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|  THE STEAK N SHAKE COMPANY(Exact name of registrant as specified in its charter) |
|---------------------------------------------------------------------------------------|

| INDIANA                           | 37-0684070                              |
|-----------------------------------|-----------------------------------------|
| (State or other jurisdiction      | (I.R.S. Employer Identification Number) |
| of incorporation or organization) |                                    |

| 175 East Houston Street, Suite 1300      |       |
|------------------------------------------|------------|
| San Antonio, Texas                       | 78205      |
| (Address of principal executive offices) | (Zip code) |

|                     (317) 633-4100(Registrant’s telephone number, including area code)  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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TABLE OF CONTENTS

| PART I. FINANCIAL INFORMATION | Page                                                                                                                                     |
|------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------|
|                               |                                                                                                                                     |   |
| ITEM 1.                            | FINANCIAL STATEMENTS                                                                                                                     |   |
|                               | Condensed Consolidated Statements of Financial Position (Unaudited) as of December 23, 2009 and September 30, 2009                  | 3 |
|                               | Condensed Consolidated Statements of Operations (Unaudited) for the Twelve Weeks Ended December 23, 2009 and December 17, 2008 | 4 |
|                               | Condensed Consolidated Statements of Cash Flows (Unaudited) for the Twelve Weeks Ended December 23, 2009 and December 17, 2008      | 5 |
|                               | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                                         | 6 |
|                               |                                                                                                                                     |   |
| ITEM 2.                            | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                              | 15 |
|                               |                                                                                                                                     |   |
| ITEM 3.                            | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                                               | 19 |
|                               |                                                                                                                                     |   |
| ITEM 4.                            | CONTROLS AND PROCEDURES                                                                                                                  | 20 |
|                               |                                                                                                                                     |
| PART II. OTHER INFORMATION         |                                                                                                                                     |
|                               |                                                                                                                                     |   |
| ITEM 6.                            | EXHIBITS                                                                                                                                 | 20 |
|                               |                                                                                                                                     |
| SIGNATURES                         | 21                                                                                                                                       |

