Raising Cane’s is one of the fastest-growing fast-food chains in the world. COO AJ Kumaran spoke with WFAA about the company’s future plans.
DALLAS — When AJ Kumaran came on board at Raising Cane’s ten years ago, it didn’t look anything like the company we see today.
“When I joined, we had about 175 restaurants, about half of them franchised…in roughly 14 states,” Kumaran said.
Now, there are well over 850 stores in 40 states and five countries, and nearly all of them are company-owned.
“In this industry, it’s all about the long-term viewpoint, and it is tough to do that in a franchise business. Even if you get the best partners, they will struggle to make some of those long-term investments in the business.”
There are more Raising Cane’s in Texas than any other state, but the company has plans to expand its national and international footprint by the end of the decade.
“That means over 1600 restaurants, over 150,000 crew members strong. Our aspirations are to be a top ten US restaurant brand in sales. We’re #14 now, and by the end of the decade we’ll be there,” Kumaran said.
When the current Restaurant Support Office opened in Plano’s Legacy business park 15 years ago, about 50 people were working there. Now, nearly 500 employees show up to work every day. That’s why the company is planning to triple its available space by moving five minutes down the road.
“We just purchased our new headquarters, right here in Plano. We’re in the design phase of that building. It is roughly 400,000 square feet, which is going to be one of the largest restaurant support offices out there,” Kumaran said.
All that growth does carry some measure of risk. Restaurants can measure success by a metric called AVU, or Average Unit Volume. It’s the total sales divided by the number of units. Right now, Raising Cane’s generates the second-highest average, right behind Chick-fil-A.
The credit rating agencies give high marks to its overall financial performance while raising some concerns over using so much cash to expand. Since Cane’s is a private company, it cannot sell stock to raise cash. But Kumaran said he’s not worried.
“Obviously, we approach the debt markets to continue expanding our business. To be able to expand by 100 restaurants as is our goal every year, we need to invest in it. But our financial performance is among the best in this industry. Our Times Square location just completed its first year. It is one of the busiest quick-service restaurants in the entire world. So, I’m not at all concerned.”
Fitch Ratings also noted that “the ratings are tempered by its single-brand concept…which leaves the company more vulnerable to brand-specific weakness.” But Kumaran told WFAA, he sees Raising Cane’s singular focus on chicken fingers as a positive. “It’s a very intentional choice. Do that one thing, execute it very well,” he said.
Like every other restaurant chain in the country, Cane’s was hit by high inflation over the past few years. Kumaran said it costs more to ship its ingredients and food. “We’re in 40 states, and we have over 35 different suppliers for our products, who come from all over the country.”
The company operates more than 100 restaurants in California. When the state’s new fast-food law took effect earlier this year, it raised the minimum wage to $20 an hour. Kumaran said, “It’s a roughly 25% increase in wages. It’s impossible to soak all of that up into margins, so we try to look at it from a holistic perspective: What can we pass along to the consumer? What can’t we pass along? In this particular case, we took almost half of that in margin hit to the business, and the rest we had to pass along to the consumer.”
We asked Kumaran if it’s still affordable for average families given the hit from inflation. We took the example of a family of five, ordering two 3-finger combos and three kids meals. That would cost just over $40. He explained that, unlike some other industries, there’s little to no fat available to trim in this industry.
“If a restaurant company makes 10 cents on the dollar, that’s considered incredibly strong. Incredibly strong. We are under that. We are under that margin. The business model is razor thin.”
Kumaran said that, unlike other fast-food chains, Raising Cane’s has never relied on limited-time offers or price promotions. “We use fresh, never-frozen chicken. It’s cooked to order, so we can’t hedge and keep our prices flat for a long time. But we have no heat lamps in our restaurant, we don’t hold anything, which means you’re truly getting a product that is cooked and made ready for you. And from a value perspective, our customers rate it among the highest across the board.”
Kumaran said he believes that continued growth will allow Cane’s to expand its investment in local areas.
“In the first 25 years of the company, we were able to give back about $100 million in the community. By the end of this decade, we’re going to give an additional $100 million back to the community.”
He also reiterated the goal of opening roughly 100 more restaurants a year. “I think that’s about the ceiling we can grow right now because that allows us to internally train and develop and promote crew members into managers and leaders in the company.”
If Raising Cane’s hits its target, it would leave the company’s iconic Yellow Lab a lot higher on the fast-food pecking order.
Full one-on-one interview: