Friday, February 12, 2010

Meet the Man Who Wants to Be the Warren Buffett of Restaurants

After gobbling up Steak n Shake in 2008, Sardar Biglari has been working to turn the restaurant chain around but also has shown an appetite for expanding beyond restaurants. The latest sign: a proposal to change the company’s name to Biglari Holdings.

Mr. Biglari is a 32-year-old activist investor from Texas who has agitated for change at Friendly Ice Cream and bought Western Sizzlin in 2006.

In December, he launched a hostile $43 million offer for Fremont Michigan InsuraCorp, a Michigan insurer.

In his annual letter to shareholders in December, Mr. Biglari, chairman and chief executive of Steak n Shake, described how he transformed the chain from a loss-plagued burger chain that was losing customers into one that has started turning a profit and increasing customer visits. He halted expansion, closed unprofitable locations, pared down the menu and offered meal promotions that attracted customers. Now, it has more than 475 restaurants and revenue of more than $627 million.

In October, Steak n Shake and Western Sizzlin agreed to merge.

His push to become a broader holding company has led some to compare him to an aspiring Warren Buffett, whose Berkshire Hathaway Inc. owns everything from insurance companies to underwear maker Fruit of the Loom. “I would say philosophically, Sardar definitely models himself after Buffett,” says Kevin Byun, managing director of Denali Investors, which owns Steak n Shake shares.

With more than $62 million in cash and a market cap of almost half a billion dollars, Steak n Shake has the war chest to continue Mr. Biglari’s acquisition spree.

“Simply because profits are generated in the restaurant business doesn’t mean the money must be reinvested there,” Mr. Biglari said in his letter to shareholders. “We intend to invest in both related and unrelated businesses with varying economic characteristics.”

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