How a 25-year-old turned his 'passion project' into a global business with $30 million in sales

Why a 25-year-old quit Wall Street to pursue a passion project that's now a...

When recent college grads Luke Holden and Ben Conniff opened a hole-in-the-wall, 200-square-foot lobster shack in New York City's East Village in the fall of 2009, they were wholly unprepared.

The economy was still struggling and neither Holden, a 25-year-old banking analyst, nor Conniff, a 24-year-old freelance food writer, had any restaurant-management experience. The two had recently met through Craigslist and gave themselves a two-month timeframe to open their shack, which they dubbed "Luke's Lobster."

"We were very naive out of the gate," Holden, the company's CEO, recalls. "We were just a couple of inexperienced, hungry, can't-say-no, going-to-find-the-answer-on-Google-type individuals."

Co-founders Luke Holden and Ben Conniff on a fishing vessel off the coast of Maine.

Holden had graduated from Georgetown University in 2007 and moved to New York City to work in finance. As an analyst at Cohen and Steers Capital Advisors, he eventually earned nearly $150,000 a year in salary and bonuses. At 25, he had an extremely comfortable lifestyle — but something was missing.

"He called me one day," Holden's dad, Jeff, tells CNBC Make It, "and said, 'I'm making great money down here, I've got great friends, but I just don't like what I'm doing.'"

Holden did have an idea he was excited about: a lobster shack. Growing up in the coastal town of Cape Elizabeth, Maine, his childhood revolved around the ocean. Restless with his corporate job and nostalgic for home, Holden decided to return to his family roots. In the summer of 2009 he started searching online for a high-quality, affordable, authentic Maine lobster roll, but was disappointed with the results. They were either too expensive (in the $30 range), poorly frozen, or had too much "mayo-celery," Holden says.

"When I graduated from Georgetown, I really didn't have a clue what I wanted to do," Holden says.
Luke Holden

At the time, the only concept that came close to what he was looking for was an operation being run out of a basement in Brooklyn by another young New England-bred lobsterman, known as "Doktor Klaw." Holden saw a hole in the market. He called his dad, who had 50 years of experience as a Maine lobsterman, dealer and processor, and asked him to be a 50-50 investor in the first Luke's Lobster shack.

The elder Holden borrowed against his 401(K) while the younger tapped into savings from his banking job. By most standards, it was a modest investment. Together, the Holdens invested a total of around $45,000. According to the industry site RestaurantOwner.com, total startup costs typically range from $125,000 on the low end to $494,888 on the high end.

"I feel like I had nothing to lose," Luke, now 34, says. "My heart was 100 percent in it."

Making waves

According to a study by Cornell University, 26 percent of restaurants fail in their first year, and Luke's Lobster seemed destined to be one of those statistics. Employees handed customers food without a plate or utensils when they were low on paper products. When there weren't enough dollar bills in the cash register, cashiers distributed change in nickels. The air conditioning frequently broke, and there never seemed to be enough people on hand to run the restaurant.

The company prepares for its first store opening in the fall of 2009.
Luke's Lobster

Conniff, the company's president, says he was "running around like a chicken with my head cut off trying to get things figured out." But the high-stress environment helped the team bond, fast. Conniff and Holden took on the same jobs as their employees. Everyone at Luke's Lobster — including family members — pitched in to keep the business afloat.

When lobster was in short supply, Holden's dad would drive the meat halfway from Maine to New York City. Sometimes, he'd drive all the way, put in a 10-hour shift at the restaurant, then drive the 300-plus miles home.

Despite the chaos, customers came and returned. They were eager to try the tender Maine lobster, shrimp and crab rolls offered at a fraction of the price ($4 to $14) of those at New York City's upscale restaurants, and without the usual accompanying river of mayonnaise. The friendly, no-frills, at-times-apologetic atmosphere made customers eager to support the fledgling entrepreneurs.

"I think we got away with a lot that we would not get away with as a bigger company," says Conniff.

Luke's Lobster president Ben Conniff,  early investor Jeff Holden and CEO Luke Holden (L to R) during the early years of Luke's Lobster.
Luke's Lobster

Nearly nine years later, that lobster shack has grown into a global food brand. Today, Luke's Lobster has 29 "shacks" across the U.S., a seven-location licensing deal in Japan, a single-shack licensing deal in Taiwan, a traveling food truck, a deal selling lobster tails to Whole Foods and several partnerships with small food businesses. The company generated approximately $30 million in sales in 2017 and employs just under 500 people.