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Table of Contents

ITEM 1. FINANCIAL STATEMENTS

| Condensed Consolidated Statements of Financial Position                                                                            |         |    |              |   |    |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------------|---------|-------------------|--------|---------|--------|
| The Steak n Shake Company                                                                                                          |         |    |              |   |    |   |
| (Amounts in $000s except share and per share data)                                                                                 |         |    |              |   |    |   |
|                                                                                                                               | December 23, |    | September 30,     |   |
|                                                                                                                               | 2009         |    | 2009              |   |
|                                                                                                                               | (Unaudited)  |    | (Unaudited)  |   |
| Assets                                                                                                                             |         |    |              |   |    |   |
| Current assets:                                                                                                                    |         |    |              |   |    |   |
| Cash and cash equivalents                                                                                                          | $            | 62,191  |              | $      | 51,395  |   |
| Investments                                                                                                                        |         | 9,182   |              |   | 3,001   |   |
| Receivables, net of allowance of $536 and $538, respectively                                                                       |         | 6,384   |              |   | 7,660   |   |
| Inventories                                                                                                                        |         | 7,335   |              |   | 6,595   |   |
| Deferred income taxes                                                                                                              |         | 3,910   |              |   | 3,910   |   |
| Assets held for sale                                                                                                               |         | 12,997  |              |   | 13,733  |   |
| Other current assets                                                                                                               |         | 3,225   |              |   | 4,421   |   |
| Total current assets                                                                                                               |         | 105,224 |              |   | 90,715  |   |
| Property and equipment, net                                                                                                        |         | 394,037 |              |   | 399,635 |   |
| Goodwill                                                                                                                           |         | 14,503  |              |   | 14,503  |   |
| Other intangible assets, net                                                                                                       |         | 1,523   |              |   | 1,567   |   |
| Other assets                                                                                                                       |         | 8,391   |              |   | 8,076   |   |
| Total assets                                                                                                                       | $            | 523,678 |              | $      | 514,496 |   |
|                                                                                                                               |         |    |              |   |    |   |
| Liabilities and shareholders' equity                                                                                               |         |    |              |   |    |   |
| Liabilities                                                                                                                        |         |    |              |   |    |   |
| Current liabilities:                                                                                                               |         |    |              |   |    |   |
| Accounts payable                                                                                                                   | $            | 26,822  |              | $      | 22,293  |   |
| Accrued expenses                                                                                                                   |         | 30,652  |              |   | 30,381  |   |
| Revolving credit                                                                                                                   |         | 18,500  |              |   | 18,500  |   |
| Current portion of obligations under leases                                                                                        |         | 4,267   |              |   | 4,339   |   |
| Current portion of long-term debt                                                                                                  |         | 21      |              |   | 20      |   |
| Total current liabilities                                                                                                          |         | 80,262  |              |   | 75,533  |   |
| Deferred income taxes                                                                                                              |         | 9,678   |              |   | 9,388   |   |
| Other long-term liabilities                                                                                                        |         | 7,589   |              |   | 7,452   |   |
| Obligations under leases                                                                                                           |         | 128,619 |              |   | 130,076 |   |
| Total liabilities                                                                                                                  |         | 226,148 |              |   | 222,449 |   |
|                                                                                                                               |         |    |              |   |    |   |
| Commitments and contingencies                                                                                                      |         |    |              |   |    |   |
|                                                                                                                               |         |    |              |   |    |   |
| Shareholders' equity                                                                                                               |         |    |              |   |    |   |
| Common stock - $0.50 stated value, 2,500,000 shares authorized -  1,514,257 shares issued, 1,436,252 shares outstanding* |         | 757     |              |   | 757     |   |
| Additional paid-in capital                                                                                                         |         | 143,299 |              |   | 143,691 |   |
| Retained earnings                                                                                                                  |         | 173,208 |              |   | 167,731 |   |
| Accumulated other comprehensive income                                                                                             |         | 567     |              |   | 112     |   |
| Treasury stock - at cost: 78,005 shares as of December 23,  2009; 77,796 shares as of September 30, 2009*                |         | (20,479 | )                 |   | (20,430 | )      |
| The Steak n Shake Company shareholders' equity                                                                                     |         | 297,352 |              |   | 291,861 |   |
| Noncontrolling interest                                                                                                            |         | 178     |              |   | 186     |   |
| Total shareholders' equity                                                                                                         |         | 297,530 |              |   | 292,047 |   |
| Total liabilities and shareholders' equity                                                                                         | $            | 523,678 |              | $      | 514,496 |   |
|                                                                                                                               |         |    |              |   |    |   |
| * Adjusted for 1-for-20 reverse stock split effective December 18, 2009.                                                           |         |    |              |   |    |
| See accompanying notes.                                                                                                            |         |    |              |   |    |   |

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| Condensed Consolidated Statements of Operations                            |               |        |         |   |         |   |
|----------------------------------------------------------------------------|--------------------|-------------|--------------|--------|--------------|--------|
| The Steak n Shake Company                                                  |               |        |         |   |         |   |
| (Amounts in $000s except share and per share data)                         |               |        |         |   |         |   |
|                                                                       | Twelve Weeks Ended |        |
|                                                                       | December 23,       |        | December 17, |   |
|                                                                       | 2009               |        | 2008         |   |
|                                                                       | (Unaudited)        |        | (Unaudited)  |   |
| Revenues                                                                   |               |        |         |   |         |   |
| Net sales                                                                  | $                  | 147,586     |         | $      | 130,719      |   |
| Franchise fees                                                             |               | 919         |         |   | 958          |   |
| Total revenues                                                             |               | 148,505     |         |   | 131,677      |   |
|                                                                       |               |        |         |   |         |   |
| Costs and expenses                                                         |               |        |         |   |         |   |
| Cost of sales                                                              |               | 38,479      |         |   | 35,117       |   |
| Restaurant operating costs                                                 |               | 73,157      |         |   | 71,596       |   |
| General and administrative                                                 |               | 8,785       |         |   | 8,645        |   |
| Depreciation and amortization                                              |               | 6,923       |         |   | 7,443        |   |
| Marketing                                                                  |               | 7,727       |         |   | 7,543        |   |
| Interest                                                                   |               | 2,554       |         |   | 3,602        |   |
| Rent                                                                       |               | 3,693       |         |   | 3,565        |   |
| Asset impairments and provision for restaurant closing                     |               | 171         |         |   | 176          |   |
| Gain on disposal of assets                                                 |               | (23         | )            |   | (59          | )      |
| Other (income) expense, net                                                |               | (827        | )            |   | 30           |   |
| Total costs and expenses                                                   |               | 140,639     |         |   | 137,658      |   |
|                                                                       |               |        |         |   |         |   |
| Realized investment gains/losses                                           |               | 312         |         |   | -            |   |
|                                                                       |               |        |         |   |         |   |
| Earnings (loss) before income taxes                                        |               |  8,178 |         |   |  (5,981 | )      |
|                                                                       |               |        |         |   |         |   |
| Income taxes                                                               |               |  2,684 |         |   |  (2,541 | )      |
|                                                                       |               |        |         |   |         |   |
| Net earnings (loss)                                                        |               | 5,494       |         |   | (3,440       | )      |
|                                                                       |               |        |         |   |         |   |
| Less: Earnings attributable to noncontrolling interest                     |               |  17    |         |   |  -      |   |
|                                                                       |               |        |         |   |         |   |
| Net earnings (loss) attributable to The Steak n Shake Company              | $                  | 5,477       |         | $      | (3,440       | )      |
|                                                                       |               |        |         |   |         |   |
| Basic earnings (loss) per common and  common equivalent share*   | $                  | 3.84        |         | $      | (2.43        | )      |
|                                                                       |               |        |         |   |         |   |
| Diluted earnings (loss) per common and  common equivalent share* | $                  | 3.82        |         | $      | (2.43        | )      |
|                                                                       |               |        |         |   |         |   |
| Weighted average shares and equivalents*                                   |               |        |         |   |         |   |
| Basic                                                                      |               | 1,426,684   |         |   | 1,415,089    |   |
| Diluted                                                                    |               | 1,433,995   |         |   | 1,415,089    |   |
|                                                                       |               |        |         |   |         |   |
| * Adjusted for 1-for-20 reverse stock split effective December 18, 2009.   |               |        |         |   |
| See accompanying notes.                                                    |               |        |         |   |         |   |

