Author Topic: BH - Biglari Holdings  (Read 1325524 times)

NBL0303

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Re: BH - Biglari Holdings
« Reply #2800 on: May 14, 2019, 05:49:27 AM »
Very sad!  What a great franchise and I can't believe they shuttered 60 locations...in Indianapolis, their core market!  It was running so well several years ago, when they had streamlined the menu, brought in a nominal offering of the $4 deals and franchisees were happy.  Then he took out so much debt, did everything to increase volume (but not profitability) and pissed off the franchisees.  Really sad...I loved this business!  Plundered it and killed what was a pure cash cow!  I hope he turns it around for the sake of the franchisees, employees and people who love SNS.  Cheers!

Just to be clear, I think it is more like 100 closures now, but most of them are not in Indianapolis. A few of them are, but the closures have been in many markets.

I think Steak n Shake may have been on borrowed time even a few years ago - it seemed okay coming out of the recession - but according to franchisees it was always a fragile demand.

I do think the one smart thing he did though is take out debt not backed by the company. He upstreamed cash, from that debt, and invested it - after a series of investments - putting it into Cracker Barrel. That is now the only channel with value. So if he hadn't done that - he would just be left with Steak n Shake's real estate. Instead, the real estate will be the creditors - but he has all of that other value outside of it.

For his own enrichment, that was probably the right call. I know, I know, all the enrichment has gone to him and not shareholders - but I'm just saying he is better off having taken the debt on, upstreaming it and investing it - than he would have been not doing that.

Some will say, he is taking advantage of the lenders - and maybe to a certain extent that is true. But on some level, that is what they were signing off on/underwriting - the credit risk related to Steak n Shake's business - and the deterioration of Steak n Shake is what is causing them heartburn - but that is the exact thing they were making a judgment on (along with the value of the real estate). Additionally, Steak n Shake is definitely going under - but the lenders already have perfected security interests in the company's real estate - so I do not believe they will be out most of the $180 million.


shalab

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Re: BH - Biglari Holdings
« Reply #2801 on: May 14, 2019, 07:20:45 AM »
It was all about enriching himself, I remember he stopped the 401(k) at SnS for the employees to reduce cost and it never came back. The whole thing sounded very unethical to me but at that time there was a cheer leading squad on this very board calling him a messiah.

Even now, the large amount of 40 MM capex on milkshake patent will go to Biglari's pocket. He is using money from the parent for this. I am surprised no one else called it.

I am looking at more ways money will find its way to Biglari's account as the top most priority is to transfer money from shareholders to Biglari account

Very sad!  What a great franchise and I can't believe they shuttered 60 locations...in Indianapolis, their core market!  It was running so well several years ago, when they had streamlined the menu, brought in a nominal offering of the $4 deals and franchisees were happy.  Then he took out so much debt, did everything to increase volume (but not profitability) and pissed off the franchisees.  Really sad...I loved this business!  Plundered it and killed what was a pure cash cow!  I hope he turns it around for the sake of the franchisees, employees and people who love SNS.  Cheers!

Just to be clear, I think it is more like 100 closures now, but most of them are not in Indianapolis. A few of them are, but the closures have been in many markets.

I think Steak n Shake may have been on borrowed time even a few years ago - it seemed okay coming out of the recession - but according to franchisees it was always a fragile demand.

I do think the one smart thing he did though is take out debt not backed by the company. He upstreamed cash, from that debt, and invested it - after a series of investments - putting it into Cracker Barrel. That is now the only channel with value. So if he hadn't done that - he would just be left with Steak n Shake's real estate. Instead, the real estate will be the creditors - but he has all of that other value outside of it.

For his own enrichment, that was probably the right call. I know, I know, all the enrichment has gone to him and not shareholders - but I'm just saying he is better off having taken the debt on, upstreaming it and investing it - than he would have been not doing that.

Some will say, he is taking advantage of the lenders - and maybe to a certain extent that is true. But on some level, that is what they were signing off on/underwriting - the credit risk related to Steak n Shake's business - and the deterioration of Steak n Shake is what is causing them heartburn - but that is the exact thing they were making a judgment on (along with the value of the real estate). Additionally, Steak n Shake is definitely going under - but the lenders already have perfected security interests in the company's real estate - so I do not believe they will be out most of the $180 million.

Txvestor

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Re: BH - Biglari Holdings
« Reply #2802 on: May 14, 2019, 07:31:11 AM »
Very sad!  What a great franchise and I can't believe they shuttered 60 locations...in Indianapolis, their core market!  It was running so well several years ago, when they had streamlined the menu, brought in a nominal offering of the $4 deals and franchisees were happy.  Then he took out so much debt, did everything to increase volume (but not profitability) and pissed off the franchisees.  Really sad...I loved this business!  Plundered it and killed what was a pure cash cow!  I hope he turns it around for the sake of the franchisees, employees and people who love SNS.  Cheers!

