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

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Hail to our Constitutional Law Expert in the Executive Office! “What you’re not paying attention to is the fact that I just took an action to change the law,” Obama said.

  2. What is this, the Ind Supreme Court thinking that there is a separation of powers and limited enumerated powers as delegated by a dusty old document? Such eighteen century thinking, so rare and unwanted by the elites in this modern age. Dictate to us, dictate over us, the massess are chanting! George Soros agrees. Time to change with times Ind Supreme Court, says all President Snows. Rule by executive decree is the new black.

  3. I made the same argument before a commission of the Indiana Supreme Court and then to the fedeal district and federal appellate courts. Fell flat. So very glad to read that some judges still beleive that evidentiary foundations matter.

  4. KUDOS to the Indiana Supreme Court for realizing that some bureacracies need to go to the stake. Recall what RWR said: "No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!" NOW ... what next to this rare and inspiring chopping block? Well, the Commission on Gender and Race (but not religion!?!) is way overdue. And some other Board's could be cut with a positive for State and the reputation of the Indiana judiciary.

  5. During a visit where an informant with police wears audio and video, does the video necessary have to show hand to hand transaction of money and narcotics?

ADVERTISEMENT