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In the mid-1990s, Todd Graves and his friend, Craig Silvey, wrote a business plan for a fast-food restaurant that sold only fried chicken tenders. Silvey’s professor at Louisiana State University gave it the lowest grade in the class.

But Graves didn’t let the criticism stop him.

He worked to raise his own funds and eventually opened his chicken-tender restaurant, Raising Cane’s, in 1996.

Cane’s now has more than 800 restaurants in the US and internationally, with locations in over 40 states. The chain, whose loyal fans are known as “Canaics,” made $2.3 billion in revenue during the first half of 2024, Bloomberg reported.

As founder, Graves has close to a 90% stake in the company. Forbes reported his estimated net worth is $9.5 billion as of October 18, 2024.

Here’s how Graves turned a bad grade into a billion-dollar business.

Chipotle has no immediate plans to raise menu prices this year. | Photo: Shutterstock.

Executives placed blame for the negative turn of Chipotle’s same-store sales in the first quarter squarely on the consumer.

In other words, Chipotle said, It’s not us. It’s them.

But does the 0.4% decline in same-store sales for the March 31-ended quarter—which included a 2.3% decline in traffic—indicate any problem with Chipotle?

Outside data indicates consumers are slowing spending. But Chipotle’s perception of value could also be a factor in the brand’s sales trend downturn.

In explaining earnings on Wednesday, Chipotle CEO Scott Boatwright said the chain asked guests in a recent visitation survey why they weren’t spending as much.

“It was all around this idea of saving money, the economic uncertainty,” he said. “They’re eating at home more frequently than they’re eating out.”

Boatwright reiterated that Chipotle’s value perception remains a competitive advantage.

The average cost of a chicken bowl or burrito is still under $10, which is about 20% to 30% below comparable fast-casual competitors, and can be as much as 50% below those peers in some markets, he said.

“What you get for this price is hand-crafted, high-quality culinary in abundance at a speed in which you can’t find anywhere else,” said Boatwright. “This is resonating with our guests, and we can see it in our brand tracker, which continues to gain momentum. In fact, our latest survey shows Chipotle ranks top three in a record 15 perceptual drivers and leads in key areas, including good amount of food for your money, and quality of ingredients.”

Outside data, however, indicates that consumers may be seeing things a bit differently.

Consumer survey data from market research firm Technomic, which is a sister brand to Restaurant Business, has Chipotle ranking well below fast-casual peers like Sweetgreen, Cava and Raising Cane’s on aspects like affordability, portion sizes for the price paid, and value through high-quality menu items.

And on the aspect of “value through quick, high-quality service,” Chipotle ranked dead last among its peers.

“I have never seen them being a top performer in the way [Boatwright] is talking about,” said Robert Byrne, Technomic’s senior director, consumer research. “I don’t know that they spend enough time looking in a mirror and seeing what they really rate.”

Technomic tracks 108 limited-service brands, including quick service and fast casual, looking at consumer surveys that go back years. Byrne said Chipotle consistently scores in the bottom 100 or more for a lot of the attributes that measure value specifically.

It’s true that a chicken bowl or burrito can be under $10 in most markets, Byrne said. But most people don’t just choose a bowl or burrito. Often there’s a drink and additional sides, like guacamole, which can increase the price significantly.

“If they put in double chicken, or extra steak, that can make it a $20 burrito,” said Byrne.

What ends up happening is that one of the most important measures of loyalty—the intent to return—is also low for Chipotle, relative to the brand’s peers.

“Their top box score, people who strongly agree that they intend to return, is 106 out of 108,” Byrne said.

Chipotle has been battling perceptions about value for some time.

During the post-pandemic era of rising food and labor costs, Chipotle (and most restaurants) raised menu prices, and former CEO Brian Niccol repeatedly touted the brand’s pricing power.

Last spring, the chain came under attack by hordes on TikTok and other platforms who insisted Chipotle was skimping on portion sizes, even as those menu prices climbed.

And Chipotle responded. Last year, the chain launched a program to retrain team members to ensure portions would be generous, a move that continues to raise food costs. Company officials say that has fixed the portion problem.

Chipotle has also put a lid on price increases. This year, Boatwright said there are no current plans to raise menu prices, though they remain up about 2% over last year from earlier hikes.

