tv The Profit CNBC February 7, 2016 3:00am-4:01am EST
letonight on "the profit"...s. we head back to some of the business i've partnered with over the past year. -carolyn? -carolyn: i'm carolyn. -nice to meet you. -lemonis: when i make a deal, i come in with a plan and a check. man: thank you, marcus. woman: i was gonna work you a little bit more. lemonis: [ chuckles ] but what happens after the cameras shut down... michael: i've let it slide for three freakin' years! lemonis: ...may surprise you. one struggling novelty sporting good company has been totally transformed. wow. look at this place. but the owner is still making the same sort of short-sighted decisions that nearly brought them to the brink. i'm pissed that you bought the printer. i'm not gonna lie. if you were me, would you stop putting money in this business? at unique spa in long island,
we did a full-on renovation and launched a new product line. but the owner... carolyn: you almost put my family out of a house. man: i don't care. lemonis: ...still isn't taking her paycheck. but no matter how much you invest or how good your intentions may be, sometimes deals fall apart and partnerships go south. sal: i never did anything to try to break this deal whatsoever. michael: where's my money?! gina: i'll end you, bro. michael: i haven't been paid for three years! lemonis: tonight, on "the profit," a progress report. michael: i'm closing you down first! lemonis: my name is marcus lemonis, and over the past two years, i've introduced you to 23 small businesses across this country... okay, let's go to work. ...most of them struggling... you've got to trust the process. ...some just weeks away from closing their doors... cut your losses and go home. ...but all of them looking for answers and help.
woman: we certainly need your business expertise. man: absolutely -- 100%. lemonis: i've made deals with a candy company in jacksonville... i didn't really get a good taste. i need another one. ...a family barbecue south carolina... these ribs are ridiculous. ...a national clothing company based in new york city... woman: wow. i mean, i'm blown away. lemonis: ...an ice cream company in new jersey... -that green tea's good. -woman: isn't it good? lemonis: ...and a used car business in chicago. whoo-hoo! liquidation. when i get involved, i invest my time and my money... i'm 100% in charge. ...close to $23 million so far for a stake in those businesses. i'm not a consultant, and i'm not the fairy godmother. my goal -- save jobs, keep dreams alive, and of course... -scott: we got a deal. -lemonis: ...make a profit. i'm gonna become an owner in this business, and a lot of things are gonna change. once the shows have been shot and aired, my work is often just beginning. last year, i made a deal with coopersburg sports,
a sports novelty business located in pennsylvania. this is a family business run by scott pino along with his son ben and his daughter jackie. jackie: dad! scott: i can't find the yankee order out here. lemonis: their big seller had always been these novelty bats. at one time, they were in every major league ballpark. up until just three years ago, they were bringing north of $3 million a year in revenue, and the pinos were a success story. scott: that's the los angeles dodgers, the new york yankees. lemonis: but then, the competition got tough. scott: a major competitor who's really stolen a lot of our business. lemonis: who's the major competitor? scott: louisville slugger. lemonis: after years of stability and prosperity, the business went into free fall. how much debt is on the company today? scott: i have about $700,000. my life savings -- gone. lemonis: when i met the family, their revenue was down 50%. they had racked up almost $700,000 of debt.
coopersburg sports was in real trouble. jackie: how did we not realize that we wouldn't have enough boxes to fulfill the order? lemonis: how many are you short? jackie: about 1,200. scott: our system doesn't manage that. lemonis: what system? the business had some problems that had to be fixed immediately. the warehouse was a disorganized mess. ben: there's not a flow. without having space to store things, you're just gonna be stepping over stuff. lemonis: and they were gonna have to expand their product line -- something scott's kids already understood. jackie: you guys want to talk about new products that we want to come up with? -lemonis: yeah. -jackie: i mean, it's the point -here that we're kind of like... -lemonis: yes, please. jackie: ...wanting to get away from the bats? scott: i don't want marcus to take his focus off the bats right now. lemonis: but it was scott's resistance to new ideas that was the company's biggest liability. for you to have this huge delusion that you're gonna beat louisville slugger in the long run is just dangerous. holy [bleep] scott. scott: you know, i started this out of nothing. i just feel like i failed.
lemonis: when scott finally accepted that it was time to change, i knew it was time for me to negotiate. so my offer is $630,000 for 30% of the equity, and i'm gonna want a 3% royalty on every product we sell. scott: we got a deal. lemonis: the first order of business was to find coopersburg a new home. i leased this 20,000 square foot space... looks good! ...a place where we would grow and create a proper work flow. scott: it's amazing, isn't it? lemonis: and while we began to renovate it, scott was put in charge of forming new partnerships and growing sales. scott: the purpose of our visit today is to show you what we do and what we can do with the existing technology that we've got. lemonis: and the kids were finally allowed to execute their own ideas. jackie: it would basically be our homegate, like, partyware line -- at-home tailgating. -lemonis: this is awesome. -jackie: thank you.
