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tv   The Profit  CNBC  August 28, 2016 8:00pm-9:01pm EDT

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lemonis: it's a small space.fit"... tonnie: it's been challenging. lemonis: ...a tiny cupcake shop with a big idea. tonnie: you walk in, you pick your cupcake out, you pick your toppings. lemonis: tonnie's minis should be raking in the dough, but it's not. there's $134,000 worth of debt. his biggest investor is his wife. erenisse: it's to the point that i'm not giving any more money. lemonis: tonnie's bakery is cramped and chaotic. sales are down. right now, we're losing money every day, and so i'm trying to stop the bleeding. and the debt keeps rising. erenisse: i'm just upset, 'cause i didn't know about all those people that we owe money to. lemonis: if i can't find a winning recipe for tonnie... we're closing the store. lauren: oh, my god. this is ama-- [ glass shatters ] lemonis: ...his relationship
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and his business will crumble. you don't always think things through. -tonnie: really? -lemonis: yeah, really. tonnie: welcome to tonnie's. first time here? woman: yeah. lemonis: tonnie rosier has always loved to bake, and he learned the craft from his mother. in 2006, he opened his first bakery in new york city, and he was able to land big accounts with retailers like macy's and bloomingdale's. but his business skills -- well, they were half-baked. tonnie: i'm a little lost as to a notice of cancellation. tamika: didn't i just pay that yesterday? lemonis: tonnie was constantly borrowing money from his wife to cover rent and payroll. erenisse: what's the plan to recoup the money and at least break even? lemonis: he's already been forced to shut down two stores. and his current shop? well, it's already losing money. tonnie: we are at a breaking point. lemonis: the gourmet cupcake business is still thriving, and it's a business i know well. and while fixing tonnie's minis won't be a cakewalk,
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he's got an idea that i've never seen before -- a build-your-own cupcake. inwood is at the northern tip of manhattan. it's an up-and-coming neighborhood with a lot of renovation, and there's a lot of new restaurants and new retail, and you feel like it's really growing. but tonnie's minis has the worst retail entrance i've ever seen. i mean, there's scaffolding everywhere. the places on either side of them look like they're in really bad shape. this build-your-own cupcake better be great. -how you doing? -tonnie: how are you? lemonis: are you tonnie? -tonnie: i am. -lemonis: i'm marcus. tonnie: pleasure to meet you, sir. lemonis: nice to meet you. it's a small space. tonnie: yes, it's been challenging. lemonis: i'm expecting to find a bright, fun retail environment. and what i end up seeing is no display and a bunch of packaged cupcakes that are made in the back. it's crowded. it's not inviting. i mean, who would want to come here? -tonnie: how are you? -woman: good. tonnie: welcome to tonnie's. what can i do for you today?
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woman: let me get the cream cheese. tonnie: can i offer you a cupcake, marcus, at the same time? lemonis: you surprise me. so, that's the base? tonnie: traditionally, you walk in -- marcus, you have my -- another guy named marcus -- marcus, you have my steribag? marcus: no, it should be in the front. tonnie: never mind. i got it. so, the beauty of tonnie's minis is you walk in, you pick your cupcake out, you pick your topping. woman: i like it. it means make your own cupcake, essentially. lemonis: you a cupcake eater? woman: yes, actually. thank you so much. -have a wonderful day. -tonnie: take care. lemonis: cupcake's good. tonnie: always happy to hear that. lemonis: the frosting's good. the process seemed a little...nonexistent. i would have thought there would have been a bit of an assembly line, like base, frosting, topping. i don't necessarily see that. tonnie's idea of a build-your-own cupcake, quite frankly, is phenomenal. but the idea i thought i was coming for i just don't see. somebody takes a cake off a rack and then the toppings are, like, hidden under the counter. i mean, it's terrible. how much business are you doing in this location? tonnie: average is $500 a day. lemonis: and what are your margins on that $500?