Predicting that same-store sales will turn positive in the second half of the year, Chipotle is also planning to introduce an additional limited-time offer this summer—which could be either a side item or a dip—supported by advertising, which would create some news to juice traffic.

Typically, Chipotle has introduced limited-time offers in the spring and fall, and those promotions can be highly effective in driving traffic. This would add a third event to the marketing lineup.

Beginning in May and continuing through the summer, Chipotle plans to increase its marketing spend “to reach more guests and meet them where they are,” said Boatwright. “This will include menu innovation around the possible side or dip, increasing marketing in our digital and social channels, and leveraging our rewards platform to target specific customer cohorts and group occasions.”

That was good news for Wall Street analysts who follow the brand.

Peter Saleh, managing director of BTIG and restaurant analyst, said in a report on Thursday that he was encouraged by news of a third LTO coming at Chipotle.

Saleh, however, said he thought Chipotle’s loss in sales could be an indication of the fast-casual chain losing market share, saying guests could be trading down to quick-service chains like McDonald’s, which he said had a very strong April, as well as Taco Bell, which is “marching toward 8% comps.”

Jeffrey Bernstein of Barclays Capital argued in a report that traffic is likely to remain challenged in the second half of the year.

In addition, Bernstein expects the impact of tariffs to impact Chipotle’s planned expansion, increasing building costs. The chain plans to add 315 to 345 units this year.

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Todd Graves, co-founder of the chicken tender Raising Cane’s restaurant empire, managed to convert a poor college grade into a multi-billion-dollar thriving business.

His secret?

“I believe God made me good at chicken fingers to help people,” he’s said. “I think God makes us all good at what we’re doing, ultimately, to help people.”

A devout Christian, Graves calls himself, “CEO, Fry Cook, and Cashier of Raising Cane’s Chicken Fingers.”

As a student at Louisianna State University in the early 1990s, Graves and classmate Craig Silvey submitted a business plan in a class detailing their idea for a singularly focused chicken tender business. The professor wasn’t impressed, accused them of not doing enough research, and gave them a B- for the paper – the lowest in the class.

Only Graves had done the work.

“I’d basically written the Bible on a chicken finger restaurant,” he told Inc. “I even knew what our aprons would cost.”

Despite the negative feedback from his professor, Graves was determined to make the mere idea a reality. Banks didn’t seem to believe in the idea either. So after graduation, Todd took a job as a boilermaker at an oil refinery – and then headed to Alaska to fish for salmon. Both roles were tons of work and highly lucrative, allowing the budding entrepreneur to sock away money he’d use to open the chicken business.

Moving back to Louisiana, Todd and Craig opened the first “Raising Cane’s” just outside the entrance of LSU in Baton Rouge. He named the restaurant after his yellow Labrador Retriever, “Cane.”

Like many small business owners, Cane’s grew but struggled. Hurricane Katrina almost put the company under, both literally and figuratively. But they were able to bounce back and actually gained market share as other businesses remained closed. The COVID pandemic was another struggle – and opportunity for growth.

Looking back, Todd Graves credits his attitude of seeing his work as an opportunity to serve others for helping the company experience such growth.

In fact, Graves has established an entire department within the company called “Cane’s Love” as a means by which to express appreciation to their employees They send out over 4,000 thank you cards per week, have a generous benevolence fund for special needs, and provide tuition assistance.

Scripture has a lot to say about our work.

“Commit your work to the Lord, and your plans will be established” (Proverbs 16:3) urged Solomon. “Whatever you do, work heartily, as for the Lord and not for men,” wrote the apostle Paul (Col. 3:23).

Gallup has recently found that only 23% of the global workforce is what they term “engaged.” Most employees aren’t quitting or finding other employment – they’re simply just doing enough to get by and then go and collect their paycheck.

It might seem as though the God of the universe has more important things than to specially gift a guy on how best to prepare and sell chicken fingers. But it’s in the details of life, and using the hands and feet of His people, where the Lord often accomplishes His purposes.

Every Raising Cane’s employee receives a hard hat on their first anniversary. It’s a nod to Todd’s work as a boiler maker, the half of the hustle that helped him raise the dollars to launch the first store. The helmet also serves as a reminder that God’s work can sometimes be hard even as we help others.

