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tv   The Profit  CNBC  September 6, 2016 12:00am-1:01am EDT

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cate: welcome toto the blues jean bar... lemonis: ...a chain of blue-jean boutiques built around one big gimmick. lady: our slogan is, "you belly up to the bar, and we'll cover your ass." lemonis: the owner is clinging to a questionable sales strategy. you've taken up a lot of space with a dead shoe bar that could have been a cashmere corner. and her mother's legacy is on the line. lady: to lose her money would be doing her a disservice. lemonis: there's no supervision at the top, and roles are confused. tasha: if i had more direction, i could have done better. lemonis: i need to sort out the staffing problems, get rid of stagnant merchandise, and give this retail chain a brand-new identity. lady: oh, my god. lemonis: or the blues jean bar will be a wash out. lady: i'm consumed by fixing this problem.
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lemonis: my name is marcus lemonis, and i risk my own money to save struggling businesses. we're not gonna wake up every morning wondering if we have a job. we're gonna wake up every morning wondering how many jobs we have to do. it's not always pretty. everything's gonna change -- everything. but i do it to save jobs, and i do it to make money. this... let's go to work. "the profit." katelyn: hi, ladies, welcome in. -lady: customer return. -tasha: yeah. lemonis: lady fuller got the idea for a bar-themed jeans store while still in school and then made it a reality. lady: we are obviously a bar of jeans. you walk up and kind of order a jean like you'd order a cocktail or coffee. lemonis: the concept was a hit, prompting her to open up 12 more stores in just a few short years. but the denim game is incredibly competitive,
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and lady's aggressive expansion plus her retail inexperience created some serious problems. lady: these are super-dirty. that's disgusting. how the... did it get like this? lemonis: blue jeans are part of almost everybody's wardrobe. man: is this all girls'? lady: no, we do have men's jeans. lemonis: and i believe in lady's concept -- a specialty boutique for blue jeans. with tweaks and some refinement, i believe we can raise the bar and turn this into a national brand. i'm in san francisco to visit the flagship store. it's on a great block with tons of cars and foot traffic, and i'm liking the energy around here. -hi, there. -lady: hi, how are you? -i'm lady. -lemonis: i'm marcus. -how are you? -lady: it's nice to meet you. -lemonis: how are you? -amy: hi, i'm amy. lemonis: amy. how are you? lady: i'm so glad you're wearing jeans. -lemonis: you didn't think i would come to a jean bar with jeans? lady: belly up.
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lemonis: so, what's "belly up" mean? lady: our slogan is, "you belly up to the bar, and we'll cover your ass." when someone walks in, we always say, "belly up to the bar, and we'll help you." so you basically tell the jean tenders, these lovely folks, how you like your jeans to fit. amy: so you tell me straight cut, bootcut, relaxed, darker or lighter, and then what size you think you are, and i can help guide you to, like, the best-fitting jean. lady: the basic premise of the store is that you can't, you know, touch the jeans without us. lemonis: do they actually say to the people, "you can't touch the jeans without us"? -lady: yeah. -amy: mm-hmm. lady: they can't walk behind the bar. lemonis: okay. amy: hi, ladies. welcome in. lemonis: have you guys shopped here before? woman: i pop in every once in a while. you know, i just live down the street. lemonis: have you done this whole, like, "belly up to the bar" concept? woman: no. lemonis: you can belly up to the bar, but you can't touch the jeans without us. woman: i actually like to be able to kind of touch it myself. -yeah. -amy: [ laughs ] lemonis: i agree. "we don't want you touching the jeans." well, then, i don't want to buy them. so, let's see how the process works. lady: okay, so, can you back up a little bit? -lemonis: [ laughing ] sure. -lady: can you turn around?
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i think you're probably, like, a size 36. this is a slim straight cut. lemonis: i mean, you typically have to be slim to wear slim. so i'm gonna give it a shot. -lady: you're pretty slim. -lemonis: i have a big ass. lady: you have an athletic ass. lemonis: we'll go with "athletic." lady: [ laughs ] marcus, how you doing? lemonis: these feel -- so, the problem with these -- they feel big on me. lady: i like the leg shape on you. lemonis: no, i can't fit in 34s. lady: do we have the size 36? amy: we don't have them anymore. lemonis: these have too much stretch in them. i feel like i'm in, like, grandma pants -or something with leg stretch. -lady: yoga pants. lemonis: same issue. so these actually got even wider. lady: yeah, those are actually way too wide. you got to take those off. [ laughs ] lemonis: you want me to take them off right here? -just like -- -lady: well -- lemonis: they didn't have my size in most instances, and they didn't have much inventory for me to choose from. i felt like i was being given the leftovers. why is it called blujean bar as opposed to blue jean bar? lady: i'm from new orleans, and so i came up with this idea that it was gonna be, like, a blues bar, like a new orleans blues bar.