Just to be clear, I think it is more like 100 closures now, but most of them are not in Indianapolis. A few of them are, but the closures have been in many markets.

I think Steak n Shake may have been on borrowed time even a few years ago - it seemed okay coming out of the recession - but according to franchisees it was always a fragile demand.

I do think the one smart thing he did though is take out debt not backed by the company. He upstreamed cash, from that debt, and invested it - after a series of investments - putting it into Cracker Barrel. That is now the only channel with value. So if he hadn't done that - he would just be left with Steak n Shake's real estate. Instead, the real estate will be the creditors - but he has all of that other value outside of it.

For his own enrichment, that was probably the right call. I know, I know, all the enrichment has gone to him and not shareholders - but I'm just saying he is better off having taken the debt on, upstreaming it and investing it - than he would have been not doing that.

Some will say, he is taking advantage of the lenders - and maybe to a certain extent that is true. But on some level, that is what they were signing off on/underwriting - the credit risk related to Steak n Shake's business - and the deterioration of Steak n Shake is what is causing them heartburn - but that is the exact thing they were making a judgment on (along with the value of the real estate). Additionally, Steak n Shake is definitely going under - but the lenders already have perfected security interests in the company's real estate - so I do not believe they will be out most of the $180 million.


If he wanted to upstream money and always knew it was a marginal brand he could and should have sold it when he instead saddled it with debt. He wanted to try out the upside through franchising while protecting the downside by taking advantage of those buying the bonds. You could argue its buyer
beware, but in all sincerity, its more like anyone dealing with this character in any way beware! I wonder how the guy that sold his trucking insurance company feels right about now. I think he atleast got cash for his company. If there is any good that comes out of this character, it will be eventually exposing all the loopholes for self enrichment from shareholders out into the open.

NBL0303

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Re: BH - Biglari Holdings
« Reply #2803 on: May 14, 2019, 08:33:29 AM »
I wonder how the guy that sold his trucking insurance company feels right about now. I think he atleast got cash for his company.

According to people that went to the annual meeting, that guy, Ed Campbell, apparently likes Sardar. He sat up front at the annual meeting and always smiled when Sardar mentioned him and he told people before and after the meeting that he was very happy with being a part of Biglari Holdings.

But Sardar pays him well, gives him autonomy and lavishes praise on him publicly - so from a self-interested point-of-view, why wouldn't Ed Campbell like him? I would be horrified if I sold a company I cared about to Biglari Holdings, but thats just me.

Sardar Biglari clearly thinks that he can lavish praise on Ed Campbell at the meeting and in the annual report, and then point to that relationship to future potential sellers of their business. Sardar, his brother and his father, maybe his wife and maybe Phil Cooley are probably the only people on the planet who don't realize that no one who cared about their business would sell it to Biglari Holdings. The only way he'll get a deal is with other unscrupulous people or if he is willing to wildly overpay for a business - or maybe some combination of the two.

Parsad

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Re: BH - Biglari Holdings
« Reply #2804 on: May 14, 2019, 02:40:26 PM »
Very sad!  What a great franchise and I can't believe they shuttered 60 locations...in Indianapolis, their core market!  It was running so well several years ago, when they had streamlined the menu, brought in a nominal offering of the $4 deals and franchisees were happy.  Then he took out so much debt, did everything to increase volume (but not profitability) and pissed off the franchisees.  Really sad...I loved this business!  Plundered it and killed what was a pure cash cow!  I hope he turns it around for the sake of the franchisees, employees and people who love SNS.  Cheers!

Just to be clear, I think it is more like 100 closures now, but most of them are not in Indianapolis. A few of them are, but the closures have been in many markets.

I think Steak n Shake may have been on borrowed time even a few years ago - it seemed okay coming out of the recession - but according to franchisees it was always a fragile demand.

I do think the one smart thing he did though is take out debt not backed by the company. He upstreamed cash, from that debt, and invested it - after a series of investments - putting it into Cracker Barrel. That is now the only channel with value. So if he hadn't done that - he would just be left with Steak n Shake's real estate. Instead, the real estate will be the creditors - but he has all of that other value outside of it.

For his own enrichment, that was probably the right call. I know, I know, all the enrichment has gone to him and not shareholders - but I'm just saying he is better off having taken the debt on, upstreaming it and investing it - than he would have been not doing that.

Some will say, he is taking advantage of the lenders - and maybe to a certain extent that is true. But on some level, that is what they were signing off on/underwriting - the credit risk related to Steak n Shake's business - and the deterioration of Steak n Shake is what is causing them heartburn - but that is the exact thing they were making a judgment on (along with the value of the real estate). Additionally, Steak n Shake is definitely going under - but the lenders already have perfected security interests in the company's real estate - so I do not believe they will be out most of the $180 million.


