Should I open or buy a Steak 'n Shake franchise in 2027?

What the two Steak 'n Shake models actually are

The single most expensive mistake a prospective operator makes is treating "Steak 'n Shake franchise" as one thing. It is two completely different businesses that happen to share a logo, and the financial outcomes diverge by an order of magnitude.

The traditional franchise is a conventional quick-service restaurant deal. You pay a $40,000 initial franchise fee, you build or acquire the box, you own or lease the real estate, you buy the equipment, you hire the staff, and you keep every dollar of profit after a 5.5% royalty on gross sales and a marketing contribution that runs roughly 1% to 4% of gross sales. Total investment under the most recent Franchise Disclosure Document lands between about $188,000 and $838,000 depending on whether you are converting an existing building, taking over a closed unit, or building from raw dirt. The agreement term is 20 years. What you are buying is an operating asset with a resale market — you can sell the business later to another franchisee, and the enterprise value typically clears somewhere around 3.0x to 3.5x trailing EBITDA in the current market for small QSR resales.

The Franchise Partner program is structurally different in a way the marketing language obscures. You pay a $10,000 entry fee. Biglari Holdings owns the building, owns the equipment, owns the leasehold, and sets the menu, the pricing, and the supply chain. You run the restaurant. In exchange you receive a share of the unit's profit — the widely publicized structure is a 50/50 split of net profit, with the franchisor's side of the economics also absorbing a meaningful percentage of gross sales in fees before that split is computed. You are not accumulating equity. You cannot sell your position to a buyer. The agreement renews on a short cycle rather than running two decades. If the unit underperforms, you have neither the real estate nor the resale value to fall back on.

The reason this matters for the 2027 decision is that the two paths screen for completely different people. The traditional path is a capital allocation decision: you are deploying $250,000 to $840,000 of liquid capital and asking whether the risk-adjusted return beats Culver's, Freddy's, a self-storage facility, or an index fund. The Franchise Partner path is a career decision: you are asking whether $70,000 to $130,000 of take-home for 55-to-60-hour weeks, with no equity accrual, beats being a general manager for a well-run multi-unit operator who would pay you a salary plus bonus for similar hours and none of the downside exposure.

Most of the new franchise units awarded since the program launched have used the Franchise Partner structure rather than the traditional one. Traditional awards have skewed toward area developers who can commit to three to five stores, because the franchisor gets more leverage per signature and the operator gets the route density that makes the labor model work. If you are a first-timer walking in with $300,000 and asking for one traditional store, understand that you are asking for the least-preferred deal in the system.

There is a third path that gets almost no marketing attention and is frequently the best of the three: buying an existing unit from a retiring or exiting franchisee. You skip the ramp period entirely, you underwrite against three years of actual profit-and-loss statements instead of a projection, and you negotiate against a motivated seller rather than a franchisor with a template. The catch is deal flow — these units rarely list publicly, and finding one requires calling franchisees directly off the Item 20 disclosure list.

Running the diligence: a 90-day sequence

The following sequence is deliberately ordered so that the cheapest disqualifying facts surface first. Do not reorder it. Every week you spend on financing before you have read Item 19 yourself is a week you may be spending on a deal that dies on the numbers.

Days 1 through 15 — Pull the FDD yourself. Several states publish franchise disclosure documents through their securities or financial regulation departments, including California, Illinois, Minnesota, New York, Virginia, Washington, and Wisconsin. Pull the document directly rather than accepting a broker's summary or a franchise-portal "FDD Talk" article, because those summaries routinely lag a year behind and routinely omit the closure data. Read Item 7 for the estimated initial investment table line by line — note especially the working capital line, which most first-timers underfund. Read Item 19 for the financial performance representation, and pay attention to which subset of units the average describes: system-wide averages that include long-tenured high-volume locations flatter a new build materially. Read Item 20 for outlet counts, transfers, terminations, non-renewals, and ceased operations over the trailing three years. The closure and transfer columns tell you more about the real health of the system than any comp-sales press release. Read Item 12 for territory rights and Item 23 for the development and area obligations you would be signing; territory protection in the QSR space is frequently narrower than prospective operators assume.

