Unassociated Document
Filed
by the Steak n Shake Company
|
Pursuant
to Rule 425 under the Securities
|
Act
of 1933, as amended, and deemed
|
filed
pursuant to Rule 14a-12 of the
|
Securities
Exchange Act of 1934, as amended
|
Registration
No.: 333-163192
|
|
Subject
Company:
|
Western
Sizzlin Corporation
|
(Commission
File No. 001-13650)
|
Dear
Steak n Shake Shareholders:
If fiscal
2008 was annus
horribilis, and it was truly horrible, then, by contrast, fiscal 2009 was
annus mirabilis, or a
miraculous year. 2009 was a year marked by the reversal of the decline in
customer traffic that had been troubling Steak n Shake over most of the last
decade as well as a welcome reversal of operating losses that started in late
fiscal 2007. In this letter, I will review with you the turnaround of the
restaurant chain, the transformation of the Steak n Shake firm into a
diversified holding company, its pending acquisition of Western Sizzlin
Corporation, and other information that I would want to know if I were in your
position.
As I
wrote in last year’s Chairman’s Letter, a copy of which is available on our
website (steaknshake.com), to revitalize Steak n Shake, we set several goals:
form a strong management team, achieve a low cost structure, maintain a sound
balance sheet, establish a focused strategy, and ultimately execute the plan
effectively. To engineer our turnaround required drastic changes in strategy,
operations, and culture. Otherwise, Steak n Shake would have devolved into a
footnote in the history of iconic American brands. When I assumed the CEO
position, I quickly arrived at many of my decisions in an ambiguous, nebulous
environment. We had no time to waste because Steak n Shake was hemorrhaging
losses — to the discordant tune of almost $100,000 per day. Sleeping was not an
option; it cost too much!
However,
we simply implemented the plan as laid out to you, and — thanks to our 20,000
associates — the company turned the corner in less than a year. The game plan
worked because we prioritized the customer first, second, and
third.
A
critical impetus for our business’s metamorphosis has featured slashing
noncompetitive levels of expenses to achieve sustainable cost advantages. We
have disproved the outworn quotation, “You can’t cut your way to success.” This
overused adage is hazardous to decision-making acuity. Our former high cost
structure had been a significant competitive disadvantage. Thus, we reasoned
that lowering it was crucial. We are demons on costs, and trimming them is now
embedded in our corporate DNA. Over a year ago, the company’s elevated operating
costs were being passed along to the customer. However, the problem was
undeniable: The customer was unwilling to pay for them, as evidenced by
declining traffic. As a consequence, we needed to lower our cost structure in
order to pass along most of the savings to the customer. Achieving sustainable
cost advantages is the cornerstone of our business model. Consequently, after
understanding the consumers’ coordinates of value, we repositioned the Steak n
Shake brand. Our extremely strong value proposition resonated with consumers
because they perceived and actually received far more in quality, taste, and
service than the price they paid. After all, who could resist our savory
steakburger or delicious hand-dipped milkshake? We have consistently succeeded
in forming fine gustatory habits around our burgers and shakes — our core
products — old favorites that won’t go out of style. Our premise
is simple: Great value for customers translates into great results for
shareholders.
However,
the daily grind is endless. We have a long row to hoe to attain best-in-class
hospitality. We still continue to work on improving the customer’s experience.
It is a daily, continuous, and unrelenting battle to exceed guests’
expectations. Therefore, while the turnaround has achieved success, I subscribe
to the logical thinking of IBM’s late Thomas Watson, Sr. He believed that no
business could be termed a successful one because in reality it never will be.
In his words a
business “is merely succeeding, going a little farther each year in its endeavor
to succeed. Whenever an individual or a business decides that success has been
attained, progress stops.” At Steak n Shake, we will never rest on our
laurels.