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lemonis: does it feel like a blues bar in here? lady: it does not feel like a blues bar. lemonis: and so what's the model that you use for pricing? lady: so, basically, we have about a 50% margin, which is a huge improvement for us, just by trying -- lemonis: so you're proven, but you're not gonna get there. lady: no. lemonis: today, blues jean bar is operating at about a 50% margin. the retail minimum for a clothing store should be north of 60%. if they want to make more money, they need to compliment the jeans with more products that have higher margin. for example, if jeans had a 50% margin and a t-shirt has a 70% margin and a sweater has a 68% margin, you'll add those all together and come up with a blended average -- somewhere around 62%. why is the inventory so anemic? lady: well, i think we've been cash-poor. i have been trying to pay old debt and buy new inventory. -lemonis: at the same time. -lady: at the same time. amy: our stacks used to be, you know -- every single one was to the top,
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and i had two back rooms full of these. lemonis: like, there's a whole shelf that's empty. amy: that used to be an entire wall full of denim. lemonis: so you used to have inventory just stacked. -amy: yeah. -lemonis: and what changed? lady: well, the business changed in the past couple of years, mainly 'cause i opened too many stores too fast. lemonis: how many did you open? lady: at the height of it, i believe we had 13 stores. lemonis: and how many stores left today? lady: we have three stores now. lemonis: what happened? lady: well, new orleans -- i don't think i understood the market. and i never could figure denver out. lemonis: but they wear jeans in denver, right? lady: they do wear jeans in denver. lemonis: so, denver. the next one? lady: boston. i did not understand the boston customer. -the next one was san jose. -lemonis: okay. lady: i never understood that market. we had mill valley, california. lemonis: [ laughing ] and why didn't it work? please, don't say because you didn't know the market. lady: that is what happened there. lemonis: jeans isn't barbecue. it's not that complicated. whether this is cleveland or the most fascinating city in america, it's jeans. really.
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so three stores left today. lady: yes -- san francisco, chicago, then dallas. lemonis: what was the worst year? lady: i believe 2013. and we did like $8 million on the top line, -but we had losses. -lemonis: how much was that? lady: $396,000. lemonis: and that was with 13 stores? lady: that was with the whole engine running. lemonis: ah. in 2013, lady did $8 million in sales across 13 stores but lost close to $400,000. that's because only three of the stores were actually making money. and the big problem was they weren't making enough money to keep the other 10 open. and so the only solution was to keep those three and say goodbye to the rest. lady: every day, i sit there at the computer, and it's, you know, "how do i manage the lean amount of cash that i have?" because my number-one priority is to keep the lights on in three locations, pay old debt, keep everybody working. and that spins a tightrope i've been walking. and it kind of feels like breathing with a noose around your neck. lemonis: which is not very easy. lady: no. lemonis: and when you had 13 stores, where was the office for merchandising,
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inventory management, accounting, i.t.? where was all that? lady: i live just right outside of aspen, colorado, and so it's there. lemonis: why do you live there? lady: my husband got a job there. i have two kids now -- 3 and 5. lemonis: and is there a store there? lady: there is not a store there. lemonis: lady was literally like a horse out of the barn, opening stores all over the country with no research, and she doesn't even live where one of the stores exist so that she can see the product, talk to the consumers, listen to the customers, see what's selling and not selling. no wonder this place is in total chaos. when you source inventory, who buys all the inventory? lady: currently, i do. lemonis: and then, who does the merchandising? lady: the store managers. amy's been with us since 2010. lemonis: you're the manager here, amy? amy: yeah. lady: tasha's been with me since 2007. lemonis: tasha, what do you do? tasha: i'm the director of sales. lemonis: who does the ordering? lady: i do. lemonis: so let me understand that -- tasha, what do you do again? i'm sorry. tasha: i manage the managers within the stores. lemonis: three stores. all store managers, they report to you.