Days 16 through 30 — Call current franchisees. Item 20 includes a contact list. Call eight to ten of them, and specifically call at least two who have exited or transferred. Ask five questions and write the answers down: (1) What were your actual Year-1 EBITDA dollars, not percentage? (2) What is your labor cost as a percentage of sales, and how has it moved in the last 18 months? (3) What is your food cost percentage, and what happens to it when you are not physically in the building? (4) How many hours per week are you actually on site? (5) If you are a Franchise Partner, walk me through the arithmetic from gross sales to the dollars that hit your personal bank account. That last question is the single highest-yield question in the entire diligence process, because the gap between the advertised profit-share headline and the realized take-home is where most of the disappointment lives.

Days 31 through 45 — Drive the trade area. Map every competing quick-service burger concept within a three-mile radius and every one within a ten-minute drive time. Count Culver's, Five Guys, Whataburger, Shake Shack, Smashburger, Freddy's, and the strongest local independent. Sit in the parking lot of the nearest existing Steak 'n Shake at 12:15 p.m. on a Tuesday and at 7:30 p.m. on a Friday and count cars through the drive-thru for 30 minutes each. If your target trade area has three or more direct burger competitors with established traffic, either walk away or cut 20% to 25% off your AUV assumption before you underwrite anything.

Days 46 through 60 — Pick the structure. If your liquid net worth is below roughly $500,000, the Franchise Partner program is realistically your only path, and you should evaluate it against a salaried GM role rather than against other franchises. If you are above $500,000, model both paths on a ten-year basis with an explicit terminal value, because the traditional model's advantage shows up almost entirely in the exit, not in the annual cash flow.

Days 61 through 75 — Get three lender term sheets. SBA 7(a) is the common instrument for QSR franchise acquisition. Expect lenders to want 25% to 30% equity injection, a personal guarantee, and a lien on your home if you have equity in it. Rates float over a benchmark index with a spread that varies by loan size and lender appetite; get three sheets and compare the spread, the amortization on the leasehold-improvement portion, the prepayment terms, and the guaranty fee, not just the headline rate.

Days 76 through 90 — Execute or walk. Have a CPA who has actually underwritten restaurants review your Item 19 model. Have a franchise attorney review Item 12 (territory), Item 17 (renewal, transfer, and termination), and Item 23 (the agreements you are actually signing). Then sign or walk, and be genuinely willing to walk — the sunk cost of 90 days of diligence is trivially small compared to a 20-year agreement on a bad trade area.

The money: capital, fees, and what actually lands in your pocket

Here is the arithmetic laid out end to end, because the headline numbers circulating in franchise-broker content are not the numbers that determine whether this works.

Capital in, traditional model. The initial franchise fee is $40,000. Build-out and construction is the swing variable and runs roughly $150,000 to $550,000 — a conversion of an existing restaurant box sits at the bottom of that band, a ground-up build on new dirt sits at the top or above it. Equipment and smallwares run roughly $20,000 to $90,000. Working capital for the first three months should be budgeted at $50,000 to $120,000, and this is the line most first-timers cut, which is exactly the wrong line to cut. Add professional fees, permits, opening inventory, pre-opening labor, and grand-opening marketing. Total: roughly $188,000 at the absolute low end to roughly $838,000 at the high end. The franchisor's liquid capital requirement sits in the $250,000-plus range and the net worth requirement is higher still.

Revenue. Average unit volume for franchised locations runs in the neighborhood of $1.51 million to $1.63 million annually. Do not underwrite to the top of that range for a new build. New units in QSR typically open with a honeymoon bump, settle 15% to 25% below opening-month run rate by month four, and take 24 to 36 months to reach a stable mature volume. Your Year-1 model should assume you land meaningfully below system average.

