21
                            SCHEDULE 14A INFORMATION
                  Proxy Statement Pursuant to Section 14(a) of
              the Securities Exchange Act of 1934 (Amendment No. )





Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to  240.14a-12


                            THE STEAK N SHAKE COMPANY

                (Name of Registrant as Specified In Its Charter)

        (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1)  Title of each class of securities to which transaction applies:

(2)  Aggregate number of securities to which transaction applies:

(3)  Per unit price or other underlying value of transaction computed pursuant
     to Exchange Act Rule 0-11 (set forth

(4)  Proposed maximum aggregate value of transaction:

(5)  Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
    Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
    paid previously. Identify the previous filing by registration statement
    number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:







                            THE STEAK N SHAKE COMPANY

                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                          TO BE HELD FEBRUARY 11, 2004

TO  THE  SHAREHOLDERS  OF  THE  STEAK  N  SHAKE  COMPANY

     NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of The Steak
n  Shake Company (the "Company") will be held at the Company's Corporate Office,
4th Floor, Century Building, 36 South Pennsylvania Street, Indianapolis, Indiana
46204,  on Wednesday, February 11, 2004 at 1:30 p.m., Eastern Standard Time, for
the  following  purposes:

1.   To elect nine directors to serve until the next Annual Meeting of
     Shareholders and until their respective successors shall be elected and
     qualified.

2.   To act upon the approval of the Company's Amended and Restated 1997 Capital
     Appreciation Plan, as adopted by the Board of Directors.

3.   To act upon the approval of the 2004 Director Stock Option Plan, as adopted
     by the Board of Directors.

4.   To ratify the selection by the Audit Committee of the Board of Directors of
     Deloitte & Touche, LLP as the Company's independent auditors for the fiscal
     year ending September 29, 2004.

5.   To transact such other business as may properly come before the meeting and
     any adjournment thereof.

     The Board of Directors has fixed the close of business on December 5, 2003,
as  the  record date for the determination of shareholders entitled to notice of
and  to  vote  at  the  Annual  Meeting.

     We  urge  you  to  sign,  date  and mail the enclosed proxy in the envelope
provided  whether or not you expect to be present in person.  You may revoke the
proxy  at  any  time prior to the time the proxy is exercised by filing with the
Secretary  of the Company a properly executed instrument revoking such proxy, or
by  filing  a  properly executed proxy bearing a later date, or by attending the
Annual  Meeting  and  withdrawing  your  proxy  and  voting  in  person.


                                   By  Order  of  the  Board  of  Directors



                                   Mary  E.  Ham,  Secretary
December  19,  2003
Indianapolis,  Indiana


              PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
                        PROMPTLY IN THE ENCLOSED ENVELOPE



                            THE STEAK N SHAKE COMPANY
                              500 CENTURY BUILDING
                          36 SOUTH PENNSYLVANIA STREET
                           INDIANAPOLIS, INDIANA 46204
                                 (317) 633-4100

                                 PROXY STATEMENT
                     For the Annual Meeting of Shareholders
                          To be held February 11, 2004

     This  proxy statement is furnished to the shareholders of The Steak n Shake
Company  in  connection  with  the  solicitation by the Company of proxies to be
voted at the Annual Meeting of Shareholders (the "Annual Meeting") to be held at
the  Company's  Corporate  Office,  4th  Floor,  Century  Building,  36  South
Pennsylvania  Street,  Indianapolis,  Indiana  46204, on Wednesday, February 11,
2004, at 1:30 p.m., Eastern Standard Time, and at any adjournment thereof.  This
proxy  statement  and  the  accompanying  form  of  proxy  were  first mailed to
shareholders  on  or  about  December  19,  2003.

     Each properly executed proxy returned prior to the meeting will be voted in
accordance  with  the  directions  contained therein.  The enclosed proxy may be
revoked by the person giving it at any time before it is voted by giving written
notice  to  the  Secretary  of  the  Company.

OUTSTANDING  COMMON  STOCK

     The record date for shareholders entitled to vote at the Annual Meeting was
December 5, 2003.  At the close of business on that date, the Company had issued
and outstanding 27,265,073 shares of Common Stock entitled to vote at the Annual
Meeting.  Unless  otherwise  stated, all references herein to numbers and prices
of  shares  of  Common  Stock,  options  and  capital appreciation shares of the
Company  have  been  adjusted  to  reflect  all stock dividends and stock splits
heretofore  distributed  by  the  Company.

ACTION  TO  BE  TAKEN  AT  THE  ANNUAL  MEETING

     Unless  the  shareholder otherwise specifies in the proxy, the accompanying
proxy  will  be  voted (i) FOR the election, as directors of the Company, of the
nine  persons  named  under  the  caption  "Election of Directors"; (ii) FOR the
approval  of the Amended and Restated 1997 Capital Appreciation Plan;  (iii) FOR
the approval of the 2004 Director Stock Option Plan and (iv) FOR the approval of
Deloitte & Touche, LLP as the Company's independent auditors for the fiscal year
ending  September  29,  2004.

QUORUM  AND  VOTING

     The  presence,  in  person or by proxy, of the holders of a majority of the
outstanding  shares  of  Common Stock is necessary to constitute a quorum at the
Annual Meeting.  In deciding all questions, a holder of Common Stock is entitled
to  one  vote,  in  person or by proxy, for each share registered in his/her/its
name on the record date.  Directors of the Company are elected by a plurality of
the  votes  cast  by  the  holders  of  the  shares  represented at the meeting.
Abstentions,  broker non-votes and instructions on the enclosed form of proxy to
withhold  authority  to  vote for one or more of the nominees will result in the
nominee  receiving  fewer  votes;  however,  the  number  of  shares present for
purposes  of  determining  a  quorum  will  not  be reduced by such action.  The
Amended  and Restated 1997 Capital Appreciation Plan and the 2004 Director Stock
Option Plan will be approved if they receive the affirmative vote of the holders
of a majority of the Company's Common Stock present or represented and voting at
the  Annual  Meeting.  Abstentions  and  broker  non-votes  with  respect to any
proposal  will  not  be  counted  as  votes  for  or  against  that  proposal.

SHAREHOLDER  PROPOSALS

     The bylaws of the Company require shareholders to provide advance notice in
order  to bring business before an annual meeting. In order for a shareholder to
properly  bring  business  before  the 2005 Annual Meeting, the shareholder must
give  written  notice  to  the  Company at the address on the front page of this
proxy  statement.  To  be timely, a shareholder's notice must be received by the
Company  on  or  before  August  21,  2004  or in the event that the date of the
meeting  is  changed more than 30 days from February 9, 2005 such notice must be
delivered or mailed to and received by the Company not later than 120 days prior
to  the  date  the Company begins to print and mail proxy materials for the 2005
Annual  Meeting.  These procedures apply to any matter that a shareholder wishes
to  raise  at the 2005 Annual Meeting, including those matters raised other than
pursuant  to  17  C.F.R.  240.14a-8  of the Rules and Regulations of the SEC.  A
shareholder  proposal  that  does  not  meet  the  above  requirements  will  be
considered  untimely,  and  any  proxy  solicited  by  the  Company  may  confer
discretionary  authority  to  vote  on  such  proposal.

OWNERSHIP  OF  COMMON  STOCK

     The  following  table shows the number and percentage of outstanding shares
of  Common  Stock  beneficially  owned  as of December 5, 2003 by each person or
entity  known  to be the beneficial owner of more than 5% of the Common Stock of
the  Company:

Name  &  Address  of           Amount and Nature of
Beneficial  Owner              Beneficial Ownership(1)        Percent  of  Class
--------------------------------------------------------------------------------
MSD  Capital,  Inc.                   2,053,100                       7.5%
645  Fifth  Avenue,
21st  Floor
New  York,  NY  10022-5910

(1)     This  table  is  based upon information supplied by MSD Capital, Inc. on
Schedule  13G  filed  with  the  Securities and Exchange Commission on April 11,
2003  and  information  supplied  thereafter  by  MSD  Capital,  Inc.

     The  following  table  shows  the  total  number  of shares of Common Stock
beneficially owned as of December 5, 2003, and the percentage of Common Stock so
owned  as  of  that date, with respect to (i) each director, (ii) each executive
officer  named  in  the  Summary Compensation Table, and (iii) all directors and
executive  officers,  as  a  group:

                                   Amount and Nature of
Name of Beneficial Owner         Beneficial Ownership(1)      Percent  of  Class
--------------------------------------------------------------------------------
S. Sue Aramian                          605,666 (2)                   2.2%
James W. Bear                           437,225 (3)                   1.4%
Peter M. Dunn                            62,000 (4)                     *
Alan B. Gilman                          459,010 (5)                   1.7%
Stephen Goldsmith                         9,180 (6)                     *
Wayne L. Kelley                         390,867 (7)                   1.5%
Charles E. Lanham                       410,480 (8)                   1.5%
Ruth J. Person                            2,000 (9)                     *
Gary T. Reinwald                        394,625 (10)                  1.5%
J. Fred Risk                            115,299 (11)                    *
John W. Ryan                             18,382 (12)                    *
Gary S. Walker                           41,600 (13)                    *
James Williamson, Jr.                   327,352 (14)                  1.2%
All  directors  and  executive  officers
as a group (19  persons)              3,137,140 (15)                 11.5%

*Less than 1%.

(1)  Includes shares which may be acquired pursuant to stock options exercisable
within  60  days  under  the  Company's  stock  option  plans.

(2)  Includes  5,000  shares  which  may  be  acquired pursuant to stock options
exercisable  within  60  days.  Also  includes  305,334 shares owned by Kelley &
Partners,  L.P.,  of  which  Ms.  Aramian  is  the  Managing  General  Partner.

(3)  Includes  59,518  shares  which  may  be acquired pursuant to stock options
exercisable  within  60  days.  Also  includes 97,259 shares owned of record and
beneficially  by  Mr. Bear's wife, with respect to which he disclaims beneficial
ownership,  and 90,000 shares owned by Mr. Bear's affiliate, Bear Family Limited
Partnership.

(4)  Includes  12,000  shares  which  may  be acquired pursuant to stock options
exercisable  with  in  60  days.

(5)  Includes  120,866  shares  which  may be acquired pursuant to stock options
exercisable  within  60  days.

(6)  Includes  8,300  shares  which  may  be  acquired pursuant to stock options
exercisable  within  60  days.

(7)  Includes  1,200  shares  which  may  be  acquired pursuant to stock options
exercisable  within  60  days.  Also  includes  305,334 shares owned by Kelley &
Partners,  L.P.  of  which  Mr.  Kelley  is  a  General  Partner.
(8)  Includes  8,300  shares  which  may  be  acquired pursuant to stock options
exercisable  within  60  days.  Also  includes 10,928 shares owned of record and
beneficially by Mr. Lanham's wife, with respect to which he disclaims beneficial
ownership, and 26,750 shares owned by Mr. Lanham's affiliate, Hartford Heritage,
LLC.

(9)  Includes  2,000  shares  which  may  be  acquired pursuant to stock options
exercisable  within  60  days.

