Steak ‘n Shake adds sizzle to brand with Indy car deal

Bobby and Graham Rahal

Rob Chinn/AR1.com

Steakburgers and hand-dipped milkshakes, meet your Dallara chassis and ethanol fuel.

Steak 'n Shake, for the first time in its 81-year history, is sponsoring an Indy car.

It took a mouth-watering pitch from Rahal Letterman Lanigan Racing to make it happen.

The race team noted how founder Bobby Rahal and his son, driver Graham Rahal, are fans of Steak 'n Shake. How the team is locally based, just like Steak 'n Shake. And how co-owner David Letterman is a virtual animated billboard for steakburgers. (On his late-night TV show, he once called Steak 'n Shake "the cherished jewel of my childhood.")

The Indianapolis restaurant chain was smitten.

"Partnering with someone who has a genuine love for the brand makes a lot of sense," said the chain's senior vice president of marketing, James Flaniken. "It just seemed like a natural fit."

No matter that the race team's sponsor pitch didn't occur until February and that Steak 'n Shake's 2015 marketing budget hadn't set aside a penny for race sponsorships.

Within weeks, Steak 'n Shake agreed to ante up more than $1 million to become the primary sponsor of an Indy car in five races, including the Indianapolis 500. The deal was sealed after a meeting in Letterman's New York office with Sardar Biglari, CEO of Biglari Holdings, which owns Steak 'n Shake.

The red Steak 'n Shake Indy car roaring around the Speedway this month follows in a long line of locally sponsored Indy race cars. Central Indiana companies, from Cummins Inc. to Indiana Oxygen and McGilvery's Pub & Eatery, have always had a fondness for attaching their brands to the Indianapolis 500. What other local event, after all, can bring the eyeballs, the goodwill, the glamour that come from attaching your brand to the Greatest Spectacle in Racing?

Steak 'n Shake aims to milk its sponsorship for all the positive pub it can get.

It has bought space on 14 billboards in the Indianapolis area to picture the Steak 'n Shake car next to a giant milkshake. It lined up Graham Rahal to sign autographs and display his car at two area restaurants. And the Steak 'n Shake logo and name are plastered over everything from the car to the garage and the team uniforms.

The restaurant chain even supplied one of its plush toys, Shaker, to serve as the protective cover on the car's radio antenna when it's not on the track. And a Graham Rahal chocolate milkshake is on the menu locally.

Graham Rahal

Rob Chinn/AR1.com

Rahal, 26, who followed his father into racing, said the Steak 'n Shake sponsorship has connected with race fans like few other sponsorships his team has had.

"The response I've gotten from fans is beyond incredible. I've represented a whole host of companies, and I've never seen anything like this, that's for sure. I just did an autograph session, and I had 30 people come up to me and say, 'I ate at Steak 'n Shake this morning.' I get tweets every day from people saying they eat there to support the team."

The sponsorship comes at a time when Steak 'n Shake is hungry for some public goodwill.

Its parent, Biglari Holdings, just went through a bitter takeover fight with an activist shareholder who waged a three-month campaign accusing CEO Biglari of being overpaid and wielding too much power and the board of making poor governance decisions that have hurt shareholders.

Biglari beat back the proxy challenge last month, with shareholders voting to re-elect the current board.

Within Biglari Holdings, the 544-store Steak 'n Shake chain is the largest and most profitable of its four companies. Biglari is getting a two-fer out of its Indy car sponsorship, adding the name of its men's magazine Maxim as an associate sponsor of the Rahal car.

While Steak 'n Shake hopes to see a return on its Indy car investment in the form of increased sales and brand awareness, supporting the Indianapolis 500 and IndyCar is a worthy end in itself, Flaniken said. He has worked for Steak 'n Shake for 23 years, predating Biglari, who took control of Steak 'n Shake in 2008.

"One thing we like to do, given our headquarters here in Indianapolis, is support the community," Flaniken said. Steak 'n Shake has had a similar sports sponsorship for the past four years with the NBA's Indiana Pacers. The restaurant mascots Shaker the milkshake, Sizzle the steakburger and Goldie the french fries have become regulars at Pacers home games.

Flaniken said he saw race fans connecting with the red Steak 'n Shake car in practices at the Speedway and at the Angie's List Grand Prix last weekend. "The feedback has been awesome. So many people are excited there was a Steak 'n Shake car."

Flaniken wouldn't reveal the price of the sponsorship, which tops $1million.

IndyCar sponsorships vary widely in price, depending on the extent of signage and perks that the sponsor wants. Last year, Bloomberg reported that full-season IndyCar sponsorships cost $5 million to $9 million for a name or logo on the side of the car, $1 million to $2 million for a front wing and $100,000 to $300,000 for a helmet decal.

The Rahal team's previous main sponsor was the Army National Guard, which has cut back on its IndyCar and other sports sponsorships.

Corporate sponsorship revenue for IndyCar and the 500-Mile Race is still recovering from the downturn during the recession of 2007-2009, said Jay Frye, chief revenue officer for IndyCar and the Indianapolis Motor Speedway.

"We still have work to do, but it feels like we are trending in the right way," he said. One thing that helps draw in new sponsors: growing TV viewership of IndyCar races, which rose 20 percent last year from 2013, he said.

Major new sponsors added by Indianapolis Motor Speedway in the past two years include Verizon, Panasonic, Tag Heuer and Angie's List, Frye said.

He called Steak 'n Shake and Hitachi the most well-known of this year's first-time IndyCar team sponsors. Steak 'n Shake comes in as a sponsor after several other restaurant chains, including McDonald's, Domino's and Rally's, pulled out of IndyCar in recent years.

Few are more enthused about Steak 'n Shake's sponsorship than Letterman, who grew up in Indianapolis and frequented the Steak 'n Shake at 54th Street and Keystone Avenue as a boy. He has requested that steakburgers and milkshakes be served at the Rahal team's main dinner for sponsors before the 500-Mile Race next Sunday. Flaniken said Steak 'n Shake will oblige, bringing its food truck to the track to serve up grilled steakburgers.

Letterman also used his late-night TV show to put in a national plug for Steak 'n Shake after Rahal took second in the Honda Indy Grand Prix of Alabama on April 26 and in the Angie's List Grand Prix last weekend.

"Dave recognized Graham's super finish and gave the whole audience free milkshakes," ordered from the Steak 'n Shake near Times Square, Flaniken said. "It was live on the show – 480 milkshakes!"

Flaniken was elated. That kind of publicity even beats a front-wing decal Indy Star