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Steak n Shake.


Long before the drive-thru, there was curb service. And the king of the curb was a black-and-white restaurant where the waiters and waitresses wore black pants, white shirts, bowties, white hats and tennies. It was famous for its steakburgers, fries, chili and "tru-flavor" shakes.

If you were in high school, you pulled Dad's old Chevy up to the restaurant put your arm around your honey, turned on your headlights, gave the carhop your order and got a tray full of food hooked onto your partially rolled-down window. If you were a bit older, you walked inside into the homey atmosphere and ate your meal off real china while you watched someone else do the cooking.

Up front were the trademark slogans: "TAKHOMASAK," "In Sight It Must Be Right," "Famous for Steakburgers" and, perhaps the most visible, "Steak n Shake," which is the name of the successful restaurant chain now 56 years young.

Gus Beltopened the original Steak n Shake in 1934 at 1219 Main Street in Normal, III. Belt developed the famous seared steakburger and the concept of cooking food in front of the customer. His cooking caught the public's fancy and he expanded by building additional restaurants in Illinois and St. Louis. In 1954, he opened his first stores in Indianapolis and in Daytona Beach, Fla. Although Beltdied in 1954, his wife, Edith (whose picture still hangs in the original Illinois store), continued to run the company until the late '60s when she finally sold her interest.

The company was purchased by the Franklin Corporation, an Indiana company that moved its headquarters to Indianapolis. Although Steak n Shake always remained a viable enterprise, in the '70s it expanded beyond its capabilities and by the late '70s and early '80s, retrenchment was in order. The first thing it did was sell off or close unprofitable stores. The company ceased paying dividends due to a decline in earnings. Since Steak n Shake was Franklin's only source of revenue, the company looked for a way to refinance and solve its financial problems. It found its white knight in Kelley & Partners, Ltd., a New York-based limited partnership that purchased a controlling interest in Franklin in 1981. Today, Kelley operates Steak n Shake through an Indianapolis-based holding company, Consolidated Products, Inc.

Consolidated Products has had two subsidiaries: Steak n Shake, Inc., and Consolidated Specialty Restaurants, Inc. The latter operates 15 theme restaurants in Illinois and Indiana, including eateries such as The Charley Horse in Chicago and the Gold Rush and Jeremiah Sweeney's in Bloomington. But it is Steak n Shake that is the company's mainstay, with 111 stores (including 12 franchises) in seven Midwestern states, Florida and Georgia.

In 1985, when James Williamson, Jr., was hired as president and CEO of Consolidated Products, Steak n Shake had posted five quarters of losses due to operating problems. Williamson's philosophy was: When a company is in trouble, go back to basics. "People had been going to the stores for 30 or 40 years. It was a matter of delivering on a consistent basis - clean stores, hot food and friendly service. That's all we did," Williamson says modestly.

According to Williamson, his first year was basically a break-even year. "That year, our bottom line was $8,000. We've had some nice increases since then," he says. In 1989, for example, the company showed net earnings of $4.3 million on revenues of $99.8 million, up 7 percent from the year before.

One of Williamson's first moves was to analyze what worked and what didn't. He reviewed the menu with his associates and cut out items that were ordered infrequently and took a lot of preparation. He determined that what made Steak n Shake different from its competitors was its steakburger, which always had been made with 100 percent pure ground beef that included fine cuts of T-bone, strip steak and sirloin.

"We do have a unique product," he says with pride. The method Steak n Shake uses to cook its steakburgers also is different from anybody else's. "We use a solid grill and smash the puck (called pucks because they resemble hockey pucks), which seals it to the grill. We use a sharp spatula and cut it off so the caramelization stays on the grill," he says.

Williamson felt the restaurants had strayed from the fundamental concept. In the early '80s, some of the stores had taken on a coffee-shop look, the decor having retreated to beige from the original black and white. The kitchens also had been taken from behind the counter and moved to the back to hold down on noise. Williamson brought the kitchen back out in front of the customer and revived the slogan, "In Sight It Must Be Right."

Gradually, the old tile buildings as well were replaced by updated buildings with black awnings and red accents. Curb service was discontinued and drive-thrus were added. As a result of this modernization program, dining room sales now represent 70 percent of the annual sales, while take-outs account for the other 30 percent.

Williamson's entry into the business did not precipitate a major defection of personnel. "The net (number of) people here are about the same, about 5,730 employees," he says. "I think a couple of the marketing people left because I wouldn't do TV media. I also added a couple of people in real-estate franchising."

Steak n Shake, which went "semi-public" back in the '40s, is now a public company whose stock is traded over the counter. The management and board of directors control 50 percent of the company. According to Jim Bear, vice president of finance, the company's goal is to have net earnings before taxes 7 percent or greater of net sales - a goal that it achieved in 1989. Steak n Shake also wants its net earnings after taxes to produce a return of 20 percent or greater on the average shareholder's equity. "We've achieved this the last couple of years," Bear says.

"Most restaurateurs control their own destiny if they control the customer," says Williamson. "The three key factors are quality food, friendly service and a clean and pleasant environment. If a customer goes away with a good feeling, he'll come back," he concludes.

PHOTO : Steak n Shake went back to the fundamentals to make earnings sizzle for its Indianapolis-based parent corporation.
COPYRIGHT 1990 Curtis Magazine Group, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:Regional Report: Company Profile; restaurant chain
Author:Partington, Marta
Publication:Indiana Business Magazine
Article Type:company profile
Date:Apr 1, 1990
Previous Article:Sports, Inc.
Next Article:Franklin.

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