Biglari Holdings Inc. (BH)

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

(dollars in thousands except per share data)

Overview

Biglari Holdings Inc. is a holding company owning subsidiaries engaged in a number of diverse business activities, including property and casualty insurance and reinsurance, licensing and media, restaurants, and oil and gas. Biglari Holdings is founded and led by Sardar Biglari, Chairman and Chief Executive Officer of the Company.

Biglari Holdings’ management system combines decentralized operations with centralized financial decision-making. Operating decisions for the various business units are made by their respective managers. All major investment and capital allocation decisions are made for the Company and its subsidiaries by Mr. Biglari.

Net earnings (loss) are disaggregated in the table that follows. Amounts are recorded after deducting income taxes.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Restaurants

Our restaurant businesses, which include Steak n Shake and Western Sizzlin, comprise 428 company-operated and franchise restaurants as of June 30, 2026.

As of June 30, 2026, eight of the 126 company-operated Steak n Shake stores were closed. Of the eight locations, Steak n Shake plans to reopen two locations and sell or lease six locations.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Restaurant operations are summarized below.

Cost of food, labor costs, and occupancy and other costs are expressed as a percentage of net sales.

General and administrative, marketing, other expenses, impairments, and depreciation are expressed as a percentage of total revenue.

Net sales for the second quarter and first six months of 2026 were $45,648 and $85,995, respectively, representing a decrease of $1,210 or 2.6% and $2,478 or 2.8%, compared to the second quarter and first six months of 2025, respectively. Total revenue decreased due to fewer company-operated units in 2026 compared to 2025. Steak n Shake’s domestic same-store sales increased 11.9% during the second quarter of 2026.

For company-operated units, sales to the end customer are recorded as revenue generated by the Company, but for franchise partner units, only our share of the restaurant’s profits, along with certain fees, are recorded as revenue. Because we derive most of our revenue from our share of the profits, revenue will decline as we transition from company-operated units to franchise partner units.

Fees generated by our franchise partners were $23,141 during the second quarter of 2026, as compared to $20,150 during the second quarter of 2025. Franchise partner fees were $43,682 and $37,289 during the first six months of 2026 and 2025, respectively. Franchise partner same-store sales increased 14.5%.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The franchise royalties and fees generated by the traditional franchising business were $3,350 during the second quarter of 2026, as compared to $3,128 during the second quarter of 2025. Franchise royalties and fees during the first six months of 2026 were $6,476 as compared to $6,617 during the first six months of 2025. There were 90 Steak n Shake traditional units open on June 30, 2026, as compared to 100 units open on June 30, 2025.

The cost of food at company-operated units during the second quarter of 2026 was $15,203 or 33.3% of net sales, as compared to $14,167 or 30.2% of net sales during the second quarter of 2025. The cost of food at company-operated units during the first six months of 2026 was $27,868 or 32.4% of net sales, as compared to $26,631 or 30.1% of net sales during the first six months of 2025. The increase was primarily because of Steak n Shake materially enhancing the quality of its food ingredients.

The labor costs at company-operated restaurants during the second quarter of 2026 were $13,749 or 30.1% of net sales, as compared to $14,020 or 29.9% of net sales in the second quarter of 2025. Labor costs at company-operated restaurants during the first six months of 2026 were $26,607 or 30.9% of net sales, as compared to $27,460 or 31.0% of net sales in 2025. Labor costs expressed as a percentage of net sales remained consistent with 2025.

General and administrative expenses during the second quarter of 2026 were $12,348 or 16.5% of total revenue, as compared to $12,776 or 17.7% of total revenue in the second quarter of 2025. General and administrative expenses during the first six months of 2026 were $24,184 or 17.2% of total revenue, as compared to $24,704 or 18.1% of total revenue in the first six months of 2025. General and administrative expenses in 2026 remained consistent with 2025.

The Company recorded no impairment charges in the second quarter and first six months of 2026 and recorded $1,251 in the first six months of 2025 related to underperforming stores.

Interest on obligations under leases was $2,757 during 2026 versus $2,573 during 2025.

To better convey the performance of the franchise partnership model, the table below shows the underlying sales, cost of food, labor costs, and other restaurant costs of the franchise partners. We believe the unaudited franchise partner information is useful to readers, as they have a direct effect on Steak n Shake’s profitability.

The Company’s consolidated financial statements do not include data in the table above. Figures are shown for information purposes only.

Insurance

We view our insurance businesses as possessing two activities: underwriting and investing. Underwriting decisions are the responsibility of the unit managers, whereas investing decisions are the responsibility of our Chairman and CEO, Sardar Biglari. Our business units are operated under separate local management. Biglari Holdings’ insurance operations consist of First Guard, Southern Pioneer, and Biglari Reinsurance.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Underwriting results of our insurance operations are summarized below.

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

(dollars in thousands, except per-share data)

Biglari Holdings Inc. is a holding company owning subsidiaries engaged in a number of diverse business activities, including property and casualty insurance and reinsurance, licensing and media, restaurants, and oil and gas. The Company’s largest operating subsidiaries are involved in the franchising and operating of restaurants. Biglari Holdings is founded and led by Sardar Biglari, Chairman and Chief Executive Officer of the Company.