Image credit: Todd Graves/Instagram

The U.S. already has tariffs on a few sectors. It hasn’t gone that great

toggle caption Jeff Kowalsky/AFP

For decades, the United States has generally kept tariffs low and promoted free trade, but a few domestic industries have long been protected by import taxes and other trade barriers.

Now, as President Trump prepares to announce another big round of tariffs, these sheltered American industries offer clues about how those import taxes could work out for the rest of the country.

Trade barriers can prop up domestic industries. But they also raise prices, distort markets and leave the U.S. vulnerable when home-grown supplies run short. Here are three examples of how protectionist policies can lead to unintended consequences.

The not so sweet tax on sugar

For most of its history, the U.S. government has taken steps to support the home-grown sugar industry. The current sugar program was established in 1981, but its roots go back even farther — to the Cuban Revolution.

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“Fidel Castro came in and took over,” says Wes Peterson, an economist at the University of Nebraska at Lincoln. “And we cut all of our relations from Cuba,” a major sugar supplier at the time.

toggle caption Keystone/Getty Images/Hulton Archive

To encourage more domestic sugar production, the government imposed strict limits on sugar imports. As a result, Americans now pay almost twice as much for sugar as people elsewhere around the world.

The absolute cost is still fairly low — about 38 cents a pound last year — so for most people, the trade barrier is easily overlooked.

“If you go the supermarket and buy five pounds of sugar, this is not going to break your food budget,” Peterson says. “But if you’re producing candy and your main ingredient is sugar, this is a big deal.”

Searching for cheaper sugar elsewhere

Just ask Kirk Vashaw, CEO of the Spangler Candy company in Bryan, Ohio.

“It was founded by my great-grandfather in 1906,” Vashaw says. “Dum-Dums is our flagship brand. We’re the only candy cane manufacturer in the United States.”

Sugar is the main ingredient in lollipops and candy canes, accounting for more than half the cost. So most of Vashaw’s competitors have left the U.S. in search of cheaper sugar elsewhere. He understands that pressure.

toggle caption Two Hearts Collective and Spangler Candy

“Chicago used to be the candy capital of the United States, and it’s not any more. It’s been hollowed out,” Vashaw says. “If we were a public company, we would get closed down tomorrow and moved. But we’re just doing our best to maintain our family business here in Bryan and support the community.”

Vashaw’s company supports more than 500 employees in Ohio, not to mention businesses that supply his machinery, packaging, and lollipop sticks — all of whom would likely feel more secure if sugar were cheaper in the U.S.

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Customers who use sugar — meaning most Americans — far outnumber domestic sugar producers. But sugar producers still have a lot of political clout.

“It’s a lot easier to organize to lobby the government if you’re a fairly small, concentrated industry than if you’re a large, diverse group of people like consumers,” Peterson says. “Consumers always have a hard time getting organized whereas the producers are often very, very effective.”

Policies that protect the domestic sugar industry have even outlasted Fidel Castro.

“One of the real problems with tariffs is that once they’re in place, it’s very hard to get rid of them, because you generate all these vested interests who want to maintain their protection,” Peterson says.

The ‘chicken tax’ on pickup trucks

Tariffs and other trade barriers often outlive their original purpose. Back in the 1960s, for example, the U.S. was unhappy with a German tax on imported chicken, so in retaliation, policymakers imposed a 25% tariff on all imported pickup trucks.

That pickup truck tariff is still in place more than 50 years later. Until this week, it was ten times the tax on imported cars.

As a result, domestic carmakers have focused on building big pickup trucks that don’t face foreign competition, while largely ignoring the more hotly contested market for sedans.

“This is one of the things that tariffs do: they distort markets,” says Eugenio Aleman, chief economist at Raymond James, a financial services firm. “The distortion that has been created by this 25% tariff on light trucks is that the U.S. auto industry doesn’t want to produce smaller, cheaper cars.”

Businesses that benefit from protectionist policies often have less incentive to invest, invent and compete on the world stage. While building big pickup trucks has been very profitable for U.S. automakers here at home, there’s not much market for those vehicles elsewhere around the world.

“Have you seen the roads in Europe?” Aleman says with a chuckle. “These are very old cities where American cars cannot turn the corner because they are so big that it’s impossible.”

toggle caption Brandon Bell/Getty Images/Getty Images North America

Babying the formula makers

Tariffs aren’t the only way to restrict imports. Government regulations and “Buy American” programs can have a similar effect.

