Raising Cane's Co-CEO on price pressures: 'Chicken prices have gone up by almost 70%'

Raising Cane’s Co-CEO and COO AJ Kumaran joins Yahoo Finance's Seana Smith to discuss Hurricane Ida, the U.S. labor market, and inflation.

Video transcript

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SEANA SMITH: Aftermath of Hurricane Ida, the storm shutting down and causing significant damage to a number of businesses in the state of Louisiana. So we want to talk to one of the business owners that was directly impacted by the storm. And not only that, but what they're feeling from COVID and also just the supply constraints that they are facing.

For that, we want to bring in AJ Kumaran. He's a co-CEO and co-COO of Raining Cane's chicken fingers, based in Baton Rouge, Louisiana. And AJ, it's great to have you on. Thank so much for taking the time. I know you guys are extremely busy over the last 24 hours or so. But just give us an assessment just on what you're seeing on the ground there and how many of your restaurants have been impacted. Because as I understand, you have just over 60 restaurants in the state of Louisiana.

AJ KUMARAN: Yes, ma'am. Thanks for having us. So as you know, Todd is in Louisiana. He's actually in Baton Rouge, hunkered down, kind of helping our teams gather together and make progress on the storm. It's a crazy storm. Thankfully, it moved a little bit further east, which kind of spared our Baton Rouge office and the surrounding areas, which is where we're based out of in terms of managing that regional office, et cetera.

That said, man, New Orleans is a wreck. Over a million people don't have power. Sewage issues, lots of, I don't know when is going to get better there. All of our restaurants, they are shut down. We have a little more than 80 restaurants in the state of Louisiana and we have 40 of them, a little more than 40 of them completely shut down. We just opened three of them in Baton Rouge about an hour ago. We have about seven more coming up towards other parts of Louisiana. But like, Houma, Thibodeu, all of them that has been shut down and they have no power. It is pretty devastating stuff. It's a pretty serious storm that went through.

BRIAN CHEUNG: Hey AJ, it's Brian here. Obviously, we hope that you, your team and all the employees are safe during this scary time. But I guess when it comes to you operating down South, this is not the first time you've seen a storm like this. How do you do contingency planning when it comes to making sure that you do have your employees and everyone safe and that you're deciding which stores are open, which stores are closed? I imagine there's a lot of knowledge sharing with other businesses down there as well.

AJ KUMARAN: That's right, Brian. So, yes, we have been through Katrina, Harvey, Gustav, all of them. So you know, I want to say, it's not our first rodeo. That said, you know, we started planning as soon as we found out about it. Crew member, customer safety is our number one priority, so we focus on that. Then we start contingency planning, you know. We're not only doing this for business reasons, but it's also like some semblance of normalcy for customers who can come in, have a hot fresh meal. We try to keep our dining rooms open, et cetera.

But I'll tell you, Brian, it's hard, you know. This is the first time we're dealing with something of this magnitude in the middle of a pandemic. So pandemic adds an extra layer of complexity to it. We have over 5,000 crew members that are quarantined due to the pandemic. So it's tough to get all the crew members going, we have to keep them safe, they're masked.

Also, by the way, the communication has been pretty hard this time around. Cell phone towers, multiple of them are down. So some of the networks are completely down. So we cannot reach all our people. But we're doing all we can. So there's a group of people in Baton Rouge working from one restaurant, kind of using that as our command center driving the rest of the Louisiana business. So when it comes to opening though, we try to open as quickly and safely as we can so that we can be there for our customers. And also for our crew members to earn a paycheck. So that's what we try to do.

SEANA SMITH: And AJ, speaking of reopening restaurants and opening new locations, I was going through some of your notes here. You're aggressively expanding. You hope to add 600 locations by this fall. Right now, you just have over 560. Adding 10,000 new jobs. How are you doing that in this environment? You just laid out some of the challenges that your company is facing right now, so how are you attaining some of those goals?

AJ KUMARAN: Unprecedented times, right? So you know, it's very tough staffing market. We've created over 10,000 jobs this year, as you mentioned. We are opening about 85 restaurants this year, about 35 to 40 more to come for the balance of this year. We will have a little more than 600 restaurants by the fall of this year. And we just celebrated our 25th anniversary a couple of days ago.

You know, Seana, one of the most important thing is, our culture is rooted in appreciation from day one when Todd opened the first restaurant at the mothership. So that culture truly helps. So even in these challenging times, crew members are not only looking for a financial proposition, they're looking for a place where they're cared for, loved, respected, and also they can grow their careers. So thankfully, we can offer all of that.

With the growth that we have, a lot of our crew members grow into managers, going to different jobs in the restaurant support office, et cetera, et cetera. And we have tons of those success stories. And we also believe in sharing in our success with them. For example, this year, the business has been really good. And we were able to share almost $80 million in thank you bonuses to our crew members. And they see that. They see that we share in our success.

We also announced our Millionaire Program with our restaurant partners in the beginning of this pandemic. So that's attracting great talent. So it is tough out there, but I will say, we're doing better than most others. And we're very thankful for that, you know.

BRIAN CHEUNG: Now we've heard anecdotes about the difficulty in keeping your prices low, especially for a brand of your type. How do you manage price pressures right now not just on the labor side? You talked about the efforts to try to retain talent. But also on the material side, because we know that there's been chicken price inflation over the course of 2021 as well.

AJ KUMARAN: It has been very hard, Brian. Honestly, over the course of last three months, are chicken prices have gone up almost by 70%. It is going to be a major financial impact this year. And look, we cannot just pass it along to the customer right away like our suppliers do often to kind of cover their costs. So you know, it's a financial impact to our business, it has a serious impact. And in fact, just looking over financials for the balance of this year, well over $50 million that we will have extra cost in chicken that is coming through our back doors.

That said, we're fortunate that we have supply. We're also fortunate to have great relationship with our suppliers, who are supplying our restaurants. Many restaurants even struggle with that. This is like I was mentioning earlier, unprecedented times. Supply shortage, pandemic, now a hurricane blowing through, and staffing is a huge concern. So it is something that we've never seen.

SEANA SMITH: AJ, talking about something you haven't seen before, I'm sure that running a business over the last 12 or 18 months has certainly been something that business school doesn't prepare you for, life almost doesn't really prepare you for something like this. But what has been the biggest challenge or the biggest, I guess obstacle that you have had to face as a leader in your company and trying to navigate so many uncertainties at one time?

AJ KUMARAN: You're right. This is not taught in any business school. This is the best MBA one could go through. Look, none of us are prepared for it, you know. I don't want to use the word shooting from the hip, but the right word is being very, very nimble. I will tell you, the biggest thing I've been surprised by, sort of has been a learning for me, is how quickly everyone can get the matter and move ahead with the program. If you communicate really well, if you keep the right intention in mind, and if you keep everybody aligned in the same direction, how quickly that turns into action. It's been pretty inspiring for us to watch.

You know, we were rated number one in safety precautions for all across the entire restaurant industry last year in the survey. And that's not something we went after and chased after. It's all because of the communication protocols we manage, and it was all about remote management. We couldn't even go into restaurants. But crew members followed it. Crew members followed to the T.

We used some advanced platforms, like camera tracking so that we can quarantine crew members to keep them safe and healthy. All of that is paying off and adding up. I'll surely take that learning into the future on making sure communication is number one, clear communication is ultimate priority, and it does wonders for the business. Not that it's new science, not that it's new magic, but it is a reinforcement of what you always talk about.