How I Built This with Guy Raz - How I Built Resilience: Luke Holden and Ben Conniff of Luke's Lobster

Episode Date: September 3, 2020

COVID-19's impact on the seafood industry hit Luke Holden and Ben Conniff hard; in March they closed their restaurants and laid off 300 employees. Since then, Luke's Lobster has been able to stay afloat by upstarting an e-commerce website, but their focus remains on sustaining the local seafood economy of Maine. These conversations are excerpts from our How I Built Resilience series, where Guy talks online with founders and entrepreneurs about how they're navigating turbulent times.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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walking distance from so much of the city, made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. Your place with all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.ca. Hey, hey, everyone and welcome to how I built this resilience edition. On these episodes, we're talking with entrepreneurs and other business leaders about how they're coping during this crazy time. And today we're going to hear from Luke Holden and Ben Kahnif, the co-founders of Luke's Lobster. We first met Luke and Ben last year in Boston when we told their story in front of a live audience. Their episode came out last November, and you can check it out if you're interested.

Anyway, since then, Luke's Lobster has gone through the many stages of a restaurant during COVID, which meant furloughing and temporarily closing more than 30 restaurants of the U.S., Taiwan, and Japan. Luke and Ben not only oversee a restaurant chain, but they also work closely with their fishermen to buy, process, and ship lobster and other seafood around the U.S. I spoke with Luke and Ben from their office, which is right by the water in Portland, Maine, so you might hear some boat engines and glass clinking in the background, but it kind of feels like you're catching lobsters with them. So when it became clear that the pandemic was really going to create some severe economic disruptions, you guys had to take some severe actions, right? I mean, you had to shut down your processing plant. You had to let go about 300 employees.

Walk us through the process of what you did. As you realized, this was going to be really severe. It was absolutely horrible. It was really March 7th that week that this kind of slammed home for us. I think we were good to act quickly, but this business, I mean, not just because my namesake is in it and my family as part of it, there is no difference or delineation between my personal and business life. So when you're faced with ultimately making that critical decisions to like save a business, it affects your family and friends in major ways. And that week was, there's

nothing like that I've ever experienced calling up some of your friends and family members and furlough terminating, reducing salary. We got super small that week. We got aligned around some strategic initiatives pretty quickly. Safety and people was always our number one priority. Moving all hourlys to unemployment and doing it quickly was intentional. We knew that there was going to be backlogs in the unemployment offices. Something like that was intentional to act quickly there for their benefit.

We also made sure that we had personal conversations. with every single one of those teammates. There was no text, there was no email, there was no untethered connection. We made sure that they understood the why behind all of these decisions and the intention behind it. And that continued. We made sure that we kept tabs and open dialogue with all of those teammates

so that we ended up shutting everything down besides one shack. And now we've got Sifu Company back up and going. We've got 12 shacks up and going. There's no way we would have been. able to do that unless we had that mentality of people first and make sure that we had those open communications to bring people back and the time was right. What did you say to an employee that you had to furlough? I mean, what was the conversation like? I mean, how did you explain that? It was tough. Transparency is one of our core brand values. We were not going to separate ourselves from any of our

core brand values during this crisis. So we were honest with them. We were in a tough spot. We're a very seasonal business to begin with. We make most of our, hey, Memorial Day to Labor Day. And this couldn't have happened at a worse time for a business like us because we're kind of at the end of our rope to begin with. We're just at the end of our reserve and just about to start building, rebuilding reserves. So when this comes and sales go from 100 down to 20% or eventually nothing, there was nothing in the kitty to help get us on the other side of us.

So we were honest about that. And we were able to have good, frank, honest conversations with our teammates. because we made sure we over-communicated in every kind of step of this, we made sure they understood what was in our heads and how we were making decisions. And I think as a result, we've always had very good relationships and trust with our teammates. So they understood that we really didn't have any other option. I'll also say, like, the thing that everyone on this team understands is that we're here for a larger community than even just the loose lobster team.