Fiscal
2009 Results
For
fiscal year 2009 we reported a net income of $6 million versus a net loss of $23 million in the
prior year. (2009 and 2008 include non-cash charges of $2.6 million and $14.9
million, respectively.) Our love for the customer and hate for unwarranted cost
underlay our strategy, which solved the revenue/expense problem. The more
relevant figure than profit is the uplift in per-share intrinsic value.
(Intrinsic value is calculated by taking all future cash flows into and out of a
business and then discounting the resultant number at an appropriate interest
rate.) While we don’t provide our estimate of intrinsic value, our intent is to
supply you with information to advance your understanding of the business so you
can arrive at your own approximation of value. Our plan is to create value on
many dimensions over time.
Maximizing
profit in fiscal 2010 is not our goal. Our rationale
is that doing so could derail our prospects of building long-term value through
strengthening our competitive position. Before Phil Cooley, Steak n Shake’s Vice
Chairman, and I entered the business, shareholders suffered painfully from an
ill-advised aggregate of concepts, such as lack of financial flexibility,
absence of an ownership mentality, and an erroneous focus on short-term
quarterly results.
Instead,
we aim to grow long-term cash flows, not reported earnings. Our view on reported
earnings is that they are not real until they are cash. And inasmuch as
companies don’t go out of business because they run out of earnings but because
they run out of cash, our propensity, logically, is to generate cash flow. Our
view — we admonish — diverges from business management as practiced by most in
corporate America. However, we prefer rational thought to irrational
convention.
Below is
a table of sales, profits, depreciation, and capital expenditures for the
decade before — and the year after — present management took
over. Fiscal 2009, of course, is ours and marks the starting point for tracking
our progress.
|
|
($
in 000’s)
|
|
|
|
1999
|
|
|
2000
|
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
Revenues
|
|
$ |
350,879 |
|
|
$ |
408,686 |
|
|
$ |
445,191 |
|
|
$ |
459,014 |
|
|
$ |
499,104 |
|
|
$ |
553,692 |
|
|
$ |
606,912 |
|
|
$ |
638,822 |
|
|
$ |
654,142 |
|
|
$ |
610,061 |
|
|
$ |
627,042 |
|
Pre-Tax
Earnings
|
|
$ |
30,602 |
|
|
$ |
33,204 |
|
|
$ |
32,366 |
|
|
$ |
35,895 |
|
|
$ |
32,304 |
|
|
$ |
42,438 |
|
|
$ |
44,444 |
|
|
$ |
42,292 |
|
|
$ |
14,871 |
|
|
$ |
(34,784 |
) |
|
$ |
7,161 |
|
After-Tax
Earnings
|
|
$ |
19,881 |
|
|
$ |
21,467 |
|
|
$ |
20,796 |
|
|
$ |
22,922 |
|
|
$ |
20,861 |
|
|
$ |
27,591 |
|
|
$ |
30,222 |
|
|
$ |
28,001 |
|
|
$ |
11,808 |
|
|
$ |
(22,979 |
) |
|
$ |
5,998 |
|
Depreciation
|
|
$ |
13,066 |
|
|
$ |
18,375 |
|
|
$ |
20,953 |
|
|
$ |
23,243 |
|
|
$ |
24,318 |
|
|
$ |
24,858 |
|
|
$ |
26,945 |
|
|
$ |
28,967 |
|
|
$ |
32,185 |
|
|
$ |
33,659 |
|
|
$ |
31,369 |
|
Capital
Expenditures
|
|
$ |
66,974 |
|
|
$ |
75,765 |
|
|
$ |
39,910 |
|
|
$ |
41,351 |
|
|
$ |
30,707 |
|
|
$ |
46,278 |
|
|
$ |
63,622 |
|
|
$ |
80,840 |
|
|
$ |
68,643 |
|
|
$ |
31,443 |
|
|
$ |
5,751 |
|
Incidentally,
the generation of free cash flow in the past year exceeded that of any year
during the last ten. Plainly, the capital that was sunk before we appeared on
the scene failed to produce a return above its cost — but is currently being
managed for maximum cash flow production. Although the past approach resulted in
growing sales, it destroyed shareholder value in the process; our approach, we
believe, will produce substantial and sustainable shareholder value. Naturally,
any such claims should be corroborated by an impartial measure. And there is no
better barometer of value creation over the very long haul than stock
price. On that basis, note that the stock price was $12.77 at the end of fiscal
1998. However, almost a decade later, on August 5, 2008 when I took over as CEO,
the stock price had dropped to $7.20. You should measure our results over the
long term to ascertain the validity of our approach. Rest assured, we will fire
ourselves if we fail to create value over time.
