Bill Kerr: Many millions of Americans would like to work but are unable to join the workforce. Employers often overlook marginalized populations—examples include those who have suffered with mental disabilities or addiction, the homeless, and the formerly incarcerated. As a result, even though they would like to look for jobs, members of these groups are often unable to find employment, become discouraged, and stop looking for work. And as their skills become outdated, they are forced even further from the workforce in an ever-worsening cycle.

Welcome to the Managing the Future of Work podcast from Harvard Business School. I’m your host, Bill Kerr. Our guest today started a company that embraces the opportunity to hire these workers. Joe DeLoss is the founder, CEO, and chief fryer of Columbus-based Hot Chicken Takeover, where a majority of the employees are people from these populations. Joe will tell us why it is good business to expand opportunities for these hidden workers and talk about his company’s strategies for getting the most out of this untapped source of talent. Welcome, Joe.

Joe DeLoss: Thanks for having me.

Kerr: Joe, as chief fryer of Hot Chicken Takeover, I wanted to just start with you coming up with this recipe. How did you get into the fried chicken business, and how’d you get into the fair chance practices that your business works with?

DeLoss: I began my career in fair chance employment in integrated workforce development in 2004, 2005, and have been doing it since. And so, the reality for me was, I was trying to find a way to build businesses that could meaningfully employ a group of people I came to really deeply care about. I’ve had a variety of different enterprises. Hot Chicken is probably the fourth or fifth, depending on how you count them.

Kerr: Okay, and how did you particularly come up with the fried chicken?

DeLoss: My wife and I took a trip down to Nashville, Tennessee, when she was seven months pregnant with our first daughter, and we fell in love with just the style of fried chicken and the experience surrounding the product. Five months from that trip, we were frying chicken for friends, and going from there. But I learned on an $80 Bed Bath & Beyond fryer, if that’s what you’re wondering.

Kerr: You took the model back to Columbus, Ohio, and then built it up from there. You had early some food trucks, and now you’re at three restaurants. Tell us a little bit about those.

DeLoss: Yeah, we’ve got three restaurants in central Ohio. We just announced our fourth to open in the summer of 2019 up in Cleveland. It’s really kicking off regional expansion for the brand. But the business employs around 130 or so folks—many men and women that have just had a lot of adversity in their lives, for one reason or another. As a company, we have this really rich hospitality experience that invites guests from all walks of life to join around communal tables and eat delicious fried chicken, which is a pretty nostalgic and inviting experience for people.

Kerr: Joe, for our listeners, tell us a little bit more about the fair chance practice. Begin with what share of your workforce have come from this hidden-worker segment—the missing worker groups—and then tell us about how they interact in the workplace.

DeLoss: “Fair chance employment” is a relatively newer term for things that have been called “reentry employment,” “second chance employment”—there’s a long list of nouns now associated with the nature of the work we do. We choose to use “fair chance employment,” in particular because we believe that we don’t have second-class employees; that, rather, we’re just giving fair consideration to somebody who has been cut out of that opportunity before. On our team, the majority of our team members have had a lot of adversity, specific to incarceration or a criminal record. It usually floats between 55 percent and 70 percent. But other than that particular group, which at this moment in the spring of ’19 is around 60 percent, we also have a lot of team members that have just experienced a lot of adversity tied to housing instability or to addiction, regardless of if they’ve actually been affected by a criminal record before.

Kerr: This is a place where many employers will not take the interview process forward once they learn of somebody’s criminal background, or their convictions in times past, and you’re choosing to look beyond that as part of the interviews. How does that conversation roll?

DeLoss: That’s exactly right. A lot of employers will just outright not consider somebody with what we call an “alternative resume.” We believe there’s a lot of value to learn from the experience somebody has had in the past. For us at Hot Chicken Takeover, our employment process is very intentional and really built out. We want to make sure that we’re hiring a high-integrity candidate that aligns with our company values, and the orientation we have to our guests, and to one another. That process is everything from phone screens to live manager screens to active time in the restaurants to get exposure to our environment and really test if somebody is motivated by the things that motivate the most successful people on our team.

Kerr: So from the beginning you’re also talking to them about the history that they have, asking them to explain it. And then what do you do in terms of the workplace to help people that have had unstable backgrounds, or even at that moment have less security than other workers? How do you help them in the workplace?

DeLoss: For the first part, we don’t hide from the experience somebody’s had. We ask that people acknowledge their past honestly and talk about some of the circumstances that led to some of those decisions that may have occurred through the course of their life. That acknowledgement of the past then becomes a very quick discussion about the future story somebody wants to have for themselves. We hire people that are highly motivated by their future and the career ambitions they have for themselves. It’s kind of a codifying experience to sit through that interview and say, “This is where I see myself in the next six months, or 12 months.” Once somebody does that and they earn a place on our team—which is about one in 10 from the candidates we source, so highly selective—but once somebody does join our team, we wrap around a series of different components that really start to tackle personal instability and increase professional stability.