(10)  Includes  76,511  shares  which  may be acquired pursuant to stock options
exercisable  within  60  days.

(11)  Includes  8,300  shares  which  may  be acquired pursuant to stock options
exercisable  within  60  days.  Also  includes  7,726 shares owned of record and
beneficially  by  Mr. Risk's wife, with respect to which he disclaims beneficial
ownership.

(12)  Includes  8,300  shares  which  may  be acquired pursuant to stock options
exercisable  within  60  days.

(13)  Includes  17,600  shares  which  may be acquired pursuant to stock options
exercisable  within  60  days and 300 shares owned of record and beneficially by
Mr.  Walker's  minor  children,  with  respect  to which he disclaims beneficial
ownership.

(14)  Includes  8,300  shares  which  may  be acquired pursuant to stock options
exercisable  within  60  days.  Also  includes 19,011 shares owned of record and
beneficially  by  Mr.  Williamson's  wife,  with  respect  to which he disclaims
beneficial  ownership.

(15)  Includes  417,112  shares  which may be acquired pursuant to stock options
exercisable  within  60  days  held  by  all  directors and officers as a group.



SECTION  16(A)  BENEFICIAL  OWNERSHIP  REPORTING  COMPLIANCE

     Section  16(a)  of  the  Securities Exchange Act of 1934 sets forth certain
filing  requirements  relating  to  securities ownership by directors, executive
officers  and  ten  percent  shareholders  of  a  publicly held company.  To the
Company's knowledge, based on the representations of its directors and executive
officers  and  copies  of their respective reports filed with the Securities and
Exchange  Commission, all filing requirements were satisfied by each such person
during  the  fiscal year ended September 24, 2003, with the exception of filings
by  Kevin  Dooley,  Vice  President  of  Construction,  and  William  Hart, Vice
President  of  Purchasing.  Forms 4 recording the transfer of shares to a family
limited  partnership  and  a  trust,  respectively,  were  not filed in a timely
manner,  although  the  Company  has  since  filed  forms  setting  forth  these
transfers.  Additionally,  Mr.  Gilman  and  Mr.  Reinwald  exercised and timely
reported  options during the year.  However, due to an administrative oversight,
the  Company  failed  to  include  on  the reports the automatic grant of reload
options they received pursuant to the Company's 1997 Employee Stock Option Plan.
The  Company  has  filed  amended  reports  reflecting the grant of these reload
options  to  them.

INTERESTS  OF  CERTAIN  PERSONS  IN  MATTERS  TO  BE  ACTED  UPON

     All persons standing for election as director were unanimously nominated by
the  Board  of  Directors.  No  person  being  nominated  as a director is being
proposed  for  election  pursuant  to any agreement or understanding between any
such  person  and  the  Company.

MISCELLANEOUS

a)  CREATION  AND  DISTRIBUTION  OF  PROXIES
--------------------------------------------

The  entire  cost of soliciting proxies will be paid by the Company. In addition
to  the solicitation of proxies by use of the mails, certain officers, directors
and  employees  of  the  Company,  none  of whom receive additional compensation
therefor,  may  solicit proxies by telephone, facsimile or personal interview at
the  expense  of  the  Company.  The Company will also request brokers, dealers,
banks  and  voting trustees, and their nominees, to forward this proxy statement
and  the accompanying form of proxy to beneficial owners and will reimburse such
record holders for their reasonable expense in forwarding solicitation material.

b)  CODE  OF  BUSINESS  CONDUCT  AND  ETHICS
---------------------------------------------

The  Company  has  in  place  a long-standing code of ethics that applies to its
principal  executive  officer,  principal  financial  officer  and  principal
accounting  officer. A copy of the code of ethics can be obtained without charge
by written request to the Company at the address on the front page of this proxy
statement.  As  a result of the passage of revised listing standards for the New
York  Stock  Exchange  that  will  become effective as of the date of the Annual
Meeting,  the  Board  of Directors is reviewing and considering revisions to the
code  of  ethics.  Once  this  process  is completed, the code of ethics will be
posted on the Company's website at www.steaknshake.com. If the Company makes any
substantive  amendment  of,  or  grants  any  waiver to, the code of ethics, the
Company  will  disclose  the  nature  of such amendment or waiver either via its
website  or  a  current  report  on  Form  8-K.

                          1.     ELECTION OF DIRECTORS

     Nine  directors  will be elected to serve until the next Annual Meeting and
until  their  respective  successors shall have been duly elected and qualified.
Eight  of  the  nominees  are  currently  directors  of the Company.  Seven were
elected at the Annual Meeting of Shareholders held February 12, 2003.  Mr. Wayne
L.  Kelley  was elected as a director by the Board of Directors effective August
18,  2003.  The  ninth  nominee,  Mr. Peter Dunn, has not served on the Board of
Directors in the past.  The Board of Directors has affirmatively determined that
a  majority  of  the  director  nominees  are  independent  and have no material
relationship  with  the Company (either directly or as a partner, shareholder or
officer  of  an  organization  that  has  a  relationship  with  the  Company).

     If  any of the nominees named below is not available to serve as a director
at  the  time  of the Annual Meeting (an event which the Board of Directors does
not  now anticipate), the proxies will be voted for the election as directors of
such other person or persons as the Board of Directors may designate, unless the
Board of Directors, in its discretion, amends the Company's Bylaws to reduce the
number  of  directors.

     The  nominees  for  the Board of Directors of the Company are listed below,
along  with the age, tenure as director and business background for at least the
last  five  years  for  each:

                                 Served  As
Name                    Age   Director Since     Business  Experience
--------------------------------------------------------------------------------

Peter M. Dunn            48         N/A       President and Chief Operating
                                              Officer of the Company since 2002;
                                              formerly President, Borden Foods
                                              Co., 1997-2001.

Alan B. Gilman           73        1992       President and Chief Executive
                                              Officer of the Company from 1992
                                              to September 30, 2002; Chief
                                              Executive Officer and Co-Chairman
                                              of the Company from September 30,
                                              2002 through August 11, 2003;
                                              Chief Executive Officer and
                                              Chairman of the Company since
                                              August 11, 2003.

Stephen Goldsmith        57        1999       Chairman of the Corporation for
                                              National and Community Service;
                                              Senior Vice President, Strategic
                                              Initiatives and e-Government, for
                                              ACS, a national business process
                                              outsourcer; Faculty Director,
                                              Innovations in American Government
                                              Harvard  University; Chairman of
                                              the Manhattan Institute's Center
                                              for Civic Innovation; member of
                                              the Board of Directors of the
                                              Finish Line, Inc.; Mayor of
                                              Indianapolis, Indiana from 1992
                                              through  1999.

Wayne L. Kelley          59        2003       Director of Steak n Shake
                                              Operations, Inc., a subsidiary of
                                              the Company, since 1999; President
                                              of Kelley Restaurants, Inc. since
                                              1991.

Charles E. Lanham        71        1971       Chairman of the Board of Directors
                                              Of Overhead Door Company of
                                              Indianapolis, Inc.; Vice Chairman
                                              of Klipsch Lanham Investments, a
                                              private investment company;
                                              Trustee of Windrose Medical
                                              Properties Trust, a publicly
                                              traded real estate investment
                                              trust.

Ruth J. Person           58        2002       Chancellor, Indiana University
                                              Kokomo and Professor of Management
                                              President, American Association of
                                              University Administrators 2003 to
                                              2004.

J. Fred Risk             75        1971       Chairman of the Board of Directors
                                              of Security Group, Inc.

John W. Ryan             74        1996       Private investor; Chancellor of
                                              the State University of New York
                                              Systems from 1996 through 1999;
                                              President of Indiana University
                                              from 1971 through 1987.

James Williamson, Jr.    72        1985       Private investor; former President
                                              And Chief Executive Officer of the
                                              Company from 1985 to 1990.

There  is  no  family  relationship  among  any  of  the  nominees for director.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE NOMINEES
NAMED  IN  THIS  PROXY  STATEMENT.


COMMITTEES  AND  MEETINGS  OF  THE  BOARD  OF  DIRECTORS

     The  Board  of  Directors held four meetings during fiscal year 2003.   The
Board  has,  or  during  fiscal  year  2003  had,  eight standing committees: an
Executive Committee, a Personnel/Benefits Committee, an Audit Committee, a Stock
Option  Committee,  an  Employee  Stock  Purchase Plan Committee, a Compensation
Committee,  an  Investment  Committee,  and  a  Nominating/Corporate  Governance
Committee.

     The  Executive  Committee  may  exercise  all of the powers of the Board of
Directors  in  the  management  of  the  affairs  of  the  Company to the extent
permitted  by  law.  During  the  fiscal  year  ended  September  24,  2003, the
Executive  Committee  did  not  meet.  Mr. Williamson serves as Chairman and Mr.
Risk  and  Dr.  Ryan  serve  as  members  of  the  Executive  Committee.

     The  Audit  Committee,  among  other  duties,  serves  in an oversight role
intended  to  ensure  the  integrity  and objectivity of the Company's financial
reporting  process.  The  Committee meets with representatives of management and
the  independent  auditors  to  review  matters  of a material nature related to
auditing,  financial  reporting, internal accounting controls and audit results.
The  Audit Committee is also responsible for making determinations regarding the
independence  and  selection of the Company's independent auditors.  See "Report
of  the  Audit  Committee,"  below.  During  the fiscal year ended September 24,
2003,  the  Audit  Committee  met six times.  Mr. Risk serves as Chairman of the
Committee and Messrs. Goldsmith, Lanham and Ryan serve as members.  The Chairman
and each member of the Audit Committee are "independent" as that term is defined
in  Section  301 of the Sarbanes-Oxley Act of 2002 and the listing standards for
the New York Stock Exchange.  In addition, the Board of Directors has determined
that  J.  Fred  Risk  qualifies as an "audit committee financial expert" as that
term  is  defined  in  Item  401(h)(2)  of  Regulation  S-K.

     The  Compensation  Committee  is  a  newly-created  committee  charged with
establishing  the compensation for the Company's Chief Executive Officer and the
other  executive  officers  as  well  as  guidelines  for  the administration of
incentive and equity-based compensation plans.  Effective November, 2003 it also
began  to  oversee  the  administration  of the Company's stock option plans and
Employee Stock Purchase Plan.  See "Report of the Compensation Committee" below.
The  Compensation  Committee met once during fiscal 2003.  Mr. Williamson serves
as  chairman  of  the  Compensation Committee and Mr. Lanham, Dr. Person and Dr.
Ryan  serve  on the committee.  The Compensation Committee was formed in August,
2003.  Prior  to  its  formation,  the  compensation  of the Company's executive
officers  was  determined  by  the  Executive  Committee.

     The  Investment Committee did not meet in fiscal 2003.  During the November
12,  2003  Board  of  Directors  meeting,  its duties, which consisted of making
investment  decisions regarding the Company's 401k and Profit Sharing Plan, were
assigned  to  the  Executive  Committee.