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-tasha: mm-hmm. -lemonis: and you report to her. tasha: correct. lemonis: and so what are you working on? lady: so i work on the debt-management. lemonis: i subscribe to the theory of very flat management. in this case, there should be three store managers, and they should all report to the owner. but i'm not really sure why lady put this other layer in between her and the stores. tasha's not merchandising. she's not buying. she's not hiring the people in the stores. what is she actually doing? is your name really lady? lady: so, yes, and actually my mother was named lady. so... you know, my mother passed away when i was 9. and she took her own life. she left me money, and i wanted to do something with her money that paid homage to her and i think, on some much deeper level, prove to myself that my life was gonna be different than hers. [ voice breaking ] and now i'm gonna cry, but, you know, i'm turning 40 next year,
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and she killed herself when she was 43. and i think i always felt like, um... that this business would be so successful by the time i reached her age. [ sniffles ] i'm not a quitter. [ chuckles ] and i can't let go of being able to...figure it out, you know? lemonis: this is a very strong woman who took a lot of risk in opening up her own business. but it's obvious to me that her mother's passing is affecting her ability to make decisions that aren't overwhelmed with pressure. i'm sorry to hear about your mother. lady: yeah, no, thank you. i'm sorry to cry about it. -it's just -- it's personal. -lemonis: no, i can relate. listen, my mother died recently, and so i kind of get all that. and the fact that you feel the pressure to not fail -- -it makes sense. -lady: yeah. lemonis: i still don't have enough information. i really need to look at the financials.
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hello. -lady: hi. -lemonis: how are you? lady: good. good to see you. lemonis: there are a number of really big issues here. there's anemic inventory. there's layers of management. the margins are horrible. i mean, the list could go on and on. you couldn't have picked a better setting. lady: i know. [ chuckles ] i feel like he's about to give me a rose. [ both laugh ] lemonis: right? it feels like that. lady: while we're sitting in this romantic spot... [ both laugh ] you're blushing. see? lemonis: um... what i wanted to do is actually just go -through the numbers with you. -lady: okay. lemonis: you went from 13 stores to 3? so let's look at the p&l. $3,145,000 in sales. -business lost 10 grand. -lady: yeah. lemonis: and that's because you lifted all the bad stores out. there's three stores left. they generate over $3 million of business, which is a heck of a job. -lady: right. -lemonis: especially considering that the inventory is anemic. so, a negative balance in all the checking accounts?
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-lady: yeah. -lemonis: okay. so the total assets with inventory that you own -- $166,898. $1,603,000 of liabilities... lady: mm-hmm. which is made up of $865,000 in payables to vendors. lady: all payables to vendors. lemonis: $50,000 in credit cards. and $688,000 in line of credit. and that line of credit -- you said you personally signed for it? lady: yes, and i pledged my assets towards it. lemonis: and what are those assets again? lady: it's portfolio -- old, like, blue-chip stocks. lemonis: and that's what your mother left? -that was your inheritance? -lady: yes. lemonis: if everything goes bad... lady: [ voice breaking ] my creative spirit is invested in this business, and, for three years, i've been not being the best mom or the best wife because i'm consumed by fixing this problem. i would like to take this business to the next level.
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it's very hard to have a business where people feel it. it's the juju. and we have it. lemonis: that juju that you talk about -- that's actually you, to be honest with you. you basically started a business by rubbing two sticks together. -lady: [ laughs ] -lemonis: right? lady: yes. lemonis: and so, i want to make an offer. lady: okay. lemonis: and so, my offer's $800,000 for 50% of the business. that $800,000 will be used to clean up the situation with the vendors, pay down the bank significantly, and put money in the bank for working capital so that we can have inventory for everybody. lady: you know, i'm thinking that, to me, the equity piece is really important mainly just because i spent so much time, blood, sweat, and tears in this company. lemonis: okay. lady: i think my counter would be... ...but raise you to $1 million.
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cate: i assumed the store-manager role. lemonis: when's the last time you saw lady? cate: i haven't seen lady in six years. so we know how to cover almost alanything.ything, even mer-mutts. (1940s aqua music)
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lemonis: and so my offer is $800,000 for 50% of the business. lady: i think my counter would be if you could take 40% of the company but raise you to $1 million to satisfy the vendor debt specifically. lemonis: the vendor debt could be worked out -with a much lower amount. -lady: it can be worked out. -i hear you. -lemonis: so your $865,000 could be for maybe 10 or 20 cents on the dollar. well, that's $160,000. lady: yeah, so, i could come back down to $800,000, but i think i really need to do 60/40. lemonis: why is the 50% hanging you up so much? or is it you still want to have more than me? from a creativity standpoint, you trump me by 100. from a control and process standpoint -- i feel like that's my strong suit. i bring value. you bring value.
