Steak 'N Shake Unplugs Point-Of-Sale, Cuts Supply Chain In Franchise Price Fight

Burger chain Steak 'n Shake (NYSE:BH) is fighting in court with Colorado franchisees over prices for food items—and the Midwestern chain is resorting to undercover customers and even pulling the plug on two franchised stores' point-of-sale system, according to the Denver Post.

In a Denver federal courtroom on Friday (Aug. 23), chain employee Elvin Leonardo testified that, acting as a regular customer in May, he paid more than the chain allows for orders at the franchisees' Denver-area restaurants, which are the first Steak 'n Shake stores in Colorado. The franchisees—Kathryn, Larry and Christopher Baerns—say they were losing money with the chain's prices, which aren't scaled for the higher labor and food costs of the Denver area. The chain is in court trying to stop them from using the Steak 'n Shake name.

The chain terminated the franchise agreement in June, but the two restaurants are still open after the chain shut down the stores' point-of-sale software in early August, which prevented them from taking credit and debit cards. The judge in the case ordered the chain to turn the software back on.

The chain also cut off the two stores' supply chains early this month, preventing them from serving the pressed-steak burgers associated with the chain. Again, U.S. District Judge Raymond Moore said the chain had to allow Sysco, the only supplier the chain allows franchisees to use, to resume shipments.

However, those may be the last breaks the franchisees will get. The Post reported that at Friday's hearing, Judge Moore "tried to maintain his patience through tedious and sometimes contentious questioning of witnesses by the Baernses' legal team."

For more:

- See this Denver Post story

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