Ozier Muhammad/The New York TimesSardar Biglari, chairman of Biglari Holdings, his investment vehicle.At the grand opening of a Steak ’n Shake Signature in Midtown Manhattan last month, Sardar Biglari, the fast-food chain’s chief executive, tried his best to look happy. Tall and well dressed, with slicked-back hair and a Chopard watch, Mr. Biglari seemed every bit the young Wall Street tycoon as he joined his employees in a ribbon-cutting cheer: “Steak ’n Shake is great! Steak ’n Shake is great!”
It was something of a mood shift for Mr. Biglari, who just three weeks earlier had been defeated in one of the biggest battles of his short career. An upstart investor who has become known for knock-down, drag-out proxy fights, Mr. Biglari, 34, lost an election to the board of Cracker Barrel, the restaurant chain based in Tennessee. The ordeal involved searing letters, a contentious board election and no shortage of harsh words — the same playbook he used to gain control of Steak ’n Shake in 2008.
Mr. Biglari, the chairman of Biglari Holdings, the publicly traded investment vehicle that controls Steak ’n Shake and several other businesses, is one of a small army of investors who have styled themselves after Warren E. Buffett, the celebrated chairman of Berkshire Hathaway.
The two men share a birthday (Aug. 30), a corporate monogram (BH) and a fondness for burger-and-ice-cream joints (Berkshire Hathaway owns Dairy Queen). At a market value of $500 million, Biglari Holdings operates on a much smaller scale, but both investors have succeeded in buying undervalued businesses, fixing them up and letting shareholders reap the benefits.
But like many of Wall Street’s Buffett simulacra — a group that includes the money managers Edward S. Lampert and Bruce R. Berkowitz — Mr. Biglari has developed his own style. In recent years, he has de-emphasized Mr. Buffett’s passive investment strategy and gone after the boards of companies that he believes are underperforming, including Friendly’s, a restaurant chain; Fremont Insurance, based in Michigan; and a beauty products company, CCA Industries.
Diane Bondareff/AP Images for Steak ‘n ShakeSardar Biglari, center, at the opening of the Steak ‘n Shake Signature restaurant in New York.“He certainly is a Warren Buffett disciple,” said Zeke Ashton, managing partner of Centaur Capital Partners, which owns shares in Biglari Holdings. “The one thing that’s quite different is that he’s not a guy who’s afraid of picking a fight.”
For Mr. Biglari, who emigrated to the United States from Iran, toughness runs in the family. His father, a former military officer, was imprisoned after the Iranian revolution and released when his mother negotiated with the prison guards. In 1984, the family moved to Texas, where the young Mr. Biglari began working at the family’s rug store.
His entrepreneurial spirit started young. While still in college, Mr. Biglari and a friend started an Internet service provider called INTX Networking, which they sold in 1999 for an undisclosed sum. As part of an upper-level business class at Trinity University, he also got the chance to help manage a small chunk of the school’s endowment. (He later brought his professor, Philip L. Cooley, on board as the vice chairman of Biglari Holdings.)
After graduation, Mr. Biglari started a hedge fund and got his first taste of corporate warfare. He bought a stake in a small restaurant chain called Western Sizzlin, which he used to take control of the company’s board. He tried the same tack with Friendly’s, accusing the company’s management of wasting money and fostering a “self-interested culture.” In his quest for two board seats, Mr. Biglari rented billboards near the restaurant’s headquarters to advertise a Web site, Enhance Friendly’s, which laid out his case for change.
Mr. Biglari cashed out when Friendly’s was acquired by a private equity firm in 2007. The restaurant chain filed for bankruptcy last year.
Shortly thereafter, he set his sights on Steak ’n Shake, a 500-store chain that he believed had enormous potential despite years of losses. In 2008, he and Dr. Cooley pushed their way onto the company’s board, denouncing the chain’s “failed vision, failed strategy, failed execution and failed board.” He later became the company’s chief executive and consolidated it with his other businesses under the Biglari Holdings umbrella.