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i want us to be the same or nothing. so, my offer's $800,000 for 50%. lady: no $900,000, 50/50? lemonis: who's determining what happens with the $900,000? lady: you are. lemonis: i'll put the extra $100,000 in because i know that i own 50% of it, and i'm controlling how the money gets spent. lady: i'm really happy to be your partner. -lemonis: thank you. -lady: and i feel like -it's right. -lemonis: so we have a deal? lady: we have a deal. -[ laughs ] -lemonis: congratulations. lady: congratulations to you -- both of us. lemonis: and don't forget -- i'm 100% in charge. lady: [ laughs ] i know you are. i'm excited. lemonis: good morning. lady and i had dinner last night, and we made a deal for me to invest $900,000 -into the business. -amy: [ chuckles ] nice. lemonis: and i'm 100% in charge.
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so the $900,000 that i'm putting into the business is gonna be used to solve three primary things -- bring inventory in, take care of the vendors that supply us, and we're going to pretty significantly change the look of the store. and as we kind of re-merchandise the store, we're going to pick products that we think are easy bolt-ons, easy up-sells. we want to make sure that everybody's in the appropriate role. and i think, tasha, the question that i have -- -if you're in dallas... -tasha: correct. lemonis: ...why is there a store manager and you? why all these layers? tasha: well, i think, one, i do some of the training. it's a whole mix -of things that i do. -lemonis: i want -to really dig into that. -tasha: yeah. lemonis: the problem with this business is that when this company shrunk from 13 stores to 3 stores, the management structure didn't shrink with it. so, there's lady, who's the owner. there's tasha's position, who's the director of sales, who oversees the managers. then there's the managers who have assistant managers and floor managers and salespeople. we got to flatten that out. that is too many layers of management.
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what do you guys think the biggest challenge for lady is gonna be? -amy: getting used to you. -tasha: yeah. [ laughter ] lemonis: i have a feeling you and i are gonna... [ laughter ] lady: giddyup. lemonis: all right, let's go to work. i live in chicago, and so while i was home, i decided to visit the blues jean bar on halsted street -- unannounced. the employees think the cameras are there only for basic footage. they don't know i'm coming. and right away, i notice a dirty storefront and a dirty awning. it wasn't good. hi, guys. welcome. let us know if you need help with denim. man: these in a... katelyn: 33. we do not. we only have a 34 and a 38. i know. lemonis: just like in san francisco, they didn't have enough inventory. customers are asking for things, and they don't even have their sizes. katelyn: unfortunately not right now. our shorts are kind of limited.
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lemonis: i noticed this shoe-bar area, and it was just boxes piled up, merchandise all over the place. from a presentation standpoint, they'd get an "f." -what is your name? -cate: i'm cate. -nice to meet you. -lemonis: marcus. -cate: marcus. hello. hello. -lemonis: nice to meet you. -cate: welcome to our store. -lemonis: thank you. did you know lady and i made a deal for 50%? -cate: yeah. -lemonis: how long -have you been here? -cate: six years. and i assumed the store-manager role four weeks ago. lemonis: and so who do you report to now? cate: i answer to tasha. lemonis: how often does she come? cate: i have not seen tasha for over four years. lemonis: and how about lady? cate: i haven't seen lady in six years. i know she has been to the store in the last 12 months, -but i have not seen her. -lemonis: happened to be -a day you were off. -cate: yeah. katelyn: i've never met lady. and the roles of everyone is very confusing. lemonis: i'm definitely frustrated with the fact that tasha hasn't been in these stores managing these people. but if i was gonna hold one person accountable, it would be lady, the woman who owns this business.
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she should be setting the direction. -nice meeting you. -katelyn: you, too. lemonis: it was really nice meeting you. morning, guys. -cate: hello. -lemonis: how are you? after seeing what i saw in chicago, i called lady, and i told her that her and tasha need to come and bring amy 'cause what i've seen, i don't like. i want to know what the hell's going on around here. i know you haven't been here in a while. lady: i haven't. lemonis: and why is that, by the way? lady: you know, i have been working on cash and keeping, sort of, the lights on. lemonis: i came to this store yesterday, and, you know, it raised a lot of questions for me. seeing the dirty windows and the dirty awning -- and i would bet that the reason it looks this way is because it feels un-supervised, under-resourced, under-loved. and it's a reflection of you, and it's a reflection of you. and so, while i really like cate, the store doesn't look great. so who came here to train her for that job?
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tasha: well, i mean, i talked to cate extensively on the phone. lemonis: cate, how often do you get the financial performance of your stores, like whether it makes money or doesn't make money or the margins or how much inventory you have? cate: i do that on my own. lady: all of our managers have a lot of ownership in their stores, which i don't think is necessarily a bad thing. lemonis: i'm starting to understand the dynamic here. now, clearly, tasha is failing her store managers, but, in my opinion, lady is failing tasha. these employees have been given the freedom to do whatever they want, and in the absence of leadership, particularly from lady, people are gonna do whatever they have to to make it work. and it's obvious to me that, just like san francisco, this place doesn't have enough inventory. is there inventory downstairs? -cate: sure. -lemonis: let's go downstairs. and so i ask them to take me down to the basement, hoping that there's actually more inventory. lady: a lot of this stuff just all needs to be liquidated. more back-stock. lemonis: this basement is a disaster. and my bet is that there was tens of thousands of dollars worth of inventory here.