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tonnie: um... cupcake costs me a quarter to make. lemonis: wrapper, frosting, labor, everything? tonnie: so it, uh... lemonis: one cupcake -- what does that cost to make? tonnie: so, the cost of the cupcake would be closer to...33 cents. -lemonis: are you winging it? -tonnie: i'm estimating. lemonis: i wouldn't call it estimating. i'm gonna call it guesstimating. tonnie: touché. lemonis: what are you selling them for? tonnie: starting at $2.25. lemonis: okay. if you're selling $500 a day worth, and you and i do a deal and we sell $5,000 a day worth, i still want to know what it costs to make one. if it costs tonnie 33 cents to make a cupcake and he sells it for $2.25, he's got great margin. the worry here is that he's shaky on his numbers, and at $500 a day in sales, there is no room for error. kind of a tight space. tonnie: this is the oven. lemonis: this is the only oven you have? tonnie: this is the only oven i have, yeah. lemonis: there is no workflow in this place, and it's cramped and it's hard to maneuver,
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and their ingredients are just stored randomly everywhere. i don't know how they've been able to bake here. tamika: hi, marcus. tamika. lemonis: tamika, nice to meet you. tamika: you too. lemonis: how are you? are you the sister? tamika: yes. lemonis: i'd love to kind of spend a few minutes with you if you don't mind. tamika: okay. lemonis: who's the manager here? tamika: i'm on again, off again. lemonis: walk me through that. tamika: i worked for, like, really, really low pay, which was okay with me. lemonis: for how long? -tamika: like a year. -lemonis: wow. tonnie's basically relying on free labor. and the fact that his sister is willing to help out shows that he has real backing from his family. that's a big advantage when you're struggling. so, who's doing the quality control on this kind of stuff? -tamika: myself and tonnie. -lemonis: yourself? and so do you think this looks right? tamika: no, that one's not going out. lemonis: i don't want to see paper. this wouldn't clear. tamika: and the more we go through, we realize how much is wasted. lemonis: when this happens, two from the same batch at the same time, there's no process. tamika: and let me tell you,
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i have fought with my brother on this process. lemonis: why are you fighting with him? why aren't you just fixing it? -does he listen to you? -tamika: no. -lemonis: no? -tamika: no. lemonis: that looks nice. are you a professional cake decorator? marcus: yeah, i am. lemonis: it's a small space to work, no? and is tonnie easy to work with? marcus: yeah. lemonis: and how about her? is she mean? marcus: [ laughing ] no, she's -- tamika: [ laughs ] woman: hi. how are you? lauren: what kind of cupcake would you like? girl: strawberry twist. lauren: you want a strawberry twist? all right, so, your total's gonna be $7.50. lemonis: how many staff members do you have? tonnie: 12. lauren will be the one who'll be in the front. -lemonis: hi. are you -- hi. -lauren: i'm lauren. lemonis: hi, lauren. how are you? -lauren: good. nice to meet you. -lemonis: very nice to meet you. -are you a baker? -lauren: when i have to be. lemonis: so what is your primary role here? lauren: i'm in the front selling the product. lemonis: okay, great. nice meeting you. lauren: you too. thank you. tonnie: there's a lot going on with tonnie's minis right now as we speak. i'm doing a project in newark that's close to being finalized. the people who are giving me the space,
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they're building out the store. lemonis: at their expense? tonnie: at their expense. so what i have to supply is equipment, the first month's deposit, working capital. lemonis: and they're giving you the money to do that? tonnie: they'loaning me the money to do that. lemonis: do you feel like you're ready for more expansion? tonnie: i am now. lemonis: the only time a business should be expanding is when it's totally proven out its model. you have the product right, you have the right people, you have the right process, and it makes money. so good-idea people are good, but good-idea people that don't know how to execute can be very lethal to a business. hi. erenisse: hi. how are you? -lemonis: how are you? -erenisse: : i'm erenisse. -lemonis: are you tonnie's wife? -erenisse: yes, i am. -lemonis: hey, nice to meet you. -erenisse: nice to meet you. lemonis: you want help taking your coat off? erenisse: thank you. -lemonis: you got it. -erenisse: what a gentleman. lemonis: so, what do you think of the store? erenisse: i think it needs an upgrade. that's why i wrote you. lemonis: oh, okay. tonnie, i thought it was you. tonnie: no, it was -- it was -- it was her. erenisse: the business aspect of it has placed a lot of stress on our marriage. it's to the point that i'm not giving any more money.
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lemonis: how much money do you have invested in this business? erenisse: like $250,000. lemonis: $250,000 is what erenisse has put into that business. that money is gone. erenisse: altogether, we've been together over 10 years now, so different things -- helped with the rent, helped with materials. lemonis: did you win the lotto or something? erenisse: no, i'm trying to support him, you know, until the business can take off. lemonis: okay. erenisse: i think he needs you. i think he needs your expertise. if he hears it from you, maybe he'll take it. lemonis: he doesn't listen to you? erenisse: not all the time. not quite. lemonis: tonnie doesn't listen to his wife, who's invested a ton of money. he doesn't listen to his sister, who works there virtually for free. how do i know he's gonna listen to me? so, cupcake tastes great, but the fact that you don't know what it costs to make it is disturbing, 'cause you don't really know if you're making money here or not.