If he wanted to upstream money and always knew it was a marginal brand he could and should have sold it when he instead saddled it with debt. He wanted to try out the upside through franchising while protecting the downside by taking advantage of those buying the bonds. You could argue its buyer
beware, but in all sincerity, its more like anyone dealing with this character in any way beware! I wonder how the guy that sold his trucking insurance company feels right about now. I think he atleast got cash for his company. If there is any good that comes out of this character, it will be eventually exposing all the loopholes for self enrichment from shareholders out into the open.

Yup, there was nothing wrong with the business.  The biggest problems they had were with franchisees not making enough money because he was pushing volume.  If your franchisees aren't making money, they are going to underperform and eventually shut down.  He took away regional products and pushed the volume discount meals.  He went from thinning the menu to enlarging it...that increases food costs, waste and reduces profitability.  When you are paying $20M a year in interest costs, from a business that made $35M a year and then drawing all remaining profitability to the top, your business will deteriorate.  And then you forgo advice from the people who got you there and increase expenditures in non-core, experimental areas, you open yourself up to risk, mistakes and failure. 

I'm the last one that should talk, because we stuck it out too long with Sequant Re, but we did get it right in other areas and there was nothing wrong at all with the Steak'n Shake business...if it had received the focus that it should have, it would be a billion dollar business today.  Sardar was on target for that!  He knows it and we all know it!  Cheers!
No man is a failure who has friends!

shalab

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Re: BH - Biglari Holdings
« Reply #2805 on: May 14, 2019, 09:14:37 PM »

Txvestor

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Re: BH - Biglari Holdings
« Reply #2806 on: May 14, 2019, 09:28:33 PM »
SnS ordered to pay 7.7m in overtime

https://www.restaurantbusinessonline.com/financing/steak-n-shake-ordered-pay-77m-unpaid-overtime

Just another nail in the coffin. Only the deluded fool SB will talk about 2 yr turnaround with milkshake machines invented by him. Total con artist. Chapter and verse of the intelligent investor huh. What a pathetic excuse for a human.

Spekulatius

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Re: BH - Biglari Holdings
« Reply #2807 on: May 15, 2019, 03:54:56 AM »

I'm the last one that should talk, because we stuck it out too long with Sequant Re, but we did get it right in other areas and there was nothing wrong at all with the Steak'n Shake business...if it had received the focus that it should have, it would be a billion dollar business today.  Sardar was on target for that!  He knows it and we all know it!  Cheers!

Having an upstart business with an yet unproven business model fail compared to running an existing business with upward momentum in the ground are two entities rely different things and much more blame should be put on management in the latter situation than the former.

I read though the archives of this site (before I signed up) and while he was hailed as the second coming of Jesus, some of Sadar‘s character flaws were quite evident. This story here is the perfect example that ability (which I think is even questionable at this point) in combination with character flaws (narcissism, self absorbed and greedy) creates disastrous results. When Managements character is lacking, the rest really doesn’t matter.
To be a realist, one has to believe in miracles.

NBL0303

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Re: BH - Biglari Holdings
« Reply #2808 on: May 15, 2019, 07:54:01 AM »
I don't think Steak n Shake had a future at all, really. I've spoken with franchisees, former franchisees and the brand always had inherent limitations - it seems to me - and it just had a couple of good years due to external factors. So I think taking money out of it, keeping investment low, trying to franchise - those things made all the sense in the world.  Not refranchising stores when they were profitable and now pouring money into the brand via capex for improved processes (to improve speed of service) to "turn it around" - and spending money on this franchise partner program - I think these are the mistakes. Not accepting it for what it was and getting the money out of it while you could but without risking any further capital on it - I think that a major mistake caused by Sardar Biglari's fundamental weaknesses as a businessman and capital allocator.

rkbabang

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Re: BH - Biglari Holdings
« Reply #2809 on: May 15, 2019, 10:50:16 AM »
Yup, there was nothing wrong with the business.  The biggest problems they had were with franchisees not making enough money because he was pushing volume.  If your franchisees aren't making money, they are going to underperform and eventually shut down.  He took away regional products and pushed the volume discount meals.  He went from thinning the menu to enlarging it...that increases food costs, waste and reduces profitability.  When you are paying $20M a year in interest costs, from a business that made $35M a year and then drawing all remaining profitability to the top, your business will deteriorate.  And then you forgo advice from the people who got you there and increase expenditures in non-core, experimental areas, you open yourself up to risk, mistakes and failure. 

I'm the last one that should talk, because we stuck it out too long with Sequant Re, but we did get it right in other areas and there was nothing wrong at all with the Steak'n Shake business...if it had received the focus that it should have, it would be a billion dollar business today.  Sardar was on target for that!  He knows it and we all know it!  Cheers!

I don't think you are factoring in the coming of the amazing new milkshake machines.  ;D