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and whether it was oddball shoes or shirts or blouses, it feels like a warehouse of odd clothes that don't belong upstairs. this is the most irresponsible use of cash that i've ever seen. this is a good example of a reason you couldn't visit stores. lady: you are correct. lemonis: what's in the next room? lady: a zillion more of those. lemonis: mm-hmm. what down here actually sells, tasha? tasha: i don't know. katelyn: i don't know how we're gonna sell this. that was my first instinct. like, chicago people aren't gonna buy this. lady: what are you thinking? lemonis: i'm not sure who to be pissed at -- myself for doing the deal... or you guys for letting the stuff just sit there. but at this point, we need to figure it out. i need more floor space. -guillermo: this is going to go. -lady: no. if we take the bar out, then we're just gap on steroids.
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lemonis: i'm not sure who to be pissed at, but at this point, we need to figure it out. so we're gonna start to define some roles. are you ready? you're responsible to get rid of everything we determine today... never gonna last. -tasha: okay. lemonis: by the way, that's the stuff down here. we're gonna go downstairs and pick some other stuff. -tasha: okay. -lemonis: this mountain of inventory doesn't just tell me that they're irresponsible with cash, but it tells me that they don't know who their customers are and who they're buying for. and we're gonna solve that right now. we're gonna define our profile right now. what is our profile?
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when you built this company, who did you want the shopper to be? lady: me. a woman between the age of 35 to 55, a woman that has disposable time and income, like a soccer mom. katelyn: that just isn't -- i don't think -- who we should target in this neighborhood. amy: i'd say a little younger. lemonis: young professionals? cate: lincoln park is primarily young professionals. lemonis: so 25 to 40? katelyn: yeah, 25 through probably 40. lemonis: this is a good example of what got you in trouble -when you opened stores. -lady: yeah. lemonis: if you're picking what you described, you picked the wrong location. this is not the neighborhood for the demographic you're looking for. i want to go through the store and figure out what won't sell here. 25 to 40 years old. let's be aggressive about it. right now, we're getting rid of everything that doesn't work for our demographic in the chicago market. after we get a handle on chicago, we're gonna do the same for dallas and san francisco. amy: what do you think about this? -lady: no, hate it. -amy: hate it? lemonis: 25 to 40? yes or no? cate: i think they're too old-looking.
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-lemonis: yes or no? -tasha: yes. but i think we should be choosier on the colors. [ shoes clatter ] lemonis: this is basically a room full of mistakes and desperate buying without a plan. there is so much wasted inventory and so much bad product in here. this is why data and research are important. amy: i like the rainbows. lemonis: amy, are you re-ordering this? amy: hell, no. lemonis: after going through the store, i realized that over 70% of the merchandise wasn't gonna sell. and i wasn't gonna sit around for it, so i made an immediate decision to liquidate it right then and there. come on in. liquidation sale. $5 jeans. jeans are 5 and 10 bucks. store's closing. we were able to clear $15,000 worth of merchandise. i'm going to re-invest the $15,000 into brand-new inventory, and i'm gonna look for a 70% margin. in order to do that, i'm gonna have to sell the product for $50,000, yielding me a $35,000 gross profit.
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i know that i'll be able to do that four times a year, so on an annual basis we'll have $200,000 worth of revenue and $140,000 worth of gross profit. from doing what? clearing out the basement? it's not that hard. -how are you? -lady: great, how are you? -lemonis: good morning. -lady: hi. good morning. lemonis: looks a little different in here. lady: yeah, it looks better, doesn't it? lemonis: i've decided to make the chicago store the model for the other locations. -good seeing you. -guillermo: nice to see you. lemonis: i brought in guillermo, a designer who understands how to lay out interior spaces. my goal is to maximize every square inch of this place and add more fixtures and more product, allowing for more revenue to be generated. what i'm looking to do is change the entire store. i feel like i need more floor space -- a lot more floor space. guillermo: this is gonna go. i mean, we're... lady: no.