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what does it cost you to open up the place every day? tonnie: the rent would be $100 a day. lemonis: all the employees -- how much do they cost a day? tonnie: average day is $180. -lemonis: how about electricity? -tonnie: $75 a day. lemonis: how about insurance? how about maintenance? how about office supplies? how about the phone? you're already well over $350. with $500 a day in revenue, if you factor in all of the operating costs plus baked goods, paper supplies, et cetera, he's already operating at a loss. tonnie's been in business for 12 years, and he still struggles with the basics. but the big question for me is, is he willing to do what it takes to save the business and pay his wife back? i think the worry that i have is that you have two people -- one's your sister, one's your wife. you're not listening to them. what confidence would i even have in the fact that you'd listen to me if you don't listen to them? tonnie: but if someone is coming in that i think has done it before, it just gives me a different perspective.
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lemonis: we're gonna do a little math. the total revenue that it shows on this b&l is $250,000 for the year, and you lost $76,000. there's the $250,000 that you put in. for this discussion, i consider that equity. because you guys are married. that's your business. that's the fact that you own, today, 100% of the business. erenisse: i agree. lemonis: there's $134,000 that is owed to other people. and so what do we owe other people? tonnie: the payroll tax is $11,000. the state tax, $35,000. there's $15,000 in arrears, of which is february rent and water escrow. -and then late fees. -erenisse: $15,000? tonnie: then there's denise, $12,000. robert is $25,000. my mom for $13,000. michelle for $7,000. erenisse: wait a minute. is this for her services, or she lent you money? tonnie: no, this is -- this is her loaning me the money.
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so [bleep] is the person who i borrowed money from and he picks up a weekly payment from me. lemonis: like a -- like a -- like a loan shark? tonnie: yes. lemonis: it can be tough for a business like tonnie's to get a bank loan -- virtually impossible. so you end up going to small lenders with very high interest rates, and if you can't pay them back, their methods of collecting are very unorthodox -- often dangerous. this is a much bigger number of debt than i originally thought for a single-location bakery. what's wrong? erenisse: i'm just upset, 'cause i didn't know about
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all those people that we owe money to. you know how i feel about that. sorry. tonnie: i mean, you know i would never do anything to have you sitting here crying, but i did whatever i could to keep a door open, to keep from closing, to pay staff, whatever it took. so me hiding these numbers was not intentional. it was a mistake. it was foolish. would it happen again? never again. lemonis: if i'm gonna invest in this business, tonnie has to understand that everything is gonna change. the fact that he was willing to come clean with erenisse is a good first step, but he's got a mountain to climb. there's $134,000 worth of debt, and so for this business to really have a chance, and for the $250,000 that you've put in this business to be worth something, we have some work to do. the reason that i came to this business
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was because i liked your idea. and so now that i understand these numbers a little more clearly, i'm prepared to make an offer. and so here's my offer -- i'm willing to put up $100,000. for that $100,000, we're gonna satisfy some of the debt that is a real problem. and the balance is gonna go into getting this location really right, from the layout to the process to the way we organize ourselves. and we're gonna understand every cost and every corner and we're gonna have an inventory process. we're gonna know our pricing. and so, i'm interested in investing in this particular idea. so my offer is $100,000 for 20% of the business. tonnie: i'm having a really hard time with that. the number i had in my mind was $600,000. lemonis: $600,000 for how much?
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tonnie: i'd say 33%. lemonis: you thought i was gonna write you a check for $600,000, everybody was gonna get paid, and i was gonna have a third of the business, and i wasn't gonna tell you what you could or couldn't do? -tonnie: no, no. and, again -- -lemonis: wrong show. we're closing the store. do you think i'm taking advantage of you? tonnie: yes. lemonis: i don't want to be in a relationship where somebody feels like they're getting taken advantage of.
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lemonis: you thought i was gonna wreverybody was gonna get paid, and i was gonna have a third of the business, and i wasn't gonna tell you what you could or couldn't do? -tonnie: no, no. and, again -- -lemonis: wrong show. so, what are you thinking right now? erenisse: i'm thinking that now i see why your mother is uncomfortable sometimes, 'cause she probably wants to ask you for the money, but since i didn't know about it, she can't ask you in front of me. lemonis: well, your mother's $13,000, right? if my offer was $100,000, i have no problem going to $113,000, since if mom's happy, everybody's happy. -do you agree? -tamika: yeah. erenisse: i'm uncomfortable with [bleep] lemonis: you mean the loan shark? erenisse: yeah. i don't know what these people are about. i'm uncomfortable with that scenario altogether. lemonis: so it would make you happy if that got paid. erenisse: yes. lemonis: i agree with erenisse that it's a good idea to get rid of all these sort of unscrupulous lenders. and if i'm gonna be associated with the business,
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i don't want any connection to anything like that. so, then i'll up my offer to $125,000, and instead of 20%, we'll go to 25%. and i'm giving you about, like, maybe 10 seconds. tamika: you know what you having full control ends up being. so now see what sharing control ends up being. tonnie: and see, that's what scares me. only because i don't have no control over that number. if we start building out and it costs me $50,000, then... lemonis: you have $75,000 left to pay all these people. that's right. which is, by the way, $25,000 more than you had 10 minutes ago. so... my final offer's $125,000 for 25% of the business.