you know, we're here for a seafood industry. We're here for fishermen and truckers and people in the production facility. Ultimately, if we're not there to buy the seafood, as we've promised, come May, June, July, then the entire machine fails. And you fail that many more people. So every teammate at Luke's understands that they're part of that broader family and that for them, you know, to go on unemployment to stay safe then, actually was creating the opportunity come summer for us to continue buying

and continue that ecosystem working. Yeah, so tell me how it's working, because I know back in May you opened, you've got a processing, a lobster processing plant in Maine. That's where all of the lobster that's sold at your restaurants and that you sell to other restaurants and goes through there. It's not operating at full capacity. You've got, I think, about roughly 30 restaurants in the country and about 12, that are now open. So I'm assuming that, you know, you're not able to buy the quantities of lobster

that you had expected or hoped to buy, you know, starting in May. Is that right? It's right. So in the U.S., about 70% of the seafood is consumed within restaurants. And so when you completely take that out of the supply chain, you're left with a complete imbalance. And we knew that heading into this. So for us, we've had to pivot from selling to other restaurants and food service and casinos and cruise lines and build that grocery branded business that we had. We had to get from big unbranded commodity packs and start producing grocery branded freezer and refresh container type packages. So that was a huge pivot for us. Because obviously you can't sell to cruise lines and casinos are probably aren't buying a whole lot. as you say, restaurants are not buying a whole lot. You kind of had to shift your focus to,

like, what frozen lobster and lobster meat that you sell at grocery stores that's available for consumers to just purchase. In a nutshell, like fishermen go out and fish. We want these guys to go out and compete and earn a living. So we've had to figure out how to produce a similar amount of production at our seafood company. And even though the restaurant sales are not taking nearly as much volume as they were pre-COVID or last year, we've had to take that production and reallocate it. Yeah. I mean, I think really the silver lining here was looking at how people started behaving in their kitchens once they were locked down. You know, they weren't just starting their own sourdough. They were also starting to cook seafood a lot more than they ever

have before. You know, we noticed that there was just a new openness to trying new things. things in your home kitchen. So taking that conversation and starting it with our partners at Whole Foods, they were actually eager to help us move more seafood. And they came to us and asked how they could actually buy more lobster and how they could, you know, put inventory we would have sent to our restaurants into their seafood case or into an innovative product like a lobster cake. And so the first step was improving our grocery business and growing it. Yeah. So mid-March, it was supposed to be a huge seafood expo. It was going to happen in Boston, the North American Seafood Expo. This is a huge opportunity for you. And then I guess at the beginning of March,

a lot of the Chinese exhibitors just started pulling out. I mean, were you already starting to think about the possibility of what we're seeing today already that early? Or were you just kind of thinking, well, let's wait and see. We were fortunate and unfortunate to start to have rumblings of this and reality of this through our partners in Japan. It was pretty wild how those conversations tracked exactly how this played out in the U.S. We in the country really had that mentality that this wasn't going to happen to us. Now, you've got locations in Japan and Taiwan.

How are those locations doing? I mean, are they opened? Are they sort of operating normally in comparison to the ones in the U.S.? They're open. So there's 10 checks in Japan that are open, and they've made a lot of the similar decisions that we've seen restaurants in the U.S. do. You know, they've got some of their best and brightest, making the food and serving guests and changing their labor model

and renegotiating rents with the landlords that want to be long-term partners. But the reality is that they are highly dependent on international tourism, And there's none of that. So they're working on fraction of sales as well. You know, it's really interested to read about some kind of really creative things you did. Obviously, going to directly to consumers by packaging lobster. You're also going direct to consumer through the website. And I think I read that like some of your shacks started, you know, like when customers came to pick up meals,

they were also selling things like flour and butter and like household pantry staples, which is super cool. I mean, really creative, right? What are some other things that you've been thinking about, even tactics that you're thinking about as you move forward to kind of, you know, try and diversify your revenue streams and keep everything, you know, moving forward? I think that, you know, what you said about the direct-to-consumer e-commerce is really, you know, one of the most exciting things that's been happening here and that has happened here and that it really goes back to mid-March when we first realized we were going to, have to start shutting down shacks for a period of time that we didn't know how long it was going to be. All we knew is we need to find a way to keep buying seafood and getting seafood to people who want it. So it was actually an amazing experience. We had one of our teammates who was our culinary director named Lauren just suddenly have to start researching how to build an e-commerce

business. And, you know, that had only really been a pie in the sky hope for us before then. So she started digging into the nuts and bolts, and then Megan on our marketing team, started figuring out how you market and advertise an e-commerce business. And it was almost like me and Luke in 2009 all over again because they're in this kind of pressure cooker, don't have time, don't have experience, just need to figure it out a situation. And in seven days, they had stood up this website. It was a pretty heroic experience to be a part of. When we come back in just a moment, Luke and Ben talked about.

