Steak N' Shake Annual Meeting Notes

• Going forward, the name will be changed to Biglari Holdings, symbol: BH .

• Many company's have a fixed mindset to blindly reinvest in their business; We're going to examine the landscape and go where returns are the most attractive. Don't expect dividends. Looking at insurance.

• Companies with low debt and strong balance sheets will acquire those with high costs and weak balance sheets. It's a competitive advantage we intend to keep.
• Two advantageous aspects of the restaurant business: negative working capital requirements, and little required capital expenditures.
• SNS Franchise Prototype
  
  
  • current model: 4,200 sf, 97 seats, $2.2 million capital cost.
    
  • New model: 3,200 sf, 94 seats, $1.5 million capital cost.
  • 1 new franchisee expected in Rome, 1 in Richmond by the end of the year. 1 planned in Las Vegas, 1 of 5 planned in Denver.

Notes from Q&A:

On managing and incentivizing managers:

• There are redundancies. For example, we have 81 stores in Florida. 1 district manager, several regional managers, and then each store has a general manager and then a manager.
  
• Every district manager now goes through Sardar. "If all my money were in those 8 stores, would I want this guy running it?"

On Western Sizzlin:

• cash flows are actually quiet strong.
• we're making the franchise agreement stronger.
• between Western Sizzlin and Steak N' Shake, we purchase a lot of beef. We expect improvements in cost from supply chain and procurement.
• also puts the franchise experience from SNS to WS.
• The merging of two very long legacies in the restaurant business. (50 & 75 years old)

On Store Prototype:

• revenue to capital cost should be over 1.
• I still see the potential for 1500 domestic units.
• So far, our new franchisees have terrific resources. But we're trying to fix the economics so a small business owner can put up some equity and make it happen.
• The new prototype brings the grill operations into the open, front and center, so customers can see the show. (In sight, it must be right!)
  

On running the business:

• We're not trying to maximize the amount we charge the customer. This may be one of the worst lessons of business schools ever.
• We're trying to maximize the value of the experience to customers.
• Take our new Guacamole Steakburger. Rather than buy the guacomole several days old, we put the guacamole in from scratch. We bring the avocados, the cilantro, etc. That's good quality.

On investment management:

• Possibly streamlining BH with the Lion Fund.
• Hired someone to raise investment capital.
• Mustang Capital has increased AUM to 66 million. (Up 18% since March 08)

Others:

• Over the course of the new three years, we should see an international Steak N' Shake.
• We'll put a company owned SNS on the San Antonio lot. It should happen within a year.
• We plan to have 5 company owned in-line (strip mall) stores to test out the economics, the model.