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| Condensed Consolidated Statements of Cash Flows                                                       |               |       |         |   |    |   |
|-------------------------------------------------------------------------------------------------------|--------------------|------------|--------------|--------|---------|--------|
| The Steak n Shake Company                                                                             |               |       |         |   |    |   |
| (Amounts in $000s)                                                                                    |               |       |         |   |    |   |
|                                                                                                  | Twelve Weeks Ended |       |
|                                                                                                  | December 23,       |       | December 17, |   |
|                                                                                                  | 2009               |       | 2008         |   |
|                                                                                                  | (Unaudited)        |       | (Unaudited)  |   |
| Operating activities                                                                                  |               |       |         |   |    |   |
| Net earnings (loss)                                                                                   | $                  | 5,494      |         | $      | (3,440  | )      |
| Adjustments to reconcile net earnings (loss)  to net cash provided by operating activities: |               |       |         |   |    |   |
| Depreciation and amortization                                                                         |               | 6,923      |         |   | 7,443   |   |
| Provision for deferred income taxes                                                                   |               |  -    |         |   | 733     |   |
| Asset impairments and provision for restaurant closing                                                |               | 171        |         |   | 176     |   |
| Stock-based compensation and other non-cash expenses                                                  |               | 360        |         |   | 1,230   |   |
| Gain on disposal of assets                                                                            |               | (23        | )       |   | (59     | )      |
| Realized investment gains                                                                             |               | (312       | )            |   | -       |   |
| Changes in receivables and inventories                                                                |               | 679        |         |   | 9,570   |   |
| Changes in other assets                                                                               |               | 1,107      |         |   | (1,104  | )      |
| Changes in accounts payable and accrued expenses                                                      |               | 5,287      |         |   | 1,043   |   |
| Net cash provided by operating activities                                                             |               | 19,686     |         |   | 15,592  |   |
|                                                                                                  |               |       |         |   |    |   |
| Investing activities                                                                                  |               |       |         |   |    |   |
| Additions of property and equipment                                                                   |               | (3,068     | )       |   | (1,974  | )      |
| Proceeds from property and equipment disposals                                                        |               | 711        |         |   | 5,056   |   |
| Purchases of investments                                                                              |               | (8,174     | )       |   |  - |   |
| Sale of investments                                                                                   |               | 3,050      |         |   |  - |   |
| Net cash (used in) provided by investing activities                                                   |               | (7,481     | )       |   | 3,082   |   |
|                                                                                                  |               |       |         |   |    |   |
| Financing activities                                                                                  |               |       |         |   |    |   |
| Net proceeds from line of credit facility                                                             |               |  -    |         |   | 5,660   |   |
| Principal payments on long-term debt                                                                  |               |  (5   | )       |   | (4,476  | )      |
| Principal payments on direct financing lease obligations                                              |               |  (753 | )       |   | (1,066  | )      |
| Proceeds from exercise of stock options                                                               |               |  10   |         |   |  - |   |
| Proceeds from employee stock purchase plan                                                            |               |  118  |         |   |  - |   |
| Cash paid in lieu of fractional shares                                                                |               |  (711 | )       |   |  - |   |
| Repurchase of employee shares for tax withholding                                                     |               |  (15  | )       |   | (11     | )      |
| Distributions to noncontrolling interest                                                              |               |  (53  | )       |   |  - |   |
| Net cash (used in) provided by financing activities                                                   |               | (1,409     | )       |   | 107     |   |
|                                                                                                  |               |       |         |   |    |   |
| Increase in cash and cash equivalents                                                                 |               | 10,796     |         |   | 18,781  |   |
| Cash and cash equivalents at beginning of period                                                      |               | 51,395     |         |   | 6,855   |   |
|                                                                                                  |               |       |         |   |    |   |
| Cash and cash equivalents at end of period                                                            | $                  | 62,191     |         | $      | 25,636  |   |
|                                                                                                  |               |       |         |   |    |   |
| See accompanying notes.                                                                               |               |       |         |   |    |   |