-lemonis: it looks really good. -jackie: yay, i'm so excited. lemonis: it's been just over seven months since we shook hands on the deal. my initial investment was $635,000, but to date, i have close to $1.4 dollars. $150,000 went towards paying additional payables, including a $70,000 past-due major league baseball bill. $200,000 went towards building out the warehouse. the balance of the money went towards new inventory. but i hate to say it -- i'm already seeing a pattern with scott. he's come back time and time and time again for more money, which prompted me to bring in dan, a wharton mba graduate, to help the family but more importantly be my eyes and ears on a daily basis. why don't you guys give me a tour? i want to kind of have you walk me through what's changed. wow. look at this place. scott: so what's changed is we tried to organize the bins
a little bit where we know what's in each aisle. you can walk down and find a bin label to locate what's on that master list. lemonis: it's way better than it used to be. scott: it's much more organized. lemonis: i can't believe how good this place looks. the inventory is in the right place. the aisles are labeled. the signs are clear. and that's the way to run a business. dan was telling me that you're now officially -in charge of the warehouse. -ben: yeah. lemonis: like, what's different about the process? ben: well, an order comes in. you would pull your raw materials -from the racks over here... -lemonis: okay. ben: ...bring them over to printing -- right through here. -this is why we leave this open. -lemonis: so from there -to the printing line. -ben: yep. then, once they're done, they'll get packaged here -or bar-coded over there. -lemonis: uh-huh. ben: and then right to here. and then they'll get routed by someone at the shipping desk. and then, once they're routed, they go out the door. lemonis: this is a huge improvement over the old warehouse. we used to have to walk to five different rooms just to get one job completed. now, with the new process, we're adding about $75,000 a year in profit --
$50,000 by eliminating mistakes, knowing where the inventory is, and doing the job right the first time, and $25,000 from not misplacing orders. but what's more important is the change in the process allows the amount of orders they can process to double. scott: ask her how far out she is. lemonis: in the previous year, coopersburg did around $2 million in sales. in their current year, we're pacing to do about $3 million in sales. now, the business is much cleaner than it used to be. we wiped out over $500,000 in debt, and we're finally gonna turn a profit. with that kind of growth and potential, i don't mind putting more money in it. how much was this machine, scott? but what i'm not happy about is surprises. scott: uh, it was about $85,000. this is what it can do, marcus. lemonis: tell me about the cost on this -- raw materials, printing. right now, it's about 80 cents a tile. so this happens to be six tiles right here. lemonis: so it's $5.00 of materials. -scott: the man operating has -- -lemonis: so how much is that? dan: 12 bucks.
scott: and the packaging itself is $2 to $3. lemonis: so now we're up to $20. for each mat that we print, the cost of the materials breaks down to $5, $9 for the machine to operate, $3 in labor, and, with the packaging, the cost rises to $22 an item. now we're talking about wholesaling it for $30. that's only $8 in margin. but scott doesn't have any orders yet. he's hoping to get some orders. he'll have to generate 263 orders a month just to break even. i want him to have a plan before he spends the money, not come up with a plan after he makes the commitment. i'm pissed that you bought the printer. i'm not gonna lie. this is a good example of you going out and just making a decision really quick without doing all of the math and all of the research. let's go in your office and maybe talk about it. so now that we know we've bought a printer that we can't even make money with, i want to find out exactly from scott what he thought we needed more money for. talk to me about what we're doing.
scott: we're trying to get raw material moving. so, right now, we don't have the material we need because we cannot pay our venders on time to get product in here. lemonis: that's confusing to me, because you haven't -- you've called me for money, and you've gotten it. dan: we're behind on the orders, and so what happened is -all the sales have gone out. -lemonis: 'cause there's more orders than you thought there was gonna be? -dan: there's more orders -- -scott: than originally thought. we're outselling the floor. lemonis: which, by the way, is an awesome problem to have. scott: as far as the printer is concerned, we want to print on that printer to react quickly to this college-market business, which is $300,000 to $400,000 worth of potential colleges. lemonis: do we have $300,000 of orders? scott: not yet. lemonis: okay, so that -- that's -- my issue isn't putting money to chase the business. my issue is putting money in and not knowing what scott's gonna do with it. scott: i know you about want to shoot me right now. lemonis: [ chuckling ] i do kind of want to shoot you. i do, because i feel like it just never ends. you see, when i look at the $85,000, the question is should it go into a new machine
for orders that don't exist, or should it go into new inventory, where i know i have a guaranteed return? scott's not willing to take the time to do the analysis. that's my issue. i think the concern that i have, scott -- and, you know, we've talked about this -- is that our original deal was for me to put $630,000 in the business. i'm now well over 1 million bucks. and every time that phone call comes, right, it's, "we got to get an order out. this is burning down. that's burning down." but i'm not sure where the end of the hole is. and so how much money do you think you need right now to kind of clean things up? no b.s., scott. scott: i don't want to ask you, but i would say $150,000. i don't want to ask you for another nickel. at the point we are right now, i want to work with our vendors, have them partner with us and help us through this crisis. okay, maybe that's not the right word. -i want to have -- -lemonis: scott, please. right, i hear "crisis."
