Parsad Posted January 5, 2010 Share Posted January 5, 2010 Indianapolis Business Journal article on Steak'n Shake. Focus of the article is on low capital expenditures and future of restaurant business. http://www.ibj.com/steak-n-shake-slashes-restaurant-spending-as-biglari-hoards-cash/PARAMS/article/15482 Of course the quote from the former SNS executive isn't flattering. I think the point the critics miss is that much of the future capital expenditures will come out of franchisee revenues as some existing company-owned stores are refranchised. Also as same store sales continue to increase, Biglari will be able to allocate a greater percentage of revenues and nominal dollars to refurbishing restaurants. The problem was that much of the past capital expenditures were spent on new restaurants, when most of that cost will now be absorbed by the new franchisees who open restaurants. Cheers! Link to comment Share on other sites More sharing options...
goldfinger Posted January 5, 2010 Share Posted January 5, 2010 Can't they also increase revenue by leasing real estate to franchisees ? Link to comment Share on other sites More sharing options...
Parsad Posted January 5, 2010 Author Share Posted January 5, 2010 Yup! Biglari's model gives the company more flexibility and a diversified stream of income, where every dollar will be reinvested within the most optimal opportunities as they present themselves. Cheers! Link to comment Share on other sites More sharing options...
Mark Jr. Posted January 6, 2010 Share Posted January 6, 2010 What about the concerns around the lack of capex spending? Do you think there's a danger he'll hamstring the main source of revenues before the investment returns really kick in? Link to comment Share on other sites More sharing options...
Parsad Posted January 7, 2010 Author Share Posted January 7, 2010 No, I think it was completely necessary to bring capex down so drastically. The company was bleeding out each quarter before Sardar took over, and there was a distinct possibility they could run out of cash over time if things weren't done quickly. With their debt convenant tightening, they had to get the cash level up and quick while reducing debt. With so much cash in the holding company, half the debt load before he took over and about $20-23M more that will end up in the holding company in 2010, things are far different. Capex now can be added back into the business slowly as traffic and revenues continue to climb. Sardar will probably continue refranchisiing opportunistically, and that will reduce the total capex the company will require over time. Most of the future build-out costs, maintenance, etc. will be covered in new stores by franchisees, not the company. Cheers! Link to comment Share on other sites More sharing options...
ragnarisapirate Posted January 7, 2010 Share Posted January 7, 2010 A lot of the stores are newer, requiring little in terms of cap ex. I am guessing that just about all of the stores have just had their remodel done too; well, as much of a remodel as paint, Musak, claw games, lights, and new pictures can be. It should be noted that at the last annual meeting, it was said that SNS would open up the newly designed prototype store before it would let a franchisee do so (to work out the kinks). Though, I would imagine that could change, especially if they had the right franchisee (possibly from the same cloth as Proffit (sp?) @ the Woodgrill?) However, the stores should only cost about a million bucks to start up- I am guessing that they will have similar economics to CMG's stores. I think that we will be seeing some pictures/plans of them at the annual meeting. Sanjeev, what is the 20-23 million number that you are talking about going to the holding company in 2010? Are you talking about deployable cash that is thrown off from operations? If so, that seems a bit low to me. Link to comment Share on other sites More sharing options...
Parsad Posted January 7, 2010 Author Share Posted January 7, 2010 Hi Ragnar, $20-23M in net profit. With modest increase in traffic going forward, they should be able to make about $5M a quarter...excluding the acquisition of Western Sizzlin and it's subs. That also excludes any profits made from all the cash he has on hand. Over the next couple of years, I think he'll be able to get it back to the previous highs in net income of $30M or so...just Steak'n Shake restaurants. Cheers! Link to comment Share on other sites More sharing options...
Nnejad Posted January 7, 2010 Share Posted January 7, 2010 Call me crazy. . . but if we're making cash flow predictions, i'm expecting 50 million for 2010. Link to comment Share on other sites More sharing options...
Parsad Posted January 7, 2010 Author Share Posted January 7, 2010 Cash flow, then we're talking about $45M. I hope we hit your $50M mark. Cheers! Link to comment Share on other sites More sharing options...
ragnarisapirate Posted January 7, 2010 Share Posted January 7, 2010 ok, thanks for the clarification- my comment was related to c/f. For the record, I would not be one bit surprised if we hit $50 million in 2010. It really depends on how much of the listed real estate the company is able to sell off. Really, there are a billion other factors too... What happens if there is another Friendly's style deal? What happens if there is an e coli outbreak at SNS? 2 different and bi-polar examples, but, an interesting way to think of things, certainly. Link to comment Share on other sites More sharing options...
Parsad Posted January 7, 2010 Author Share Posted January 7, 2010 What happens if there is an e coli outbreak at SNS? Then I'll buy a whole heck of alot more shares! ;D Cheers! Link to comment Share on other sites More sharing options...
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