     The Nominating/Corporate Governance Committee was formed in August, 2003 to
make  recommendations  regarding  the  nomination of appropriate individuals for
election  to  the  Board  of  Directors,  to  oversee  the  Company's  Corporate
Governance  Guidelines, to allocate Board resources to various committees and to
evaluate  the  performance of the Board and its individual members.  Dr. Ryan is
the  Chairman  of  the Committee and Messrs. Goldsmith, Lanham and Risk serve on
the  Committee.

     The  Stock  Option  Committee  directs  the administration of the Company's
employee  stock  option  plans  in  accordance with the terms of the plans.  The
Stock Option Committee did not meet during fiscal year 2003.  Dr. Ryan serves as
Chairman  of  the Committee and Messrs. Lanham and Williamson are members of the
Committee.  At  the  November 12, 2003 Board of Directors meeting, the duties of
the  Stock  Option  Committee  were  transferred  to the Company's newly-created
Compensation  Committee.

     The  Personnel/Benefits  Committee makes determinations and recommendations
to  the  Board  of  Directors  regarding personnel policies and employee benefit
plans,  administers the Company's 401k and Profit Sharing Plan and performs such
other  functions  with  respect  to  personnel  and  benefit  matters  as may be
requested  by  the Board.  The Personnel/Benefits Committee met two times during
fiscal  2003.  Mr.  Lanham  is Chairman of the Committee and Ms. Aramian and Dr.
Person  are  members,  together  with  Mr. Bear, Senior Vice President and Chief
Financial  Officer,  Mr.  Reinwald,  Senior  Vice President, Ms. Roxanne Crosby,
Senior  Vice  President  of  Human Resources and Ms. B. Charlene Boog, Associate
Vice  President, Administration.  Mr. Gilman and Mr. Dunn are ex officio members
of  the  Committee.

     The  Employee  Stock  Purchase Plan Committee directs the administration of
the  Company's  Employee Stock Purchase Plan in accordance with the terms of the
Plan.  Mr.  Risk  serves  as  Chairman  of  the Committee and Mr. Lanham and Dr.
Person are members of the Committee.  The Employee Stock Purchase Plan Committee
did  not meet but acted once by written consent in fiscal 2003.  At the November
12,  2003  Board of Directors meeting, the duties of the Employee Stock Purchase
Plan  Committee  were  transferred  to  the Company's newly-created Compensation
Committee.

     No  director  attended  less  than  75% in the aggregate of:  (i) the total
meetings  of  the Board of Directors, and (ii) the total number of meetings held
by  all  Board  committees  on  which  he  or  she  served.

     Pursuant  to  the  listing requirements of the New York Stock Exchange, the
non-management  directors  of  the  Company  will meet in at least one executive
session  without  management  during  the 2004 fiscal year.  Mr. Williamson, the
Lead  Outside  Director, will preside over these executive sessions.  Interested
parties  may  communicate  directly  with  the  presiding  director  or with the
non-management directors as a group via letter directed to Mr. Williamson at the
address  shown  on  the  first  page  of  this  Proxy.

     As  a  result  of the passage of the Sarbanes-Oxley Act of 2002 and revised
listing  standards for the New York Stock Exchange that will become effective as
of  the  date  of  the  Annual  Meeting, the Board of Directors is reviewing and
considering  revisions  to  the  charters of its standing committees and code of
business  ethics.  Once this process is completed, such documents will be posted
on  the Company's website and will also be available without charge upon written
request.

COMPENSATION  OF  DIRECTORS

     Directors  receive an annual fee of $18,000.  They receive $2,500 per board
meeting  attended  and  $1,000 per telephonic board meeting attended.  They also
receive  $1,000  for  each  committee  meeting  attended  that  is  not  held in
conjunction  with  a  Board  of  Directors'  meeting and $500 for each committee
meeting attended that is held in conjunction with a Board of Directors' meeting.
Mr.  Risk  is  paid  an  additional  annual  fee  of $20,000 for his services as
Chairman  of  the  Audit Committee.  Mr. Williamson is paid an additional annual
fee of $25,000 for his services as Chairman of the Executive Committee, Chairman
of  the  Compensation  Committee and Lead Outside Director.  Dr. Ryan is paid an
additional  annual  fee  of  $15,000  for  his  services  as  Chairman  of  the
Nominating/Corporate  Governance Committee.  Dr. Ryan also received a payment of
$2,400  during  fiscal 2003 for his assistance in the search for a new president
of  the  Company.  Directors  who  are  officers of the Company are not paid for
their  services  as directors.  In the fiscal year ended September 24, 2003, the
total  compensation  paid  to  non-employee directors was $274,250.  This figure
includes  $37,471  paid  to  non-employee  directors  who  served  on  boards of
subsidiaries  of  the Company.  In addition, the ordinary and necessary expenses
of  members  of the Board of Directors incurred in attending board and committee
meetings  are  paid  by  the  Company.

     The  Company  believes in compensating its non-employee directors partly on
the  basis  of  the  Company's success in increasing the value of its stock so a
portion  of a director's compensation comes from stock options.  The Company has
had  director  stock  option  plans  (the "Director Plans") in place since 1990,
which  provide for non-discretionary grants of nonqualified stock options to the
directors of the Company at a price equal to the fair market value of the Common
Stock  on  the  date of grant.  Options currently outstanding under the Director
Plans are exercisable as to 20% on the date of grant and 20% on each anniversary
of  the  date of grant until fully exercisable.  The current options expire five
years  from  the  date  of  grant.

     Options  for  the non-employee directors to purchase an aggregate of 43,000
shares  of  Common Stock were conditionally granted by the Board of Directors on
November 12, 2003, subject to shareholder approval at the 2004 Annual Meeting of
Shareholders.  The  conditional  grants were made to Ms. Aramian, Dr. Person and
Messrs.  Kelley,  Goldsmith,  Lanham, Risk, Ryan and Williamson for 5,000 shares
each,  and to Mr. Frank G. Regas, a director of a subsidiary of the Company, for
3,000 shares, at an option price of $17.98 per share.  See "Approval of the 2004
Director  Stock  Option  Plan,"  below.

CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

     The  Company  granted  franchise rights in 1991 to Kelley Restaurants, Inc.
("KRI"),  for  development  of Steak n Shake restaurants in the Atlanta, Georgia
and  Charlotte,  North  Carolina  markets.  KRI  currently  operates  twelve
restaurants  in  Atlanta,  Georgia  and three in Charlotte, North Carolina.  The
Company recorded $1,392,000 in revenues from KRI during fiscal 2003.  Mr. Kelley
serves  as  an  officer and director, and Mr. Williamson and Mr. Gilman serve as
directors of KRI. The Board of Directors believes that the transactions with KRI
described  above  were on terms no less favorable to the Company than would have
been  available  in  the  absence  of  the  relationships  described.

     Ms.  Aramian  retired  as an employee of the Company on March 1, 2003.  The
Board  of  Directors  has  approved  a retirement benefit for Ms. Aramian, which
consists  of  an  annual  payment  of  $93,000,  payable in monthly installments
commencing upon her retirement, for the remainder of her life.  In addition, the
Company  will continue to provide medical insurance coverage for Ms. Aramian for
the  remainder  of  her  life.

COMPENSATION  OF  EXECUTIVE  OFFICERS

     The  following  table  shows  the  compensation paid to the Company's Chief
Executive  Officer and its other four most highly compensated executive officers
(the  "Named  Executive  Officers")  for  the  last  three  fiscal  years:

                           SUMMARY COMPENSATION TABLE
                           --------------------------



                                                                                       
                                   Annual Compensation      Long-Term Compensation
                                                            Restricted                          All Other
                       Fiscal     Salary ($)   Bonus ($)   Stock Awards   Stock Options        Compensation
                        Year                                   ($) (1)        (#) (2)              ($) (3)
-----------------------------------------------------------------------------------------------------------
Alan B. Gilman (4)      2003      $497,692     $349,344        None          10,000               $14,906
Chairman and  Chief     2002      $425,000     $137,500        None          66,681               $16,777
Executive Officer       2001      $425,000     $108,500      $ 98,500        20,995               $18,522
-----------------------------------------------------------------------------------------------------------

Peter M. Dunn (5)       2003      $340,577     $244,541      $214,000        20,000               $ 1,442
President and Chief     2002             0       None          None           None                $     0
Operating Officer       2001             0       None          None           None                $     0
-----------------------------------------------------------------------------------------------------------
James W. Bear           2003      $222,500     $ 67,751        None           None                $12,282
Senior Vice President   2002      $216,670     $ 59,990        None          23,275               $12,111
and Chief Financial     2001      $215,000     $ 38,880      $ 55,160        13,122               $11,703
Officer
-----------------------------------------------------------------------------------------------------------
Gary T. Reinwald        2003      $245,000     $92,226         None           3,239               $11,386
Senior Vice President   2002      $221,690     $64,070         None          40,341               $ 9,084
                        2001      $215,000     $38,880       $ 66,980        13,122               $ 9,606
-----------------------------------------------------------------------------------------------------------
Gary S. Walker          2003      $205,000     $78,244         None           None                $ 6,915
Senior Vice President   2002      $185,580     $55,270         None          22,000               $10,150
                        2001      $180,000     $38,295       $ 55,160         None                $10,141
-----------------------------------------------------------------------------------------------------------



(1)  The  amounts  shown  in  this  column  represent  the  market  value of the
restricted  stock awarded under the Company's Capital Appreciation Plan and were
calculated by multiplying the closing market price of the Company's Common Stock
on  the  date of award by the number of shares awarded.  The number and value of
the  aggregate unvested restricted stock holdings of each of the Named Executive
Officers  are  as follows: Mr. Gilman, 12,500 shares ($98,500); Mr. Dunn, 20,000
shares ($214,000);  Mr. Bear, 7,000 shares ($55,160); Mr. Reinwald, 8,500 shares
($66,980)  and  Mr.  Walker, 7,000 shares ($55,160).  The shares of Common Stock
are  issued  at  the  time  of  the  award;  however,  these  shares  may not be
transferred  for  a  period  of  three years thereafter and are forfeited to the
Company  if  the  grantee  is not employed by the Company (except for reasons of
retirement,  permanent  disability  or  death)  at  the end of the period.   The
amounts  do  not reflect the cash value of Book Units awarded in tandem with the
restricted  Common  Stock,  which  provide  for a cash payment at the end of the
three-year period equal to the sum of the net change in book value per share and
the  dividends  paid  per  share  during  the  period,  as  adjusted  for  stock
dividends/splits.  The  recipient of the award is entitled to any dividends paid
on  outstanding  Common  Stock  subsequent  to  the  date  of  the  award.