about Maine's seafood supply chain and how it'll be affected in the coming months. Stay with us. I'm Guy Raz, and you're listening to How I Built This Resilience Edition from NPR. Hey, welcome back to how I built this Resilience Edition. Luke Holden and Ben Conniff are not only the co-founders of Luke's Lobster, they're also the owners of a seafood processing facility that works closely with fishermen in Maine. We have had other restaurateurs and food companies on the show throughout the COVID period. We talked to Danny Meyer, you know, famously the founder of Shakeshack and Union Square Cafe, and he's sort of a lot of chefs and restaurateurs look to him. And there's no question that this has been the biggest challenge for the food and restaurant industry and easily in half a century.

Are you sort of seeing or looking out across your industry and seeing how some are dealing with this creatively? Are you sort of, are there ideas out there that you have seen that seem to be working that may work for you? Given that we're a vertically integrated seafood company, we have to look at all of our stakeholders and we've got to solve problems in our own supply chain. Again, our fishermen are, they're going to go out and fish and they need to do that to keep their livelihoods going. And then our production facility, 150 teammates there, they need those jobs. and they need them on a monthly basis. So leaning into that supply chain and saying,

okay, where are customers buying and then how do we build robust businesses around that? We are our grocery branded business, in 2009 we probably did around 200,000 units between two different skews. We'll be over a million units this year. And then that other side of the business, the e-commerce business, like bluefin tuna.

We've got boats tied up around here because there's no market for an incredible, product like bluefin tuna. So we started sell that on our e-commerce site and it's not enabled us to go say, guys, go fish, go make a paycheck. And like for us, there's so many crinkles in the seafood supply chain beyond our typical lobster, crab and shrimp species, we get an opportunity to go solve with this e-commerce direct-to-consumer model. And I guess to answer your question, it's not just looking to restaurant leaders, it's looking at leaders in direct-to-consumer, e-commerce, grocery. So there's been so many, you know,

so many resources that either we've spoken to or researched that we're sort of trying to borrow from all over the spectrum of industries at this point. So is there a glut of lobsters of seafood right now? Is there, is there an oversupply? Lobsters in particular, we've avoided a bit of a mess and well price is healthy it's not what it was last year but on the flip side yes there's a huge glut here in the state of Maine for things like oysters which are typically consumed in in restaurants and bluefin tuna which is almost exclusively served in restaurants so we feel like we've got a great opportunity to showcase and deliver on on some of the value propositions for these other wonderful species give us a sense of bet i think you said something back in may i think it was in the

Wall Street Journal, you said there's no profit-only survival at this point, you know, that there's a whole supply chain who count on on your company to pull them through. Can you sort of explain why? I mean, is that because the cruise ships and the casinos and the big restaurants are not ordering seafood that all these fishermen are going to you guys and saying, hey, like, can you help us out? Is that basically what's happening? I mean, in some ways, like for the example of this spring, we started selling debo's scallops. We'd never sold them before. But the guys that, catch our lobster at that time of year also go out and catch scallops and they didn't have a home for a lot of those scallops so they said you know I know you normally don't buy this because you don't

sell scallops in your restaurant but I need a buyer or I don't know what I'm going to do with them and I don't know how I'm going to make my living during this particular season and that was what made us realize that because we were going into people's home kitchens rather than into our shacks, which aren't built to cook a variety of items, we could now have this seasonal rotation of what fishermen were catching at its absolute best and at a time that they really needed a home for it. And yeah, those conversations really sparked the ingenuity on our side to say, we can, you know, now that we're not limited to the four walls of the Luke's Lobster Shack

in Manhattan, we can actually do. a whole variety of different things. And rather than being restricted to only reaching folks within a short radius of our shack, we can now get them to the entire country overnight. That constant interaction with fishermen and understanding what their situation was, what they needed from us, was really what sparked our idea to pivot away from only selling lobster to selling this greater variety. You know, I know that your lobster is certified sustainable,

but I guess the Marine Stewardship Council is going to revoke Maine's, the fisheries in Maine. It's going to revoke their sustainable certification, I guess because fishermen have to go out further to get to cooler oceans, cooler temperatures, to cooler waters as the ocean temperature rises. How will that impact the sustainability of what you guys do? I'll sort of just sum it up to say the MSC of Marine Stewardship Council, part of their policy is that they kind of have to follow what, you know, federal laws and courts are wrapped up in. And so there's this awkward court decision that's really not relevant to Maine fishermen because all the data and evidence shows that any issues with right whales are really not happening in Maine waters based on their migratory patterns and where their food.