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we got a deal? tonnie: we got a deal, marcus. lemonis: you know that when you take my check, i am 100% in charge? tonnie: 100% in charge you said? lemonis: she knows that. that's why she called me. she wants me to be 100% in charge. -is that right? -erenisse: yes, absolutely. -thank you. -lemonis: thank you. -tamika: thank you. -lemonis: thank you. so, let me tell everybody what's happening. tonnie and i and erenisse made a deal for me to become a partner in the business, and i'm gonna put $125,000 in the business. a portion of that money is gonna be used to pay the bills that are not paid today. and whether that's the rent or people that have lent the company money, we're gonna pay down the debt. the rest of that money is gonna be used to renovate this whole place. the store is gonna close. tonnie: we have people who are relying on me.
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if we're closed, that means that they're not working. lemonis: it means that i'll take care of them. they get paid. tonnie: maybe i'm stuck on the fact that i'm being told. perhaps it's an ego thing, but -- tamika: stop. i'm gonna choke him in like five seconds. just trust the process. lemonis: i see that you said if he trusts the process and you trust the process, it's gonna be fine. tonnie: that's it. i get it. i'm good. lemonis: the goal going forward is to not only fix the look of the store, but to fix the process. and so my goal is to do everything we can to generate more cash without adding more fixed expense. we're not gonna be doing any sort of expansion until we get this one right. tonnie: i would like to be in a position where i can grow the company at the speed that it can grow. but i think we're just kind of cutting off our hands by letting go of these other opportunities like newark. so for me, it's a struggle.
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lemonis: we're not doing any expansion until this place is right. before we do anything else, we're gonna go back here, and we're gonna find out how much it costs us to make a cupcake. like, right now. let's get everybody together. so, what i want to do is i want to understand the cost of one cupcake. i want the raw ingredients, i want the package, and i want the frosting and the sprinkles. i want it all. in order for tonnie's minis to stop losing money, we have to know what it costs to make the products, and so we're gonna take time to find out what it costs to make one cupcake. and so you're telling me that one batch makes 24, so when we add up all these costs, we're gonna divide it by 24. you ready to go? tonnie: eggs are 15 dozen. i pay $24. lemonis: 180 eggs, about 14 cents an egg. -tonnie: this needs three eggs. -lemonis: so that's 42 cents. tonnie: the buttermilk is $1.40 per quart, and we use 1 1/4 cups. lemonis: okay. 44 cents.
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something you didn't like about that math? tonnie: no, it just seems higher than i thought. lemonis: tonnie has a history of guessing on everything, but the one thing he shouldn't be guessing on is what it costs to make his most important product, the cupcake. we have paper and packaging at 5 cents. we have toppings at 5 cents. $8.33 for materials only. we'll divide that by 24. 35 cents apiece. by the way, you haven't factored in waste -- the mistakes that you make, the stuff that drips. so it's actually costs you 38 cents a cupcake. now we have 15 cents a cupcake in labor. that's 53 cents. so 53 cents is the minimum that it costs to make this before factoring in the lights, the electricity, the worker's comp, the telephone bill, and all the other things. tonnie: right. lemonis: the fact that he didn't know the cost is the reason that the business was losing money. going forward, i need to figure out a way to lower his production costs
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so that when tonnie sells, he can actually make money. feel like you got something out of that? tamika: yes, i did. lemonis: all right. thank you. tamika: thank you. lemonis: free cupcakes. free cupcakes for everybody. woman: oh, delightful. lemonis: tonight's the last time we're open. we're closing the store. woman: aww. man: all right. tonnie: so, what happens with tomorrow's orders? lemonis: we're gonna make sure that every order for every customer gets taken care of. -tamika: okay. -tonnie: [ sighs ] lemonis: tonnie, we're not closing forever. tonnie's having a hard time trusting me, but i've been here for two days, and it's obvious this place is struggling with the workflow. it's not good for customers, and it's not good for employees. we need to totally redo this place, and we're gonna start tomorrow. we're gonna rip this [bleep] apart. what's going through your head right now? tonnie: uh [ chuckles ] you know, it's just kind of sudden.
