Evolution of a Classic


"In a service oriented business, the demands and needs of consumers evolve. It's important to stay connected to those desires to create a truly great guest experience," explains Steven Schiller, chief marketing officer for The Steak n Shake Company. "It's been a good amount of time since we've done a facelift, and the time is right to take the business to its next natural level."

Historically speaking
Steak n Shake's history began in 1934 in Normal, Illinois, when founder Gus Belt started the Steak n Shake tradition of grinding authentic steaks  round, sirloin and T-boneۢ into burgers. The company changed hands several times over the decades before falling under the leadership of E.W. Kelley and Associates in 1981. The brand began declining in the late 1970s and in 1984 was in the red. Steak n Shake quickly blossomed under Kelley's shrewd marketing skills as he focused on returning the brand to its roots with cooked-to-order food served on real china.

Today, Steak and Shake operates 478 locations (48 franchised) in 19 states, and is once again poised for an evolution to jump start its next phase of growth. The company is off to a positive start for 2007, as total revenues for the fiscal first quarter grew 6.1 percent to $147.3 million from $138.7 million in the same quarter last year. Although same-store sales declined 1.7 percent during the first quarter, this represents an improvement over the 3.4 percent decline in the fourth quarter of fiscal 2006.

"We're a long-term player in the industry," explains Schiller. "Our history is long and varied, with many turns and twists¬but we have a realness that comes from that experience, and an authenticity that defines our tone." And an authenticity that, according to Schiller, will by no means be abandoned in the evolutionary process.

Look, feel and taste
Three core components and a five-step plan serve as the backbone and strategy to Steak n Shake's evolution. The first component - experience - focuses on the physical look of the restaurants, and the experience that guests will have when they visit. The second component will look at menu offerings; the third component focuses on customer service and the emotional connection it creates with guests.

"It's been more than 15 years since Steak n Shake underwent a facelift," according to Schiller. To begin the process, the company underwent a major study in the early part of 2007 that examined the design and layout of the interior, exterior and drive-thru.

Restaurants will continue to carry on the modern diner feel, but in a "more contemporary fashion," notes Schiller. "We'll add more wood and warmness to the environment to create a clean feel that will take us into the next 15 years." Steak and Shake is also reevaluating its seating and will contemporize its menu design this summer, with the more extensive redesign slotted to take place in 2009.

For the food component, the chain plans to add more salads to its menu this summer, and eventually become a zero trans fat restaurant. "We're a destination for killer steakburgers and fabulous milkshakes. We want to build on that instead of abandoning that, creating a category of offerings off of those core competencies. As we contemporize, they will be the nucleus of the cell that we'll build."

The third and arguably most important component is Steak n Shake's commitment to service. "If we're going to be a cut above, we have to recognize that our business model has more labor than the folks we're benchmarking against, which means our labor has to be a positive differentiator in how we bring people back. How do we plate the food in a way what's exciting? How do we greet them at the door?" Schiller asks.

The quality labor component would have been a challenge for Steak and Shake five years ago, when in 2002 associate level turnover was 220 percent and management turnover was 49 percent. But after initiatives to invest in training and new technologies, boost benefits and foster employee loyalty, Steak and Shake reduced associate turnover to a record low of 128 percent in 2006, and 26 percent for management-level turnover. The reduction in turnover has had a direct relationship on guest satisfaction. "We have a strong recognition that the front line associates will be the ones to make those magic moments happen time and time again," explains Schiller.

To track service and overall operational functions, the company implemented an enterprise resource planning (ERP) system from Oracle's PeopleSoft (www.oracle.com). The solution is not only helping Steak n Shake track human resources, but is also assisting with Sarbanes-Oxley (SOX) and Payment Card Industry (PCI) compliances. "This solution is going to help us take our stores to a new level," says Schiller, alluding to initiatives with menus, training, and the company's online presence. The company also invested in new point of sale hardware from IBM (www.ibm.com) with software from Xpient Solutions (www.xpeint.com). "These major technology investments will help to facilitate the service component," explains Schiller.

5-step process
The change at Steak n Shake is much more of an evolutionary process than a big bang effect. It began in 2005 with a five-year strategic plan focused on five key areas: associates; guests; leaders; processes; and finally market expansion and performance.

The plan is being carried out by a five-step process that began in the third quarter of 2006: (1) understanding who and what Steak n Shake is, and how its guests (past and present ) feel about the company; (2) learning from this knowledge and turning it into qualitative ideas in what Schiller refers to as "the safari," whereby the company seeks to find common themes and problems, as well as opportunities to leverage; (3) quantitatively studying guest feedback to those new ideas and initiatives developed in stage two; (4) brining all of the learning together and establishing opportunities based on feedback; (5) and finally, building a roadmap of "winning ideas."

The company is currently in step three and anticipates having its roadmap in place by the end of 2007. "Once we have our roadmap, there will be several years worth of things we'll do," explains Schiller. "Some will be quick wins that we'll be able to start on right away," such as new menu offerings, and yet others will require more extensive planning prior to execution.

The company is looking at handhelds and pay at the table options, for example. Though Schiller admits they're not likely to be a bleeding edge player, they plan on staying up to date with what those technologies are.

As for expansion, Schiller says growth is a "core part of the business model" and an area the company is working very hard on going forward. Steak n Shake enlisted the assistance of location-based technology and service provider MapInfo Corporation (www.map info.com) for assistance determining the core demographics that are required for success of the Steak and Shake brand, and those locations that will be best for expansion. Steak n Shake anticipates opening approximately 15 company-owned restaurants and at least 7 franchise units in fiscal 2007.

"We're investing in building a benchmark, making sure we have systems in place to facilitate a sustained expansion that will make our new models as successful as our old models," says Schiller. "It's the natural evolution of all organizations that they need to continue to reinvent themselves to grow, build and change."

So long as they still have steakburgers and milkshakes on the menu, they will continue to be a classic slice of the American dining experience.

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