During periods of economic downturn, it’s very easy for small business owners to get trapped in survival mode, where they are willing to do anything in order to keep their business afloat. But while there will inevitably be some sacrifices that you’ll need to make during these challenging times, they should never come at the expense of your core values. In this episode, John Aidukonis and Gene Marks along with Luke’s Lobster founder, Luke Holden, discuss the importance of core values and how small business owners can uphold them even in the midst of an economic crisis.
0:16—Today’s Topic: How Can Business Owners Stick to Their Core Values during Times of Economic Crisis?
2:09—Times of crisis can often give birth to the best business ideas. Similarly, they can also force businesses to adapt or branch out in ways that they didn’t think possible.
4:56—Because of the high unemployment rates during periods of economic downturn, small business owners have more access to a bigger talent pool.
5:49—The most successful small businesses are those whose core values really resonate with their client base. In the case of Luke’s Lobster, their customers appreciated how the restaurant created a market for other struggling businesses.
7:57—The three main core values that have enabled Luke’s Lobster to thrive are taste, transparency and purpose. “Taste” refers to the quality and integrity of their products. “Transparency” describes their dedication to make decisions that benefit all members of their business. “Purpose” is their overall mission beyond their primary business objective.
13:13—One of the benefits of downsizing during difficult times is that it forces business owners to really streamline their operations for optimal productivity.
14:05—Transparency with your employees is extremely important during crisis periods because it gives them enough time to get their affairs in order.
18:05—Don’t be afraid to seek federal support if your small business is struggling during this time.
19:30—If you run a restaurant, you should apply to the Restaurant Revitalization Fund. This program offers grants of up to $10 million based on whatever your shortfall is between 2019 and 2020.
20:44—Regardless of how bleak your circumstances are, never deviate from your core brand values.
The views and opinions expressed on this podcast are for informational purposes only, and solely those of the podcast participants, contributors, and guests, and do not constitute an endorsement by or necessarily represent the views of The Hartford or its affiliates.
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Jon: Good morning everybody, and thank you for joining us for another episode of Small Biz Ahead, the small business podcast presented by The Hartford. My name is Jon Aidukonis and I’m joined by my cohost Gene Marks, as well as a very special guest Luke Holden of Luke’s Lobster.
Gene: We’re both happy to be here, to talk with you, Jon. For all of you guys listening right now, Jon is actually calling from a very secret mine in the middle of Colorado. We can’t tell you where he is, but that’s why he sounds the way he does. Actually I’m just kidding, he’s on a mobile phone. We want to get this done, and get this done timely so bear with us for the mobile phone. But, I think we can certainly make you out pretty well, Jon.
Jon: Awesome, thanks Gene. And yes, it’s one of the big things that we’ve all experienced the last year, is the joys of more frequent technical difficulties in a remote world.
Gene: The internet works except when it doesn’t.
Jon: It’s very, very true.
Jon: Luke, super excited to have you here today. I don’t know how much background you have on Gene and I, but before I made the jump into insurance, I actually grew up in my career in restaurants in New England. Excited to connect with someone else in that space, and also a former New Yorker who came back to New England. Excited to hear a little bit about your journey, here.
Luke: That’s wonderful. Again, I appreciate you having me on the podcast today, and allowing me the opportunity to tell my story.
Jon: Oh anytime, yeah. It’s been a topic this year, how restaurants have fared. I think a lot of attention, and rightly so, focused on how we help get our community back through hopefully the post-COVID era and back to normal, and hopefully better.
Jon: Well, a little bit about yours. You’re entering about, what, year 12 of business, you opened your first location in 2009?
Luke: That’s correct.
Jon: Yeah, congratulations. That’s a success in the restaurant world. I think what’s really interesting, if I have a right and keep me honest, you started your restaurant coming off of a career in Wall Street, so really this isn’t the first time you faced financial crisis or adaptation. Your concept was born in that environment, too.
Luke: I graduated back in 2007, and really didn’t know what I wanted to do. I followed a lot of my friends to Wall Street, and specifically investment banking. I remember the first couple of months, being invited to some of these closing dinners that had these real thick cuts of bacon, and enormous magnum bottles of wine. I went to New York City with probably $1500 of credit card debt and a friend that allowed me to sleep on a Futon until I could get my own place, because I didn’t have any money for a deposit. That bottle of wine was looking at me, and it was three times … A bottle of wine would have cleared my debt and then some.
Luke: And, fast forward six months, my desk was … I lost 70% of my teammates, and it seemed like overnight. That investment banking industry and the amount of positivity and the type of deals that were getting done quickly transitioned to more restructurings with a third of the team. And certainly, at a very early stage of my career, saw how quickly things can go from good to bad.