i hear, "holy cow, we got a problem." that freaks me out. you went out and bought a printer and you signed us up for $2,200 a month. what i'm saying to myself is, "i'll lend you 150 grand. pay me $2,200 a month -- oh, you can't because you bought a printer you didn't need." if you were me, would you stop putting money in this business? how much have you been averaging on saturday? carolyn: we were averaging anywhere from $5,000 to $6,000. lemonis: and what did you last saturday? carolyn: $9,500. gina: do you know the one thing i don't like? anybody [bleep] with putting food on my table to feed my kids. michael: i'm closing you down first!
lemonis: what i'm saying to myself is, "i'll lend you 150 grand. pay me $2,200 a month -- oh, you can't because you bought a printer you didn't need." if you were me, would you stop putting money in this business? i'm willing to give you the $150,000, but you got to be out of that machine. i think scott understands his mistake. and we're gonna have more mistakes. but scott's a good guy. and i believe in him, and he's a great salesman. i'm more willing to put in money and overlook some of his mistakes if i know he's gaining momentum. scott: so, basketball, -baseball, hockey. -lemonis: what's this?
scott: that's the bass pro fish, and this is the car, the nascar. lemonis: oh, this is it? scott: which i wanted to have ready for you, -but it's not quite ready. -lemonis: okay. we know that nascar fans buy nascar products religiously. so this is all the other nascar stuff. jackie: we have our poncho in a ball. this one happens to be in a tire. lemonis: is this how it actually... jackie: yep, inside is a disposable poncho. lemonis: this is a good idea. we're now licensing ponchos and umbrellas, and we sell those at all of the tracks around the country. take this typical umbrella with nascar. it costs us $8.00 to make. we'll sell for $23 -- a $15 gross profit. the fee we pay to nascar is a very small percentage of the $23, leaving us with plenty of gross profit. when i first came to coopersburg, they were a baseball company, and that was it. and we've not only expanded the types of product that they have, but we've expanded our licensing. scott: we going to call this the souvenir station, so in the grocery store, you come here. lemonis: so this is new, and this is new? scott: yeah, it will all be the same team. now the idea is walmart wants to buy a full program that they roll out when it rains with ponchos and umbrellas
that bends new margins. it's big. we're working on it right now, jackie and i. lemonis: walmart has placed a huge order for the souvenir station. it's gonna go into thousands of walmarts across the country. the order they just placed was a half a million dollars. that was their first order. this business and this family have come a long way. five months ago, we were in a very toxic, disorganized building. and today, the conversation's really been, "we don't have enough help. we have more sales than -- we're 30 orders behind." and so, it feels a little bit like a different business today. and so i think you guys honestly should pat yourselves on the back. business is gonna probably be somewhere around $3 million this year. last year, they did $2 million. but what's more important is that our margins are closer to 50% -- about 12 points higher than they were a year ago. i'm a lot more confident that we're heading in the right direction.
i've invested in all sorts of businesses. and, typically, retail is in my wheelhouse. this will end up becoming our signature product. when i was contacted by a woman in long island who owned four hair salons, i had my doubts. hair salons aren't my thing. but when i met carolyn devito, we clicked. how you doing? i'm marcus. carolyn: hi. i'm carolyn. nice to meet you. lemonis: and i decided to stick around and see if i could help her. carolyn: this is tuesday. it's usually a lot busier. lemonis: unique offers everything from haircuts to massages. she even had her own personal hair care line. but i have to tell you, i saw problems the minute i walked through that door. the place looked very rundown... that's disgusting. ...with very few customers. at first glance, it's not the most inviting space. and she had major inventory problems. you see those hair dyes? at about $20 per bottle, those represented the biggest liability in carolyn's business, and no one was tracking it. you don't know what you have in here, do you?