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Notes to CondensedConsolidated Financial Statements

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|                                                     |   | Twelve Weeks Ended |   |
|----------------------------------------------------------|--------|--------------------|--------|
|                                                     |   | December 17, 2008  |   |
| General and administrative - previously reported         |   | $                  | 8,586  |   |
| Reclass of gain on disposal of assets                    |   |               | 59     |   |
| General and administrative                               |   | $                  | 8,645  |   |
|                                                     |   |               |   |   |
| Cost of sales - previously reported                      |   | $                  | 32,031 |   |
| Reclass to cost of sales from restaurant operating costs |   |               | 3,086  |   |
| Cost of sales                                            |   | $                  | 35,117 |   |
|                                                     |   |               |   |   |
| Restaurant operating costs – previously reported   |   | $                  | 74,682 |   |
| Reclass to cost of sales from restaurant operating costs |   |               | (3,086 | ) |
| Restaurant operating costs                               |   | $                  | 71,596 |   |

|                                                                                                                                                                                                                                                                                                                | Twelve Weeks Ended |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|
|                                                                                                                                                                                                                                                                                                                | December 23,       |   | December 17, |
|                                                                                                                                                                                                                                                                                                                | 2009               |   | 2008 |
| Basic earnings (loss) per share:                                                                                                                                                                                                                                                                                    |               |   |   |
| Weighted average common shares                                                                                                                                                                                                                                                                                      | 1,426,684          |   | 1,415,089 |
|                                                                                                                                                                                                                                                                                                                |               |   |   |
| Diluted earnings (loss) per share:                                                                                                                                                                                                                                                                                  |               |   |   |
| Weighted average common shares                                                                                                                                                                                                                                                                                      | 1,426,684          |   | 1,415,089 |
| Dilutive effect of stock awards                                                                                                                                                                                                                                                                                     |  7,311        |   |  - |
| Weighted average common and incremental shares                                                                                                                                                                                                                                                                      | 1,433,995          |   | 1,415,089 |
|                                                                                                                                                                                                                                                                                                                |               |   |   |
| Number of share-based awards excluded from the calculation of diluted loss per share because the awards' exercise prices were greater than the average market price ofthe Company's common stock, or because they were antidilutive due to the Company's net loss for the twelve weeks ended December 17, 2008 | 17,827             |   | 78,974 |