(2)  Options  granted under the Employee Stock Option Plans provide for a reload
option  (the  "Reload Option") in the event the optionee surrenders other shares
of the Company's Common Stock in payment for option shares, in whole or in part.
Any such Reload Option (i) will be for a number of shares equal to the number of
shares  so  surrendered; (ii) will have an expiration date which is 5 years from
the  Reload Option issuance date; (iii) will be fully exercisable on the date of
grant, and (iv) will have an exercise price equal to the average market price of
the  Company's Common Stock on the five (5) business days before the shares were
surrendered  to  exercise the option.  There is no Reload Option with respect to
the  exercise  of a Reload Option.  Mr. Gilman's 2001 stock option grant was the
grant  of  a  Reload Option for 20,995 shares on April 12, 2001.  His 2002 stock
option  grants include the grant of options for 25,000 shares on each of October
1, 2001 and June 21, 2002, and the grant of a Reload Option for 16,681 shares on
January  29,  2002.  His  2003 grant was the grant of a Reload Option for 10,000
shares  on  July 2, 2003.  Mr. Dunn's 2003 option grant was the grant of options
for  20,000  shares  on September 30, 2002.  Mr. Bear's  2001 stock option grant
was  the grant of a Reload Option for 13,122 shares on April 12, 2001.  His 2002
stock option grants include the grant of options for 11,000 shares on October 1,
2001  and  5,000  shares  on June 21, 2002, and the grant of a Reload Option for
7,275  shares  on March 4, 2002.  Mr. Reinwald's 2001 stock option grant was the
grant  of  a  Reload Option for 13,122 shares on April 12, 2001.  His 2002 stock
option  grants include the grant of options for 16,000 shares on each of October
1,  2001 and June 21, 2002, and the grant of a Reload Option for 8,341 shares on
January  29,  2002.  His  2003 option grant was the grant of a Reload Option for
3,239 shares on July 2, 2003.  Mr. Walker's 2002 option grants include the grant
of options for 11,000 shares on each of October 1, 2001 and June 21, 2002.  More
information regarding the fiscal 2003 stock option grants to the Named Executive
Officers  is set forth in the Option/SAR Grants in Last Fiscal Year table, which
follows.

(3)  Includes  (i)  amounts  payable pursuant to the Company's executive medical
reimbursement  plan  which  provides for payment of certain medical expenses, as
defined, up to $3,500 for each plan year ending October 31, (ii) amounts paid by
the  Company  for  or  on  behalf  of  each executive with respect to group life
insurance  premiums  for  coverage  in  excess  of $50,000, and (iii) amounts of
annual  profit sharing contributions by the Company to the accounts of the Named
Executive  Officers  under  the Company's Employee 401k and Profit Sharing Plan.

(4)     The  Company  has  agreed  that  if  Mr.  Gilman  leaves  the  Company's
employment  for  any  reason other than retirement or termination by the Company
for  cause,  he  will  be  paid  at  his  base  compensation rate on the date of
termination  for  a  period  of  nine  months  thereafter.

(5)     The  Company has agreed that if Mr. Dunn leaves the Company's employment
for  any reason other than termination for malfeasance or retirement, he will be
paid at his base compensation rate on the date of termination for a period of 12
months  thereafter.


The  following  table presents information for the Named Executive Officers
who received stock options during fiscal 2003 under the Company's Employee Stock
Option  Plans:


 
                                    OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
                                    --------------------------------------
                               Percentage of                                           Potential Realizable
                               Total Options                                         Value at Assumed Annual
                 Number of       Granted to                                            Rates of Stock Price
                  Options       Employees in     Exercise Price   Expiration      Appreciation for Option Term (1)
Name              Granted        Fiscal 2003     ($ per share)       Date              5% ($)         10% ($)
------------------------------------------------------------------------------------------------------------------
Alan B. Gilman
(Reload Option)   10,000            10.0%            $14.93        7/2/08              41,200          91,100
James W. Bear          0             N/A               N/A           N/A                 N/A             N/A
Peter M. Dunn     20,000            19.9%            $10.70       9/30/07              59,200         130,600
Gary T. Reinwald
(Reload  Option)   3,239             3.2%            $14.93        7/2/08              13,345          29,507
Gary S. Walker         0             N/A               N/A           N/A                 N/A             N/A



(1)  The dollar amounts under these columns are the result of calculations at
     the 5% and 10% rates as required by the Securities and Exchange Commission
     and should not be considered a reliable forecast of future appreciation, if
     any, of the Company's stock price. As an example, the Company's per share
     stock price would be $13.66 and $17.23 if increased by 5% and 10%,
     respectively, compounded annually over a five-year option term on a grant
     price of $10.70.

     The  following  table  presents certain information for the Named Executive
Officers  relating to exercises of stock options during fiscal year 2003 and, in
addition,  information  relating  to the valuation of unexercised stock options:


 
                         AGGREGATED OPTION EXERCISES IN
                         ------------------------------
                  FISCAL 2003 AND FISCAL YEAR END OPTION VALUES
                  ---------------------------------------------
                                                Number of Shares Underlying    Value of Shares Underlying
                   Number of        Dollar        Unexercised Options On        Unexercised Options On
                Shares Acquired     Value          September 24, 2003            September 24, 2003 (2)
Name               On Exercise    Realized(1)   Exercisable   Unexercisable    Exercisable   Unexercisable
----------------------------------------------------------------------------------------------------------
Alan B. Gilman      23,750         $85,700        120,866        25,000         $227,833        $57,500
Peter M. Dunn            0         $     0          8,000        12,000         $ 36,960        $55,440
James W. Bear            0         $     0         59,518         7,400         $133,996        $24,508
Gary T. Reinwald     4,000         $11,520         76,511        16,000         $208,660        $36,800
Gary S. Walker           0         $     0         17,600        11,000         $ 36,740        $25,300



(1)   Based on the New York Stock Exchange closing price of the Company's Common
Stock  on  the  date  of  exercise.

(2)  Based  on the New York Stock Exchange closing price of the Company's Common
Stock  on  September  24,  2003,  of  $15.32  per  share.

     The  following  table  presents certain information for the Named Executive
Officers  relating  to  Capital Appreciation Plan grants during fiscal year 2003
and,  in  addition,  information  relating  to  the  valuation  of those grants:


 
                     LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
                     ------------------------------------------------------
              Number of Shares,      Performance or Other Period     Estimated Future Payouts Under Non-
Name         Units or Other Rights    Until Maturation or Payout          Stock Price-Based Plans
                                                                     Threshold     Target      Maximum
---------------------------------------------------------------------------------------------------------
Peter Dunn        20,000           3  years  -  September  30, 2005     N/A          N/A         N/A



REPORT  OF  THE  COMPENSATION  COMMITTEE

     The  compensation  of the Company's executive officers is determined by the
Compensation  Committee  of  the  Board  of  Directors  (the "Committee").   The
following  report  with  respect  to certain cash and stock compensation paid or
awarded  to  the  Company's  executive  officers,  including the Named Executive
Officers,  during  fiscal  2003  is  furnished by the directors who comprise the
Compensation  Committee.

GENERAL  POLICIES

     The  Company's  compensation programs are intended to enable the Company to
attract,  motivate,  reward and retain the high level management talent required
to achieve corporate objectives and, thereby, increase shareholder value.  It is
the  Company's  policy  to  provide  cash  and  stock  incentives  to its senior
management  to  achieve  both  short-term and long-term objectives and to reward
exceptional  performance  and  contributions  to  the  success  of the Company's
business.  To  attain  these  objectives,  the  Company's executive compensation
program includes a competitive base salary, coupled with an added cash incentive
bonus, which is "at risk" based on the performance of the Company's business, as
reflected  in  the  achievement  of  predetermined  financial  and  operational
objectives.  In  addition,  awards  may  be  made  under  the  Company's Capital
Appreciation  Plan  to  a  select  group  of  executives and under the Company's
Employee  Stock  Option  Plans  to a broader group of management employees based
upon  the  potential  contributions  of  each to the long-term profitability and
growth  of  the  Company's  business.  As  a  general  matter,  as  an executive
officer's level of management responsibility in the Company increases, a greater
portion  of  his  or her potential total compensation depends upon the Company's
performance  as  measured by the attainment of defined financial and operational
performance  objectives.  In addition, all eligible Company employees, including
its  eligible executive officers, participate in the profit sharing component of
the  Company's Employee 401k and Profit Sharing Plan.  Subject to the discretion
of the Board of Directors, the Company makes annual contributions to a trust for
the  benefit  of  employees  participating  in  the  Plan.

RELATIONSHIP  OF  COMPENSATION  TO  PERFORMANCE

     From  time  to  time,  the Committee establishes the salaries which will be
paid  to  the  Company's  executive  officers.  In  setting  base  salaries, the
Committee  takes  into  account  a  number  of  factors,  including  competitive
compensation  data,  the  extent  to  which an individual may participate in the
incentive  compensation plans maintained by the Company, and qualitative factors
bearing  on  an  individual's  experience,  responsibilities,  management  and
leadership  abilities  and  job  performance.

     In  connection with the compensation determinations to be made, the Company
utilizes  the Hay Guide Chart- Profile Method of Job Evaluation developed by Hay
Management Consultants, a nationally recognized compensation consulting firm, to
evaluate  and  rank executive and management positions within the Company.  This
method of measuring job difficulty and importance, as updated from time to time,
together  with the Towers Perrin Annual Chain Restaurant Compensation survey and
other studies that become available, serve as reference points for the Committee
and  the  Board  of  Directors  in  establishing  compensation  programs for the
Company's  executive  officers  and  other  management which are appropriate and
competitive  within  the  industry.

     The Committee also determines, with the approval of the Board of Directors,
the  terms of the Company's Incentive Bonus Plan in which the executive officers
participate.  In  doing  so,  the  Committee  reviews management's plans for the
Company's  growth  and  profitability, determines the criteria for bonus awards,
including  the  bonus percentage level for each executive, and recommends to the
Board the level of attainment of financial performance objectives by the Company
for  awards  to  be  made  under  the  Plan.

     During  fiscal  2003,  each  of  the  Company's executive officers received
compensation  pursuant  to the Company's annual Incentive Bonus Plan.  Each year
the  Board  establishes,  in  advance, targeted earnings and sales growth goals.
Each executive job classification has a specific bonus percentage level based on
the  job  rating  (as  explained  above).  Bonuses  are  determined based on the
Company's  actual  earnings and sales results as compared to the targeted goals.
No  bonus  is  paid  for  performance  more than a small percentage below either
target, and the percentage paid to each participant is reduced substantially for
performance  below the targets.  The maximum amount payable under the bonus plan
is  2.5  times  the  individual  bonus  percentage  level  if  increases  are
substantially  above  the  targeted  earnings  and  sales  goals.