carolyn: we reorder based on what comes out of that garbage pail. lemonis: carolyn's general manager, well, she wasn't general-managing. woman: i'm here to help you manage, not manage your salon, so don't start with me. woman #2: she's off saturday, sunday, and monday. woman #3: our biggest day, she's not even a part of. lemonis: well, what do i need her for? carolyn: inventory systems -- lemonis: all these things that aren't happening. something's got to change, 'cause this model doesn't work. it's totally broken. and all these problems were compounded by the fact that she had split with her partner. carolyn: you almost put my family out of a house. man: i don't care. lemonis: and hundreds of thousands of dollars had been squandered. carolyn: [ voice breaking ] i'm behind on my mortgage, taxes, and things like that. so, i put on a facade, and i put on a happy face every day and wake up as long as my feet hit the floor. lemonis: carolyn was in a very dark place, but i knew she had talent and unbelievable work ethic.
and so i knew that i wanted to partner up with her. so, i invested $250,000 for 20% of the salons and 51% of the product line. -congratulations. -carolyn: thank you. thank you. lemonis: the $250,000 was gonna go towards renovating her flagship salon. [ cheering ] lemonis: we spend over $150,000 buying new equipment so that the place would look state-of-the-art. the place was open about a month after we first shook hands. carolyn: hey, doesn't it look amazing? [ laughter ] amazing! lemonis: the big opportunity here was the product line. we re-branded it and repackaged it with a new name, erika cole by raquel, a name that represented her three kids. the result was amazing. i feel like we entirely changed the process. carolyn: and i thank you. lemonis: the most important change was firing the general manager and having carolyn step into the role, a role she should have always had. it's been about five months since we renovated, and we've already been named
one of the top 20 salons in america by a big industry publication, salon today. those are the kind of things that make it worth it. -hi, carolyn. -carolyn: hi, how are you? lemonis: how are you? good. carolyn: good to see you. -lemonis: the place looks good. -carolyn: it looks amazing. -lemonis: what's happening? -woman: how are you? -lemonis: how are you? -woman: good! lemonis: it is so nice to see people excited and smiling. -are you seeing new customers? -debbie: yes, we are. last saturday, we had, i think, eight people walk in the door. lemonis: do you feel like you're more present? carolyn: i feel like i'm more present. having a g.m. kind of, like, separated me from the business. so now i am the g.m. -lemonis: and the owner. -carolyn: which i was -- and the owner, which i was before. i just didn't realize it, you know? lemonis: how much had you been averaging on saturday? carolyn: we were averaging anywhere from $5,000 to $6,000. lemonis: and what did you last saturday? carolyn: $9,500. lemonis: last year, the business did about $1 million. but if you look at the last five months, this year, we're on pace to do about $1.4 million.
and while that's a nice increase, what's even better is the 14% improvement in margin. that comes from a change in pricing and the elimination of waste by the installation of the color bar. you know what i'd really like is a free haircut. carolyn: okay. lemonis: everybody at my office says that carolyn is the only one that's not a pain in the ass. [ both laugh ] lemonis: i want an honest answer from you -- -carolyn: okay. -lemonis: okay? have you been taking your paycheck? carolyn: [ chuckles ] half and half. lemonis: so, i'm not gonna budge on that. -that's a really big deal to me. -carolyn: okay. lemonis: and we made an agreement that you were gonna take your paycheck, -so you need to just, please -- -carolyn: okay. lemonis: that's my only request. because if we're gonna be partners, i have to know that the one that's doing all the work, -which is you, is getting paid. -carolyn: okay. lemonis: never in all my years have i ever had to demand that someone take a paycheck. and it's not okay with me. but it says a lot about carolyn. i've done a lot of deals on this show. -you've seen them all. -carolyn: mm-hmm.
i've enjoyed most of them. but the one that i have with you is different. and it's because your work ethic -- no b.s., i haven't seen it very often. your dedication to your staff, your commitment to your business -- i don't think you realize how awesome it is to be partners with somebody that just gives and gives. most partners -- i have to be honest, carolyn -- they just take. you, you're not taking. you're giving, and i don't want to go on -- carolyn: 'cause you gave so much already. lemonis: but that's the deal we made. i'm with you, okay? i'm gonna be with you. carolyn: you make me cry. lemonis: well, what are you crying about? carolyn: no, i'm happy, 'cause i never met... [ voice breaking ] anybody like you in my life, actually. [ chuckles ] i really have not. lemonis: carolyn has done an amazing job here, and i am so proud to call her my partner. i have a feeling i'm not even 20% in charge right now. carolyn: no, you're not. lemonis: [ laughs ]
sal: where are we at with this job? fabio: it'll be done today. lemonis: artistic stitch was once a very successful custom-embroidery and silk-screening business in queens, new york. at one point, they were bringing in around $2 million of revenue and making a profit for sal loretta and his partner nick. then, they had a big idea. [ baseball bat cracks ] first, they moved into this new building -- a 28,000-square-foot warehouse. and then, they began to create new businesses -- a sports complex for kids, an italian restaurant. sal: it's a multiplex of businesses that really work together. lemonis: that's what's called a mall. it was a huge idea, just not a good one. sal and nick got away from the business they actually understood.