The cost stack. On $1.55 million in sales, a competently run unit looks roughly like this: food and paper at 28% to 32% of sales, or about $434,000 to $496,000. Labor at 24% to 27% of sales nationally, or roughly $372,000 to $419,000 — but 30% to 33% in California, New York, Illinois, and other high-minimum-wage jurisdictions, which is $465,000 to $512,000 and is the single largest geographic determinant of whether the unit works. Occupancy at 6% to 9% depending on whether you own, ground-lease, or take a triple-net lease at market. Royalty at 5.5%, or roughly $85,000. Marketing at 1% to 4%, or $15,500 to $62,000. Then utilities, insurance, repairs and maintenance, credit card processing, and general administrative costs.

What is left. Franchisee-level EBITDA on a well-run unit lands in the 12% to 16% band, which on $1.55 million is roughly $186,000 to $248,000. Median owner earnings in the system cluster around $182,000 to $227,500. That is *before* debt service. If you financed $500,000 at typical SBA terms over ten years, annual debt service is meaningful — plan on $70,000 to $90,000 a year depending on rate and amortization. Real Year-1 free cash flow to the owner on a competent traditional unit therefore lands closer to $80,000 to $140,000, and that is assuming the unit performs. Payback on the full capital stack runs 10 to 12 years.

The Franchise Partner arithmetic. Because you contribute $10,000 and no build-out, the "payback period" headline is under a year, which is technically true and analytically useless — you did not buy an asset, so there is nothing to pay back. What matters is take-home. Fees consume a substantial slice of gross sales before the profit split, and then the remaining profit is halved. Realized operator income lands in the $70,000 to $130,000 range on a healthy unit, and can compress into the $50,000-to-$80,000 range on a marginal one. Compare that honestly against a salaried multi-unit GM role in your market before signing.

Ongoing capital you will forget to budget. Equipment refresh cycles run every five to seven years. Remodel obligations are typically triggered at renewal or at defined intervals in the franchise agreement — read Item 17 for the exact trigger, because a mandated remodel on a marginal unit is how otherwise-viable franchisees get pushed out. Point-of-sale and kiosk technology upgrades are recurring and non-optional. If you lease, model rent escalators of 2% to 3% annually over a ten-year term compounding against flat menu pricing.

Where operators get this wrong

Underwriting to the turnaround comps. Steak 'n Shake has posted genuinely strong same-store sales comparisons through 2025 and into 2026, driven by a smaller-footprint kiosk-ordering format, the beef-tallow fry relaunch, and real brand re-engagement. Those comps are real. They are also measured against a badly depressed base following a contraction that closed a substantial share of the system between 2018 and 2023. Double-digit comps off a trough do not annualize. If your ten-year model assumes anything above low-single-digit same-store growth after 2027, your model is wrong and every downstream number is inflated.

Buying the absentee-ownership story. Steak 'n Shake's product is made-to-order steakburgers and hand-spun shakes. That is a labor-intensive, execution-sensitive format. Franchisees who are physically present 45-plus hours a week hold food cost within benchmark; those who are not routinely run 200 to 300 basis points over, which on $1.55 million is $31,000 to $46,000 of lost profit annually — roughly a quarter to a third of your entire free cash flow. Owner-operators working the first 18 months hard can realistically reach cash-on-cash returns in the low-to-mid 20% range; genuinely absentee owners land in the single digits and frequently below.

Confusing the profit-share headline with take-home. This is the defining error of the Franchise Partner path. A percentage of profit is not a percentage of sales, fees come out before the split, and "profit" is defined by the franchisor's accounting, not yours. Ask three current partners to walk you from gross sales to their deposited dollars, on the record, before you sign anything.

Ignoring the Bitcoin question in both directions. Biglari Holdings has put corporate cash into Bitcoin, and Steak 'n Shake has leaned into Bitcoin payment acceptance as a brand differentiator. Lightning-based payments carry lower processing cost than standard card interchange, which is a genuine if modest margin benefit at the unit level — worth basis points, not percentage points. But the corporate treasury position introduces balance-sheet volatility at the parent, and parent-company volatility is a real risk for a franchisee whose brand support, supply chain, and remodel financing depend on that parent. Do not underwrite Bitcoin as a growth thesis, and do not dismiss it as irrelevant to franchisor stability either.