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i would have preferred to have some notice of some sort. lemonis: well, right now, we're losing money every day, and so i'm trying to stop the bleeding. tonnie: you don't say, "tonnie, guess what? we got 10 minutes to clear the house. we're gonna close the store." people tend to take advantage of my niceness. lemonis: do you think i'm taking advantage of you? tonnie: it's not as simple as yes or no answer. lemonis: tamika, do you think i'm taking advantage of you? tamika: no. lemonis: okay. that was a yes or a no. do you think i'm taking advantage of you? tonnie: yes. lemonis: if you think i'm taking advantage of you, it's been awesome knowing you, nice meeting you. but i don't want to be in a relationship where somebody feels like they're getting taken advantage of.
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tonnie: i've been accustomed for the past 20 years at running my business. lemonis: which is why i came here. tonnie: no, see, but if that's the case, then you have to understand how i feel at some point. i have no idea what's happening with the store and i have no timeline. i don't know. i'm gonna struggle with this scenario. it's not one -- it's not as easy as this may be for you. you know what? this is great. i'm gonna just kind of step back here and watch this -- 'cause i know at the end, it's gonna be amazing. that i know. it doesn't take away the struggle with it. lemonis: right. tonnie: i apologize if -- lemonis: tonnie, no. honestly, that was the most honest and open you've been with me since i got here. and i'm learning to trust you more as you share more with me. it's about trusting each other. tonnie: i agree. lemonis: hello. tamika: erenisse. -erenisse: how are you? -lemonis: good. so, we're gonna be closing the store tonight for the construction. erenisse: i'm so excited. i'm very happy. thank you. lemonis: it's early. we're gonna have fun. out with the old, in with the new.
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lauren: oh, my gosh. this is ama-- i'm speechless. lemonis: in order for this place to function, i'm gonna have to take it all the way down to the studs. -all this is getting -- -[ glass shatters ] i want to create a layout that's good for people who work here... lauren: excuse me. coming through. lemonis: ...and shop here. watch the stuff on the top of it. so when they walk in, they see the cupcakes. then there's a station where they pick their frosting and their toppings. there's a natural beginning and an end. careful, guys. don't worry about the floor. tonnie: i know you got some reservations about newark, but i truly believe that if we can figure out a way to have two different locations with the same type of setup -- lemonis: but don't you think you should get one right first?
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tonnie: one right is easy. i'm gonna get it done. i have your support. i've got the team around me. lemonis: it's not unusual that people want to expand quickly, but if you do it too soon, it could destroy a promising business. but being a good partner requires you to listen to ideas, even when you know they're terrible from the start. i'm willing to take the drive, but i'm telling you right now, i am not committing to it. so, me agreeing to go look at it... tonnie: fair enough. lemonis: ...is because i want to at least, you know, give you the benefit of the doubt. but, i mean, you're gonna have to be airtight with your plan. you're gonna have to know exactly what you're talking about. tonnie: well, there will be a dilemma, because the area's still up-and-coming. lemonis: you feel like you've done your research and you're ready to go? tonnie: my answer's yes. lemonis: okay. so, what is this building? tonnie: this actually is 60,000 square feet of retail space coming in. lemonis: how far along are you in discussions here? tonnie: the lease was signed at this point. lemonis: a lease was signed?
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tonnie: it's been signed. lemonis: you have one location that's in total disrepair, and you're several hundred thousand dollars in debt, and you're still feeling like this is a good idea? tonnie: i know it's a good idea. lemonis: i don't mind ideas, but i don't like surprises. what am i gonna find out next? we have a store in boston? tonnie: this was gonna be the beginning here, give or take. door's here. retail space. and the remaining part, the commissary. so, that was the initial plan. lemonis: what are your projected sales for this location? tonnie: $590 per day. lemonis: oh, so $590 of cash is gonna go through your register. how much is gonna go towards paying the employees? tonnie: we scheduled two employees for the front and in the wholesale department, there's four. lemonis: you'll have six people that work here at an average of $10 an hour, so that's $60 an hour. and $60 an hour times 8 hours is $480 a day in labor.