and with the bigger rent... so you actually owe him $120,000? ...their future looked bleak. sal was the idea guy, and nick was in charge of sales. nick: the biggest tool we use is yellowpages.com. lemonis: that was a job that did not suit him. you pay him his commission on a monthly basis, right? nick: i just get a salary. lemonis: these guys were barely hanging on. their core business, embroidery and silk screening... that's really good. ...was still doing $2 million a year. so i made a deal for $660,000 for half the business, and the way we structured the deal was that we would pay down the landlord, we would take care of the other liabilities, so there was a method and a plan. this is a new day. let's go. let's go to work. [ applause ] we rebuilt the space to maximize the business for the most revenue -- silk-screening and embroidery. we also created a new retail space where people could design their own artwork
and print their own shirts and hats with a new $27,000 printer i bought them. i also took nick off salary. i'm gonna put you on a 100% commission plan. things were taking off, so we decided to start fresh with a new name in this vibrant location. queens vibe was coming to life. but throughout the process, there were big clues that sal wasn't being straightforward with me. wasabi japanese steakhouse -- $230? now i'm paying for your meals? sal: all right, you know what, guys, come on. lemonis: you told me that this was for construction. you lied to me. -sal: i lied to you? -lemonis: yeah. i mean, the numbers aren't adding up here. and later, i met with sal's landlord and heard they were behind in rent -- several years behind. but what's really bad -- they didn't even have permission to be open. michael: why can't he get his "c" of "o"? lemonis: he doesn't have his certificate of occupancy here? michael: no, not to my knowledge, no. -lemonis: how is he operating? -michael: he's operating.
now, i got a criminal-court violation. my name is on it. lemonis: your landlord could go to jail. do you understand that? sal: i understand what you're saying. lemonis: i tried to get through to sal and keep his business on the road to success. we got a bright future. -sal: i'm excited. -lemonis: let's go, come on. but the minute the cameras left, sal and nick started drawing a salary that was never negotiated or approved, and they didn't use any of the money that i invested to bring the landlord's past-due rent current, so i cut ties. lemonis: do i feel like i got hustled? yeah. i'd be happy to never look back again, but i had already invested over $300,000 of my original investment to go towards vendors, past-due payables, the landlord. sal and nick are gonna have to pay taxes on the money, and they're gonna get a 1099.
now, me losing my money is one thing, but the irs, that's a whole 'nother story. unreal. we're in queens at artistic stitch, which used to be queens vibe, which is now artistic stitch again. when i went back into the building, the basketball court was back in operation and the signage for the italian restaurant went back up. it's clear to me that sal has washed his hands of me. when i gave him his tax paperwork, i'll do the same. fabio. fabio: what brings you in today? lemonis: i just came to bring sal his 1099. -fabio: all right. -lemonis: is he busy -in his office upstairs? -fabio: he's not here yet. -lemonis: no? -fabio: he'll be here later on. -lemonis: yeah? -fabio: yeah. lemonis: can i call sal and just let him know i just came to bring his tax bill for him? fabio: all right. [ telephone rings ] woman: your call has been forwarded... -lemonis: oh, what a surprise. -woman: to an automated voice-messaging system. lemonis: i'll just wait for him. i'll just hang out. fabio: very well. lemonis: where's my printer at?
lemonis: they sold it? who did he sell that to? fabio: honestly, i do not -- i'm dead serious. lemonis: you literally just saw somebody come and pick it up? -fabio: yeah. -lemonis: look, i knew things were not on the up and up with sal. but selling a $27,000 printer that doesn't even belong to him? that's a new low. do you know where my printer is? giovanna: no. lemonis: you didn't get a check for it? giovanna: no. lemonis: so, you didn't get a check, so sal must have kept the money when he sold everything. giovanna: you know, i'm really just not comfortable saying anything right now. lemonis: yeah, and you're in charge of accounting? -giovanna: yeah. -lemonis: and so you know that we were wiring money, and you know what was happening with the payroll -- you know all of that. giovanna: yeah, it's gotten so bad that i might not work anymore. it's very difficult right now. lemonis: yeah. how's the landlord? giovanna: oh, i haven't seen him in a while, actually. he hasn't been -- -lemonis: he's been quiet? -giovanna: yeah. lemonis: that's never a good thing. all right, well, i'll just wait for sal. [ telephone rings ] woman: your call has been forwarded --
[ receiver clicks ] gina: we were all excited for it. every day, like five, six e-mails and orders and orders, repeats. and then, i knew something happened 'cause one day went by -- nothing happened. lemonis: this is a house of cards. lemonis: i know. gina: the one thing i don't like, marcus -- and this is not towards you. the one thing i don't like -- excuse my language -- anybody [bleep] with putting food on my table to feed my kids. anybody -- anybody. there'll be a problem. lemonis: i know. you know i get the family thing. that's why i was here from the beginning. i know things aren't good. but i feel bad that these workers are gonna get hurt because of sal's bad decisions. and i have a terrible feeling that things are only gonna get worse. five days after my first visit, i got a call from sal's landlord, michael. he informed me that he hadn't been given any of the money that i invested specifically to pay him
and he was ready to start eviction. i met with him outside in an effort to calm him down. there were still over a dozen employees there, and i didn't want the thing to totally implode. michael: you're caught with your pants down. gina: leave him alone! he can't pay anything. -he can't even defend himself. -michael: there is no defense. don't defend guilty people! -gina: i'm defending him! -sal: gina, gina! michael: where is my money?! where is my money?! where is my money?! [ all shouting indistinctly ] woman: shut up, already!
xo lemonis: when i went there with michael, the landlord, i knew he was upset. i knew he hadn't gotten paid his rent, i knew that he was about to start the eviction process. and i care about a lot of the people that work there. and so i wanted to make sure that all hell didn't break loose. we look familiar to you? sal: yes. michael: i would like some clarification, because i have been talking to you at length, and i'm just trying to get paid. lemonis: i've tried to help you. michael's tried to help you. and you just struggle with people straight with people. sal: i never, ever did anything -- anything at all to go ahead and try to break this deal whatsoever. lemonis: did you take money out of the business that you weren't supposed to? sal: to pay some of my expenses that i had. -lemonis: personal expenses? -sal: yeah. lemonis: you never got my permission to do that. sal: i understand that. lemonis: money was going into the business, and he still wasn't paid.
that was our biggest sticking point -- that our landlord get paid. then, i come to pick up the printer after our deal falls apart, and they tell me that it's sold. michael: you're caught with your pants down. gina: leave him alone! he can't pay anything. he can't even defend himself. michael: there is no defense. don't defend guilty people. -gina: i'm defending him! -sal: gina, gina! michael: where is my money?! where is my money?! where is my money?! [ indistinct shouting ] woman: shut up, already! -shut up, already! -gina: get out -of my [bleep] face! -lemonis: michael! michael! gina: i'm the wrong [bleep] one. i'm the wrong one. i'm the wrong [bleep] one. it takes one phone call... -sal: gina. gina. -gina: ...and i'll end you, bro. -sal: gina, please. -gina: [ shouting indistinctly ] -michael: you have no respect. -gina: sit the [bleep] down. -michael: no respect. -gina: not when you get in my face and try to talk to me like that! fabio: do me a favor, babe, please? just calm down. i know. just calm down. lemonis: gina is going bananas because she's scared that she's gonna lose her job. this is how she provides for her family. what i was worried about is this thing was gonna get totally out of hand. woman #2: he's the one starting the problem -- him. -sal: honestly -- -michael: i haven't been paid for three years, and i'm no good? i've let it slide for three freakin' years!
lemonis: okay, okay. gina, please don't go out there. michael: i'm closing you down first, because i got to get paid! -sal: gina. gina. -michael: that's the facts! all right?! lemonis: you know, as i'm watching this go down, i'm pissed off at sal. i'm angry. this is the hole that sal dug not only for him but for everyone around him. the fear, the anger, the disappointment, everything is erupting right now. sal: [ sighs ] lemonis: and sal knows he did it. you had to follow the plan. and when you got into a bad spot, you made a decision that you just shouldn't have made. sal: and i agree with you. i made a mistake there. you know, i should have contacted you -and said, "hey, marcus" -- -lemonis: "i'm gonna take money -out of the company for myself." -sal: yeah, i agree. i agree. lemonis: i know deep down you're not a terrible guy, but i think your thought process is just off. you can see what not telling the truth -- look at what happens. it gets crazy. sal: i don't know how much more sincere i can be as far as apologizing to you for what happened here.
i never wanted it to go that route, honestly. okay, again, i apologize. lemonis: yeah. i wish you luck, sal. sal: thank you. thank you, marcus. -lemonis: i wish you luck. -fabio: thank you. lemonis: i do wish the best for sal and his whole team going forward, but, unfortunately, it's not gonna be with me.
with all my partners. do we have a deal? -woman: let's do it. -lemonis: okay. but it's equally as important for me to build a relationship with the people that work there. the management team will own 25% of the business. they're the backbone of the business. and that's what brought me to the key west key lime pie company -- and the fact that i like sweets. jim brush and allison sloat were partners in life and in the pie company. their pie won a ton of awards, but the business lost money. and they were several hundred thousand dollars in debt. there's a lot of places to get key lime pie in key west. what are the ingredients? jim: it comes in one-gallon pails. it's already reconstituted. lemonis: their pie was good, but there was nothing that special about it. jim: and we put a whipped topping on it. lemonis: and what is that made of? jim: that is a powdered product. lemonis: and it definitely was not homemade. you guys don't make your own crust? woman: no, we don't. lemonis: and they had also opened up a second store that was bleeding money. how much business will this store do?