Kerr: Can you give us a few more-specific examples?

DeLoss: The quick headlines for that are first starting with really clear expectations and pathways for people. A lot of our candidates have never had a positive work experience in their past. So to be presented with an opportunity to grow objectively alongside of clear metrics and clear position descriptions is really empowering.

Kerr: In your workplace, you have, I think, three levels that employees advance through, and they can come into management.

DeLoss: Yeah.

Kerr: There’s no upper bound on how far somebody can go.

DeLoss: Absolutely not. We want to be a business that’s growing at an accelerated pace, so we need people to keep growing. We have three crew levels. Everybody starts at the dish tank, regardless of if you’re a VP or a new trainee in the restaurant. It becomes a really important cultural component as somebody’s experience. It starts with clear expectations and pathways for growth. From there, it goes on to really think about the types of wraparound services and benefits we provide our employees. Oftentimes, on business podcasts you hear about what great employers are doing for middle-income or professional employees.

Kerr: We’ve had a few of those on our podcast, yeah.

DeLoss: You’ve had a few of those. Our orientation is taking a hyper-relevant approach to what our employees need, and 401(k)s aren’t super popular with somebody that’s getting back on their feet. So it’s informing that benefit by making a matched-savings account associated with the types of investments somebody might make in their life at that moment.

Kerr: This is like for a purchase of a car, or for …

DeLoss: Yeah. Car, housing, transportation assistance, a lot of things like that. Being alongside of somebody as they make those big milestone improvements in their life breeds a lot of loyalty and commitment to one another. And so clear expectations, relevant benefits. The third component of that is really frequent feedback of just consistently letting people know where they stand at the business, and where they stand on those crew levels in terms of what growth looks like. When you talk to most people about bad work experiences in our segment, they’ll say, “I had a terrible manager.” Or “He was picking favorites.” Or “I just never knew what to do to demonstrate that I could get promoted.” We take a lot of that out of the equation by just putting it on paper and putting it in front of people.

Kerr: One of the things that you put in front of people is that rather unique training handbook. Can you tell us a little bit about how that handbook came to be, and tell us some of the things it talks about and what others can learn from it?

DeLoss: We found, if you want to give people clear expectations, you’ve probably got to write them down somewhere. It shouldn’t be that groundbreaking, but for many of our team members, walking away with a document that is not printed on sideways black-and-white copy paper is a really cool thing to receive. So we’ve created a handbook that’s both a combination of policy and cultural norms and values to really try to bring somebody along in that journey from the very first moment they start learning about the job they just got accepted to.

Kerr: In terms of team integration and employer/mentor relationships that surround people—peer effects, and so forth—do you see any differences with fair chance employees once they’ve come on board?

DeLoss: I don’t know if I’d credit fair chance employment with that, but I think we’ve created a work culture and an environment of people that are deeply concerned and care for one another. That makes a really fundamental difference. I think the propensity of a fair chance candidate to play in that space is probably a little higher, particularly because we have a lot of team members in recovery. And if you’ve ever sat in a group meeting or a recovery meeting, you see a genuine concern for one another and some peer accountability. We very organically built some of those themes into our work environment on that methodology of a therapeutic community or an environment where people hold one another accountable.

Kerr: Now to this point, people might be listening to this podcast and think that Joe’s got a great big heart, which he probably does. But you also say that this offers you a competitive advantage. So I want to walk through that side of the business. You think this is a driver for Hot Chicken Takeover’s success. Tell us about that.

DeLoss: There’s a lot people that talk about the novelty of who we hire. The reality is we have a methodology of how we hire people, particularly entry-level candidates for work, that deeply invest in their increase in stability. We’ve seen a direct correlation between somebody’s personal stability and their professional stability. So as a business, though we do make some larger investments upfront, we have dramatically lower turnover than our industry. As research keeps coming out about the cost of that churn in employment—in just hard costs, let alone guest continuity or any of those other things we look at—it’s really clear to us that our business is stronger because our people are stronger. And they’re performing better than our industry in almost every critical metric.

Kerr: So to put some numbers to this, how much lower is the turnover relative to the typical quick-service restaurant?

DeLoss: The Bureau of Labor Statistics at the end of ’17 put the hospitality and accommodations sector at around like 75 percent turnover, somewhere in the low 70s. Hot Chicken Takeover, in the same period, was sub-40. But keep in mind that that was a very large data set. When you look specifically at quick-service restaurants, or fast casual, most employers are reporting 130 percent, 160 percent turnover a year. Three or four times.