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tonnie: okay. lemonis: how much is your rent here a month? tonnie: $2,600. lemonis: so about $100 a day on average, right? so now we're at $580. you just lost money. tonnie: it's not as simple as just saying your six staff times whatever the number you're giving me. it doesn't -- it doesn't really work that way. -it may -- it may work -- -lemonis: no, no, no, no. let me give you a little news flash. it does work that way. tonnie's not a guy that lacks integrity. he lacks good business logic. this location would barely break even, and probably lose money. and he wants to build a commissary for his wholesale business. but he doesn't have any wholesale business. i have to be honest with you. in this moment, i'm not in favor of this idea. because the numbers aren't well-thought out. tonnie: i can only accept and take so much abuse. lemonis: if you're accusing me of abuse, i don't appreciate it. tonnie: no, but listen to what i'm saying for a second. i've always been able to figure out how to land on the highest ground. lemonis: we're just gonna be honest. from a business standpoint,
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you haven't always just figured it out. tonnie: really? lemonis: yeah, really. expansion is a great idea if you have your home base in order. i don't think you have your home base in order. tamika: okay. erenisse: i want to know when the money's coming in. that's what i want to know. because at this point, we're maxed out. alzheimer's disease the fi is out there.survive they're going to hold on to everything the disease steals away. that smile they can't hide. the dance class they love. every single piece of them is going to make it through. and the alzheimer's association is going to make it happen by funding research,
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expansion is a great idea if you have your home base in order. i don't think you have your home base in order. tamika: okay. lemonis: tonnie thinks i'm abusing him, when in reality, i'm trying to get him to answer real questions. to tell you that my head popped off my shoulders would be an understatement. tamika: what's up? tonnie: i'm just running out of patience. tamika: i mean, i will say the way that business has been run -- destructive. tonnie: but i was doing it by myself. tamika: oh, here's marcus now. welcome back. lemonis: thought i'd cool off. tonnie: i'm not used to being spoken to in that kind of way. i get you don't see what i'm trying to do. lemonis: actually, i do get what you're trying to do. but i am here
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to change the way you think about things in business. tonnie's upset, but i think he understands why this is a bad idea and he can't do this, and he realizes he has to get out of his lease. i am going to be like a dog on a bone and i'm not gonna let go. tonnie: and i think i need that. you're right. lemonis: tonnie's a frustrating guy to do business with, and i often have to remind myself that i made a commitment to come here and help not only him but his family and the people that work here. but it's hard. we have to prove that we can make money without adding locations, and we have to find ways to actually put cash in the bank. and until that happens, we shouldn't be doing anything else. -tamika: okay. -tonnie: okay. all right. lemonis: hey, guys. -tonnie: marcus. -lemonis: how are you? today, i'm taking tonnie to melita's bakery, a 47,000-square-foot production facility located in the bronx.
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tamika: wow. tonnie: [ laughs ] this is a bakery, huh? tamika: oh, my gosh. full-scale operation. lemonis: i have an idea for tonnie to partner with melita's because they'll actually give him the ability to lower his production costs. manny, this is my friend tonnie. manny: hi, tonnie. -lemonis: this is tamika. -manny: hi, tamika. lemonis: look, manny does millions of dollars a year in business, and so i thought it would be important for you to see how a very efficient process worked. so, what does it cost you to make a basic cupcake? -manny: 44 cents. -tonnie: so 44 cents? lemonis: that's about 9 cents cheaper, right? tonnie: right. yeah. lemonis: he can make the same products for 18% less than you can make it for. and so if the break even is lower, what are you able to do? tonnie: make more money on each cupcake. lemonis: with an 18% reduction in production costs, it's a no-brainer to use melita's instead of tonnie's small kitchen. but when you look at
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the $250,000 of revenue they do annually, and you factor in the 18% of savings, well, that's $45,000 in additional gross profit. that's real money. so, here's the deal -- if you didn't have to make everything that you sold last year and somebody else with a more efficient process made the exact same amount of product that you made, how much more would you have made? 18% to 20%. tonnie: you're right. lemonis: and so i want to be very clear -- you cannot bake anymore in that shop. at all. tamika: but the brand -- it wouldn't be tonnie's minis if it wasn't his recipes. lemonis: oh, it's gonna be his recipe. -you mean of the cakes? -tamika: okay, yeah. lemonis: sure, but he's not gonna be making them. tonnie: you're right. no, you're right. this is how it should look. this is the way it should be done. lemonis: and so i'd like you to come up with some ideas that could be signature tonnie's minis cupcakes. tamika: get back to the basics, bro.
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tonnie: my mom's carrot's kind of how it started. lemonis: so the carrot cake is your mom's? -tonnie: it's my mom's, yeah. -lemonis: okay. i like that. -what else? -tonnie: sweet potato. chocolate kiss. strawberry lemon. tamika: the pistachio cupcake rocked. lemonis: great. i love that. the best thing about today is that tonnie is finally recognizing that the margin of 18% is important. but what's even better is that i can get tonnie refocused on what he's best at, and that's selling. tonnie: i'm actually getting excited about this. man: do you want framers? lemonis: after my visit to melita's, i decided to swing by tonnie's minis and check on the construction. what happened to, like, a little bit of work? man: a little bit of work turned into the ceiling falling down. -lemonis: holy [bleep] -man: and it fell down. we come to cut some lights in, and the ceiling falls down. lemonis: literally fell down? man: i mean literally fell down. lemonis: when my guys started working on the ceiling, it wasn't suspended properly,
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and so it literally caved in on them, and i had to spend another 30 grand. -tonnie: hello? -lemonis: tonnie? -tonnie: speaking. -lemonis: hey. it's marcus. tonnie: marcus, how are you? lemonis: i'm down at the store, and the ceiling caved in. tonnie: the ceiling... lemonis: collapsed. the ceiling collapsed. literally collapsed. -tonnie: the entire ceiling? -lemonis: the entire ceiling. tonnie: okay. i'm on my way. lemonis: okay. if your business is in trouble and you need my help, log on to...