Gene: Hey Luke, did you jump right from Wall Street into starting up this business?
Luke: It wasn’t a typical entrepreneurial jump off a cliff type transition. I built a business plan for Luke’s Lobster that I ultimately shared with a handful of mentors. And, refined it on paper, ultimately got it to the point where I had that conviction that hey, this is worth my time and worth all of my savings, which at the time was $15,000. My father co-funded this, with $15,000 that he borrowed against his 401K. What we ended up doing was finding a partner to run the day-to-day, over Craig’s List of all places. My partner, my co-founder Ben, ran the business for the first six months until I said, “Hey, this can be more than just a passion project, this can be a passion project and a career.” That’s when I gave my several month notice to the bank that I was going to be leaving to join Luke’s full-time, when we opened the second shack in the Upper East Side.
Gene: Tell me more about this story. So you open up a second location in New York. How many locations do you have now?
Luke: Right now, we’ve got 17 shacks open in the US. We’ve definitely lost a few shacks as a result of the pandemic. We’ve had to transition the business quite dramatically. In 2009, opening in the East Village.
Luke: Quick timeline here. October 1st, 2009, we opened the first Luke’s, it was just a smashing success from day one, just queues around the block. We were having fun, and that was most important. We were making money, we were having fun, and had just great access to talent. During the recession, ultimately it’s typically pretty easy to hire really great people and we had access to that, we had access to great people. Ultimately, I think people liked the story of Wall Street to Main Street, it’s something that people can identify with. The lobster industry was taking a beating at the time, there was record low prices and we were able to pass some of that value that we were creating at the restaurant back to the fisherman, pay them a little bit more. But also, just create a marketplace for the product so that they could keep fishing. That resonated with guests, so that helped propel us to open the second on, May 2010.
Luke: My brother, who was working as a consultant for IBM said, “Hey, this is cool. I want to be part of the family business,” so he joined that summer, helped open up our third shack which was on the Upper West Side, we did that December 2010. Then from there, he was everything from selecting the project to building it out, to hiring the team, to managing it for those first couple months. And then, he went down to DC, brought another partner into the business, and they parallel built out the DC market. Those first couple years were just absolutely wild. They were a lot of fun, we were learning at the rate of water coming out the end of a firehouse.
Luke: In a lot of ways, when we were sitting around the table over the last six to 12 months, and we were talking about how are we going to tackle this challenge as a result of the pandemic, how are we going to tackle that challenge, it reminded us so much of those early days around not having the right experience, not having the right answer, not having enough resources. But ultimately, just sticking to the reasons for why you started this business, sticking to your core brand values, and just finding a way. I’m definitely not going to say that the last six to 12 months were as fun as those first couple of years, but I will say that there was moments where you had these euphoric small wins that were reinvigorating at points in time, despite some of just the real low lows that we’ve experienced over the last six to 12 months. It’s been really a pretty amazing journey.
Jon: Luke, it’s interesting you say that, because our category, we’re in the business of risk. I think we share on our side, a belief that one of the biggest risks a small business owner takes is putting their idea into the world and really having that faith that they have something that’s going to serve their community well. It feels like, even though you didn’t have the traditional entrepreneurial moment where, “I’m going to do this starting today.” That seems core to your experience.
Jon: I’m wondering, because you do approach your business from this planful lens, there’s a lot behind it so it’s more than just retail or a restaurant facility. You started to hit on this a little bit, where you’re really integrated not only into your vertical, you have a lot of connections in the value chain of, I’m going to say this wrong, but fishery, or seafood. But, you’ve also built that into your business model, where you have an end-to-end view on your product. And similarly, it seems not only just in your category community, but being that the corporate position is also really important to you, and I’m curious about how much of that was something intended when you started, and how much of that came as a result of business learning and optimization, and seeing new opportunity?
Luke: It’s a fantastic question, and the hallmark point is that nothing has changed over the last 12 years. The definition, the level of specificity and the professionalism has just dramatically changed. So how does that manifest? Our brand mission is to become the world’s most respected seafood brand. Now we can say that, we can articulate that in one sentence to someone that asks. Day one it was treat people the way you’d like to be treated, and serve the best damn lobster roll at the best price.
Luke: And really, how that has transformed over the last 12 years is in the core brand values such as taste, transparency and purpose. When we think about taste, we think about simple preparation, we think about how the seafood is meticulously handled and traced back to sustainable waters, and sustainable fishing practices, and best in world ingredients. When we think about transparency, it’s we’re a stakeholder model versus a shareholder model. We constantly look at the decisions we make and say, “How does this benefit? Where’s the win-win for all of our stakeholders?” We don’t believe in the importance of middlemen, we try and own as much of the supply chain as possible so we can offer the most value to our stakeholders. Again, those are fishermen, our teammates, our suppliers or our guests.
