Brand Deterioration: What Doesn’t Show Up In The Numbers

Sardar Biglari, the Chairman of Biglari Holdings, has demonstrated an ability to execute an intelligent business strategy. Personally, I have been impressed with the turnaround he has orchestrated at Steak ‘N Shake. Before he purchased it, the brand was languishing even to the point that the possibility of bankruptcy could not be laughed off. If you went to Steak ‘N Shake in 2006, it would cost you $7 to $10.

The issue was that Steak ‘N Shake did have brand recognition, but it did not have brand strength pricing power at the $7 to $10 range. Just as a company’s management team can become enamored with its business and repurchase its own stock at any price, it can also overestimate the amount of pricing power that its brand has. Or it can become intoxicated with high profit margins on the retail price to customers compared to the ingredient cost.

Biglari’s … Read the rest of this article!