STOCK  OPTION  AWARDS

     Stock  options  are  granted  to  key  employees  by  the  Board,  upon the
recommendation of the Committee, under the Company's Employee Stock Option Plans
(the  "Plans").  The  number  of  shares  subject  to  options  granted  to each
individual generally depends upon his or her level of management responsibility.
The  largest  grants are awarded to the employees who, in the view of the Board,
have  the  greatest  potential to impact the Company's profitability and growth.
Options  under  the  Plans may be either incentive stock options or nonqualified
stock  options at the discretion of the Committee and are granted at an exercise
price equal to 100% of the fair market value on the date of grant. The Committee
has  discretion,  as  limited  by  the  Plans,  as to the duration of the option
exercise  period  and  the  vesting of the right to exercise within that period.
Options  currently  outstanding under the Plans are exercisable as to 20% on the
date  of grant and 20% on each anniversary of the date of grant thereafter until
fully  exercisable,  with  the  exception  of  Reload  Options,  which are fully
exercisable  on  the  date of grant.  The majority of outstanding options expire
five  years  from  the  date  of grant, with the exception of options granted on
April  29,  1998 and May 6, 1999, which expire ten years from the date of grant.
Stock  option  awards to the Named Executive Officers over the past three fiscal
years  are  disclosed  in  the  Summary  Compensation  Table.

     There are two stock option plans currently in effect that were not approved
by  the Company's shareholders, the 2000 Director Stock Option Plan and the 2002
Director  Stock  Option Plan.  The 2000 Director Stock Option Plan called for an
award  to  each  director  of the Company of 3,000 options to purchase shares of
Company  stock  for  $12.19  per  share  (unadjusted  for  dividends).  The 2002
Director Stock Option Plan called for an award of 5,000 options to each director
of  the  Company  to  purchase  shares  of  Company  stock  for $9.99 per share.

RESTRICTED  STOCK  AWARDS

     Restricted  stock  awards under the Company's Capital Appreciation Plan may
be  granted  by the Board of Directors, upon recommendation by the Committee, to
executive  officers  and  other  key  employees  of  the Company.  The number of
restricted  shares  and  book units awarded are intended to serve as a retention
vehicle  and  are  based  on the Board's evaluation of the contributions of each
grantee  to  the long-term profitability and growth of the Company.  The grantee
holds all of the ownership rights to the stock from the date of grant, including
the  right to vote the stock and receive dividends thereon, if paid, but may not
transfer  or  assign the stock during a period of three years following the date
of  the  grant.  These shares are forfeited to the Company if the grantee is not
employed  by the Company (except for reasons of retirement, permanent disability
or  death) at the end of the period.  Book units granted in conjunction with the
shares  are  paid in cash at the end of the forfeiture period in an amount equal
to  the sum of the net change in book value per share and the dividends paid per
share  during  the  period,  as adjusted for stock dividends/splits.  Restricted
stock  awards granted to the Named Executive Officers over the past three fiscal
years  are  disclosed  in  the  Summary  Compensation  Table.


COMPENSATION  OF  CHIEF  EXECUTIVE  OFFICER

     Alan  B. Gilman was elected as President and Chief Executive Officer of the
Company  in  1992  and  is  currently Chairman and Chief Executive Officer.  The
total  compensation paid to Mr. Gilman during fiscal year 2003 was determined by
the  Committee  and  the  Board  of  Directors  in  accordance with the criteria
described  in  the  "Relationship of Compensation to Performance," "Stock Option
Awards"  and  "Restricted  Stock Awards" sections in this report.  He received a
base compensation of $497,692 in fiscal 2003 and an incentive bonus of $349,344,
representing  70.2%  of  his  fiscal  2003  base  salary.

COMPENSATION  COMMITTEE  INTERLOCKS  AND  INSIDER  PARTICIPATION

Mr. Williamson was the President and Chief Executive Officer of the Company
from  1985  until  1990.

The  foregoing  report  is  respectfully  submitted  by  the members of the
Compensation  Committee:

James Williamson, Jr., Chairman  Charles E. Lanham  Ruth J. Person  John W. Ryan

REPORT  OF  THE  AUDIT  COMMITTEE

     The  Audit Committee of the Board is responsible for providing independent,
objective oversight of the Company's accounting functions and internal controls.
The  Audit  Committee  operates under a written charter approved by the Board of
Directors.  A  copy  of  the charter was attached to the 2003 Proxy Statement as
Appendix  A.

     Management is responsible for the Company's internal controls and financial
reporting  process.  The  independent auditors are responsible for performing an
independent  audit  of  the  Company's  consolidated  financial  statements  in
accordance  with  auditing  standards generally accepted in the United States of
America  and  issuing a report thereon.  The Audit Committee's responsibility is
to  monitor  and  oversee  these  processes.

     The Audit Committee fulfills its responsibilities through periodic meetings
with  the  Company's  independent  auditors, internal auditors and the Company's
management.  During  fiscal  year  2003,  the Audit Committee met six times.  In
addition,  the chairman of the Audit Committee, as a representative of the Audit
Committee,  discussed  the  interim  financial  information  contained  in  each
quarterly  10-Q  filing  with  the Company's independent auditors and management
prior  to  public  release.

     The Audit Committee has reviewed the Company's audited financial statements
for the fiscal year ended September 24, 2003, and discussed them with management
and  the  Company's independent auditors.  The Audit Committee's review included
discussion with the independent auditors of the matters required to be discussed
pursuant to the Statement on Auditing Standards No. 61 (Communication with Audit
Committees).  The  Audit  Committee  also  received written disclosures from the
independent  auditors as required by Independence Standards Board Standard No. 1
(Independence  Discussions  with  Audit  Committees)  and  discussed  with  the
independent  auditors  that firm's independence.  More information regarding the
Company's  independent  auditors is attached to this Proxy Statement as Appendix
A.

     Based  upon  the  Audit  Committee's  discussions  with  management and the
independent  auditors and the Audit Committee's review of the representations of
management  and  the  independent auditors, the Audit Committee recommended that
the Board of Directors include the audited financial statements in the Company's
Annual  Report  on  Form 10-K for the year ended September 24, 2003, to be filed
with  the  Securities  and  Exchange  Commission.

     Pursuant  to  its  charter, the Audit Committee selected Deloitte & Touche,
LLP  as  the  Company's  auditors  for  fiscal  year  2003.

     The  foregoing report is respectfully submitted by the members of the Audit
Committee.

J. Fred Risk, Chairman   Stephen Goldsmith   Charles E. Lanham   John W. Ryan

COMPANY  PERFORMANCE

     The  graph  below  compares  for  each  of  the  last five fiscal years the
cumulative  total  return  of the Company, the S&P 500, the S&P SmallCap 600 and
the  S&P  Restaurants  Indices.  The  Company  is  included  among the companies
comprising  the  S&P  SmallCap  600,  a major market index.  The S&P Restaurants
Index  is  included in the graph in order to provide a more direct comparison of
the  Company's  returns  to those of other companies in the restaurant business.
The  cumulative  total  returns  displayed  below  have assumed $100 invested on
September 30, 1998, in the Company's Common Stock, the S&P 500, the S&P SmallCap
600  and  the  S&P Restaurants Indices, and reinvestment of dividends paid since
September  30,  1998.









2.     APPROVAL  OF  THE  AMENDED  AND  RESTATED  1997 CAPITAL APPRECIATION PLAN

     The  Company  has  had  a  Capital Appreciation Plan (the "Plan") in effect
since  1982.  The  purpose  of these Plans has always been to foster and enhance
the  long-term  profitability of the Company for the benefit of its shareholders
by  offering  the incentive of long-term rewards to those corporate officers and
key  executives  who  have principal responsibility for long-term profitability.
Pursuant to the Plans, executive officers of the Company and other key employees
may  receive  restricted shares of the Company's stock.  Awards to employees are
based  on  the  evaluation  of  the Compensation Committee and the Board of each
employee's contribution to the long-term growth and profitability of the Company
and  are  intended  to  serve as both compensation and as a retention tool.  The
purpose  of  the  current amendment and restatement to the existing 1997 Capital
Appreciation  Plan (the "1997 Plan") is to make 500,000 additional shares of the
Company's  stock  eligible  for grants to key employees during the coming years.
As  of  September  24,  2003,  the  1997  Plan  had only 14,122 shares remaining
available  for  grants,  7,000  of  which  were  issued  on  December  1,  2003.
     Subject  to  approval by the vote in favor of the amendment and restatement
of the 1997 Plan by persons holding a majority of the shares of Company stock in
attendance  and  voting  at  the  Annual  Meeting  of Shareholders, the Board of
Directors  of  the  Company has approved amendments to the 1997 Plan which would
enable  the  board  to  make  tandem awards to the Company's executives of up to
514,122  shares  of  Company  stock ("restricted shares") and up to 514,122 book
units over a four-year period ending on December 31, 2007.  The shares of common
stock  are issued at the time of the award, however the transfer of these shares
is  restricted  during  a period of 3 years, and the shares are forfeited to the
Company  if  the  grantee  is not employed by the Company (except for reasons of
retirement, permanent disability, or death) at the end of the period.  A copy of
the  amended  and  restated  1997  Plan  is included as Appendix B to this proxy
statement.  The  foregoing  discussion is qualified in its entirety by reference
to  that  Appendix.

     The following table provides certain information with respect to all grants
which  have  been made under the 1997 Plan to specific individuals and groups of
individuals,  specifying  the  amounts  granted  to  Named  Executive  Officers
individually,  all director nominees who are employees individually, all current
executive  officers as a group and all employees, including current officers who
are  not  executive officers as a group.  Directors who are not employees of the
Company  are not eligible to participate in the 1997 Plan.  The amount and terms
of any future grants of to the above individuals or groups of individuals is not
determinable.

                                  PLAN BENEFITS
                         1997 CAPITAL APPRECIATION PLAN
                         ------------------------------




                                                                     
Name and Position                           Dollar Value (1)        Number of Units (2)
---------------------------------------------------------------------------------------

Alan B. Gilman, Chairman and
Chief Executive Officer                       $  829,781                    71,063

Peter M. Dunn, President and
Chief Operating Officer                       $  512,000                    40,000

James W. Bear, Senior Vice
President and Chief Financial Officer         $  405,000                    36,597

Gary T. Reinwald, Senior
Vice President                                $  550,913                    47,097

Gary S. Walker, Senior Vice
President                                     $  306,488                    25,000

All current executive officers
as a group                                    $3,378,581                   280,469

All employees, including current
officers who are not executive
officers, as a group                          $6,631,337                   560,065




(1)  The amounts shown in this column represent the aggregate market value of
     the restricted stock awarded under the Capital Appreciation Plan and were
     calculated by multiplying the closing market price of the Company's Common
     Stock on the date of award by the number of shares awarded. The amounts do
     not reflect the cash value of Book Units awarded in tandem with the
     restricted shares, which provide for a cash payment at the end of the
     three-year restricted period equal to the sum of the net change in book
     value per share and the dividends paid per share during the period, as
     adjusted for stock dividends/splits.


(2)  Represents the aggregate number of tandem awards of restricted shares and
     corresponding Book Units granted under the 1997 Plan to each specific
     individual or group of individuals as of December 5, 2003.

THE  BOARD  OF  DIRECTORS  AND MANAGEMENT RECOMMEND A VOTE "FOR" THE PROPOSAL TO
APPROVE  THE  AMENDMENT AND RESTATEMENT OF THE 1997 CAPITAL APPRECIATION PLAN AS
DESCRIBED  ABOVE.