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|                    |   | December 23, |   |   |   | September 30, |
|-------------------------|--------|--------------|--------|--------|--------|---------------|
|                    |   | 2009         |   |   |   | 2009          |
| Cost                    | $      |  8,253  |   |   | $      |  2,818   |
| Gross unrealized gains  |   |  968    |   |   |   |  183     |
| Gross unrealized losses |   |  (39    | )      |   |   |  -       |
| Fair value              | $      |  9,182  |   |   | $      |  3,001   |

|                           |   | December 23, 2009 |   |
|--------------------------------|--------|-------------------|--------|
| Gross realized gains on sales  |   | $                 | 312    |   |
| Gross realized losses on sales |   |              | -      |   |

|                                           | December 23, |     | September 30, |   |
|------------------------------------------------|--------------|----------|---------------|--------|
|                                           | 2009         |     | 2009          |   |
| Land                                           | $            | 152,653  |          | $      | 152,413 |   |
| Buildings                                      |         | 148,274  |          |   | 148,335 |   |
| Land and leasehold improvements                |         | 153,980  |          |   | 153,990 |   |
| Equipment                                      |         | 201,228  |          |   | 200,291 |   |
| Construction in progress                       |         | 886      |          |   | 1,813 |   |
|                                           |         | 657,021  |          |   | 656,842 |   |
| Less accumulated depreciation and amortization |         | (262,984 | )        |   | (257,207 | ) |
| Property and equipment, net                    | $            | 394,037  |          | $      | 399,635 |   |

|                            | December 23, |         |   | September 30, |   |
|---------------------------------|--------------|--------------|--------|---------------|--------|
|                            | 2009         |         |   | 2009          |   |
| Land and buildings              | $            |  11,240 |   |          | $      | 11,849 |   |
| Land and leasehold improvements |         |  1,757  |   |          |   | 1,881 |   |
| Equipment                       |         | -            |   |          |   | 3 |   |
| Total assets held for sale      | $            | 12,997       |   |          | $      | 13,733 |   |

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|                                                     | December 23, |   |    | September 30, |   |
|----------------------------------------------------------|--------------|--------|---------|---------------|--------|
|                                                     | 2009         |   |    | 2009          |   |
| Gross value of intangible assets subject to amortization | $            | 2,291  |    |          | $      | 2,291 |   |
| Accumulated amortization                                 |         | (1,268 | )  |          |   | (1,224 | ) |
| Intangible assets subject to amortization, net           |         | 1,023  |    |          |   | 1,067 |   |
| Intangible assets with indefinite lives                  |         | 500    |    |          |   | 500 |   |
| Total intangible assets                                  | $            | 1,523  |    |          | $      | 1,567 |   |

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| ·   | Level 1:  Unadjusted quoted prices in active markets for identical assets and liabilities. |
|--------------------|------------------------------------------------------------------------------------------------------|

| ·   | Level 2:  Observable inputs other than those included in Level 1.  For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 3:  Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------|

| Assets                                               | Level 1 |        | Level 2 |   | Level 3 |   | Total  |
|------------------------------------------------------|---------|-------------|---------|--------|---------|--------|--------|
| Cash equivalents                                     | $       |  -     |    | $      | 42,857  |   | $      |  - |   | $ | 42,857 |
| Investments                                          |    |  9,182 |    |   |  - |   |   |  - |   |   | 9,182 |
| Non-qualified deferred compensation plan investments |    | 379         |    |   |  - |   |   |  - |   |   | 379 |
| Total assets at fair value                           | $       | 9,561       |    | $      | 42,857  |   | $      |  - |   | $ | 52,418 |

