment, initial inventory, and additional funds for initial operating expenses. Assuming that you will finance your franchise investment, you should plan to have 20% of the total investment amount in the form of equity (cash) for the investment.
- Liquid Assets Requirement Steak ‘n Shake typically requires franchisees to have a minimum of $500,000 in liquid assets. This ensures that the franchisee has sufficient funds to cover unforeseen expenses and maintain financial stability during the startup phase.
- Net Worth Requirement While specific net worth requirements can vary, it is generally recommended that franchisees have a net worth of at least $1 million. This includes the value of assets like real estate, investments, and personal property, minus any liabilities.
These estimates provide a general guideline for potential franchisees, but it’s important to consult directly with Steak ‘n Shake for the most accurate and up-to-date financial requirements.
How much does a Steak ‘n Shake franchise owner make?
Calculating the salary of a Steak ‘n Shake franchise owner involves analyzing gross sales to determine total revenue, assessing operational efficiency to understand profit margins, and accounting for franchisor fees and additional expenses such as rent, utilities, and payroll. Effective management of these factors can significantly impact the profitability and financial success of a Steak ‘n Shake franchise owner. This comprehensive financial analysis helps estimate net profits, from which the owner’s salary can be derived. A clear understanding of these factors ensures accurate salary projections and financial planning for sustainable business operations.
Steak ‘n Shake Revenue & Gross Sales
In 2023, Steak ‘n Shake franchises achieved a median gross sales of $1,429,110, reflecting a 12% decrease from the previous year. This decline highlights the challenges faced in the current market, yet the brand’s longstanding reputation and loyal customer base continue to offer potential for resilient franchise performance.
Which key factors impact the average revenue performance of Steak ‘n Shake franchisees?
The decline in Steak ‘n Shake’s U.S. franchisee median gross sales from 2022 to 2023 can likely be attributed to several factors. Economic challenges, including inflation and rising costs, may have tightened consumer spending on dining out. Additionally, increased competition within the fast-casual and quick-service restaurant sectors could have diverted customers to newer or alternative dining options. Operational changes and brand modernization efforts may have caused temporary disruptions that impacted customer experience. Finally, the lingering effects of the COVID-19 pandemic and shifts in consumer behavior might have also played a role in reducing dine-in traffic and overall sales.
Steak ‘n Shake Franchise Operational Costs
When opening a Steak ‘n Shake franchise, it’s important to consider several key ongoing operational costs:
- Labor Costs Wages for staff, including managers, cooks, servers, and other support staff, will be a significant ongoing expense. This includes payroll taxes, benefits, and any additional training costs.
- Food and Beverage Costs The cost of ingredients and beverages is a major operational expense. This includes purchasing fresh produce, meats, dairy, and other essentials to maintain menu quality.
- Rent and Utilities Leasing the restaurant space and paying for utilities like electricity, water, gas, and waste disposal are essential ongoing costs. These can vary greatly depending on the location.
- Marketing and Advertising Continuous marketing efforts, including local promotions, digital marketing, and brand advertising, are necessary to maintain and grow customer traffic.
- Maintenance and Equipment Regular maintenance of kitchen equipment, dining areas, and the facility itself is crucial to ensure smooth operations. This also includes the cost of any repairs or replacements.
- Franchise Fees and Royalties As a franchisee, you’ll need to pay ongoing royalties to Steak ‘n Shake, which are typically a percentage of your gross sales. There may also be additional fees for marketing support and other services.
- Insurance Comprehensive insurance coverage, including property, liability, and workers’ compensation, is a required ongoing cost to protect your business from various risks.
- Supplies and Inventory Maintaining an adequate inventory of non-food items such as packaging, cleaning supplies, and uniforms is another ongoing operational cost.
These costs collectively contribute to the overall financial management of your franchise and are important to consider when planning your budget.
Steak ‘n Shake Franchise Fees
When considering the ongoing fees associated with owning a Steak ‘n Shake franchise, it’s crucial to understand the various costs that will impact your operations. Here’s a breakdown of the key fees you should be aware of:
- Royalty and System Fee 5% of Gross Receipts, due weekly on Friday. This fee covers the use of the Steak ‘n Shake brand and systems. In certain markets or non-traditional locations, this fee may increase to 10%.