is, but this certification kind of gets lost as collateral damage in an issue that's really federal as opposed to Maine-related. So it just means that we have to work that much harder to communicate the actual situation with lobster sustainability in Maine specifically because, you know, a lot of these certification bodies, they just aren't specific enough in looking at what fishery you're talking about and what issues are or aren't posed by that fishery. So, you know, it's, it wasn't exactly the problem that we needed right now in the middle of COVID. But ultimately, we know that the sustainability of, of the catch here isn't, isn't actually a problem. Here's a question from Patrice Esperant.

How has COVID shifted your approach to expansion? Because you had really ambitious plans to expand and to build more restaurants out. So is that kind of on hold for now? Yeah, as you can hear in the background, you got the bottles clanking around. We're collecting the five-cent deposits. I wouldn't say it's on hold. It's something that we're starting to get reorganized around, though. The restaurant businesses, it was tough pre-COVID.

You know, there was a lot of competition for real estate and this whole, like, Amazon effect of ultimately a lot of retail going out of business. It created more and more. competition for restaurants and more restaurants were sort of filling these real states. So the whole concept of like share of stomach was very, very competitive. So we had escalating rents and in a lot of competition. And it's horrible for the industry, but there's going to be opportunity to grow on the backside of this because there's just will be a lot more opportunity. Given all the challenges that you faced over the last six, seven months and that you will probably face for the next several months, what are some of the things you've learned

about your own leadership that you want to take with you into the business in the future when this hopefully passes. What are some of the things you've learned about how you lead that you want to continue and develop and maintain? I think for me, we've always run like a very flat organization. There's no task that's ever been too small or too big for this team. But what's been nice about this crisis is that as the team has had to really kind of come together and problem solve on a daily weekly basis and make decisions with 80% of the facts because that's all we're going to have. I've always been extremely appreciative of the team and the people here that choose to be part of this, this family business, but like how we've gotten back to our roots

around having big team meetings and making sure that any concept of like hierarchy is sort of dismantled in a way of like transparency has been something that I really hope that we maintain going forward. I guess I would say that this has really reaffirmed the importance of the core values of the business and especially, you know, our transparency and purpose because the other one is taste and that has been, you know, maintained throughout the business and always will be. But, you know, transparency, that ability to speak so directly, clearly and honestly with every person who touches this business inside and out is, I think, the number one thing that's

kept us going and that's allowed us to make the right decisions and the right pivots with the right amount of input from everyone involved. And I think really our investment in the purpose, the reason that we're here and the benefits that we're trying to create, that's really guided our decision making. And it's guided how we communicate with our guest base, which continues to grow online, even as it shrinks in person. I just firmly believe that we're seeing a consumer that is going to make their decisions more and more on what your company is doing to better the world. And I think that we need to be louder and louder about what that is because we're not looking to go back to normal. We're looking to create a new normal that's

better for everyone. And I think that, you know, this situation has really just hammered home the need for us to focus on that. Luke Holden, Ben Conn, co-founders of Luke's Lobster. guys. Thank you so much. Thanks, Guy. That's an excerpt for my conversation with Luke Holden and Ben Conniff, the co-founders of Luke's Lobster. To see our full interview, you can go to facebook.com slash how I built this. And if you want to see all of our past live interviews, you can find them there or at YouTube.com slash NPR. If you want to find out more about the How I Built This Resilience series or other virtual NPR events, you can go to nprpresents.org. And don't forget, the How I Built

this book is now available for pre-order. You can find all the details at guyroz.com or at how I built this.com. This episode was produced by Candice Limb, with help from Will Mitchell, Matt Adams, Gianna Cappadona, John Isabella, Julia Carney, Neva Grant, and Jeff Rogers. Thanks for listening. Stay safe and I'll see you back here in a few days. I'm Guy Raz and you've been listening to How I Built This.