3.     APPROVAL  OF  THE  2004  DIRECTOR  STOCK  OPTION  PLAN

     Subject  to  approval by the vote in favor of adoption of the 2004 Director
Stock  Option  Plan  (the  "Director Plan") by persons holding a majority of the
shares of Common Stock in attendance and voting at the Annual Meeting, the Board
of  Directors  of  the Company approved, on November 12, 2003, the Director Plan
for  non-employee  members  of the Board of Directors.  Pursuant to the Director
Plan,  non-discretionary,  non-qualified  stock  options  have  been  granted to
non-employee  directors of the Company to purchase an aggregate of 43,000 shares
of  the  Company's Common Stock.  The options have a term of five years from the
date  of grant and are exercisable in annual increments of 20% commencing on the
date  of  grant.  All  options were conditionally granted effective November 12,
2003,  at  an option price of $17.98, which is equal to the closing price of the
Company's  Common Stock on the New York Stock Exchange on the date of the grant.
Options  are  not  transferable  except  by  will  or  the  laws  of descent and
distribution.

FEDERAL  INCOME  TAX  CONSEQUENCES  OF  NONQUALIFIED  STOCK  OPTIONS

     An optionee will not be subject to tax at the time a nonqualified option is
granted; however, a director who exercises a nonqualified option must include in
income as of the date of exercise the difference between (a) the amount paid for
Common  Stock  upon  exercise of the option and (b) the fair market value of the
Common  Stock.  The recognized income may be subject to withholding for federal,
state  and  local income and other payroll taxes.  The optionee's federal income
tax cost basis for the Common Stock will be the amount paid for the Common Stock
plus the income recognized.  If an optionee uses Common Stock in full or partial
payment  of the exercise price of a nonqualified option, the exchange should not
affect  the  federal  income  tax  treatment of the exercise.  The optionee will
realize  no  gain  or  loss  with  respect to the Common Stock so used.  The net
additional  shares  of  Common Stock received upon such exercise by the optionee
will  have  a  federal  income  tax  cost  basis  equal  to  the ordinary income
recognized  as a result of the option exercise (plus the amount of any cash used
in  the  option  exercise)  and  a  holding period commencing upon the date such
income  is  recognized.  Subsequent  sale  of such Common Stock will result in a
capital  gain  or  loss  equal  to the difference between the optionee's federal
income  tax  cost  basis  for  the  Common  Stock  and  the  sale  price.

          The  Company will be entitled to a federal income tax deduction in the
amount  of  the  ordinary  income  recognized by the optionee as of the date the
optionee  recognizes  ordinary  income.

     The options were conditionally granted to eight of the Company's directors.
Ms.  Aramian, Dr. Person and Messrs. Kelley, Goldsmith, Lanham, Risk, Williamson
and  Dr.  Ryan  conditionally  received  5,000  shares,  and  the  director of a
subsidiary  of  the  Company,  Mr.  Frank G. Regas, conditionally received 3,000
shares,  for  a total of 43,000 shares, being all of the shares authorized under
the  Director  Plan.  No further options will be granted under the Director Plan
and,  if  any  outstanding  options  expire  or terminate for any reason without
having  been  exercised  in full, the forfeited options will not become eligible
for further grant under the Director Plan.  A copy of the Director Plan has been
included  as Appendix C to this proxy statement, and the foregoing discussion is
qualified  in  its  entirety by reference to that Appendix.  The following table
regarding  the  Director  Plan  is  provided  as  required  by  regulations:

                                NEW PLAN BENEFITS
                         2004 DIRECTOR STOCK OPTION PLAN
                         -------------------------------

     Name  and  Position                                     Number  of  Options
     -------------------                                     -------------------

     Executive  Group                                                0

     Non-Executive  Director  Group  (1)                          43,000

     Non-Executive  Officer  Employee  Group                         0


(1)     Includes  one  director  of  a  subsidiary  corporation as stated above.


     The  following  table  provides information regarding the Company's current
equity  compensation plans as of September 24, 2003. The information provided in
the  table  does  not  include  the  number of securities to be issued under the
Director Plan or the 500,000 additional shares to be issued under the 1997 Plan,
which  are  subject  to shareholder approval at the Annual Meeting and discussed
more  fully  above.  The  table does include, however, all securities previously
approved  for  issuance  under  the  1997  Plan.


 
                                EQUITY COMPENSATION PLAN INFORMATION
                                ------------------------------------
                                                      Weighted-Average       Number of Securities
                                Number of Securities  Exercise Price of     Remaining Available for
                                To be Issued Upon       Outstanding        Future Issuance Under
                                   Exercise of           Options         Equity Compensation Plans
                               Outstanding Options      Warrants and       (Excluding  Securities
Plan Category                  Warrants and Rights        Rights          Reflected in FirstColumn)
---------------------------------------------------------------------------------------------------

Equity compensation plans
Approved by shareholders (1)         1,275,989            $12.92                  1,319,227 (2)

Equity compensation plans
not approved by shareholders (3)        51,500            $10.34                          0
                                    ----------            ------                  ---------
Total                                1,327,489            $12.82                  1,319,227



(1)  Consists of 1995 and 1997 ESOP plans, 2003 Director Stock Option Plan, 1997
Capital  Appreciation  Plan  and  the  1992  Employee  Stock  Purchase  Plan.

(2)  The  Capital  Appreciation  Plan  provides  for tandem awards of restricted
stock  and  book  units.  As  of  September  24,  2003,  14,122  shares remained
available  for  issuance  pursuant  to  awards  under  that  plan.

(3)  Consists  of  the  2000  and  2002  Director  Stock  Option  Plans.

     THE  BOARD  OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE "FOR" THE PROPOSAL
TO  APPROVE  THE  STEAK  N  SHAKE  COMPANY'S  2004 DIRECTOR STOCK OPTION PLAN AS
DESCRIBED  ABOVE.


4.     RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

     In  light  of  changes in audit requirements mandated by the Sarbanes-Oxley
Act  of  2002  and  recommendations  regarding  the rotation of audit firms from
several sources, the Audit Committee of the Company solicited proposals to audit
the  Company's  financial  statements  for  its  2003  fiscal  year from several
auditing  firms,  including  the firm that had been the Company's auditors since
1982,  Ernst  &  Young  LLP  ("E&Y").  As  a  result  of this process, the Audit
Committee  decided  to change the Company's independent auditor and replaced E&Y
with  Deloitte  &  Touche  LLP  ("Deloitte").

     The  reports  of E&Y for the past two fiscal years ended September 25, 2002
and  September  26,  2001, contained no adverse opinion or disclaimer of opinion
and  were not qualified or modified as to uncertainty, audit scope or accounting
principles.

     E&Y's  report dated December 3, 2002, makes reference to the restatement of
the Company's previously issued 2001 and 2000 consolidated financial statements.
As more fully described in the Notes to Consolidated Financial Statements of the
Company  as  of  and  for  the period ended September 25, 2002, during 2002, the
Company  changed  its  accounting  for  sale  and  leaseback  transactions  and
build-to-suit  leases  to  more  fully  reflect  the  provisions of Statement of
Financial  Accounting  Standards  No.  98,  "Accounting  for  Leases".

     In  connection  with  its audits for the two most recent fiscal years ended
September  25,  2002  and  September 26, 2001, and through the date Deloitte was
retained,  there have been no disagreements with E&Y on any matter of accounting
principles  or  practices,  financial statement disclosure, or auditing scope or
procedure,  which  disagreements,  if  not  resolved to the satisfaction of E&Y,
would  have  caused  them  to  make  reference  to  the  subject  matter  of the
disagreement  in  connection  with  their report on the financial statements for
such  periods.

     During  the  two  most  recent  fiscal  years  ended September 25, 2002 and
September 26, 2001, and through February 12, 2003, there have been no reportable
events  (as  defined  in  Regulation  S-K,  Item  304(a)(1)(v)).

     The  Company  requested  that E&Y furnish it with a letter addressed to the
Securities  and  Exchange  Commission  stating whether or not it agreed with the
above  statements.  A copy of such letter, dated February 18, 2003, was filed as
Exhibit  16.1  to  the  Company's  Current  Report  on  Form  8-K filed with the
Commission  on  February  19,  2003.

     The  Company  engaged  Deloitte as its new independent auditors on February
12,  2003.  During the two most recent fiscal years ended September 25, 2002 and
September 26, 2001, and through February 12, 2003, the Company has not consulted
with Deloitte regarding either (i) the application of accounting principles to a
specified  transaction,  either  completed  or  proposed;  or  the type of audit
opinion  that  might  be rendered on the Company's financial statements; or (ii)
any  matter  that  was  either  the  subject  of a disagreement (as that term is
defined  in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to
that  Item)  or a reportable event (as that term is defined in Item 304(a)(1)(v)
of  Regulation  S-K).

     Deloitte  was our independent auditor for the year ended September 24, 2003
and  will  serve  in  that  capacity  for  the 2004 fiscal year unless the audit
committee deems it advisable to change the independent auditor.  Representatives
of  Deloitte  will be present at the Annual Meeting, will have an opportunity to
make  a statement, and will be available to respond to appropriate questions.  A
synopsis of the fees paid to Deloitte and services provided by the firm, as well
as  fees  charged  by  E&Y  are set forth in Appendix A to this proxy statement.

THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE "FOR" THE RATIFICATION OF
DELOITTE  &  TOUCHE,  LLP  AS INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL
YEAR  ENDING  SEPTEMBER  29,  2004.


5.   OTHER MATTERS

As  of  the  date of this proxy statement, the Board of Directors of the Company
has  no knowledge of any matters to be presented for consideration at the Annual
Meeting  other than those set forth above.  If any other matters should properly
come  before  the  meeting,  the  proxies  will  be voted in accordance with the
recommendations  of  the  Board  of  Directors  of  the  Company.


                                   APPENDIX A
                                   ----------

                     RELATIONSHIP WITH INDEPENDENT AUDITORS

On  February  12,  2003,  Ernst  &  Young ("E&Y") was succeeded as the Company's
independent  auditor  by Deloitte & Touche, LLP, ("Deloitte"). Deloitte examined
the Company's financial statements for the fiscal year ended September 24, 2003.
Representatives of Deloitte will be present at the Annual Meeting, will have the
opportunity to make a statement, and will be available to respond to appropriate
questions.

Deloitte and E&Y have advised the Company that they have billed or will bill the
Company the below indicated amounts for the following categories of services for
each  of  the  Company's  last  two  fiscal  years.