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that comes up along the way. legalzoom. legal help is here. -man: how are you? -tonnie: hey, guys. -lemonis: hi. -tamika: hi. lemonis: did tonnie tell you what happened to the ceiling? -tamika: it fell. -lemonis: collapsed. completely. crazy. after the ceiling collapsed, i had to bring in extra workers and materials, and it's gonna cost me an extra $30,000. but i really don't have a choice. in order for this business to work, the space has to be functional. erenisse: oh, hi. lemonis: i'm really glad that erenisse is here, because i want her to see what kind of progress we're making, especially since she's tonnie's largest investor. tonnie: you know about the ceiling collapsing, so as you can see, there's a whole new ceiling. so, you're standing on the side where the customers will stand. it's being set up so that you have your cupcake, your icing, your topping. and that corner there where the stoves used to be is an actual display case.
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erenisse: but let me ask you a question. so, all of this is being done. all this work is being done. have you done anything to bring in customers, some money? -tonnie: i have things lined up. -erenisse: like what? we'll have this beautiful store, and what are we gonna bring? tonnie: great product. the best-tasting product we can bring. erenisse: but if people don't know we're out there, how's that gonna happen? tonnie: so, the marketing team's gonna be pulled together. erenisse: i want to know when the money's coming in. that's what i want to know. you need to give some thought to that. tonnie: okay. erenisse: because at this point, we're maxed out. lemonis: so, i'll give you the plan. tonnie: i appreciate that. lemonis: we're about three days from the grand opening here, and we can invite the neighborhood. but i know right now i can tell you're a little annoyed, so i'm just asking you just to be patient. erenisse: i am annoyed, 'cause it's been a while.
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-maybe it's my way of thinking. -lemonis: no, no. erenisse: he always tells me, "you don't understand. i'm a businessperson." lemonis: no, no, no. you understand. we're just not as ready as we want to be. and so we will be ready. just give us a few more days, all right? erenisse: yeah, all right. thank you. lemonis: i think erenisse is so tired about hearing how great things are gonna be in the future, and she's $250,000 in the hole, and she wants to be assured that tonnie's doing everything in his power to bring in revenue, whether that's standing behind the counter and selling or generating new wholesale business. all right, guys. i'll see you soon. -tonnie: okay. -tamika: okay, marcus. -lemonis: goodbye. -erenisse: all right. lemonis: look at all these people. it's busy. now that tonnie is devoting 100% of his time to sales, i've set up a meeting at sylvia's to see what kind of salesman he really is. tren'ness, nice to meet you. -tren'ness: welcome to sylvia's. -lemonis: thank you. sylvia's is one of the most popular soul food restaurants in all of america, and having an opportunity to sell to them
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would be big margin, because it doesn't come with rent or labor. it's establishing a relationship and fulfilling it. and so you've been around this place for how long? bedelia: the business is gonna be 53. lemonis: wow. bedelia: so do the math. [ laughter ] lemonis: i'm not doing the math. i'm with a lady, and i'm a gentleman. tonnie: i want to thank you for taking the time, obviously. tren'ness: of course. tonnie: i want to come to harlem. tren'ness: all right. tonnie: how fantastic would it be if we could identify one or two items that we can display and sell on your countertop? this is actually a sweet potato cupcake, which i believe you don't have. bedelia: that's right. we don't have. lemonis: but i think there's a good deal here for all of us, because your margins on something like this will be really, really good. i don't know what you sell a slice of cake for. -bedelia: $5.50. -tren'ness: yeah, $5.50, $6. lemonis: and so this may allow for a little lower price point but the same kind of margins. tren'ness: here's the thing -- i'm a little nervous about bringing them in-house.
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i sold everything i had to own a brewery. you might have heard its name... stella artois be legacy
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trewe're already struggling -- trying to house the items that we have. i'm not certain that we would have space for these. but just from our customer standpoint, they dictate, so...