- Digital and Production Fund Fee 1% of Gross Receipts, due weekly on Friday. This fee supports the brand’s digital marketing and production efforts. It may be reduced or waived for certain non-traditional locations.
- Additional Opening Support $100-$300 per day plus travel, lodging, and meals, due 30 days after billing. This fee applies if you request extra help from the franchisor’s opening trainers.
- Operating Assistance $4,000 per month plus payroll, travel, lodging, and meals, due 30 days after billing. This fee is charged if additional managerial support is needed due to non-compliance with system standards.
- Transfer Fee $5,000 per Restaurant, due before or at the time of approval. This fee is applicable if you transfer ownership or a controlling interest in the franchise.
- Additional Fees There may be other fees that could apply depending on specific circumstances, such as extra support or unique operational needs.
These fees are essential to factor into your financial planning as they directly affect your profitability and cash flow.
Steak ‘n Shake Franchise Earnings
In 2023, the median gross sales for a Steak ‘n Shake franchise were $1,429,110, which represents a 12% decrease from the previous year. For owner-operators, earnings were approximately $214,367, also reflecting a 12% decline from 2022. This drop in revenue and earnings highlights the challenges faced by franchisees, possibly due to market competition, economic conditions, or operational adjustments.
For semi-absentee owners, the earnings in 2023 were about $171,493, also down 12% from the previous year. These figures provide a realistic estimate of what franchisees can expect in terms of earnings, depending on their level of involvement in the day-to-day operations of the business. Despite the decrease, the earnings potential remains substantial, especially for those able to effectively manage costs and operations.
How to Open a Steak ‘n Shake Franchise
Becoming a Steak ‘n Shake franchisee involves a series of steps designed to ensure you are well-prepared to run a successful franchise. Here’s an outline of the process:
- Initial Inquiry You or your franchise specialist submits an initial inquiry basic information about your interest and background. You should also conduct thorough research on the franchise, including seeing all of the information available on the Vetted Biz franchise intelligence platform, including access to the most recent Franchise Disclosure Document (FDD).
- Application and Review Complete and submit a formal franchise application, including financial disclosures and background information. The franchisor will then review your application to assess your suitability.
- Discovery Day Attend a Discovery Day at Steak ‘n Shake headquarters to meet the corporate team, tour the facilities, and gain deeper insights into franchise operations. This is also an opportunity for both parties to evaluate the potential partnership.
- Franchise Agreement If both parties are satisfied, you will sign the Franchise Agreement and pay the initial franchise fee, officially becoming a Steak ‘n Shake franchisee.
- Site Selection and Approval Work with the franchisor’s real estate team to find and secure a suitable location for your franchise. The site will need to be approved by Steak ‘n Shake.
- Training Program Participate in a comprehensive training program covering all aspects of restaurant operations, management, and customer service. Additional on-site training may be provided once your location is ready.
- Restaurant Build-Out and Opening Oversee the build-out and setup of your restaurant according to Steak ‘n Shake’s specifications. Once complete, you’ll be ready for the grand opening and to start operations.
Pros & Cons
Pros
Established Brand: Steak ‘n Shake has a strong brand presence with over 90 years of history, which can attract loyal customers and provide a solid foundation for your business.
Affordable Investment: Compared to other fast-casual franchises, Steak ‘n Shake offers a relatively low initial investment, especially with their “franchise partner” program, which can be appealing for new entrepreneurs.
Diverse Menu Offering: The franchise’s core products, like Steakburgers and milkshakes, have broad appeal across various demographics, providing a stable customer base.
Marketing and Branding Support: As a franchisee, you benefit from national and regional marketing efforts that help drive customer traffic to your location.
Cons
Recent Financial Performance: The recent decline in gross sales and earnings might indicate challenges within the brand, which could impact profitability for new franchisees.
Competitive Market: The fast-casual and quick-service restaurant market is highly competitive, with many players offering similar products, which could make it difficult to stand out.
Operational Challenges: Running a Steak ‘n Shake franchise requires significant involvement, particularly in maintaining quality and managing labor costs, which can be demanding.
Royalty and Ongoing Fees: The ongoing fees, including royalties and marketing contributions, are a consistent financial obligation that can affect your bottom line.
Economic Sensitivity: The brand’s performance can be sensitive to broader economic conditions, such as inflation or shifts in consumer spending habits, which may affect sales.