2003  FISCAL  YEAR




                                                                              
AUDIT FEES                                          Ernst & Young   Deloitte & Touche   Total Amount
-------------------------------------------------  --------------  ------------------  -------------

Audit Fees (1)                                     $        6,400  $          155,000  $     161,400
Audit-Related Fees (2)                                             $           25,500  $      25,500
Tax Fees (3)                                       $       10,824  $            1,000  $      11,824
All Other Fees (4)                                 $        2,500  $           17,390  $      19,890


Total Fees for the Year Ended September 24, 2003   $       19,724  $          198,890  $     218,614




2002  FISCAL  YEAR




                                                
AUDIT FEES                                          Ernst & Young
-------------------------------------------------  --------------

Audit Fees (1). . . . . . . . . . . . . . . . . .  $      202,000
Audit-Related Fees (2). . . . . . . . . . . . . .  $       12,285
Tax Fees (3). . . . . . . . . . . . . . . . . . .  $       88,900
All Other Fees (4). . . . . . . . . . . . . . . .  $       19,859

Total Fees for the Year Ended September 25, 2002.  $      323,044




(1)     Audit  fees  include  fees  for services performed for the audit of the
Company's  annual  financial  statements  and  review  of  financial  statements
included  in the Company's 10-Q filings, and services that are normally provided
in  connection  with  statutory  or  regulatory  filings  or  engagements.

(2)     Audit-Related  Fees  include  fees  for  assurance and related services
performed  that are reasonably related to the performance of the audit or review
of the Company's financial statements.  This includes the audit of the Company's
401k  and  Profit  Sharing  Plan.

(3)     Tax  Fees  are  fees  for  services  performed  with  respect  to  tax
compliance,  tax  advice  and tax planning.  This includes: WOTC administration,
sales  &  use  tax  assistance  and  tax  planning  work.

(4)      All  Other  Fees are fees for other permissible work that does not meet
the  above  category  descriptions.  This includes:  preparation and information
related  to  Section  404  of  the  Sarbanes-Oxley  Act,  an  on-line  research
subscription,  consultation  regarding  employee benefit programs, the Company's
Uniform  Franchise Offering Circulars, unclaimed property and the liquidation of
Consolidated  Specialty  Restaurants,  one  of  the  Company's  subsidiaries.



PRE-APPROVAL  POLICY

The  Audit  Committee's  policy  is  to  pre-approve  all  audit and permissible
non-audit  services  provided  by  the  independent auditor.  These services may
include audit services, audit-related services, tax services and other services.
Pre-approval  is  generally  provided for up to one year and any pre-approval is
detailed  as  to the particular service or category of services and is generally
subject  to  a  specific  budget.  The  independent  auditor  and management are
required  to  periodically report to the Audit Committee regarding the extent of
services  provided  by  the  independent  auditor  in  accordance  with  this
pre-approval,  and  the  fees  for  the  services  performed to date.  The Audit
Committee  may also pre-approve particular services on a case-by-case basis.  In
fiscal  2003,  the  Audit Committee approved the non-audit services performed by
Ernst  &  Young  and  Deloitte  &  Touche  described  on  the  prior  page.



                                   APPENDIX B

                 THE STEAK N SHAKE COMPANY AMENDED AND RESTATED
                         1997 CAPITAL APPRECIATION PLAN

1.     PURPOSE.

The  purpose  of  the  Amended  and Restated 1997 Capital Appreciation Plan (the
"Plan")  is  to  foster  and  enhance the long-term profitability of The Steak n
Shake  Company  (the  "Company") for the benefit of its shareholders by offering
the  incentive  of  long-term  rewards  to  those  corporate  officers  and  key
executives  who  have  principal  responsibility  for  long-term  profitability.

2.     ELIGIBILITY.

Eligibility  for  grants  under the Plan shall be limited to those key executive
employees,  whether  or  not  such  employees  are  officers or directors of the
Company,  or  its  subsidiaries,  recommended  by the Compensation Committee and
selected  by  the  Board  of Directors from among those who are in a position to
contribute  materially  to  the  success of the Company and who have significant
opportunities  to  influence  long-term  profit  performance.  Subject  to  such
selection,  these  would  normally  include  key  employees  in  executive,
administrative,  professional,  operating and technical positions.  The Board of
Directors  may,  in its discretion, also make an award to any other employee who
has  made  an  unusual contribution outside the ordinary course of their duties.

3.     RESTRICTED  STOCK  GRANTS.

(a)  The Board of Directors may grant shares of the Common Stock of the Company
     which are subject to restrictions ("Restricted Shares") to participating
     employees ("Participants") pursuant to the Plan over a period ending
     December 31, 2007. The number of Restricted Shares, if any, granted
     hereunder to Participants shall be within the discretion of the Board of
     Directors; provided, however, that the number of Restricted Shares which
     may be granted after November 11, 2003 shall not exceed an aggregate of
     514,122 shares except as may be adjusted pursuant to Section 5 below.
     Restricted Shares which are forfeited or canceled under 3(d) or (e) hereof
     shall be available for further grants. In making grants, the Board of
     Directors shall take into account such factors as the Participant's level
     of responsibility, previous performance, rate of compensation and the
     potential value of the grant.

(b)  Grants made by the Board of Directors may consist in whole or in part of
     authorized but unissued or treasury shares, and shall be subject to the
     provisions of the Plan and to such other terms and conditions, not
     inconsistent with the Plan, as the Board of Directors determine.

(c)  Subject to the provisions contained in 3(d) and (e) hereof, the Restricted
     Shares granted hereunder shall be conditionally owned by the Participant as
     of the grant date, and such Participant shall be entitled to the receipt of
     cash dividends and voting rights with respect thereto.

(d)  In the event of termination of Participant's employment with the Company
     for any reason other than death, retirement under the normal or disability
     provisions of a retirement plan of the Company, or retirement under the
     early retirement provisions of such retirement plan with the consent of the
     Company, during a period of three (3) years following the grant date
     ("Forfeiture Period"), the Restricted Shares so granted shall be thereupon
     forfeited by Participant and transferred to the Company as of the date of
     termination. The Restricted Shares granted hereunder may not be sold,
     transferred or pledged by the Participant during the Forfeiture Period.
(e)  If a Participant's employment has terminated because of death, disability
     or retirement under a retirement plan of the Company as set out in 3(d)
     above prior to the end of the Forfeiture Period, the number of Restricted
     Shares such Participant or such Participant's beneficiary or estate would
     be entitled to retain shall be the number of Restricted Shares determined
     as though such Participant's employment had not been terminated, multiplied
     by a fraction, the numerator of which is the number of months such
     Participant was employed during the Forfeiture Period (including the month
     during which employment terminated) and the denominator of which is the
     number of months in the Forfeiture Period. The balance of Restricted Shares
     shall be transferred to the Company as of the termination date.

4.     BOOK  UNIT  GRANTS.

(a)  In conjunction with the Restricted Share grants, the Board of Directors
     shall simultaneously grant each Participant an equivalent number of book
     value units ("Book Units") which are equal to the book value per share of
     the Common Stock of the Company. The aggregate number of Book Units granted
     hereunder after November 11, 2003 shall not exceed 514,122 units as
     adjusted for splits and stock dividends. Units forfeited or canceled under
     paragraphs 4 (c) or (d) hereof shall be thereafter available for further
     grants.
(b)  Book Units shall be valued on the basis of book value of the Common Stock
     of the Company, as determined in accordance with 5 (c) hereof on the last
     day of the fiscal quarter next preceding the date of grant ("Value Date")
     and again on the third anniversary of the Value Date, said three (3) year
     period hereafter referred to as the "Accumulation Period". The increase, if
     any, in book value during the Accumulation Period plus an amount equal to
     the dividends paid during the Accumulation Period on an equal number of
     shares of Common Stock of the Company, shall be paid to such Participant in
     cash within ninety (90) days following the expiration of the Accumulation
     Period; provided, however, the Book Units have not been forfeited under
     paragraph 4 (c) hereof.
(c)  In the event of termination of Participant's employment with the Company
     for any reason other than death, retirement under the normal or disability
     provisions of a retirement plan of the Company, or retirement under the
     early retirement provisions of such retirement plan with the consent of the
     Company during the Accumulation Period, the appreciation and dividend
     equivalents shall be forfeited by the Participant.
(d)  If a Participant's employment has terminated because of death, disability
     or retirement under a retirement plan of the Company as set out in 4 (c)
     above prior to the end of the Accumulation Period, the number of Book Units
     such Participant or such Participant's beneficiary or estate shall be
     entitled to receive shall be the number of Book Units determined as though
     such Participant's employment had not been terminated, multiplied by a
     fraction, the numerator of which is the number of months such Participant
     was employed during the Accumulation Period (including the month during
     which employment terminated) and the denominator of which is the number of
     months in the Accumulation Period. In such event, the Board of Directors
     shall determine the book value as of the last day of the quarter next
     preceding the date of termination.
(e)  Any payment made with respect to a Participant who has died shall be paid
     to the beneficiary designated by the Participant to receive the proceeds of
     any group life insurance coverage provided for the Participant by the
     Company. A Participant who has not designated such beneficiary, or who
     desires to designate a different beneficiary, may file with the Secretary
     of the Company, a written designation of a beneficiary under the Book Unit
     plan, which designation may be changed or revoked only by the participant.
     If no designation of a beneficiary has been made under such life insurance
     coverage or filed with the Secretary of the Company, distribution shall be
     made to the Participant's spouse, if surviving, and if not, to the
     Participant's estate.

5.     ADJUSTMENTS.

(a)  In the event that there are changes in the capitalization of the Company
     affecting in any manner the number or kind of outstanding shares of Common
     Stock, whether such changes have been occasioned by declaration of stock
     dividends, stock splits, reclassification or recapitalization, or because
     the Company has merged or consolidated with another corporation, or for any
     reason whatsoever, then the number and kind of shares then subject to
     Restricted Share grants and thereafter to become subject to such grants,
     and the Book Unit values, shall be proportionally adjusted by the Board of
     Directors of the Company to whatever extent the Board of Directors
     determines, in its sole and absolute discretion, that any such change
     equitably requires an adjustment.

(b)  If the Company at any time should elect to dissolve, undergo a
     reorganization or split-up its stock or merge or consolidate with any other
     corporation and The Steak n Shake Company is not the surviving corporation,
     then (unless in the case of a reorganization, stock split, merger or
     consolidation where one or more of the surviving corporations assumes the
     obligations to Participants hereunder or replaces this Plan with a
     reasonably equivalent plan in all respects), the Board of Directors may
     thereupon accelerate grants of Restricted Shares and Book Units hereunder,
     reduce the applicable Forfeiture Periods and Accumulation Periods, or take
     such other action as the Board of Directors, in its sole and absolute
     discretion deems equitable.
(c)  The Board of Directors shall determine book value of the Common Stock under
     4 above based on generally accepted accounting principles, and shall have
     the right, in its sole and absolute discretion, to proportionally adjust
     such book values for sales or purchases by the Company of Common Stock,
     acquisitions or divestitures, accounting changes or other actions of the
     Company taken during the Accumulation Period affecting book value, to
     whatever extent the Board of Directors determines that any such action
     equitably requires an adjustment.

6.     AMENDMENT  AND  TERMINATION.

The  Board  of Directors shall have the power to amend, suspend or terminate the
Plan  at any time except that, subject to the conditions of 5 above, (i) no such
action  shall  cancel,  reduce  or  adversely  affect any grant theretofore made
without  the  consent  of  the  Participant  or the Participant's beneficiary or
estate;  or  (ii)  without  the approval of the shareholders of the Company, the
Board  of  Directors  may not increase the aggregate number of Restricted Shares
and  Book  Units  to  be  granted.