Skipping the labor-jurisdiction analysis. A unit in a $16-to-$20 minimum-wage state and a unit in a federal-minimum state are not the same business. The 6-to-8-point labor differential is roughly $93,000 to $124,000 on $1.55 million of sales — more than half of median owner earnings. If you are in a high-wage state, your entire underwriting needs a different AUV threshold to clear.

Buying a location the franchisor could not make work. Some available conversion opportunities are locations that previously closed. Sometimes the closure was a corporate-strategy decision; sometimes the trade area simply does not support the format. Find out which, in writing, before you take the box.

Choosing among the paths, including walking away

Here is how the decision actually resolves for different profiles.

Buy an existing franchisee resale if you can find one. This is the highest-confidence path into the brand. You underwrite real P&Ls rather than a projection, you skip the 24-to-36-month ramp, you inherit a trained crew, and small QSR resales frequently transact around 3.0x to 3.5x trailing EBITDA, which on $200,000 of EBITDA is $600,000 to $700,000 — comparable to a mid-range new build but with the risk already retired. Source these by calling franchisees off Item 20 and asking who is retiring.

Sign a traditional multi-unit development deal if you have $750,000-plus in deployable capital, prior QSR operating experience, and the intent to run three or more stores. Route density is what makes the labor model work: one area manager across three units, shared inventory buffering, and cross-unit staffing coverage recover several points of margin that a single unit simply cannot. Operators with prior QSR general-management experience consistently outperform first-timers on volume, and the gap is not small.

Take the Franchise Partner program only with clear eyes: you are accepting an operator job with variable compensation and no equity. That can be a legitimately good outcome for a strong GM with no capital who wants upside on their own execution — but benchmark it against a salaried multi-unit management role, and price the fact that you cannot sell your position.

Look at the alternatives if none of the above fits. Culver's requires roughly $3.0 million to $5.2 million of investment against considerably higher average unit volumes and a far longer track record of stability — several times the capital for a meaningfully lower-risk profile. Freddy's Frozen Custard is the closest concept comparison, steakburgers plus custard, at a mid-range investment level and with a growth trajectory that has been more consistently positive. An independent burger concept with a strong operator and a $400,000 build-out pays no royalty at all, and if you have genuine operating chops that 5.5% is worth more to you than the brand is.

Walk away if you cannot answer, in one sentence and without hedging, why a customer in your specific trade area chooses Steak 'n Shake over the Culver's, the Freddy's, and the best independent within a ten-minute drive. Brand momentum at the system level does not put cars in your drive-thru.

One structural note for anyone approaching this from an analytical background: the discipline here is the same one RevOps applies to any funnel — instrument the inputs, refuse to model off a peak-quarter comp, and separate the metric that is being marketed to you from the metric that determines your outcome. Advertised AUV is the top-of-funnel number. Deposited dollars after fees, debt service, and your own uncompensated labor is the number that decides whether you should open or buy anything at all.

Related questions

How long does it take to open a Steak 'n Shake from signing?

Budget nine to eighteen months for a ground-up build: site selection and lease negotiation take three to six months, permitting and entitlement two to six, construction four to seven, plus training. A conversion of an existing restaurant box or a takeover of a closed unit can compress this to four to eight months.

Can I own a Steak 'n Shake without working in it?

Realistically, no. The made-to-order format is execution-sensitive, and units without an owner or a genuinely elite general manager on site 45-plus hours weekly run food and labor costs materially over benchmark. Absentee cash-on-cash returns land in the single digits versus the low twenties for hands-on operators.

Is the Franchise Partner program actually franchise ownership?