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that's really a place to display the jeans. guillermo: i think it's a little too big for the store. lady: i mean, i just think show the jeans to the customer and, like, show them the fabrics. i want the bar to be a main feature. lemonis: you've taken up a lot of space with a dead shoe bar that could have been a cashmere corner. lady: well, what if you had the bar, but you could have, you know, more access? i don't want someone to walk in and think, "i'm in a cashmere store." lemonis: you've taken up a lot of nice display spaces down the middle of the aisle because i have this big piece of wood. her ability to up-sell is minimized because she's back there. what is she gonna do? keep coming in and out? lady: can we step back for a second, and can i ask you -- if we take the bar out, then we're just gap on steroids. we're just a white box. i feel like the reason why this store is so cool is because we have the bar. lemonis: but it didn't work for this business. you opened up 13 of them, and they didn't work. what's the one thing that you would say you're not willing to compromise on?
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lady: i think the soul of the store. lemonis: the soul of the store is the most important thing? lady: i think so. i mean, the specialness. lemonis: it's obvious to me that lady is struggling to let go of the bar because that's how she started the business. but we can't be managing this business from the rearview mirror. we have to be looking forward. the store is shutting down for remodel and a re-brand. -lady: okay. -lemonis: and we will re-open, and it will be big and bad. it's gonna take about 30 days to renovate the chicago store, and so i'm sending all of the good inventory to dallas and san francisco. but the bad inventory that's still in the basement -- well, i asked tasha to get rid of that days ago. and it's still here. why isn't it gone? tasha: i think i've just been engulfed in doing a lot of different things. i could have done better, but i also thought if i had better tools and more direction... lemonis: you know, in the position that you're in right now, don't you think you should be coming up with the solutions on a daily basis? tasha: well, right.
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lemonis: tasha seems very confused about her role, like she doesn't know what to do. and lady's just standing there with nothing to say. if you're responsible for the three stores, if that's your job, tell me why san francisco is a mess, chicago is a mess, dallas -- i don't know. i'm assuming it's the same. tasha: i failed at my job, you know? [ sniffles ] i failed. [ sniffles ] lemonis: i think i have a video of what the chicago store looks like right now. lady: oh... oh, my god. where's the bar?
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tasha? tasha: [ sniffles ] -sorry. -lemonis: no, no, it's okay. i think, at the end of the day, you know, i think that there definitely has been a failure. tasha: yeah. lemonis: if you're in that position of authority, you have to come up with solutions on your own. tasha: right. lemonis: and just because the house is burning down, you can't wait for her to figure out how to put the fire out. -tasha: yeah. -lemonis: and these girls in the stores, i think, have a lack of respect because they feel like you abandoned them. tasha: because i can't do everything. i've done everything for a really long time, and it obviously doesn't work. lemonis: or you could be just, you know, -getting back to basics. -tasha: yeah. lemonis: i know that tasha thinks that she's working hard, but i need her to work smarter, not harder. so we just have to figure out
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what's the right strategy going forward, and what's the right position for everybody? with the chicago store closed and ready for remodeling, i want to get a head start on new inventory. so, i'm taking lady and amy to aviator nation in los angeles to set up a wholesale account. my goal is to buy a small collection of products that go well with jeans for 25- to 40-year-olds -- things that'll be a great bolt-on to the jean purchase. paige: the cool thing about aviator nation product is it's all made here in l.a. amy: i was saying to lady a while back that we need to carry more hoodies and whatnot, especially in san francisco. lemonis: if jeans are the primary product and they come with a 50% margin, i'm looking to have the balance of the inventory be products that can go with jeans but at a much higher margin. -so that's $164.99. -paige: yes. lemonis: so if we had a price of $165 and we wanted to make a 65% margin, that would come in at around just under $60.
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-paige: right. -lemonis: but the larger commitment we make, obviously that's gonna help -the relationship and the price. -paige: yeah, absolutely. lemonis: does that work in your mind? lady: yeah. lemonis: while we're in l.a. looking for new products and new ways to grow our business, back in chicago, there's an entire demolition crew basically gutting the place. hello. i heard from lady that she had a few important things that she wanted to discuss, so we're gonna meet for some lunch. lady: it's been hard for me to vocalize my whole feeling about the bar and why it's special. the bar makes us very different as a retailer. i don't want us to turn out to just be a common retailer with a lot of clothes in a store. i want the personal connection there, and i want a format in a store that aids that. lemonis: i think i have a video of what the chicago store looks like right now. let me see if i have this. lady: oh...