Holden and Conniff attribute much of their success to embracing risk, following their gut and being willing to accept guidance. Today, they are no longer preoccupied with managing a restaurant and keeping it stocked. With five shacks having opened in the past 10 months and more on the horizon — including the company's first west coast location opening in San Francisco this fall — there are new obstacles ahead.

Luke's Lobster added shacks in Chicago, Boston, Miami, Washington, D.C. and New York City over the past 10 months.
Luke's Lobster

"The number one thing that is challenging that we're learning is how to preserve our company culture when we go from 10 people to 300 people to some day 1,000 people," says Conniff. "If that culture goes away at any point, then that's time for us to stop growing."

A family business

After the first shack experienced higher-than-expected demand, Luke's Lobster opened a second New York City location in May of 2010. Holden quit his job in finance, taking a $30,000 annual salary to run the business. His mother cried.

"It was a tough moment for her," Holden says. "She had this, her oldest son who was supposed to be an example for his two younger brothers, wearing a suit, getting health insurance on somebody else's liability line."

Luke Holden grew up along the waters of Maine and followed his father and grandfather into the seafood business.
Luke Holden

Instead, Holden had followed in his father's and grandfather's footsteps into an industry known for its high risks and unpredictability. Holden had experienced the industry's potential to create what his father called "feast and famine" growing up, depending on the year's lobster supply and prices.

Over the past couple of years, the population and value of lobster has climbed significantly, but it fluctuates, and the Gulf of Maine Research Institute reports that warming waters will cause the area's lobster population to decline by up to 62 percent by 2050.

But Holden remains unequivocal in his passion for Luke's Lobster. "Being behind a desk in New York City just pounding away on a keyboard is not something that centers me," Holden says. "This was a complete passion project for me."

Eventually, and against his mother's wishes, Holden brought his two younger brothers, Bryan and Mike, into the business with him. Bryan now oversees the company's real estate while Mike focuses on training staff and opening new locations.

Luke Holden's office at the company's processing facility in Saco, Maine.

"I think she just kind of gave up," Holden says about his mom's initial skepticism. "I think now she's very proud of what her three boys have accomplished at Luke's."

Ocean to table

Instead of working with a middleman, Luke's Lobster purchases its lobster, shrimp and crab directly from certified, sustainable fisheries around Maine and Canada. It's the company's way of directly supporting lobstermen and ensuring a sustainably-harvested fish supply.

Modern lobster harvesters haul lobsters by hand in traps.

At the company's processing facility in Saco, Maine, approximately 32,000 pounds of lobster are cooked and prepared each day. Different parts of the lobster — claws, knuckles, bodies, legs and tails — are separated, weighed and grouped into batches according to size. The lobster is then divided into quarter-pound servings, bagged, packed and transported.

By the time the meat arrives at each of the 29 shacks across the country, it has been cut to perfection, divided into equal proportions and prepared for consumption. This highly orchestrated process helps Luke's Lobster ensure quality and cost-control at each of the company's shacks, minimizing the type of disorder that slowed the company down in its early days.

Maine is responsible for producing more than 80 percent of the lobsters in the U.S., according to analysis by Bloomberg.

Steering ahead

With a growing national and international business and a number of philanthropic initiatives, the company Holden and Conniff started nearly nine years ago looks drastically different today.

In 2016, Holden and Conniff brought in private equity investor Quilvest to help the company grow. Quilvest now controls a minority stake in the company, while Holden, Conniff, Luke's dad Jeff, and brother, Bryan, retain the majority.

"What I've tried to do is surround my team and our organization with mentors that have been there and done that," Holden says, "so that while we're going 100 miles an hour trying to do what we think is best for the business [and] for the organization, we have outside guidance."

Members of the Luke's Lobster team take part in a lobster cook-out in the summer of 2017.

Holden and Conniff remain committed to keeping Luke's Lobster largely independent, family-run and socially responsible. In January, the company became a certified B-corp, agreeing to meet rigorous standards of social and environmental performance, accountability and transparency. The status was hard-won and rare for a restaurant group. Luke's Lobster is now one of 17 restaurants to be B-corp certified, and the only seafood company.

To begin the certification process, Holden and Conniff had to convince their new investors and board it was a sound financial decision. They also had to rewrite the company's entire operating agreement.

"Figure out what centers you," Holden advises other budding entrepreneurs, "and stick to it."

Despite his growing responsibilities, Holden says the business is still as fulfilling as he hoped it might be when he quit his banking job.

"Because [Luke's Lobster] was meant to be a passion project, because it was meant to be something that was fun, it still is a passion project and it still is fun.”

Video by Mary Stevens. Additional reporting by Marguerite Ward.

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