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lemonis: how about you and i take them around? can we do that? can we give a few away? tren'ness: of course. of course. lemonis: even though sylvia's initially acts like they're not open to taking on this product, the fact that they let us pass it out to some of their customers and get feedback tells me that they may be a little more open than they think. tonnie: can we offer you guys a complimentary cupcake on the house? lemonis: at a restaurant as popular and as busy as sylvia's, this account could generate about $2,000 a day. and what's even better is that $1,600 of it would be pure profit. tren'ness: how'd y'all like it? -woman: it's great. -tren'ness: oh, good, good. so, great feedback. yeah, this is some good stuff. tonnie: you know, one of the things, of course, is to figure out a way to produce an item that's gonna be exclusive to sylvia's. tren'ness: hmm. well, we like exclusive. tonnie: this would be just here for you guys. -bedelia: i'm sold. -tren'ness: [ laughs ] i see this absolutely working. lemonis: the fact that tonnie was able to turn a no into a yes
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is proof to me that i invested in the right guy. he did a great job in this presentation. well? tonnie: that was great. lemonis: you did great. when you start to follow the process, that's what happens. -tonnie: okay. -lemonis: okay? i'll see you back at the store. i'm proud of you. tonnie: all right. thank you, marcus. bye. tamika: would you like a sample? tonnie: would you like a sample from tonnie's minis? grand opening. grand opening one block down. -tamika: awesome. -man: thank you very much. tamika: you're welcome. enjoy. lemonis: today is the grand opening of tonnie's minis, and it's a very proud day. tamika: would you like a sample? lemonis: i'd like a sample. tamika: oh! hi! lemonis: the scaffolding outside is now gone, so you can actually see the store. tonnie: good to see you, marcus. lemonis: how are you? the space has been completely renovated,
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so it's bright and open. before, it was dark and cramped. now it has an efficient flow for the employees to make the cupcakes. -the store looks great. -tonnie: it looks good. lauren: these are awesome. they've been selling like crazy. man: all right. let me get one. lemonis: welcome to tonnie's. come on in. woman: hi. how are you? lemonis: you're gonna make a cupcake with me, okay? woman: yes, sir. lemonis: okay, so which one do you want? woman: got to go with the red velvet. lemonis: okay, i'm gonna take the strawberry and sponge together. okay, let's go to the next place. our frosting choices. woman: gonna do half cream cheese and half strawberry. lemonis: oh, see, now you're mixing it up a little. woman: yes. lemonis: we finally launched the do-it-yourself. the signage is now clear and understandable. the toppings bar is easy for kids and adults to see and pick from. thank you. woman: thank you very much. employee: enjoy. lemonis: i am part of the family. the best part was seeing tonnie pay his mom back.
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tonnie: as you know, over the years, you've been an amazing part of the business, never mind being my mom. and finally i'm able to pay you back. tonnie's mom: love you. tonnie: love you, too. lemonis: the fact that he's paid his mom back is a big deal to me, but what's even better is that he now knows that erenisse's money is safe and it's headed in the right direction. tonnie: this day has been an amazing day. i actually have to thank marcus and thank all of you for attending. a big part of tonnie's minis has been kind of pushed in a different direction because of the support of my wife. i'm a very blessed man to have a wife like erenisse, and i thank you a thousand times. erenisse: this is really an amazing opportunity that i really never thought was gonna happen for my husband that i love dearly. i've been blessed to have him and the family in my life, and, you know, i'm just, like, grateful.
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thank you, marcus. lemonis: well, we used to do $500 a day in business. we're now doing a minimum of $1,500 a day, and our operating costs on a daily basis are averaging around $1,100, leaving us with gross profit of $400. on an annual basis, it's about $140,000 of profit per year. woman: cheers to legacy building. tonnie: and continued success. not long ago, i was focusing on just opening stores. now i'm focusing on an empire -- an empire that is built to last. i love you so much. new tonnie's minis, new me. no stress. tamika: get over here by my boo. [ camera shutters clicking ] lemonis: selfie. tamika: we ready? [ laughs ] lemonis: ta-da! [ laughter ]
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lemonis: tothis place is awesome... two business partners revive a beloved family restaurant chain... woman: i was so excited to see that it was back. lemonis: ...only to run it right back into the ground. mike: we've gone through hell together. lemonis: the c.e.o. is incapable of doing his job. why are you blaming everybody else? mike: i'm not blaming everybody. lemonis: what about you? the head of marketing isn't allowed to do hers. shauna: i feel like i try to take on things, and you try to take them back. -sandy: it's not that simple. -shauna: well, it is. lemonis: as the dysfunction gets worse and worse... mike: paul was handling the numbers. i trusted, but i didn't verify. lemonis: ...the day of reckoning gets closer and closer. $1,900,000 is the total debt, and you have no cash.

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