Starting a franchise can be an exciting venture, and when it comes to the world of fast-food, Steak ‘n Shake is undoubtedly a renowned name. With its mouthwatering menu and loyal customer base, opening a Steak ‘n Shake franchise can be a profitable business opportunity. In this comprehensive blog post, we will explore the business model of Steak ‘n Shake, go through the step-by-step application process, break down the costs and fees involved, delve into the profit margin prospects, discuss the pros and cons, and provide answers to some frequently asked questions. So if you’re ready to embark on this journey, let’s get started!
Business Overview of Steak ‘n Shake Franchise
Steak ‘n Shake is a popular fast-food chain that specializes in steakburgers and milkshakes. Known for its high-quality ingredients and classic American flavors, the franchise has built a strong reputation since its inception in 1934. With a commitment to freshness and customer satisfaction, Steak ‘n Shake continues to attract a loyal fan base and offers a proven business model for aspiring franchisees.
The franchise operates on a combination of company-owned restaurants and franchised locations. This ensures a balance between consistency in quality and brand control while allowing motivated individuals to join the endeavor as franchise partners. As a franchisee, you will benefit from the established brand recognition and a comprehensive support system provided by the company.
How to Apply for Steak n Shake Franchise
Applying to become a Steak ‘n Shake franchisee involves a few important steps. Here is a step-by-step guide to help you through the application process:
- Research and Preparation: Before diving into the application, take the time to thoroughly research the franchise industry and specifically study the Steak ‘n Shake brand. Familiarize yourself with their core values, menu offerings, and target market to ensure this is the right fit for you.
- Initial Inquiry: Begin by expressing your interest in a Steak ‘n Shake franchise by submitting an initial inquiry. This can typically be done through the company’s official website or by directly contacting their franchise department.
- Formal Application: After your initial inquiry, you will be provided with a formal application to complete. This application will require detailed information about your personal background, financial resources, and any previous business experience you may have.
- Review and Approval Process: Once your application is submitted, it will be reviewed by the franchise department. They will assess your qualifications to determine if you meet the criteria set by the company. This evaluation may also include an interview and background checks.
- Franchise Agreement: If you successfully pass the review process, you will be presented with a franchise agreement. This agreement will outline the terms and conditions of the franchise partnership, including the initial investment required, ongoing fees, and the rights and responsibilities of both parties involved.
- Training and Support: Upon signing the franchise agreement, you will undergo comprehensive training provided by Steak ‘n Shake. This training will equip you with the necessary skills and knowledge to operate a successful franchise. Additionally, the company offers ongoing support in areas such as marketing, operations, and supply chain management.
Steak n Shake Franchise Cost & Investment Breakdown:
Opening a Steak ‘n Shake franchise requires a significant investment, which consists of several costs and fees. Here is a breakdown of the typical expenses you can expect:
- Initial Franchise Fee: As a franchisee, you will need to pay an initial franchise fee. This fee grants you the right to operate a Steak ‘n Shake restaurant under their brand. The exact amount of the fee is not publicly disclosed and may vary depending on factors such as location and market conditions.
- Real Estate and Leasehold Improvements: Finding a suitable location and setting up the restaurant involves real estate costs and leasehold improvements. You may need to secure a lease or purchase a property, and there will likely be expenses related to renovations and customization to meet the brand’s standards.
- Equipment and Furnishings: To run a Steak ‘n Shake franchise, you will need to invest in kitchen equipment, furniture, and fixtures. These essential items ensure smooth operations and provide a comfortable dining experience for customers.
- Initial Inventory and Supplies: Stocking up on initial inventory and supplies is another cost to consider. This includes ingredients for the menu items, packaging materials, cleaning supplies, and other necessary items.
- Marketing and Advertising: Building brand awareness and attracting customers requires strategic marketing and advertising efforts. As a franchisee, you will contribute to national and local advertising funds, as per the terms of the franchise agreement.
- Ongoing Royalty and Continuing Fees: In addition to the initial investment, franchisees are also responsible for ongoing fees. These typically include a royalty fee, which is a percentage of the restaurant’s gross sales, and continuing fees for marketing and support services.
|$10,000 – $30,000 (estimated)
|$1,340,000 – $2,340,000
|Real Estate & Construction
|Land & Lease Costs
|Inventory & Supplies
|$10,000 – $15,000 (estimated)
|$20,000 – $30,000
|Marketing & Advertising
|Included in partnership fee
|$5,000 – $10,000 (estimated)
|Included in partnership fee
|Included in initial investment
|Included in partnership fee
|Varies depending on technology needs
|5.5% of gross sales
|5.5% – 6.5% of gross sales
|Included in partnership fee
|4% of gross sales
|May vary depending on specific location and partnership agreement
|May vary depending on specific location and build-out needs
|Estimated Total Investment
|$25,000 – $40,000
|$1,415,000 – $2,420,000
It’s important to note that the specific costs and fees can vary depending on various factors such as location, size of the restaurant, and local regulations. Therefore, it’s crucial to consult with the franchise department and carefully review the franchise agreement to get an accurate estimate of the investment required.
Steak ‘n Shake Franchise Model: Two Paths to Shake Things Up
Steak n Shake offers two distinct franchise models, catering to different levels of investment and operational involvement:
1. Franchise Partnership:
- Unique Feature: This model involves a shared ownership structure between the franchisee and Steak n Shake, where the franchisee contributes $10,000 and becomes a partner in the restaurant.
- Investment: Lower barrier to entry compared to traditional franchising, with primary responsibility for day-to-day operations.
- Requirements: Be an active owner-operator, with no other active business ventures.
- Benefits: Lower initial investment, shared profits and risks with the franchisor.