Customer
Traffic and Same-Store Sales
Growing
through existing stores is obviously superior to opening new ones. Same-store
sales could be kindled through increases in customer traffic, or increases in
the average check, or both.
Over the
past 75 years Steak n Shake has endured both good and bad times. The last
several years were the worst. In the fourth quarter of fiscal 2005, the company
began a series of quarterly declines in same-store sales. Here is the table of
customer traffic and same-store sales for the last 17 quarters.
|
Customer
Traffic
|
|
|
Same-Store
Sales
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
2005
|
-
|
|
-
|
|
-
|
|
-6.7%
|
|
|
-
|
|
-
|
|
-
|
|
-3.0%
|
2006
|
-5.1%
|
|
-5.0%
|
|
-7.9%
|
|
-6.5%
|
|
|
-1.1%
|
|
-0.3%
|
|
-3.9%
|
|
-3.4%
|
2007
|
-3.8%
|
|
-6.0%
|
|
-5.7%
|
|
-6.6%
|
|
|
-1.7%
|
|
-4.7%
|
|
-4.3%
|
|
-3.9%
|
2008
|
-13.3%
|
|
-8.8%
|
|
-8.5%
|
|
-10.2%
|
|
|
-9.5%
|
|
-6.3%
|
|
-5.8%
|
|
-7.4%
|
2009
|
-0.9%
|
|
7.8%
|
|
13.4%
|
|
20.0%
|
|
|
-1.4%
|
|
2.4%
|
|
5.0%
|
|
10.1%
|
As
illustrated in the table above, the brutality ended in the 2nd quarter
of fiscal 2009. The reversal of declining traffic began in the middle of the
first quarter, and the momentum carried throughout the year. The fourth quarter
overall traffic and same-store sales bested the prior year by 20% and 10%,
respectively. As we had designed, same-store sales constantly lagged behind
increments in traffic. We traded check for traffic.
I do
believe that trends in traffic and same-store sales are critical metrics,
particularly in the midst of a turnaround. This premise constituted the
overwhelming reason why I arranged for shareholders to receive the data quickly
throughout fiscal 2009 via 8K filings. Given the company’s then precarious
position, I wanted our shareholders apprised of our progress. Now that our
restaurant operations have stabilized, no need exists to issue those figures
before our quarterly results.
Furthermore,
I have long postulated that same-store sales do not constitute the main,
exclusive, or most important metric to evaluate results. If the
main objective of management is growth in same-store sales, then hovering over
that idea looms the ominous issue that the resultant number could be
manipulated, for example, by spending heavily on marketing without achieving an
appropriate return on investment.
Because
metrics are proxies for performance, managing by a single metric causes the tail
to wag the dog. Using just one metric is akin to taking a picture of a two-ton
elephant: No single angle can capture the “big picture.” Analysts who evaluate
same-store sales trends almost to the exclusion of other metrics, and the CEOs —
who either primarily weigh that one piece of data or (shudder) listen to the
pundits — do their best to deliver on that one statistic, but usually cost their
shareholders dearly.
The
all-encompassing and germane gauge is the company’s growth in intrinsic value,
the pillar of our economic creed. Clearly, driving traffic profitably to our stores —
and leveraging fixed restaurant-level costs — are
welcome precursors to increasing cash flow.