Luke: And then, another piece of transparency for us that’s important is this concept of the Maine way. What the Maine way means to me, or how it comes to life is if you’re walking around any one of the traditional Maine towns, it’s the subtleties of please and thank you, somebody holding the door, being able to walk across the street on a crosswalk without having to hit the button and wait for the bird to start chirping. It’s the subtlety of people looking out for other people and being hospitable, so we really try and bring that to life in all of the touchpoints in, now, our omnichannel business. Omnichannel being through shacks, and through our online market which is our eCommerce business, and through our branded grocery CPG business.
Luke: So then, our third core brand value is purpose, which you hit on a little bit. We became a certified B-corp back in 2018. The significance of that was we’ve always said we like doing things the right way, we like being viewed as a sustainable business. But, what’s really impactful about B-corp certification is it’s basically a rubric, it’s a measuring stick to say, “How are you doing? Where do you have opportunity to grow, to become a more sustainable benefit type corporation?” And, we put KPIs in place to, ultimately, increase our eligibility, our score every year. That manifests in us being an icon of responsibility for good business practices, and that’s important to us. We started something called a Keeper Fund, where we get the opportunity to go support coastal communities and environment, and we really try to focus on those communities where we’re actively buying lobster, and crab, and halibut, blue fin tuna, etc.
Luke: It’s the same saying, but very different in that these things were all important to us on day one, we just really didn’t have the business acumen how to define them, or how to verbalize them. It’s been really fun, as myself and my team have been able to, and we have so much more work to do, but to bring to life what we were all thinking and unsure how to say on day one.
Jon: Right. What’s interesting, and I think you hit on this a little bit in your last statement, too, is the pandemic or the response to it, forced everyone to think differently and make these big pivots. I’m curious about how much of the change or optimization of your business model really came about based in these brand pillars that you had. So when you think about this dramatic, and pretty fast moving shutdown, and being from New England and the mid-Atlantic, I think we saw that happen really quickly and to some level of severity. How did you react? And, how were you able to still maintain enough profit to stay afloat, and still stay true to who you are? Which, so much of it sounds like giving back, or I think that would probably come at some sort of a premium.
Luke: Two examples come to mind. I shared that one of our core brand values is transparency. What was really important to us, because at one point in time I was proudly writing as many as 500 checks … less than that. Let’s say, somewhere around 400 checks a week. And at the height of the pandemic we were probably 15 to 20 checks a week, so an enormous effort to get small and get small fast.
Luke: When we thought about our core brand values and transparency being one of them, we weren’t alone in how we had to act to stay alive, especially in those markets where we either were forced to or proactively shut down business, to just prioritize safety. We said, “Hey, how would you want to be treated in this type of environment and if you were on the other end of one of those phone calls?” We made sure that every single one of those layoffs was as transparent as possible. It was not a text message, it was not an email, it was not no communication, which we heard over and over again was the norm. We made sure that everybody had multiple touchpoints, and that they got as much support as we could possibly offer to get in unemployment queues and understand the complexity of that.
Luke: We were also thoughtful in how we timed these layoffs, too. It was pretty easy to project that unemployment offices were going to get completely inundated, so we proactively shut down all of the shacks besides one a couple of weeks before it really became mandated in a lot of markets. Again, priority one was we just don’t know what the heck’s going on so let’s prioritize safety, let’s make sure that safety is also balanced with financial security. Where we had the opportunity to get people into unemployment before the queues really started, that was really important to us. That was one example.
Luke: The second is we actually formed a partnership with the Island Institute, which is a wonderful non-profit organization that’s core mission is to build resilient leadership within coastal communities up here in Maine. I’ve had the privilege of serving on the board of trustees for several years. So Luke’s Lobster and Island Institute came together and put together a bankable model where we were able to go raise money through the non-profit to keep fisherman fishing. There was a bunch of disruption, especially in small communities that were dependent on the food service, and that were very micro in size, and we were able to raise non-profit dollars that enabled us to keep those fisherman fishing and build a world class online market, or eCommerce business.
Luke: That was a really, really neat position to be in, because here we are, our business, our world is burning. But, we were able to leverage all of the good will and history that we had created as a brand over the last 11 years to partner with a non-profit and find a donor that was willing to put up $2.5 million to help build this eCommerce platform with the intention of just building resiliency into the seafood supply chain up here in Maine. The fact that we got to lead that was really, really cool.
Luke: It’s been a real challenge, certainly the most challenging year of my life, of my professional career. But, I think we stuck to our core brand values during the good decisions and the tough decisions, and there was moments where we got rewarded for prior behavior and that felt good.