- Drawbacks: Less control over operations, potentially lower profits compared to traditional model.
WHAT YOU CAN EXPECT
- Established company restaurants
- Turnkey system to assist Franchise Partners in operating their restaurants
- On the job extensive training
- Support from field-based operations
- Administrative services (payroll, accounting, etc.)
- Creative and powerful marketing support
- Total Investment of $10,000
- 6 months on-the-job training
- No additional business ventures
- Capable of running the day-to-day business, no absentee ownership
- A passion for excellence — fanatical about pleasing customers
- Commitment to high performance and to delivering quality products
- Dedication to superior guest service
2. Traditional Franchising:
- Standard Franchise Model: Own and operate a standalone Steak n Shake restaurant.
- Investment: Ranges from $1.34 million to $2.34 million depending on location and build-out needs.
- Requirements: Strong financial qualifications, multi-unit experience preferred.
- Benefits: Full ownership and control over the business, potential for higher profits.
- Drawbacks: Higher initial investment, greater responsibility for success and failure.
- Both models require franchise fees, ongoing royalties, and marketing fees.
- Steak n Shake provides comprehensive training and support for all franchisees.
- The ideal franchise model depends on your individual financial resources, experience, and desired level of involvement.
- Optimal design for on-site dining, drive-thru, take out and delivery integration
- 1,860 to 3,400 square foot prototypes available
- Seats up to 50 guests with drive-thru
- Comfortably sits on 1 acre
- Liquid Capital: Greater than $400,000
- Net Worth: Greater than $1 Million excluding primary residence
While the initial investment and ongoing fees may seem substantial, a well-managed Steak ‘n Shake franchise has the potential to yield significant profits. The profit margin of a franchise can vary depending on numerous factors, including location, market conditions, operational efficiency, and management skills.
It’s worth noting that the restaurant industry as a whole operates on slim profit margins, and franchise businesses are no exception. However, the advantage of joining an established brand like Steak ‘n Shake is the built-in customer base and the proven success of their business model.
- EBITDA Margins: Industry reports and estimations suggest a range of 10% to 18%, based on average unit volume and expenses.
- Net Profit Margins: Similar to EBITDA margins, the range fluctuates, with figures around 8% to 15% for successful franchisees.
- Steak n Shake Reports: While not directly disclosing margins, they report an average unit volume of $573,269 (2021) and a 7-year payback period for the initial investment. These suggest potential profitability, but individual results may vary.
To maximize your profit margin, it’s essential to focus on factors such as efficient operations, effective cost management, and providing exceptional customer service. Additionally, adapting to changing consumer preferences and incorporating innovative marketing strategies can go a long way in boosting profitability.
Pros and Cons
As with any business venture, opening a Steak ‘n Shake franchise comes with its own set of advantages and challenges. Here are some key pros and cons to consider before making a decision:
- Established Brand: Operating under a well-known and respected brand like Steak ‘n Shake gives you an instant advantage in the competitive fast-food industry.
- Training and Support: Steak ‘n Shake provides comprehensive training and ongoing support to franchisees, equipping them with the necessary skills and knowledge to run a successful business.
- Built-in Customer Base: With a loyal customer base, you’ll benefit from the existing reputation and popularity of the brand, attracting customers from day one.
- Marketing and Advertising: The franchise’s marketing and advertising efforts, along with the collective contributions of franchisees, help promote brand awareness and drive customers to your location.
- Initial Investment: Starting a Steak ‘n Shake franchise requires a significant initial investment, which may be a barrier for some potential franchisees.
- Ongoing Fees: Franchisees are responsible for ongoing fees, including royalties and marketing contributions. These fees can eat into your profit margins.
- Operational Challenges: Operating a restaurant comes with inherent challenges such as managing staff, maintaining quality standards, and ensuring smooth operations during peak hours.
- Market Saturation: In some areas, the market may already be saturated with fast-food options, posing additional competition and potentially impacting profitability.
It’s crucial to carefully evaluate these pros and cons against your own goals, resources, and circumstances to determine if a Steak ‘n Shake franchise aligns with your entrepreneurial aspirations.
Embarking on a franchise journey with Steak ‘n Shake can be an exciting and potentially lucrative business opportunity. By following the step-by-step application process, carefully considering the costs and fees involved, and weighing the pros and cons, you can make an informed decision. Remember, success in the fast-food industry requires dedication, hard work, and a passion for serving quality food to customers. So, if you’re ready to bring the sizzle to your local community, why not consider starting a Steak ‘n Shake franchise?
What kind of support does Steak 'n Shake provide to franchisees?
Steak ‘n Shake offers comprehensive training to franchisees, equipping them with the necessary skills and knowledge to run a successful franchise. Additionally, the company provides ongoing support in areas such as marketing, operations, and supply chain management.
Are there any restrictions on the location of a Steak 'n Shake franchise?
While there may be certain guidelines and criteria for selecting a location, the specifics can vary depending on factors such as local regulations, market conditions, and the company’s assessment. It’s important to work closely with the franchise department to find an appropriate location for your franchise.
What is the typical profit margin of a Steak 'n Shake franchise?
The profit margin of a Steak ‘n Shake franchise can vary depending on factors such as location, market conditions, operational efficiency, and management skills. While the restaurant industry operates on slim profit margins overall, joining an established brand like Steak ‘n Shake can enhance the potential for profitability.
How long does it take to open a Steak 'n Shake franchise?
The timeline for opening a Steak ‘n Shake franchise can vary depending on factors such as location availability, obtaining necessary permits, and completing the required training. It’s best to consult with the franchise department to get a realistic estimate of the timeline based on your specific circumstances.