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The U.S. charges a 17% tariff on imported baby formula, but nutritional labeling requirements and a subsidized program for low-income families also serve to limit foreign competition.

The government’s Special Supplemental Nutrition Program for Women, Infants and Children (WIC) buys about half the baby formula in the U.S., awarding regional monopolies to a handful of large suppliers.

“The thing that really complicates it and would make it really hard for even a U.S. producer who’s small to crack into the market is the WIC program,” says Mary Sullivan, a visiting scholar at the Regulatory Studies Center at George Washington University.

That proved to be a liability in 2022, when an Abbott factory in Sturgis, Mich. that supplied about 20% of the nation’s baby formula was shut down due to contamination. Nervous parents around the country were suddenly faced with empty store shelves.

Eventually, the shortage was relieved with the help of imported baby formula, but only after a months-long delay while government restrictions were relaxed.

It’s a reminder that sometimes the most reliable supply chain is not necessarily home-grown.

If you spend too much time in the tech/venture capital echo chamber, you may think that an entrepreneur’s only path to becoming rich is to raise venture funding, scale a tech startup to tens of millions in revenue, and sell to a big tech company. While, yes, this is one way to get rich, and it’s a common way to get rich in Silicon Valley, it’s far from the only way to get rich from an entrepreneurial venture.

In other parts of the country, like, say, Louisiana, a more efficient way to become rich might be to borrow a small business loan from a bank, open a restaurant that only sells chicken fingers and french fries, expand its presence, and, 28 years later, pay yourself a cool $200 million dividend each year. And that is precisely what Raising Cane’s CEO and founder, Todd Graves, has done.

On Tuesday, Bloomberg reported that Raising Cane’s, the popular chicken finger restaurant chain, sold a $500 million leveraged loan, its second bond offering in the last year, and it cited a report from S&P Global saying the company may use the proceeds to pay down $354 million of borrowings under its existing $1.2 billion revolving credit facility.

Cool, this is all pretty normal stuff: issuing new debt, typically with later maturity, to help pay down existing debt. What stood out to me was that S&P Global also noted that Raising Cane’s maintains “an aggressive growth and dividend policy,” and its stable outlook on the newly-raised BB debt “reflects our expectation for continued strong sales and EBITDA growth with a high level of cash outlay for capex and dividends.”

Who is receiving these high dividends? Raising Cane’s shareholders. Who happens to own 90% of the company’s equity? According to Bloomberg, it’s Graves. I was curious just how much money Graves might be making in dividends, and S&P Global left some clues in its note on Raising Cane’s debt issuance from October 2023.

“The company is majority owned by its founder and historically distributes discretionary dividends that have averaged about 20% of operating cash flow over the past four years. We expect returns will continue at this level but believe the company would curtail distributions if warranted.

Last year, Bloomberg reported that Raising Cane’s had paid total dividends of $183 million in fiscal years 2020 to 2022, with revenues of $1.5 billion, $2.2 billion, and $3.1 billion in each year, respectively. With the S&P noting that Raising Cane’s had paid out dividends averaging 20% of operating cash flow over the last four years, we can infer that total operating cash flow from 2020 to 2022 was ~$915 million ($183 million / 20%). If we assume that operating margins have remained consistent over time, they would average out to be 13.46% of revenue.

Bloomberg also reported that Raising Cane’s revenue was up 33% year over year through June of 2024, with the chicken chain generating $2.3 billion, compared to $1.7 billion in the first six months of 2023, and $1.2 billion of that came from Q2. If Raising Cane’s maintained that same revenue figure for the second half of 2024, hitting $4.6 billion in total revenue, and operating margins remained consistent, the company would be on pace for ~$619 million in operating cash flow and a $124 million dividend, of which Todd Graves would take home 90%.

Because Raising Cane’s is private, we can’t see the company’s full operating costs, but given its margins and dividend payouts in 2020 through 2022, as well as the S&P’s outlook that the company will continue high cash outlay for “capex and dividends,” I think it’s safe to assume that we’re directionally accurate.

While fried chicken isn’t as glamorous as artificial intelligence, it does come with one big positive: by raising less outside capital and retaining control of the company’s equity, founders can pay themselves fat dividends if the business pays out. Hence, Todd Graves is now worth $10 billion.