ILNews

More franchisees join revolt over Steak n Shake menu pricing

Back to TopCommentsE-mailPrintBookmark and Share

More Steak n Shake franchisees are revolting over the company’s policy that prohibits restaurants in the chain from setting their own menu prices.

Three franchise owners filed suit last month against Indianapolis-based Steak n Shake, including two on the same day – April 22 – in U.S. District Court for the Southern District of Indiana in Indianapolis.

They argue the company continues to force its franchisees to abide by the menu policy even after a federal appeals court sided last year with a fellow franchise owner that first challenged the practice.

“Steak n Shake’s royalties are calculated as a percentage of a franchisee’s revenue, not profits, which explains why Steak n Shake wants to increase customer volume through the sale of lower-priced food without concern as to whether franchisees actually make a reasonable profit,” the franchisees argue in their lawsuits.

Reached by phone, Steak n Shake lawyer Tonya Sallee declined to discuss the suits, citing company policy that prohibits commenting on pending litigation.

The dispute over pricing started in 2010, when Springfield, Ill.-based Stuller Inc. brought its complaint against Steak n Shake in a federal court in Illinois. Stuller operates five Illinois Steak n Shake restaurants under franchise agreements with predecessors that date back to 1939, making it the oldest Steak n Shake franchise in the country.

The court granted Stuller a preliminary injunction to stop Steak n Shake from forcing menu prices on franchisees.

Steak n Shake appealed. But last August, the 7th Circuit Court of Appeals affirmed the Illinois federal court’s ruling in Stuller’s favor.

Yet, even after the failed appeal, the three franchisees suing Steak n Shake argue that the company “has held steadfast in its ongoing, and system-wide, breach of those [franchise] agreements by continuing to force its franchisees to abide by the policy.”

They argue in their suits that Steak n Shake’s executive leadership, led by CEO Sardar Biglari, decided that it would set menu prices contrary to existing language in the franchise agreements that says otherwise.

Steak n Shake shareholders elected Biglari CEO in 2008, and the company now is operated by San Antonio-based holding company Biglari Holdings Inc.

The three franchisees who filed suits last month against Steak n Shake are Georgia-based People Sales & Profit Co., Missouri-based Druco Restaurants Inc. and Pennsylvania-based Scott’s S&S Inc. In total, they operate eight Steak n Shake restaurants in the three states.

They’re seeking a permanent injunction to bar Steak n Shake from mandating company-wide menu prices and from terminating their franchise for refusing to comply with the pricing policy. They also are suing for breach of contract and fraud.

One of the lawyers representing them, Richard Shevitz of Indianapolis-based Cohen & Malad LLP, said more lawsuits could be forthcoming.
 
Steak n Shake operates 501 restaurants, including 87 franchised locations.

In its fiscal first quarter ended Dec. 19, Steak n Shake reported revenue of $163.2 million, a 1.7-percent increase from the same time in 2011.
 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Indianapolis employers harassment among minorities AFRICAN Americans needs to be discussed the metro Indianapolis area is horrible when it comes to harassing African American employees especially in the local healthcare facilities. Racially profiling in the workplace is an major issue. Please make it better because I'm many civil rights leaders would come here and justify that Indiana is a state the WORKS only applies to Caucasian Americans especially in Hamilton county. Indiana targets African Americans in the workplace so when governor pence is trying to convince people to vote for him this would be awesome publicity for the Presidency Elections.

  2. Wishing Mary Willis only God's best, and superhuman strength, as she attempts to right a ship that too often strays far off course. May she never suffer this personal affect, as some do who attempt to change a broken system: https://www.youtube.com/watch?v=QojajMsd2nE

  3. Indiana's seatbelt law is not punishable as a crime. It is an infraction. Apparently some of our Circuit judges have deemed settled law inapplicable if it fails to fit their litmus test of political correctness. Extrapolating to redefine terms of behavior in a violation of immigration law to the entire body of criminal law leaves a smorgasbord of opportunity for judicial mischief.

  4. I wonder if $10 diversions for failure to wear seat belts are considered moral turpitude in federal immigration law like they are under Indiana law? Anyone know?

  5. What a fine article, thank you! I can testify firsthand and by detailed legal reports (at end of this note) as to the dire consequences of rejecting this truth from the fine article above: "The inclusion and expansion of this right [to jury] in Indiana’s Constitution is a clear reflection of our state’s intention to emphasize the importance of every Hoosier’s right to make their case in front of a jury of their peers." Over $20? Every Hoosier? Well then how about when your very vocation is on the line? How about instead of a jury of peers, one faces a bevy of political appointees, mini-czars, who care less about due process of the law than the real czars did? Instead of trial by jury, trial by ideological ordeal run by Orwellian agents? Well that is built into more than a few administrative law committees of the Ind S.Ct., and it is now being weaponized, as is revealed in articles posted at this ezine, to root out post moderns heresies like refusal to stand and pledge allegiance to all things politically correct. My career was burned at the stake for not so saluting, but I think I was just one of the early logs. Due, at least in part, to the removal of the jury from bar admission and bar discipline cases, many more fires will soon be lit. Perhaps one awaits you, dear heretic? Oh, at that Ind. article 12 plank about a remedy at law for every damage done ... ah, well, the founders evidently meant only for those damages done not by the government itself, rabid statists that they were. (Yes, that was sarcasm.) My written reports available here: Denied petition for cert (this time around): http://tinyurl.com/zdmawmw Denied petition for cert (from the 2009 denial and five year banishment): http://tinyurl.com/zcypybh Related, not written by me: Amicus brief: http://tinyurl.com/hvh7qgp

ADVERTISEMENT