Let me
illustrate the worth of incremental traffic. Approximately 250,000 patrons daily
frequent our restaurants. If we were able to pull in just 20 more guests a day
per restaurant (which equates to about $130 in sales), the company would
annually generate nearly $20 million in incremental revenue. I’ll let you
estimate the cash flows from those sales (hint: marginal cost is low). Then put
a multiple on it, and you too will be amazed how powerful it is to add just 20
more guests per restaurant per day. We certainly don’t want this idea to be all
hat and no cattle. In fact, we want you to help us get the additional patronage.
Consequently, we have included in this report (page 11)
three special certificates for you, our owners, that are redeemable for a free
shake: one for you, and two for you to pass on to friends. Consider yours as a
special dividend! Nineteen thousand five hundred shareholders each handing out
two certificates for a free milkshake, which we know possesses addictive power,
will bring in repeat, nay, profitable repeat business.
Owner@steaknshake.com
We view
you as a part owner of every one of our restaurants. Doubtless, it is sensible
to have a mechanism allowing our owners to share the experience of their own
store visits with the people who are managing them on their behalf. Furthermore,
we are cultivating a culture linking ownership to accountability. To accommodate
our stockholders, over a year ago we set up the email owner@steaknshake.com as a
way for our owners to communicate their experiences with us, be they good or
bad. The email, which goes to all members of the restaurant operation’s senior
leadership team, has been both effective and cheap — in line with our motto.
Over the course of the last year we have had terrific input from many owners of
the company. Our email messages reinforce the high level of responsibility
expected from the organization. You can be assured that each message is read,
and when necessary the Steak n Shake team is dispatched quickly to remediate any
problems. In fact, we have shared with our 20,000 employees many of your
compliments as well as complaints. We want you to be proud of your ownership,
and everyone can play a part, including shareholders.
There is
only one caveat: The topic of the email must concern store experience by a
stockholder. If the email comes from someone who is not a shareholder, namely a
solicitor of products or services, he or she is guaranteed to lose the
opportunity to gain the business. This email is reserved for our owners,
exclusively, to discuss only matters pertaining to their own restaurant
experience.
Franchising
Steak n
Shake’s future growth lies in franchising.
I am
quite excited about our prototypical Steak n Shake. The prototype, which is in
its final stages of development, embodies a culmination of a year’s labor, time
rife with much attention to detail and diligence to ensure that both the
aesthetics and the unit economics are best-in-class.
Although
we like the franchising business — because, if properly executed, it can provide
a non-volatile revenue stream along with high returns on capital — nonetheless,
we will be selective in accepting new franchisees and will be sticklers when
approving real estate locations. We will not grow franchising simply for the
sake of growth, but to augment the long-term value of our iconic
brand.
We will
fortify our brand through operators who possess the expertise and commitment to
perform at a conspicuously high level. Additionally, they must demonstrate
adroit operational execution as well as conformity with our program. This
approach will make the brand a force to be reckoned with, amplifying the brand
value for all in the system.
The Steak
n Shake brand is portable. Thus, we intend to expand with the right partners
throughout the country. Our offer to a franchisee is unmatched. After all,
because we are one of the oldest chains in the nation, we have connections to
generations of consumers; we are aided by the stark fact that we are not a
Johnny-come-lately. The strength of the Steak n Shake brand has been
substantiated by its successful start-up in the midst of the Great Depression
and its successful turnaround in the midst of the Great Recession. We are a
company that is sufficiently competent to perform in all economic
seasons.
* *
*
Holding
Company
Simply
because profits are generated in the restaurant business doesn’t mean the money
must be reinvested there. The Steak n Shake restaurant chain has been
resuscitated and now enjoys prodigious cash flows. The parent firm has been
reorganized as a holding company and thus is now in the business of acquiring
other businesses — with the objective of maximizing its intrinsic business value
on a per share basis. Steak n Shake is no longer a static business; we run all
our businesses on a cash basis with the conscious decision to redeploy that cash
in the greenest, most fruitful pastures. The reinvestment of cash flow will be
indispensable to magnifying the growth rate of intrinsic value. To attain our
financial goal, we intend to invest in both related and unrelated businesses
with varying economic characteristics. We are now channeling surplus cash from
Steak n Shake to the parent and then deciding how best to reallocate the funds
based upon opportunity cost.