Kerr: At least 50, and maybe even a quarter of the typical turnover. And in terms of the costs, you’ve put some calculations around this. I think you have maybe $4,000 of just direct costs that come with an employee turnover. The handbook, the uniforms, the time spent training, and so forth. Tell us about some of the other surrounding issues with high-turnover environments.

DeLoss: What we know is our brand has been differentiated because of a really rich hospitality experience for our guests in our restaurants. There’s a lot of soft costs associated with not having that, that are just harder to do a research paper about. What we find anecdotally is that we have a lot of people that celebrate birthdays in our restaurants and take pictures with our team members because they’ve met them dozens of times. That kind of continuity is not something that comes—and that deep relational capital is not something that comes—when you walk into a fast-casual restaurant off the street. It’s because of our team, and it’s a really deep investment that the company makes in our team, and that they make in our guests. It’s really some Hot Chicken magic there.

Kerr: Well, while we always hope every fair chance employee, and any employee, is going to perform well in the job, there can be issues. Somebody can have a parole violation, or there can be a relapse in substance abuse. How do you handle those?

DeLoss: We’ve definitely had some of those instances, much like any employer. I just want to have that disclaimer. We don’t feel like we’ve had more than just peers in the space. But for us, if employees are being open and vulnerable about those instances where their recovery might be in jeopardy, those become really active dialogues with our HR team. Is there an instance here where we can make a critical contribution to somebody’s health and long-term success? We’ve had some people take leaves of absence, and supported treatment plans that they’re on, and in some cases used matched savings for some of those, some of our existing benefits to invest in those, and have had great outcomes where employees have overcome something really difficult in their life and remain on the team, and contribute in a really meaningful way long after those instances. The difference is we just talk about it, and we acknowledge that this is real life, and it’s going to affect our employees whether or not we acknowledge it. If we’re going to acknowledge it, we can control the impact in a lot better way.

Kerr: You mentioned it’s always going to happen in the workplace, and I know you must get this 1,000 times per month probably as ... well, Hot Chicken Takeover has a population that is marginalized or fair chance. I couldn’t do that at my workplace, or in my restaurants, or in my warehouse, because it wouldn’t work. Tell us about your view of that. Could this port into other environments?

DeLoss: Yeah. There are, of course, really large segments of concentrated jobs that are experiencing some economic crisis right now around not being able to find, and retain, labor. That’s a pretty popular headline to hear about how companies are being innovative about that. We’re very adamant that deeply investing in your entry-level workforce will produce those results, regardless of who you open your hiring to. What we often find from employers that are calling us to ask this question, they’d say, “Oh no. We could never be a fair chance employer.” Or, “We can’t have ...” you know, pick the label: Ex-cons, convicts, a lot of language we won’t even use about people’s experience, “... because it’ll be too much conflict, and theft at work.” What we’re finding is those are the same employers that have shrinkage on their P&L for the active criminals they’re hiring that are stealing from them. The difference for us is, we’re hiring a group of people who have a lot to gain from not having that life or that pattern anymore, and see considerably less of any of those types of instances, and generally a lot more loyalty.

Kerr: Okay. When you’re talking to various industry groups, do you see some as the most natural expansion points for the fair chance practices?

DeLoss: Restaurant and accommodations, of course, a really large segment that we’re barely scratching the surface of. But in particular ... I’m particularly interested in distribution centers, light manufacturing, warehousing, these areas where you have very large concentrated populations of employees under one roof, albeit maybe 100,000 square foot roof. But it provides a lot of economy of scale to invest in your employees and their development that are harder to come by from a restaurant chain that builds jobs in increments of 50 per geographic location.

Kerr: Joe, what happens if a supplier disagrees with this practice, or is nervous about it, or your landlord has an issue with it? How does it play out with other businesses and parties?

DeLoss: Thankfully, as a business we have an increasing amount of leverage just as a brand that continues to grow, that in 2019 was recognized by Nation Restaurant News as a breakout brand. We’re going to work with partners that want to work with us, and work really hard on the front end to make sure that our partners believe in the same mission: that we can, in fact, create extraordinary experiences for extraordinary people, be they guest or team members. We have had a handful of run-ins through the years with people and vendors that don’t completely align. They are vendors that don’t completely align, and they are no longer vendors.

Kerr: They get dropped from there.

DeLoss: Yeah.

Kerr: If you think about your senior management and it’s development process for the scale you had, do you anticipate a significant share to be fair chance employees that have advanced up through Hot Chicken? They’re going to be probably combined with people that have come from other restaurant concepts that have already hit 1,000, 3,000 stores. How do you think about that future team development?

DeLoss: It’s a blend for us, and it’s a blend that still skews toward internal development. We’ve made a commitment that 75 percent of our leaders, whether they are restaurant leaders or administrative team members, will be developed internally. We know, as a brand that is focused on culture and is focused on a really differentiated experience for both team members and guests, that that’s the easiest way, albeit still very difficult, to grow and sustain those critical differentiators.