jim: this store is probably losing about $20,000, $25,000. lemonis: but the biggest problem might have been jim himself. he was definitely resistant to change. jim: you're telling me you're closing the store? -lemonis: that's right. -jim: okay, that's enough. you're out of here. you're gone. lemonis: and, honestly, he seemed to have anger issues. [ clatter ] tammy: you want me to order it even though there may or may not be enough money to pay for it. jim: i'm tired of this bull[bleep] lemonis: stuck in the middle of this mess was tammy. tammy: every week, it's a fight, which is just ridiculous. lemonis: and what else are you managing? tammy: staffing, any human-resources issues, any customer complaints, scheduling. -lemonis: employee issues? -tammy: special events. lemonis: the only thing that jim and i actually agreed on was tammy's value. jim: she's a great employee. she does everything that needs to get done. and she works two and a half days a week at her other job. lemonis: she was working 40 hours a week and making $300. she was the heart and soul of this place. jim: i wish i could pay her more money, but i can't afford it right now. lemonis: jim and allison weren't even able to pay themselves. when's the last time you took a paycheck? -allison: seven months ago. -lemonis: okay.
the business was on its last leg. if they don't turn this business around soon, there won't be any business. jim: damn it, i'm tired of this. lemonis: look, this place had potential, but if we could turn it into a real pie store, a destination, not a cluttered mini-mart, with pies that are homemade with proprietary ingredients in great flavors and a great atmosphere, then this place would be great. and if jim and allison could agree, then we'd have a deal. i will put up to $450,000 to satisfy the payables as needed. i will have 51%. you will have 49%. jim: no, that's not gonna happen. lemonis: what if we make, for a wage, $1.00 for every pie that we sell? -do we have a deal? -jim: we have a deal. lemonis: and with the deal done, i made my first and most important move. i have to tell you we need you here. and this is more important than any pie we'll ever make, but i'm gonna need your help. you're gonna be our leader here, okay? tammy: okay. lemonis: but in order for you to be able
to have a good peace of mind, i'm gonna give you six months worth of pay, and i'm gonna pay you $1,000 a week so you don't have to bartend. tammy: [ laughs ] lemonis: okay? tammy: [ sniffles ] thank you. lemonis: the reason that i did the deal is because i knew that if i had somebody like tammy that the chances of it succeeding were significantly greater. if we don't make it, we don't sell it. everything's $1! come on in! we made room for our $200,000 overhaul. i'm gonna want to have reclaimed wood everywhere. jim: i like that. lemonis: the kitchen got new appliances and new equipment, and we added a new dessert and beverage bar all to enhance the customer experience. we went to work creating a new recipe with fresh ingredients and a homemade crust.
it's good. with tammy in charge, the business skyrocketed over 18%. but, more importantly, it went from losing $100,000 a year to making money. woman: i would like a piece of key lime pie. -do you want one, too? -woman #2: yes, please. -woman #3: this is great pie. -man: best key lime pie ever. lemonis: how's this feel to you? tammy: it's awesome. having one job and being able to spend more time with my children, it's unbelievable. [ voice breaking ] i can't. [ laughs ] lemonis: it's been over a year since i made my investment, and, unfortunately, my investment has had to double to over $700,000. the additional monies that i had to put in took care of bills that i didn't know about. they took care of irs payments that were more than i thought they were going to be. and it took care of other small issues to get the store to exactly where i wanted it to be. what's happening, tammy? tammy: marcus. -lemonis: how are you? -tammy: good.
lemonis: the place looks great. tammy: thank you. -lemonis: how are you? -shelisa: i'm good. lemonis: how long have you been here? -shelisa: for two months now. -lemonis: and is she mean? shelisa: no, she's very nice. i like my job. lemonis: you like your job? good. and what's your favorite piece of pie? -shelisa: the mango. -lemonis: the mango pie? -we have mango pie now? -tammy: we have mango pie. lemonis: very cool. tammy took another step in moving us in the right direction, like selling pie in a cup. do people like this? tammy: they do. they like to see it. lemonis: what are we selling this for? tammy: $5.95. lemonis: what does it cost? tammy: $1.09. -lemonis: so, good margin. -tammy: yeah. lemonis: are you selling a lot of these? tammy: we are. lemonis: when i first arrived in key west, they were doing about $1 million a year of business, but they were losing about $100,000 a year. today, it's gonna do about $1.2 million. that's a 20% increase. but what's more important is that the margins went from 15% to 35%. and so that $100,000 loss is now looking more like about $100,000 profit at the end of the year.