The
returns on invested capital from the operating businesses combined with my
capital allocation work will produce our overall return, which, according to our
criterion, must exceed the S&P 500 Index.
You
should be aware that we have no investment committee intruding on capital and
investment decisions. Any mistakes that would occur, and I assure you there will
be errors, are mine.
Further, when undertaking acquisitions, we will not utilize investment bankers.
Doing so is simply not our style. I will never abdicate responsibility. If we
don’t know enough about a business, we don’t want someone to teach us on your
tab. My duty is to allot capital without regard to Steak n Shake’s past history,
former philosophy, or other constraints. Our capital allocation is a matter of
discovering where we can generate the highest returns, adjusted for relevant
risks. In sum, opportunity will shape our company.
We
acknowledge that this change in corporate direction will disappoint those who
favor a “pure-play,” i.e., a company in which resources are reinvested only in
one line of business. Of course, you will need to form your own views on whether
you are comfortable with our idiosyncrasies. Otherwise, this is not a stock for
you.
Western
Sizzlin Corporation
Steak n
Shake is in the process of purchasing Western Sizzlin Corp. for $23 million.
This is a logical consolidation, which will expedite Steak n Shake’s morphing
into a more diversified holding company.
To
clarify events, I will present a brief odyssey of the last four years, which is
the time span since Phil and I took over Western. In the summer of 2005, through
my private investment firm, The Lion Fund, I took a position in Western and
within months became its largest shareholder. At that time the company was
engaged in franchising and operating restaurants, with all but a handful
franchisee run. The restaurants include a family steakhouse and a steak and
buffet concept under the names of Western Sizzlin, Wood Grill Buffet, and Great
American Steak & Buffet. In the spring of 2006, Phil and I took control of
Western. We restructured the corporation so that the parent became a holding
company with operating subsidiaries, which dispatched all excess cash upstairs
to the parent. Today, the company sports a healthy balance sheet and generates
stable cash flows. To the core franchise business, we added a quilt of other
businesses. Western now has 94 franchised locations, 5 company-owned, a joint
venture, real estate property for development through Western Real Estate L.P.,
an approximate 9% ownership in publicly traded ITEX, and a 51% interest in
Mustang Capital Advisors, an investment advisory company with around $45 million
in assets under management.
Along
with our earlier additions, over those four years we purchased major interests
in two restaurant chains. The first was Friendly Ice Cream Corp. In the summer
of 2006, I began allocating capital to Friendly. Our pursuit involved a
proxy battle that in less than a year after initiation resulted in the sale of
Friendly, thereby earning Western a return of around 80%. I will refrain from
recounting much of what you can read in the case study written by members of the
Harvard Business School, Professors V.G. Narayanan and Fabrizio Ferri along with
Senior Researcher James Weber. You may order a copy of the case study by
visiting harvardbusiness.org.
By the
time Friendly consummated its sale, I had already begun investing Western’s
capital in the stock of The Steak n Shake Company. In due time, I put almost all
of Western’s investable assets into Steak n Shake. To turn Steak n Shake around
ultimately required my assuming control of the management of the company, a
position I initially had not contemplated. But Phil and I were not going to
preside over destruction of wealth, as would have occurred by maintaining Steak
n Shake’s status quo. The upshot was that I now was leading two companies with
identical holding company structures and objectives.