Biglari Holdings’ management system combines decentralized operations with centralized financial decision-making. Operating decisions for the various business units are made by their respective managers. All major investment and capital allocation decisions are made for the Company and its subsidiaries by Mr. Biglari.

Discussion of Operations

Net earnings attributable to Biglari Holdings Inc. shareholders are disaggregated in the table that follows.

The following discussion should be read in conjunction with Item 1, Business and our Consolidated Financial Statements and the notes thereto included in this Form 10-K. The following discussion should also be read in conjunction with the “Cautionary Note Regarding Forward-Looking Statements” and the risks and uncertainties described in Item 1A, Risk Factors, set forth above.

Our Management’s Discussion and Analysis generally discusses 2025 and 2024 items. Discussions of 2023 items can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 1, 2025.

Investment gains and losses in 2025 and 2024 were mainly derived from our investments in equity securities and included unrealized gains and losses from market price changes during the period. We believe that investment gains/losses are generally meaningless for analytical purposes in understanding our reported quarterly and annual results. These gains and losses have caused and will continue to cause significant volatility in our periodic earnings.

Through our subsidiaries, we engage in numerous diverse business activities. We operate on a decentralized management structure. The business segment data (Note 16 to the accompanying Consolidated Financial Statements) should be read in conjunction with this discussion.

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Management’s Discussion and Analysis (continued)

Restaurants

Our restaurant businesses, which include Steak n Shake and Western Sizzlin, comprise 435 company-operated and franchise restaurants as of December 31, 2025.

As of December 31, 2025, seven of the 131 company-operated Steak n Shake stores were closed. Of the seven locations, Steak n Shake plans to reopen two locations and sell or lease five locations.

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Management’s Discussion and Analysis (continued)

Restaurant operations for 2025, 2024, and 2023 are summarized below.

Cost of food, labor, and occupancy and other costs are expressed as a percentage of net sales.

General and administrative, marketing, other expenses, impairments, and depreciation and amortization are expressed as a percentage of total revenue.

Net sales for 2025 were $181,884, representing an increase of $22,671, or 14.2% compared to 2024. The increase in net sales was primarily due to an increase of 10.5% in Steak n Shake’s same-store sales for company-operated units. The same-store sales performance was 10.2% for company-operated and franchise partner units combined.

For company-operated units, sales to the end customer are recorded as revenue generated by the Company, but for franchise partner units, only our share of the restaurant’s profits, along with certain fees, are recorded as revenue.

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Management’s Discussion and Analysis (continued)

Fees generated by our franchise partners were $77,001 in 2025 as compared to $70,616 during 2024. As of December 31, 2025, there were 179 franchise partner units as compared to 173 franchise partner units as of December 31, 2024. Franchise partner fees were higher primarily because franchise partner same-store sales increased 10.1% during 2025 compared to 2024.

Included in the franchise partner fees were $23,428 and $22,884 of rental income during 2025 and 2024, respectively. Franchise partners rent buildings and equipment from Steak n Shake.

The franchise royalties and fees generated by the traditional franchising business were $13,587 during 2025 as compared to $13,632 during 2024. The decrease in franchise royalties and fees was primarily due to the closing of certain traditional franchise stores. There were 122 traditional units open on December 31, 2025, as compared to 136 units open on December 31, 2024.

The cost of food at company-operated units in 2025 was $56,205, or 30.9% of net sales as compared to $47,891, or 30.1% of net sales in 2024. The cost of food as a percentage of net sales increased during 2025 compared to 2024 primarily due to inflation and improvements in the quality of various products.

The labor costs at company-operated restaurants during 2025 were $56,175, or 30.9% of net sales as compared to $50,431, or 31.7% of net sales in 2024. Labor costs expressed as a percentage of net sales decreased during 2025 compared to 2024 primarily due to the benefit from higher sales in relation to fixed management labor.

General and administrative expenses during 2025 were $48,969, or 17.4% of total revenue as compared to $47,130, or 18.7% of total revenue during 2024. The increase in general and administrative expenses was mainly attributable to higher salary expenses at Steak n Shake.

Marketing expenses during 2025 were $17,951 or 6.4% of total revenue, as compared to $12,584 or 5.0% of total revenue during 2024. Marketing expenses increased during 2025 compared to 2024 primarily due to the promotion of new, enhanced products.

Other income decreased during 2025 compared to 2024, primarily because of fewer real estate transactions.

Interest on obligations under leases was $5,421 during 2025 versus $5,361 during 2024.

To better convey the performance of the franchise partnership model, the table below shows the underlying sales, cost of food, labor costs, and other restaurant costs of the franchise partners. We believe the franchise partner information is useful to readers, as it has a direct effect on Steak n Shake’s profitability.

The Company’s consolidated financial statements do not include data in the table above. Figures are shown for information purposes only.

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Management’s Discussion and Analysis (continued)

Insurance

We view our insurance businesses as possessing two activities: underwriting and investing. Underwriting decisions are the responsibility of the unit managers, whereas investing decisions are the responsibility of our Chairman and CEO, Sardar Biglari. Our business units are operated under separate local management. Biglari Holdings’ insurance operations consist of First Guard, Southern Pioneer, and Biglari Reinsurance.

Underwriting results of our insurance operations are summarized below.

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