Mr. Biglari’s aggressive tactics — fire and brimstone couched in business-school jargon — invited some comparisons to another fabled investor, Carl C. Icahn, whose corporate rabble-rousing has given him the reputation of a raider.
“Each time, he’s taken a small company and uses it to pick on a big company,” Mr. Ashton said. “The big company doesn’t take him seriously until it’s too late.”
But it’s hard to argue with Mr. Biglari’s results. Three years after he took the reins at Steak ’n Shake, the once-flailing company is back on solid ground. Mr. Biglari instituted an enormous cost-cutting program — even focusing on the menu and the number of colors used to print paper cups — to save millions of dollars a year. In fiscal year 2011, annual profit at the chain rose 36 percent, and same-store sales have been steadily increasing over the last three years.
Cracker Barrel was supposed to be the next turnaround feather in Mr. Biglari’s cap. Last November, he began sending harshly worded letters to the chain’s shareholders, accusing the company of “lugubrious performance” and putting himself on the ballot for the company’s annual board election.
“We believe the combination of a flawed strategy and poor execution has prevented Cracker Barrel’s enhancement of value,” he wrote.
Cracker Barrel’s executives fought back, sending letters in which they called Mr. Biglari’s assault “misdirected and misinformed,” and said that his election would “result in the alienation of the board and management team.” They also pointed to Mr. Biglari’s large compensation plan — which consisted of a $900,000 salary in fiscal 2011, plus a $4 million performance bonus — as evidence that he was less interested in improving Cracker Barrel than cashing in on its brand name, according to a person with knowledge of the talks. Some scoffed at Mr. Biglari’s eccentricities, notably putting his photograph in every Steak ’n Shake after becoming chief executive, the person said.
The counterattack worked. In December, Mr. Biglari lost his election to the board.
“A lot of people are very skeptical of him,” said Sam Yake, an analyst with BGB Securities. “He’s brash and young, and he thinks he knows better than people who have been in business for years. Even if he’s absolutely right, it’s somewhat annoying.”
In an interview, Mr. Biglari would not comment on the Cracker Barrel fight in detail, saying only, “Truth is the foundation of excellence.” (The line is a quote from the writings of Ray Dalio, the billionaire hedge fund manager.) Asked whether losing the election to Cracker Barrel’s board had taken a personal toll on him, he said, “I’m supremely insensitive to criticism.”
Avoiding noise is part of Mr. Biglari’s investing strategy. He declines almost all media requests, rejects calls from analysts and answers shareholder questions only at a single annual meeting. At the 2010 annual meeting, Mr. Biglari was asked several times by his shareholders about comparisons to Berkshire Hathaway and other companies. He shot back, “We need to show some individuality here,” according to a person who was present.
But like Mr. Buffett, Mr. Biglari has steadfast commitment to his ideas. Despite being thwarted by the board, Mr. Biglari has been steadily increasing his stake in Cracker Barrel, which now stands at nearly 15 percent.
“He’s got a very, very solid understanding of the restaurant business,” said Mitchell A. Kovitz, a principal of the Kovitz Investment Group, which owns about 5 percent of Biglari Holdings stock as well as shares in Berkshire Hathaway. “If he believes that Cracker Barrel is at all similar to what Steak ’n Shake was, he absolutely should try to get in there.”
A little showmanship — as Mr. Buffett knows — never hurts either.
As rain fell outside the Manhattan Steak ’n Shake, Mr. Biglari was inside, promoting the new restaurant. He shook hands with customers and bragged about the chain’s burgers, its wine and beer selection and its touch-screen Coca-Cola machine. His mother, dressed in a full-length fur coat and Chanel earrings, looked on from a sidewalk spot next to his father, who wore a gold tie and beamed with pride.
“He’s my hero,” the elder Mr. Biglari said. “He’s always successful in everything.”