With The
Steak n Shake Company emulating Western’s diversified system, the prospect of
combining the assemblage of Western’s assets along with achieving cost savings
appealed to me. Since I believed that both firms would benefit, I presented the
opportunity to the respective boards of directors. The rationale for merger is
straightforward: to reduce costs while increasing upside potential for the
combined entities. The combination of these two firms would eliminate Western’s
public company costs at the holding level as well as redundant operating costs
at the subsidiary one. Many expenses could be pruned through leveraging Steak n
Shake’s operational capabilities to optimize efficiency. To illustrate, the near
eradication of redundant expenses in integrating business functions like
franchise sales, marketing, accounting, purchasing, and legal is
attractive cost cutting. Besides, Western’s franchisees would benefit
from the combined buying power in procurement, Steak n Shake’s marketing
prowess, and its highly effective information technology team.
The
transaction will be financed by The Steak n Shake Company issuing five-year
callable (after one year) subordinated debentures at an interest rate of 14%, or
more meaningfully for a tax paying company like ours, just under 9% after-tax.
(In anticipation of the proposed merger, Western distributed its stock in Steak
n Shake to its shareholders.)
Because
of my dual roles — identical positions at both companies— special committees of
Western’s and Steak n Shake’s board of directors independently negotiated the
price and terms of the proposed merger. Even though I did not set the terms of
the deal, I am pleased for the stockholders of both firms. Knowing both
operations intimately, I have confidence that the combination will be
satisfactory for all stockholders.
Capital
Structure
Strategically,
our intention is to maintain a very strong balance sheet since we find it to be
a source of competitive advantage. We started fiscal year 2009 with cash
equivalents of $6.9 million and total debt under credit facilities of $30.7
million. We ended the year with a cash position of $51.4 million (plus $3
million in investments) and total debt under credit facilities of $18.6
million.
Most of
the $51 million in cash equivalents is held at the parent company level and is
earmarked for redeployment to acquire businesses or to purchase securities we
believe could achieve high risk-adjusted returns. Cash returns are currently
unremunerative. But they never burn a hole in our pockets. Our current financial
posture permits us to exploit favorable opportunities as they arise. If cash is
king, valuation is its queen. I think our conservative, opportunistic value
approach is the most sensible way to earn a satisfactory return.
One note
as you review our balance sheet: You will find us holding significant cash while
maintaining debt. The reason we do not use the cash to pay off, say, our
revolving credit facility is basic: The parent company holds most of the cash,
and the debt is the burden of our restaurant-operating subsidiary. Consequently,
we treat a subsidiary’s capital structure as independent from the parent’s.
Furthermore, each subsidiary’s capital structure will vary and will be inversely
related to its business risk.
Stock
Split
Daily our
emphasis is on the value of the company, not on its stock price. Our view is
that if we assiduously tend to the former, the latter will fall in place. We are
seeking to assemble and align ourselves with long-term investors whose purpose
is to prosper in concert with the company. Because of our communications, these
well-informed investors, we expect, would set prices for our stock that are
reasonable.
To
attract knowledgeable long-term owners, we will initiate a reverse stock split. A
reverse stock split of 1-for-20, effective on December 18, 2009, will reduce the
number of outstanding common shares of Steak n Shake from the present figure of
roughly 28.8 million to 1.4 million. Thus, for every twenty shares you now own,
you will end up with one. In no way does your wealth alter nor does that of the
company’s intrinsic business value. The economic pie is the same; it just will
be sliced into bigger pieces. This change, we hope, will dissuade speculators
from participating in our stock. We are attempting to eliminate those who
erroneously think that it is easier for a $10 stock to go to $20 than a $200 one
to go to $400.
Shareholder
Communications
We do not
have an investor relations department. Furthermore, we sidestep quarterly
conference calls, road shows, and routine public relations presentations. We
think that sort of footwork is an unproductive use of our time and adds no value
to your shares. After all, talk is cheap but cash isn’t. As Henry Ford said,
“You can't build a reputation on what you are going to do.” To earn more money
requires not a conversation but rolling up our sleeves and earning it through
good, old-fashioned elbow grease.