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oh, my god. oh, my god. where's the bar? lemonis: the bar is gone. lady: this makes my heart hurt to watch it. 10 years of, like, that store being the way it was, and,'s just hard. lemonis: i'm intentionally changing things to the extreme so that it feels like a new day. -i'm doing it on purpose. -lady: yeah. lemonis: the bar's taking up valuable display space for tables and racks that will allow us to sell more merchandise. lady: it's a process, like everything else -- the letting-go piece. lemonis: today, i'm meeting lady and tasha back at the san francisco store. i wanted to find out how they did with all that extra inventory we set up. so, the stuff that came from chicago --
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what's happened to sales? amy: they went up. it's like a $16,000 difference. lemonis: the wall looks a little better. amy: it does look better. tasha: okay, so, one, i wanted to let you know who did the org chart for the whole company. so, uh... od job, tasha." lemonis: no, i just want to study it for a minute. -tasha: okay, yeah, go ahead. -lemonis: sorry. i had urged tasha to get back to basics when thinking about her role. instead, she shows me an organizational chart making herself the chief operating officer. it felt like i was running some fortune 500 company. we have a president and a founder. this nonsense stops right now. hey, lady, come on over. -so we're going through this. -lady: uh-huh. i just had some questions. and so every store has a store manager -and a floor manager. -lady: we don't have a floor manager in dallas, and we haven't mainly because tasha's been so involved there. i think, because we're so small right now, tasha's role can be the dallas manager for now. lemonis: how's that sound to you?
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-tasha: it sounds okay. -lemonis: just okay? tasha: i'm not, like, super-excited about it. i think it still can be up for discussion. lemonis: if your business is in trouble and you need my help, log on to w...i was always searching for ways to manage my symptoms. i thought i had it covered. then i realized managing was all i was doing. when i finally told my doctor, he said humira was for people like me
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lemonis: what turned me off was her giving me the impression that she was above being a store manager. how could you be a leader if you're not willing to do the job with the people? like, who do you think you are? the store managers, to me, are the most important position in our company because they control our assets, they manage our brand, they take care of our customers. i really want you to have that mentality. tasha: i'm not saying i don't like to be on the floor anymore. it's just i haven't been on the floor in a really long time. i actually feel like it would kind of be a demotion for me. and i'm just being 100% honest. lemonis: here's the problem that i'm having. this c.o.o. role overseeing the three stores is no longer going to exist in our company. with three stores, they need an owner-operator and the store managers, and that's it. tasha's role is a question mark for me. i just don't know what it is. i don't know, tasha. i really don't. i'm being honest. lady: we're not gonna get rid of tasha. we're getting rid of this position.
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lady: that position -- but not her as a person. if it hadn't been for tasha, i wouldn't be here today. and so i think that's super-important to acknowledge that. in my opinion, we need to put you somewhere that makes sense in the org chart, but we also need to make sense of the entire org chart without all the existing layers. and the obvious place is for you to be the dallas manager for now. you know, this is not a demotion. this is not a reflection of your character. so we're gonna have you be the dallas manager and take the c.o.o. role completely out of the equation. lemonis: i'm wondering where the hell you've been up until this point. for the first time, lady finally took a stand. she's actually putting tasha in the right role. it's about time. lady: so, i think two options -- of having you outside of the organization and not staying with us or staying with us as the dallas manager. i think it's a position of just getting back to basics. tasha: i mean, that's fine. let's take the demotion, this or that, if that's what i need to do. and we will kick ass.
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i will sell the...out of everything like i normally do, like i did before when i got promoted. i'm still gonna give 150% to make that store the best it can possibly be. lemonis: i think your attitude about respecting the importance of this store-manager position and all of those things and proving yourself is exactly what i wanted to hear an hour ago. when you see it, i really want you to think about moving forward. it's time for me to show lady the new look of the store. not only has it been completely renovated, but i've also changed the name. i'm gonna take you this way. for me, it represents a fresh start with lady not looking back anymore. ready? one, two, three, four, five. lady: holy [bleep] [ gasps ] oh, my...
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i don't even have words. look at the name. lemonis: the reason i came up with the name "denim & soul" is because, several times throughout my time with lady, she talked about not taking the soul out of the business and that we were gonna put in things that had personality and flavor but that would also give us good margin. to me, "soul" equals margin. lady: well, you didn't take the soul out of the business. [ chuckles ] oh, my god, wait, that's new orleans -- -the backdrop. -lemonis: yeah. lemonis: that's new orleans. -and that's chicago. -lady: chicago. lemonis: and so the goal in every market is to pay homage to the local market but to never forget where you came from, without it being, like, so in-your-face. lady: can we go inside? lemonis: yeah, we can go inside. lady: oh, my god. oh, my god.