Functionally it is a profit-share operating agreement. You do not own the real estate, the equipment, or a transferable business interest, and the term renews on a short cycle rather than running 20 years. Evaluate it as a compensation package with upside, not as an equity investment.

What return should I expect on a traditional unit?

Median owner earnings of roughly $182,000 to $227,500 against $190,000 to $840,000 invested, with payback at 10 to 12 years and franchisee-level EBITDA margins of 12% to 16%. Hands-on operators reach cash-on-cash returns in the low twenties; that assumes a strong trade area.

Does buying an existing unit beat building new?

Usually yes. A resale at 3.0x to 3.5x trailing EBITDA gives you audited performance instead of a projection, a trained crew, and no 24-to-36-month ramp. The constraint is deal flow — these rarely list publicly, so you source them by calling franchisees off the Item 20 list.

FAQ

What is the real difference between the traditional franchise and the Franchise Partner model?

The traditional franchise costs roughly $188,000 to $838,000 all-in with a $40,000 franchise fee, a 5.5% royalty, and a 1% to 4% marketing contribution, and it produces a transferable asset over a 20-year term. The Franchise Partner program costs $10,000, provides a turnkey location the franchisor owns, and pays you a share of net profit after fees. One builds equity; the other pays income.

How much will I actually take home in year one?

On a competent traditional unit, expect $80,000 to $140,000 of free cash flow after debt service in Year 1, well below the $182,000 to $227,500 median owner earnings figure, because new units typically need 24 to 36 months to reach mature volume. Franchise Partner operators typically land at $70,000 to $130,000 on a healthy unit.

How long until I get my capital back?

Roughly 10 to 12 years on the traditional model at median performance. The Franchise Partner program has a nominal payback under one year only because you invested $10,000 rather than a real capital stack — there is no meaningful asset to recover, so payback is the wrong metric for that path entirely.

Does the Bitcoin strategy make this a better or worse investment?

Both, modestly. Lightning-based payment acceptance carries lower processing cost than standard card interchange, which helps unit margin by basis points, and it has generated genuine brand attention. But holding Bitcoin on the parent company's balance sheet adds volatility at the franchisor level, and your brand support and supply chain depend on that parent's stability. Do not treat it as a growth thesis.

What costs do first-time franchisees consistently underestimate?

Working capital is the top one — three months is a minimum and six is safer. After that: equipment refresh every five to seven years, remodel obligations triggered by the franchise agreement, mandatory technology and kiosk upgrades, rent escalators of 2% to 3% annually compounding against flat pricing, and local marketing spend above the brand fund contribution.

Can I get in with less than $250,000 in liquid capital?

Not on the traditional path — the disclosed liquid capital requirement sits above that, and lenders want 25% to 30% equity injection on top. The Franchise Partner program is the realistic entry point below that threshold, but understand you are buying a job with variable pay rather than a business you can later sell.

Sources

• https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=BH&type=10-K — Biglari Holdings Inc. SEC filings, including Steak 'n Shake segment disclosures
• https://dfpi.ca.gov/franchise-investment-law/ — California Department of Financial Protection and Innovation, franchise registration and FDD filings
• https://www.sos.state.mn.us/business-liens/franchises/ — Minnesota Secretary of State franchise registration database
• https://www.wdfi.org/fi/securities/franchise/ — Wisconsin Department of Financial Institutions franchise registration search
• https://www.ftc.gov/business-guidance/resources/franchise-rule-compliance-guide — U.S. Federal Trade Commission, Franchise Rule Compliance Guide
• https://www.sba.gov/document/support-sba-franchise-directory — U.S. Small Business Administration Franchise Directory
• https://www.bls.gov/ppi/ — U.S. Bureau of Labor Statistics, Producer Price Index (beef and food commodity series)
• https://www.franchise.org/ — International Franchise Association, franchise economic outlook and industry research
• https://www.qsrmagazine.com/ — QSR Magazine, quick-service restaurant industry coverage
• https://restaurantbusinessonline.com/ — Restaurant Business Online, chain performance and unit-count reporting

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