Gene: Luke, looking back on 2020, how was the year financially? Did you make money, did you lose a lot of money? And now, as we’re emerging from COVID and the pandemic, what how does this year ahead look to you?
Luke: We got crushed in 2020, financially, just absolutely buried. But, the Federal government has been supportive of restaurant groups, and restaurant groups of our size, so that’s been helpful. I’m cautiously optimistic, I think there’s a lot of pent up demand to just get out and be with people, and eat fine food, and start to get some sense of normalcy. But while I believe that there is that pent up demand, I don’t know how it actually manifests in a lot of the markets that we do business in.
Luke: New York is our largest market, Boston probably our second, and we just depend so heavily on business traffic, and office towers being full and bustling, and international and domestic tourism. I don’t know when offices are going to fill back up, I don’t know when international tourism is going to reopen, so I think it’s going to be a staged reopening. Hopefully, when people think about celebrating or treating themselves, they think of Luke’s.
Gene: Are you planning on applying to the Restaurant Revitalization Fund? I’m assuming you’re aware of it, it’s part of the stimulus bill that recently passed.
Luke: Yes we are. Yeah. Very few details have been … It seems like just the tent pole details have been published.
Luke: So the devil will definitely be in the detail. It seems like if there’s enough money to go around, it seems like just another wonderful opportunity for support.
Gene: Just for our listeners, I just want to make sure if you’re in the restaurant business, and that’s restaurant and bar business, the March stimulus bill has something called the Restaurant Revitalization Fund. You should be checking the SBA’s website every day, sba.gov. It essentially, Luke, you compare your 2020 revenues with your 2019 revenues, and whatever the shortfall is, you’ll get a grant for that money, up to 10 million bucks. You have to spend the money on certain things, which is pretty much everything, payroll, and operations, and all of that. There’s some reporting requirements. Just saying to all of our listeners who are in the restaurant business, it is I think a vital, vital piece of stimulus that could provide great relief while we try to get back on our feet in 2021.
Gene: Back to you, Jon.
Jon: Yeah. Luke, I know we’re just about time. If you were going to say the main lesson that you learned from 2020 for our fellow business owners, what you would you want them to know? Or, if you could go back to March of last year, what would you tell yourself?
Gene: Stick to tuna fish.
Luke: The bluefin tuna market was very repressed, there was a lot of good quality bluefin floating around.
Luke: I believe what everyone should ultimately not deviate from is what their North Star is, what their core brand values are. If you understood what your North Star, what your core brand values were pre-pandemic, you really need to stay true to that because, often, crises can define, unfortunately, who we are as leaders, who we are as people, who we are as businesses. I was just very, very proud to represent a brand and a group of amazing people that found ways to make sacrifices and take risk, to just better the environment that they were in, better the community they were in, and ultimately also just compete to keep Luke’s alive. I’ll be forever grateful for that. I’ve always been a team first leader, and this year has just been remarkable. I’ve got nothing but love and lifelong appreciation for a handful of my teammates.
Jon: That’s awesome. It’s been a pleasure speaking to you, and I think your story’s so impressive. You’re such a good example of doing good by doing the right thing, and I’m happy that’s been able to payoff for you.
Jon: On a selfish note, I did run your name by a friend who’s a food writer. I’m just like, “The guy is credible, his food’s really good.” I know Gene had some questions, too. Before we let you go, we have to ask probably the most critical question which is, when we think about a lobster roll, are we thinking hot with butter or cold with mayonnaise?
Gene: I think lobster rolls, I just always go right for the lobster. I don’t know. But Luke, you offer us your opinions.
Luke: We make all our lobster rolls from scratch. I really prefer mine in a real minimalist stage, where it’s a fresh bun, toasted with butter on each side, a quarter pound of fresh lobster meat. No mayonnaise for me, and our secret seasoning and a little lemon butter on top. I view the bun, and the butter, and the seasoning just as a vehicle to deliver that super delicious lobster meat, and that’s how I prefer it.
Gene: Jon. Jon, you should know, I was telling Luke before we even started recording that I’m a big fan of his location. He’s got a location right near where I live and I’ve been there a bunch of times, it’s awesome. That advice is really helpful for the next time I visit.
Jon: I agree. I’ve been through East Village one, too, when I used to live downtown. I can’t thank you enough for joining us today, Luke. This was an absolute pleasure. I think you shared a lot of good insight, and very much appreciate your time.
Luke: Thank you for having me, and look forward to listening to the podcast.
Gene: Thanks, Luke.
Jon: All right, thanks everybody and thanks again for listening to Small Biz Ahead, the small business podcast presented by The Hartford. You can catch us on sba.thehartford.com, or stream us wherever you get your podcasts. Have a good one.
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