7.     RESTRICTED  SHARE  AND  BOOK  UNIT  AGREEMENT.

Each grant of Restricted Shares and Book Units under the Plan shall be evidenced
by  a written agreement executed by the Company and accepted by the Participant,
and  shall  contain such terms and conditions as the Board of Directors may deem
desirable  which  are  not  inconsistent  with  the  Plan.

8.     FINALITY  OF  DETERMINATION.

The  Compensation  Committee  of  the Board of Directors shall have the power to
interpret  the  Plan, and all interpretations, determinations and actions by the
Compensation  Committee shall be final, conclusive and binding upon all parties.

9.     TERMINATION  OF  EMPLOYMENT.

Nothing  in  the  Plan  or  any grant made under the Plan, shall confer upon any
Participant  any right to continue in the employ of the Company or affect in any
way  the  right  of the Company to terminate the Participant's employment at any
time.

10.     EFFECTIVE  DATE.

This  Plan  became  effective on December 31, 1996 and will continue to December
31,  2007,  subject  to approval of the amendment and restatement of the Plan by
the holders of a majority of the shares of Common Stock of the Company which are
represented  in  person  or by proxy at the 2004 Annual Meeting of Shareholders.




                                   APPENDIX C
                                   ----------

                            THE STEAK N SHAKE COMPANY
                         2004 DIRECTOR STOCK OPTION PLAN

1.     PURPOSE.

     The  purpose  of  The Steak n Shake Company 2004 Director Stock Option Plan
(the  "Plan")  is  to  provide those non-employee directors of The Steak n Shake
Company  (the  "Company")  and  its  subsidiaries (the "Directors"), a favorable
opportunity  to  acquire  shares  of  Common  Stock of the Company, (the "Common
Stock"),  thereby  providing  them  with  an increased incentive to work for the
success  of  the  Company  and better enabling the Company to attract and retain
directors.

2.      ADMINISTRATION  OF  THE  PLAN.

     It  is  intended that the Plan be administered as a non-discretionary plan,
and  no  person  shall  have  any  discretion  as  to:
(a)     the selection of Directors to whom stock options under the Plan shall be
granted,  and

(b)     the  number  of  shares  granted  to  each Director under the Plan.

3.     TAX  STATUS.

     Options  granted  under  the  Plan  will  not  be  entitled  to special tax
treatment  under  Section  422  of the Internal Revenue Code of 1986, as amended
(the  "Code").

4.      ELIGIBILITY.

     Options may be granted only to non-employee Directors of the Company or its
subsidiaries.  Such  Directors  are  not  eligible  to participate in any of the
employee  stock  option  plans  sponsored  by  the  Company.

5.     STOCK  SUBJECT  TO  THE  PLAN.

     There  shall  be reserved for issuance upon the exercise of options granted
under the Plan 43,000 shares of Common Stock of the Company, with a stated value
of  $.50  per  share,  which  may  be authorized but unissued shares or treasury
shares  of  the  Company.  Subject  to  Section  8  hereof, the shares for which
options  may  be  granted  under  the Plan shall not exceed that number.  If any
option shall expire or terminate for any reason without having been exercised in
full,  the  unpurchased  shares  subject  thereto shall not become available for
other  options  under  the  Plan.

6.     OPTION  GRANTS  AND  OPTION  PERIOD.

     Without  further  action  by  the  Board  of  Directors (the "Board"), each
Director  listed  below  shall  automatically  receive an option to purchase the
shares of Common Stock indicated, subject to approval by the shareholders of the
Company  at  the  2004  Annual  Meeting.  Each option shall have a grant date of
November  12,  2003 and shall be immediately exercisable as to 20% of the option
grant.  Thereafter,  the grant shall be exercisable to an additional 20% on each
anniversary  of  the date of grant.  Each option shall expire 5 years after date
of  grant  and  shall be subject to earlier termination as hereinafter provided.

                         S. Sue Aramian           5,000  shares
                         Stephen Goldsmith        5,000  shares
                         Wayne L. Kelley          5,000  shares
                         Charles E. Lanham        5,000  shares
                         Ruth J. Person           5,000  shares
                         J. Fred Risk             5,000  shares
                         John W. Ryan             5,000  shares
                         James Williamson, Jr.    5,000  shares
                         Frank G. Regas           3,000  shares

7.     TERMS  OF  OPTION.

     Each  option  granted  under  the Plan shall be evidenced by a Stock Option
Agreement  between  the  Company  and  the  optionee and shall be subject to the
following  terms  and  conditions:

     (a)  Option Price - The price to be paid for shares of Common Stock upon
          the  exercise of each option shall be the fair market value on the
          date of grant. As used herein, fair market value shall be the closing
          sales price for the Common Stock on the New York Stock Exchange on the
          date of grant.

     (b)  Period for Exercise of Option - An option shall not be exercisable
          after five (5) years from the date on which such option is granted.

     (c)  Purchase of Shares - The option price of each share of Common Stock
          purchased upon exercise of an option shall be paid in full, in cash,
          at the time of exercise; provided, however, that an optionee may
          exercise an option in whole or in part by tendering to the Company
          whole shares of the Company's Common Stock owned by him or her having
          a fair market value equal to the cash exercise price of the shares
          with respect to which the option is being exercised. For this purpose,
          any shares so tendered by an optionee shall be deemed to have a fair
          market value equal to the average of the closing sales price for the
          stock on the New York Stock Exchange for the five trading days
          preceding the date of exercise of the option. An option may be
          exercised at any time and from time to time during the term of the
          option as to any or all whole shares which have become subject to
          purchase pursuant to the terms of the option or the Plan, but not at
          any time as to fewer than 100 shares. An option may be exercised only
          by written notice to the Company, mailed to the attention of the
          Secretary of the Company, signed by the optionee (or such other
          persons as shall demonstrate to the Company his or her right to
          exercise the option), specifying the number of shares in respect of
          which it is being exercised, and accompanied by payment of the option
          price for such shares. The certificate or certificates for the shares
          as to which the option is exercised shall be registered in the name of
          the person or persons exercising the option and shall be delivered to
          or upon the order of that person or persons as soon as practicable
          after such written notice is received by the Company. An optionee
          shall not have any rights of a shareholder in respect to the shares
          subject to an option until a certificate representing such shares has
          been issued.

     (d)  Termination of Option - If an optionee ceases to be a director of the
          Company for any reason other than retirement, permanent and total
          disability (within the meaning of Section 105(d)(4) of the Code), or
          death, any option granted to him or her shall forthwith terminate.
          Leave of absence approved by the Board of Directors shall not
          constitute cessation of directorship. If an optionee ceases to be a
          director of the Company by reason of permanent or total disability
          (within the meaning of Section 105(d)(4) of the Code), any option
          granted to him or her may be exercised by him or her in whole or in
          part within one year after the date of termination as a director by
          reason of such disability. In the event of death of an optionee while
          serving as a director, any option granted to him or her may be
          exercised in whole or in part at any time after the date of death by
          the executor or administrator of his or her estate or by the person or
          persons entitled to the option by will or by applicable laws of
          descent and distribution until the expiration of the option term. In
          the event of retirement, any option granted to him or her may be
          exercised in whole or in part at any time until the expiration of the
          option term. This provision applies regardless of whether an option
          was exercisable at the time of retirement. Notwithstanding the
          foregoing provisions of this subsection (d), no option shall, in any
          event, be exercisable after the expiration of the period set out in
          subsection (b) above.

     (e)  Nontransferability of Option - An option may not be transferred by the
          optionee other than by will or the laws of descent and distribution
          and, during the lifetime of the optionee, shall be exercisable only by
          him or her.

     (f)  Investment Representations - Unless the shares subject to an option
          are registered under the applicable federal and state securities laws,
          each optionee by accepting an option shall be deemed to agree for
          himself or herself and his or her legal representatives that any
          option granted to him or her and any and all shares of Common Stock
          purchased upon the exercise of the option shall be acquired for
          investment and not with a view to, or for the sale in connection with,
          any distribution thereof. Any shares issued pursuant to an exercise of
          an option may bear a legend evidencing these limitations on transfer.

8.     ADJUSTMENT  OF  SHARES.

     In  the  event  of  any  change after the effective date of the Plan in the
outstanding  shares  of  Common  Stock  of  the  Company  by  reason  of  any
reorganization,  recapitalization,  stock  split, stock dividend, combination of
shares,  exchange  of shares, merger or consolidation, liquidation, or any other
change  after  the  effective  date  of  the Plan in the nature of the shares of
Common  Stock  of the Company, the Company shall make a corresponding adjustment
in  the  number  and  kind  of shares reserved under the Plan, and in the option
price  and  the number and kind of shares covered by outstanding options granted
and  to be granted under the Plan as determined by the Board.  Any determination
by  the  Board  hereunder  shall  be  conclusive.

9.     AMENDMENT.

     The Board may amend the Plan from time to time and, with the consent of the
optionee,  the  terms  and  provisions  of  an  option,  except  that:

     (a)  the number of shares of stock which may be reserved for issuance under
          the Plan may not be increased except as provided in Section 8 hereof;

     (b)  the option price under any option may not be reduced to less than the
          fair market value of the Common Stock on the date such option is
          granted except as provided in Section 8 hereof;

     (c)  the number of shares subject to options granted to any individual
          Director, the date of such grants and the period during which an
          option may be exercised may not be modified except as provided in
          Section 8 hereof, and

     (d)  the class of persons to whom options may be granted under the Plan may
          not be modified.

     No  amendment  of  the Plan may, without the consent of optionees, make any
changes in any outstanding options theretofore granted under the Plan that would
adversely  affect  the  rights  of  such  optionees.

10.     TERMINATION.

     The Plan shall terminate upon the earlier to occur of (a) the date on which
all  shares  available  for issuance under the Plan have been issued pursuant to
the  exercise of options granted hereunder or (b) at any time upon determination
by  the Board of Directors.  Any termination by the Board of Directors shall not
affect  the  validity  of  any  option  theretofore  granted  under  the  Plan.

11.     GOVERNING  LAW.

     The  terms  of any options granted hereunder and the rights and obligations
hereunder  of the Company, the Directors and their successors in interest shall,
except  to  the  extent  governed  by  federal  law, be governed by Indiana law.

12.     GOVERNMENT  AND  OTHER  REGULATIONS.

     The  obligations  of  the  Company  to issue or transfer and deliver shares
under the options granted under the Plan shall be subject to compliance with all
applicable laws, governmental rules and regulations, and administrative actions.

13.     EFFECTIVE  DATE.

     The  Plan  became effective when adopted by the Board on November 12, 2003;
provided,  however,  that  the effectiveness of any grant of options pursuant to
the  Plan  prior to the 2004 Annual Meeting of Shareholders shall be conditional
upon  the  approval  of  the  Plan  by the holders of at least a majority of the
outstanding  shares  of  the Company's stock entitled to vote at the 2004 Annual
Meeting.