lemonis: what's happening with jim and allison? have you heard from them? tammy: yeah. lemonis: jim and allison are no longer involved in the day to day operations. when i did the deal, i put tammy in charge, and the problem was that jim kept getting involved and kind of undermining tammy and really creating conflict with the employees. and so the best thing to do was for me to buy them out. so all of the debt got wiped out and they got a check for some cash that they can put in their pocket.
and furthermore, the royalty, the $1.00 per pie and 15 cents a pie slice is turning out to be very lucrative for them. what happened? tammy: we had a falling out. -lemonis: you and jim did? -tammy: so -- yeah. he wanted to continue saying what we were still doing wrong. i mean, it's jim. he's not gonna change. lemonis: i think jim would still like to be a part of the business, but he's not a bad guy. he's just not the greatest employer in the world. how many new flavors do you have now? tammy: blueberry, mango, and blood orange. lemonis: have you gone out and done any sampling? tammy: not yet. just be careful. lemonis: tammy knew that, in key west, there was lots of key lime pie places. but not everybody likes key lime pie. and so she wanted to come up with some other tropical flavors that would allow us to sell to more people. come on down for some pie! free samples! blueberry, blood orange! come on down for some free pie! would you like to try a sample? -woman: blood orange, please. -lemonis: blood orange? -woman: thank you. -lemonis: you want to give that to her first, 'cause she's better-looking?
all blood orange puree, all natural. -woman: wow. -lemonis: blood orange pie. man: you're saying this is better than key lime? lemonis: let's see what you think of this. -man: i'd buy it. -lemonis: you like it? -man: i'd buy it. -lemonis: it's good, right? -man: fantastic. -lemonis: what would -you do differently? -tammy: you can buy it. -man: make it bigger. -lemonis: make them bigger. woman: mmm. woman #2: yummy! buy it. lemonis: made the same way as a key lime pie, except no key lime juice. we're using a blood orange puree or fresh blueberries. woman: it's really good. man: oh, that's good. i like it. lemonis: you taste the fresh blueberries? man: oh, yeah. lemonis: the feedback on the product, it's amazing. and it's great for many reasons. it gives us the ability to attract new customers, and probably, more importantly, we're gonna make more money. -what do you think of that? -woman: it's pretty damn good. -lemonis: pretty damn good. -woman: pretty damn good. lemonis: i'd watch your language around here. -there's kids. -woman: [ laughs ]
lemonis: this place is always packed. tammy: mm-hmm. it's a good thing we sell our pie bars here. -lemonis: good thing. -tammy: [ laughs ] i wanted to take tammy back to hogfish bar, the place she used to bartend at. i thought it would be a perfect place to talk to her about something really important. but every comment i get from every customer, whether it's on yelp or whether it's on twitter or facebook or whatever, is always, "i went to the pie shop. i met tammy. the place is awesome." and so, i think, for me, my confidence in the business today is really all because of you. tammy: i mean, it's -- it's amazing. lemonis: and i say this from the bottom of my heart. i could not have done this without you, and you have made a really bad situation initially turn out to be absolute gold. but i don't want to feel like we have an employer/employee relationship.
and so i really want you to wake up in the morning and feel like you're going to business. i want you to have 25% of the business with me. i'm here to help you, but it's not my business. tammy: and it's crazy. it's crazy. lemonis: why is it crazy? tammy: i don't have a bachelors on the wall, and i'm -- you see me as the owner. like, it's just -- that amount of confidence is -- it's what drives us to get bigger and better. lemonis: look, if you're gonna have a successful business, you have to have people on the team that actually love the business and care about it as much as you do. so i just wanted you to know how proud i am and grateful. -tammy: thank you. -lemonis: i'm more grateful than i am anything to you. tammy: well, i'm grateful. [ laughs ] lemonis: no, i'm more grateful. [ both laugh ] -cheers. -lemonis: cheers. [ glasses clink ] tammy: you want to invest in a dive company? -lemonis: are you kidding? -tammy: [ laughs ]
>> tonight, on the profit, key west key lime pie company, a pie company nationally recognized for their award-winning desserts, run by a temperamental owner... who micromanages his selfless employees. >> i call bull[bleep] to that. is there anybody that does anything competent down in the florida keys? >> with resources stretched thin at multiple locations... >> you want me to order it even though there may or may not be enough money to pay for it? >> don't worry about that. >> u.s. key lime pie company has failed to make a profit on $1.4 million in sales. if i can't get this owner to focus on his core business of pies... if we don't make, we don't sell it--end of discussion. this business will crumble. >> i really don't want to filmed during this. i really don't. >> my name is marcus lemonis, and i fix failing businesses.