Kerr: One of the things that’s been staggering is to learn about that more people have arrest records than have college degrees in the United States, and this problem is worsening. Let’s think about, first, your ability to scale Hot Chicken Takeover. You want to go from three to 300 stores quickly. What are you putting in place to hit that internal scale so that you can take this model forward?

DeLoss: Right now we know that the critical component of our growth is around our talent infrastructure. Our business and brand started because, at a grassroots level, we hired exceptional people that were really ambitious and deeply committed to growth in themselves and the organization. We need to build a pipeline to really enable more people to be on that same path that join our ranks. So that, we believe, is the most critical factor when it comes to things like scaling our supply chain and scaling our real estate strategy. There’s a lot of great precedent there.

Kerr: Playbooks there.

DeLoss: Playbooks. Scaling an intentional work strategy, and an investment in people and that culture is …

Kerr: What about scaling a Joe DeLoss, and the intentionality and the hard work that it takes to implement this practice on a day-in and day-out basis?

DeLoss: I’m not the end to this outcome, I’m part of the means as well. I just happen to be out front a little bit in our own business to try to think about those strategies that are most impactful to our team. But at that moment they get codified and integrated and distributed through people well beyond me. My hope is that I can be an advocate for Hot Chicken Takeover and other brands that are interested in doing this work. But, ultimately, I’m not going to be the critical factor. Our team—and when you spend time with them you’ll know—are the ones really carrying the torch.

Kerr: Do you worry in the expansion process of the model becoming diluted? Maybe a way of phrasing this: Would you rather have 1,000 stores and the fair chance practice be 10 percent or 300 stores at 60-plus percent?

DeLoss: I do worry about that dilution and the pressure, particularly as we raise capital and grow and scale. But at the end of the day, what we know is that the work we’re doing with our team is inextricable to the value of the business. And if funders or external partners don’t make that same correlation, they don’t belong on our cap table. Our orientation is to continue to validate, stair step by stair step; that our business is, in fact, stronger because our people are stronger. That’s our primary target.

Kerr: I think you’ve said that franchising is the F word, and you would stay away from that.

DeLoss: I have in fact said that a few times. You know, I think franchising for us feels absurdly premature, particularly as we’re still really finding the formula, and consistently are improving unit restaurant economics, and team productivity. For us, it’s a matter of really, really validating that we have engineered a rocket ship before we go to do anything else. Franchising to me feels like it’s, even to be a consideration, is a ways down the road.

Kerr: Okay. As you think about going beyond Hot Chicken Takeover, you have been active in the public sphere around fair chance practices and have obviously a decade more of social entrepreneurship that you’ve been engaged in. Criminal justice reform is top of mind right now in Washington. What are the best things that we can be doing to increase the opportunities to people that have had stumbles along the way?

DeLoss: Hot Chicken Takeover is on the tail end of a lot of criminal justice problems. We are finding people have been cut out of significant amounts of opportunities because of mistakes they made as adolescents, in more cases or not. What we realize is, in many cases, the opportunities we’re presenting are combating two to three generations deep of really terrible, complex problems. I’m of the camp that I’m really thankful criminal justice reform is happening, and I’m getting calls from a lot more employers that want to mimic some of the work we’re doing to solve problems they are facing. But at the end of the day, what I’m most excited about is that we’re starting to intervene before those records start forming that are really cutting people out of the work environment, and in general, prosperity that we don’t all share in right now. If there’s any place I’m interested in really seeing how it evolves, it’s on the front end of really when these sentences are happening, and the interventions we choose to make as a community.

Kerr: Joe, as our last question here, we have a range from MBA students to policymakers to business executives that listen to this podcast. What parting advice do you give about fair chance practice? How can they think about this as it applies to them?

DeLoss: If I’ve learned anything through the experience of about 10 years of doing this work, it’s that we’re all a lot more alike than we are different. What’s truly different is the circumstance, not the character of people. If employers or executives or young business leaders can take a moment to suspend and acknowledge some of those preconceived notions you might have about somebody that is an “other,” to build an authentic relationship, and open themselves up to learn, you’ll have an opportunity to enrich your life but also enrich your business. Hot Chicken Takeover is a perfect example of what that can do, and hopefully we’ll prove that on a much bigger scale very soon.

Kerr: Well, Joe, I want to end the podcast by saying I have visited, well, several of your Columbus stores. The chicken is pretty darn good, so I would highly recommend it. A podcast can’t convey the taste of the food, but we appreciate you joining us today to talk about the employment practices and the future of Hot Chicken Takeover.

DeLoss: Thank you.

Kerr: Thanks.