Biglari Holdings Annual Letter: Turning $1.6 Million into $1.0 Billion

Smart Money
  • In August 2008, Biglari Holdings took control of a company on the brink of bankruptcy and built Biglari Holdings into a collection of operating companies, plus investments of over $1.0Bn
  • Turned $1.6 million into $1.0 billion since 2008
  • When we began managing the enterprise in August 2008, Steak n Shake was suffering staggering losses, at a rate of $100,000 per day. Since 2009, has generated substantial earnings and paid $345.7 million in cash to its parent company, Biglari Holdings, to fund our growth


  • Largest common stock holding is 4,737,794 shares of Cracker Barrel Old Country Store, a 19.7% equity interest
  • Purchased stock for $241.1 million from May 2011 through December 2012, with a dollar-weighted purchase date of December 2011
  • Over 6 years of ownership, at the end of 2017, market value of our stake was $752.8 million; along the way, we have collected $144.6 million in dividends (or 60% of our cost)

Operating Businesses

  • Collection of operating businesses comprises four constituent companies, each 100%-owned: Steak n Shake, Western Sizzlin, First Guard, and Maxim
  • Restaurant Operations: Steak n Shake and Western Sizzlin
    • 677 restaurants combined
    • Steak n Shake primarily operates restaurants, totaling 615 locations, of which 415 are company operated
    • Western Sizzlin, is primarily engaged in franchising restaurants, with 62 units – all but 4 are franchisee run
    • Western Sizzlin was purchased for a net purchase price of $21.7 million. Since then, Western Sizllin’s cash distributions to the parent company have totaled $20.8 million
    • Steak n Shake’s last year performance was not very good – EBIT was about breakeven, the lowest experienced under current management
    • Since 2008, number of customer visits has grown by 26 million – from 85 million to 111 million – all through the same stores. However, over the past two years, we have lost 7 million in customer visits
    • Despite recent lackluster results, our formula for success remains unchanged: provide the highest quality burgers and shakes at the lowest possible profit per customer from an ever-increasing number of customers
    • We have long believed that Steak n Shake is a brand that can become ubiquitous. To make this dream a reality, we have been investing significant sums to advance our franchising initiatives (since 2010, increased 129 franchise units from 71 to 200)
    • Modularity of Steak n Shake’s design has permitted us to adapt to and thus expand into universities, casinos, airports, sports arena, and gas stations, among other venues
  • First Guard Insurance Company
    • Direct underwriter of commercial trucking insurance – with no agent between the insurer and the insured – rendering the company a low-cost operator with a sustainable competitive advantage
    • Since Biglari Holdings acquired ownership in 2014, an aggregate of $15.8 million in pre-tax profits has been created
  • Maxim
    • Acquired when it was an unprofitable, moribund company
    • Found safety in a bargain purchase price along with the opportunity to convert a dying magazine company into a profitable business
    • We purchased an underexploited brand with the intention of generating nonmagazine revenue, notably through licensing, a cash-generating business related to consumer products, services, and events
    • Our operating philosophy is to view all expenses as variable. We assumed control of Maxim nearly 4 years ago. Between yearend 2014 and yearend 2017, productivity advanced 253%; employee count dropped by 88%; in other words, revenue per employee increased from $242,381 to $856,449
    • Clearly, Maxim is no longer exclusively a magazine; licensing generated $3.2 million in 2017; in sum, operated at near breakeven and now expect to build profits throughout 2018

Biglari Holdings 2017 Annual Letter, February 23, 2018

Image Source: Biglari Holdings Inc