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|                                                                       |                                           |   |   |   |               |   |    |     |   |          |    |     |        |   |   |   |    |   |            |   |    |   |   |   |   |
|----------------------------------------------------------------------------|------------------------------------------------|--------|--------|--------|--------------------|--------|---------|----------|--------|---------------|---------|----------|-------------|--------|--------|--------|---------|--------|-----------------|--------|---------|--------|--------|--------|--------|
|                                                                       | The Steak n Shake Company shareholders' equity |   |   |   |               |
|                                                                       |                                           |   |   |   |               |   |    |     |   |          |    |     | Accumulated |   |   |   |    |   |            |   |    |   |   |   |
|                                                                       |                                           |   |   |   |               |   |    |     |   |          |    |     | Other       |   |   |   |    |   |            |   |    |   |   |   |
|                                                                       |                                           | Common |   |   | Additional Paid-In |   |    | Retained |   | Comprehensive |    | Treasury |        |   |   |   |    |   | Non-controlling |   |
|                                                                       |                                           | Stock  |   |   | Capital            |   |    | Earnings |   | Income        |    | Stock    |        |   |   | Total  |    |   | Interest        |   |
| Balance at September 30, 2009*                                             |                                           | $      | 757    |   |               | $      | 143,691 |     |   | $             | 167,731 |     | $           | 112    |   | $      | (20,430 | )      |            | $      | 291,861 |   | $      | 186    |   |
| Net earnings                                                               |                                           |   |   |   |               |   |    |     |   |          | 5,477   |     |        |   |   |   |    |   |            |   | 5,477   |   |   | 17     |   |
| Change in unrealized gains and losses on investments, net of taxes of $291 |                                           |   |   |   |               |   |    |     |   |          |    |     |        | 455    |   |   |    |   |            |   | 455     |   |   | -      |   |
| Total comprehensive income                                                 |                                           |   |   |   |               |   |    |     |   |          |    |     |        |   |   |   |    |   |            |   | 5,932   |   |   | 17     |   |
| Shares related to exercise of stock options and other transactions         |                                           |   |   |   |               |   | 319     |     |   |          |    |     |        |   |   |   | (49     | )      |            |   | 270     |   |   |   |   |
| Cash paid in lieu of fractional shares                                     |                                           |   |   |   |               |   | (711    | )        |   |          |    |     |        |   |   |   |    |   |            |   | (711    | )      |   |   |   |
| Changes in noncontrolling interest                                         |                                           |   |   |   |               |   |    |     |   |          |    |     |        |   |   |   |    |   |            |   |    |   |   | (25    | )      |
| Balance at December 23, 2009                                               |                                           | $      | 757    |   |               | $      | 143,299 |     |   | $             | 173,208 |     | $           | 567    |   | $      | (20,479 | )      |            | $      | 297,352 |   | $      | 178    |   |
|                                                                       |                                           |   |   |   |               |   |    |     |   |          |    |     |        |   |   |   |    |   |            |   |    |   |   |   |   |
| Balance at September 24, 2008*                                             |                                           | $      | 757    |   |               | $      | 142,935 |     |   | $             | 161,733 |     | $           | -      |   | $      | (21,846 | )      |            | $      | 283,579 |   | $      | -      |   |
| Net loss                                                                   |                                           |   |   |   |               |   |    |     |   |          | (3,440  | )        |        |   |   |   |    |   |            |   | (3,440  | )      |   |   |   |
| Shares related to exercise of stock options and other transactions         |                                           |   |   |   |               |   | 26      |     |   |          |    |     |        |   |   |   | 1,030   |   |            |   | 1,056   |   |   |   |   |
| Balance at December 17, 2008*                                              |                                           | $      | 757    |   |               | $      | 142,961 |     |   | $             | 158,293 |     | $           | -      |   | $      | (20,816 | )      |            | $      | 281,195 |   | $      | -      |   |
|                                                                       |                                           |   |   |   |               |   |    |     |   |          |    |     |        |   |   |   |    |   |            |   |    |   |   |   |   |
|                                                                       |                                           |   |   |   |               |   |    |     |   |          |    |     |        |   |   |   |    |   |            |   |    |   |   |   |   |
| * Adjusted for 1-for-20 reverse stock split.                               |                                           |   |   |   |               |   |    |     |   |          |    |     |        |   |   |   |    |   |            |   |    |   |