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lady: can we go inside? lemonis: yeah, we can go inside. lady: oh, my god. oh, my god. it doesn't even look like the same store. lemonis: when lady saw the interior of the store, she was blown away. this was literally changing the floor plan, putting a lot of thought into how customers circulate through the store, bringing in all new fixtures, something hip and fun, changing the lighting that will brighten up
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and lighten up the store, changing the floors to give it a fresh, new look, bringing in products that complimented the jeans, like a one-stop-shop casual environment. lady: there's a jean bar. [ chuckles ] -lemonis: it's not a jean bar. -lady: [ laughs ] lemonis: it's a table that you can walk around. lady: it's a bar. come on, marcus. -this is a bar. -lemonis: it's a table. and the purpose of this table -- i'll call it a bar if it makes you feel better -- is to be able to take a pair of jeans, like these, and lay them out. our inventory has close to tripled. we used to carry around $30,000 of denim on one wall, but it's now closer to $75,000 with more sizes and more cuts. i have something really special to show you. come over here. i told you that i don't want you to forget things. and so... lady: [ crying ] i think that, you know, this whole process has just let me be,
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instead of embarrassed about my past, feeling, like, literally honoring her through this process. so thank you so much. [ laughs ] lemonis: the good news is that, with the debt being paid down and the stores now having the right merchandise, the ability for lady to pay off all of the debt is significantly greater, allowing her inheritance to finally be released from the bank. now, i want to show you things. that and all this stuff and all this stuff, from the bikes -- they're all skus. and so the goal over time is half of the place is denim, and the rest of it is soul. and so, from a business standpoint... -lady: love that name. -lemonis: right? -it's so cool. -lemonis: you do like the name? lady: love the name, yeah. and i could not have created a store that was this modern with a personality, and you all did it. for me, learning to trust the process was probably the biggest challenge of all of them. lemonis: you kind of sucked at it... -lady: [ laughs ] -lemonis: the middle. you got better, but in the middle, you were -- lady: but for me, this process will be,
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without a doubt, the biggest, most life-changing event ever. lemonis: thank you. lady: thank you. [ chuckles ] thank you. lemonis: can you do me a favor and start organizing [bleep] so we can invite some people in and sell some stuff? tonight is the grand opening of denim & soul. lady: welcome to denim & soul. and doesn't it look amazing? lemonis: five weeks ago, i made a deal with lady. there was debt and disorganization. today, the first of the three stores has been renovated. and we've created a model and template to use going forward. katelyn: so we have all sizes, which is awesome. we'll have all sizes constantly. lemonis: what do you think? woman: it's awesome. i was here a while back, but they didn't always have my size, and i've found multiple pants already in my size. -lemonis: you did? -woman: yeah, -the selection's incredible. -lemonis: very cool. lady: you used to not be able to come behind the bar, but now you can, so come. i'm so happy.
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lemonis: the new layout really allows the customer to circulate around the whole store. before, the jeantender was the only one that can control the whole process. tasha: so, "a," you can kind of, like, feel the product now. and then i'm gonna pull you a couple things that i think that you'll like. lemonis: it is so great to see tasha on the floor. she's engaged. she's working with customers. she's helping the staff. i'm feeling like we made the right decision. -man: okay. -tasha: do you like it? man: i do. i do. tasha: yeah, let's try that. lemonis: historically, the blues jean bar had 50% overall store margins because it was primarily made up of blue jeans. usually, 70% of the store had denim in it. with the new layout and the new merchandising plan, over 50% of the merchandise will be bolt-on items like t-shirts and blouses. these are items that will come with a much higher margin, raising the overall profitability of the store by about 10%. man: thank you so much. you have a good afternoon. woman: thanks. lady: so, can i get everyone's attention? welcome to denim & soul, which is a new name for us.
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yay. [ cheers and applause ] and thank you guys so, so, so much for being here. for me, personally, this has been a dream come true. if you haven't met marcus, which many of you have -- major thank you to him because without him, you know, [ voice breaking ] a lot of people's dreams -- not just mine -- wouldn't come true. and so thank you so much. lemonis: when i first met lady, i was very concerned about her ability to move on from the past. and i understand that the tragedy of her mother's death really weighed on her. but over the process, i really saw her evolve as not only a person but a businessperson. [ glasses clink ] and so because of that, i'm very excited about the future with her. lady: good night.
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capitalists don't sit in offices. for us, this is our office. [guys cheering] that is huge. what is that thing? meet the adventure capitalists. three extreme investors. ready to put their own money behind the next great business idea for the great outdoors. this product is a 12 out of 10. in each episode, entrepreneurs will pitch their concepts... this is a personal shark repellant...hoping for an investment that will transform their small business... i emptied out my 401k to do this. into an outdoor phenomenon. i'm looking for 500 thousand. but it has to work.


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