However,
to keep you apprised of our business progress, I will communicate with you in a
variety of ways, striving for and anticipating that doing so will be far more
informative than orthodox methods. For starters, I will cover pertinent
information in the Chairman’s Letter and disclose as much about our business,
philosophy, principles, specific processes, as make sense. We will also host an
annual meeting in which we will spend as much time as essential during that day
to answer your questions. In addition, we will disseminate to stockholders
pertinent information through 10Qs, proxy statements, and press
releases.
We will
issue press releases on fiscal 2010 quarterly results after the market closes on
January 29, May 21, and August 13. The 2010 annual report will be posted on our
website on Saturday, December 11, 2010.
Our
annual meeting will be held on Thursday,
April 8, 2010 in New York City at the St. Regis Hotel. The bulk of the
meeting, as previously mentioned, will center on answering your questions. We
will begin at 1:00 pm and continue until all your questions are answered. To be
fair to all 19,500 shareholders as well as to be efficient with our time, we
utilize the annual meetings as a surrogate for one-on-one
communication.
* *
*
Because
of my substantial financial interest in the company and my decision to use The
Steak n Shake Company as a vehicle for creating value for all shareholders, I am
personally committed to the company for the long haul. Along with my ownership,
I have family, friends, and other shareholders who have made significant
investments in the company. Additionally, over the years, other like-minded
shareholders have demonstrated their commitment and confidence, which have
fueled our eagerness to advance our mutual financial interests.
We look
forward to welcoming you at the annual meeting on April 8,
2010.
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Sardar
Biglari |
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December
8, 2009 |
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Chairman
of the Board |
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ADDITIONAL
INFORMATION CONCERNING THE TRANSACTION
Steak n
Shake on November 18, 2009, filed a registration statement (File No. 333-163192)
and related transaction statement on Schedule 13E-3 with the Securities and
Exchange Commission (the "SEC") with respect to the proposed transaction with
Western Sizzlin. The registration statement (which has not yet become
effective) includes a preliminary version (which is incomplete and subject to
completion and change) of Western's proxy statement for the special
meeting of its stockholders to consider the merger and of Steak n Shake's
prospectus with respect to the debentures. INVESTORS AND SECURITY HOLDERS
ARE URGED TO READ THE REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS
CAREFULLY (AND ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS) BECAUSE THEY
CONTAIN IMPORTANT INFORMATION ABOUT STEAK N SHAKE, WESTERN, THE TRANSACTION AND
RELATED MATTERS. Investors may obtain free copies of the registration
statement and of the proxy statement/prospectus (including the final proxy
statement/prospectus and of any amendments or supplements to these
documents, when available) and other documents filed by Steak n Shake and
Western with the SEC through the SEC's web site at www.sec.gov. In
addition, Western stockholders may obtain free copies of the registration
statement, proxy statement/prospectus and transaction statement (including
the final proxy statement/prospectus and of any amendments or supplements
to these documents, when available) from Western by directing such requests to
Western, attention: Investor Relations, 401 Albemarle Ave SE, Roanoke, Virginia
24013, telephone at (540) 345-3195.
PARTICIPANTS
IN THE SOLICITATION
Steak n
Shake, Western and Western's directors and officers may be deemed to be
participants in the solicitation of proxies from Western's stockholders in
connection with the proposed merger involving Western and Steak n Shake.
Information regarding Western's directors and officers and a description of
their interests in Western is contained in Western's definitive proxy statement
on Schedule 14A with respect to its 2009 Annual Meeting of Stockholders, which
was filed with the SEC on July 15, 2009, and will also be contained in the proxy
statement/prospectus relating to the proposed merger when it becomes
available. Western's stockholders may obtain additional information
about the direct and indirect interests of the participants in the acquisition,
by security holdings or otherwise, by reading the proxy statement/prospectus and
other materials filed or to be filed with the SEC when such information becomes
available.