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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|                                                                                         | Twelve Weeks Ended |   |   |
|----------------------------------------------------------------------------------------------|--------------------|--------|--------|
|                                                                                         | December 23,       |   |   | December 17, |   |   |
|                                                                                         | 2009               |   |   | 2008 |   |   |
| Revenues                                                                                     |               |   |   |   |   |   |
| Net sales                                                                                    | 99.4               | %      |   | 99.3 | % |   |
| Franchise fees                                                                               | 0.6                |   |   | 0.7 |   |   |
| Total revenues                                                                               | 100.0              |   |   | 100.0 |   |   |
|                                                                                         |               |   |   |   |   |   |
| Costs and expenses                                                                           |               |   |   |   |   |   |
| Cost of sales (1)                                                                            | 26.1               |   |   | 26.9 |   |   |
| Restaurant operating costs (1)                                                               | 49.6               |   |   | 54.8 |   |   |
| General and administrative                                                                   | 5.9                |   |   | 6.6 |   |   |
| Depreciation and amortization                                                                | 4.7                |   |   | 5.7 |   |   |
| Marketing                                                                                    | 5.2                |   |   | 5.7 |   |   |
| Interest                                                                                     | 1.7                |   |   | 2.7 |   |   |
| Rent                                                                                         | 2.5                |   |   | 2.7 |   |   |
| Asset impairments and provision for restaurant closing                                       | 0.1                |   |   | 0.1 |   |   |
| Gain on disposal of assets                                                                   | (0.0               | )      |   | (0.0 | ) |   |
| Other (income) expense, net                                                                  | (0.6               | )      |   | 0.0 |   |   |
|                                                                                         |               |   |   |   |   |   |
| Realized investment gains/losses                                                             | 0.2                |   |   | - |   |   |
|                                                                                         |               |   |   |   |   |   |
| Earnings (loss) before income taxes                                                          | 5.5                |   |   | (4.5 | ) |   |
|                                                                                         |               |   |   |   |   |   |
| Income taxes                                                                                 | 1.8                |   |   | (1.9 | ) |   |
|                                                                                         |               |   |   |   |   |   |
| Net earnings (loss)                                                                          | 3.7                |   |   | (2.6 | ) |   |
|                                                                                         |               |   |   |   |   |   |
| Less: Earnings attributable to noncontrolling interest                                       | 0.0                | %      |   | 0.0 | % |   |
|                                                                                         |               |   |   |   |   |   |
| Net earnings (loss) attributable to the Steak n Shake Company                                | 3.7                | %      |   | (2.6 | )% |   |
|                                                                                         |               |   |   |   |   |   |
| (1) Cost of sales and restaurant operating costs are expressed as a percentage of net sales. |               |   |

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| ·   | the success of Steak n Shake’s plan to increase store traffic on a profitable basis; |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | competition in the restaurant industry for customers, staff, locations, and new products; |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | disruptions in the overall economy and the financial markets; |
|--------------------|---------------------------------------------------------------|

| ·   | Steak n Shake’s ability to comply with the restrictions and covenants to its debt agreements; |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | declines in the market price of our common stock, which could adversely affect our goodwill impairment analysis; |
|--------------------|------------------------------------------------------------------------------------------------------------------|

| ·   | the potential to recognize additional impairment charges on our long-lived assets; |
|--------------------|------------------------------------------------------------------------------------|

| ·   | fluctuations in food commodity and energy prices and the availability of food commodities; |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | the ability of Steak n Shake’s franchisees to operate profitable restaurants; |
|--------------------|-------------------------------------------------------------------------------------|

| ·   | the poor performance or closing of even a small number of restaurants; |
|--------------------|------------------------------------------------------------------------|

| ·   | changes in customer preferences, tastes, and dietary habits; |
|--------------------|--------------------------------------------------------------|

| ·   | changes in minimum wage rates and the availability and cost of qualified personnel; |
|--------------------|-------------------------------------------------------------------------------------|

| ·   | harsh weather conditions or losses due to casualties; |
|--------------------|-------------------------------------------------------|

| ·   | unfavorable publicity relating to food safety or food-borne illness; |
|--------------------|----------------------------------------------------------------------|

| ·   | exposure to liabilities related to the ownership and leasing of significant amounts of real estate; |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | our ability to comply with existing and future governmental regulations; |
|--------------------|--------------------------------------------------------------------------|

| ·   | our ability to adequately protect our trademarks, service marks, and other components of our brand; and |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | other risks identified in the periodic reports we file with the Securities and Exchange Commission. |
|--------------------|-----------------------------------------------------------------------------------------------------|

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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ITEM 4. CONTROLS AND PROCEDURES

ITEM 6. EXHIBITS

| Exhibit Number |   | Description                                                         |
|----------------|--------|---------------------------------------------------------------------|
|           |   |                                                                |
| 10.01          |   |  Severance agreement with Duane Geiger                         |
|           |   |                                                                |
| 31.01          |   | Rule 13(a)-14(a)/15d-14(a) Certification of Chief Executive Officer |
|           |   |                                                                |
| 31.02          |   | Rule 13(a)-14(a)/15d-14(a) Certification of Chief Financial Officer |
|           |   |                                                                |
| 32.01          |   | Section 1350 Certifications                                         |

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SIGNATURES

|   | THE STEAK N SHAKE COMPANY |                                                           |
|--------|---------------------------|----------------------------------------------------------------|
|   |                      |                                                           |   |
|   | By:                       | /s/ Duane E. Geiger                                       |   |
|   |                      | Duane E. Geiger                                                |   |
|   |                      | Interim Chief Financial Officer, Vice President and Controller |   |
|   |                      |                                                           |   |

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