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tv   The Profit  CNBC  September 7, 2016 1:00am-2:01am EDT

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a silicon valley flower start-up has seen spectacular growth. christina: we've completely changed the way customers buy flowers online now. lemonis: but it might not be long before the bloom is off the rose. christina: i'm worried they're gonna beat us to market. lemonis: its rivals are catching up. christina: to not be able to raise capital and then to see competitors come in and raise $10, $12, $15 million -- that does affect me. lemonis: its technology is falling short. it's not a great website. and it's frustrated founder is letting her bitterness get the best of her. why haven't you been able to raise money? christina: because i'm a woman. lemonis: this proud entrepreneur needs to let go of her hang-ups... christina: i'm not a weak woman. lemonis: i don't think you're a weak woman. ...and gain some perspective. you just made it about money. that's how it makes me feel. you just made it about money.
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or her beloved business will die on the vine. christina: i don't want to be that person that cries on tape. i really don't. 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. let's go to work. this is "the profit." ♪ in 2010, christina stembel planted the seeds for farmgirl flowers, a unique e-commerce florist located in san francisco. originally a farm girl herself, christina first got the idea while working at stanford where she saw firsthand how much businesses spend on floral arrangements. christina: get some of these. don't just put the pale ones in. lemonis: researching the industry further,
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she realized how much florists rely on imported flowers. and that their huge selections often lead to lots of waste. and that's when she decided to start a streamlined daily delivery service that exclusively uses american flowers. christina: that looks gorgeous, kim. lemonis: while farmgirl generates millions in revenue, other online start-ups are hot on its heels. and christina needs more than just money to stay ahead. there are plenty of opportunities to make a floral e-commerce business grow into a national presence, not only in the residential sector but also in the commercial and hospitality markets. ♪ with her unique twist on the domestic based flower company, i'm excited to get a closer look at what christina does and help this business grow to its fullest potential. do you know where farmgirl flowers is? farmgirl flowers is in the heart of downtown san francisco, at the flower market. nobody else had the sort of signage that she had. it was made of carnival letters. it was bright,
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and you could really feel that it had some energy to it. -is christina here? -christina: i am! -lemonis: nice to meet you. -christina: nice to meet you. lemonis: why is you place a little jazzier than everybody else's? christina: 'cause we're a hip, young flower start-up. lemonis: is that what you would call yourself -- a start-up? christina: yes. we're an online flower company. 99.9% of our business goes through our website. lemonis: okay. well, take me inside. i want to see what it is that you do. christina: let me take you on a tour. christina: this is veronica. sasha. katie. -katie: hi! nice to meet you. -allie: and i'm allie. -lemonis: allie. -christina: and this is tati. -lemonis: how many work here? -christina: 30. -lemonis: are they all women? -ian: man coming through. lemonis: man coming through! [ laughter ] ian: ta-da! lemonis: i was like, "holy...i'm in trouble." ♪ christina: so, this is our assembly line. we run it like a manufacturing facility. our lead designer puts the recipe here, so the designers will all know what goes in each one. we have quota systems for the designers, so when they come in, they're given a quota they have to do each day. lemonis: i thought flowers were supposed to be fun.
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-christina: they are fun. -lemonis: sounds intense. christina: we have a very fun environment. we take a lot of pride in that. lemonis: you started this business, when? christina: november 7, 2010, was our launch date. -i quit my job at stanford. -lemonis: what did you do there? christina: i was a director of alumni relations and campaign outreach for the law school there. i wanted to do something that actually did something good in the world. my number-one mission is to support american flower farmers. competitors of ours, their quality i believe is sub-par. ours look much better. lemonis: what do you do that's more innovative than them? christina: domestic product. lemonis: nobody has domestic product? christina: none of the big guys. we're able to provide designer-quality arrangements at generic e-commerce prices. and instead of having 40% waste like industry standard, we have less than 1% waste. we use everything that we buy because we only do one daily arrangement. so you don't get to pick what any of the flowers are. we pick for you. lemonis: i can't pick my flowers? so if i want something for my mother that's orange or pink -- christina: we'll let you do that for our extra-larges. but if you just want to order off our menu, you don't get to pick. lemonis: i have to hand it to christina.
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she's on to something with this one daily arrangement. think of southwest airlines. it became one of the most profitable airlines by offering one type of plane, one type of seat, and one type of in-flight service. that allowed it to keep its operating costs way down and passing those savings on to the consumer. the same goes for farmgirl -- offering just one arrangement eliminates a lot of waste, allowing her to sell high-quality american flowers at affordable prices. even better, it keeps customers coming back, and they can be pleasantly surprised by what's in the next delivery. small, medium, and large. christina: you pick if you want a vase, our trademark burlap wrap -- which is reused coffee bags -- or if you want a living plant. lemonis: nine variations. and that's the basic business? christina: that's the basic business. lemonis: of the nine, what's the most popular? christina: small burlap. $38. 30%. lemonis: that's 30% of your business? christina: yes. and medium vase, $78, and medium burlap, $58, are about tied for second.
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lemonis: that would make up how much of your business? christina: between these three, about 65% of our business. -lemonis: okay. -christina: yep. lemonis: good. christina: greens are the hardest part, actually. we're gonna make a fan shape. so i'm gonna put some here. you got to cross them in your hand more. remember the fan shape? yours is gonna end up looking like a pancake. lemonis: i'm not thinking that yours looks that much better. looks like you just basically picked up a bunch of stuff -and threw it together. -christina: really? so then you're gonna take two of these. lemonis: what if there's a bunch like that? christina: they will all be bunches. what we try to do is we keep walking. lemonis: well, you're in my way. christina: then you wouldn't have to stop as much. lemonis: what's the cost of all these? just flowers. christina: $11. all right. and we're gonna take it over to the chopping block. you're gonna be really careful, and you're gonna have to go really hard, okay? like that. ♪ hey, what do you guys think between marcus' and mine? lemonis: it's not a contest. when you train people, you're supposed to motivate them. christina: i think it looks great.
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lemonis: do me a favor. nobody take credit for that one. [ laughter ] ♪ christina: this is our shipping center. this is stephanie. she's our new manager here. stephanie: it's nice to meet you. lemonis: nice to meet you. how long have you been here? -stephanie: three weeks? -lemonis: how many orders will you process a day through here? christina: it's, on average, 250. lemonis: what does it cost to ship? christina: it's $16 to about $39, depending on where it's going in the country. we just launched national shipping. and, so, that's how we get to a billion-dollar company, is by shipping national. lemonis: it's obvious to me that christina has started to crack the code with this flower delivery model. but the problem really comes in when you have to ship them. if you just ordered a $39 arrangement, and you're shipping it across the country, you have to add another $39 for delivery. now the arrangement's $78 -- not so affordable. one way to fix that is to add a distribution facility on the east coast, allowing the shipping costs to be cut in half. but the problem with that is that it takes money and expertise. what is your role here? ian: my role is that i'm the courier manager.
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so i manage all of our deliveries. lemonis: okay. ian: we're grabbing them out of here, and we wrap it in a piece of burlap, which is our, kind of, signature. christina: you can see they pack up their bikes and their pack that's on their back. lemonis: holy moses. christina: you want to try to put it on? lemonis: and now i'm gonna get on a bike? christina: and now you're gonna get on a bike. lemonis: [ laughs ] here we go. ian: all right. i think we've got a new hire. -christina: yep. -lemonis: this is a hard job. -christina: yeah. -lemonis: my ass really hurts. [ laughter ] -i'm marcus, by the way. -lauren: lauren. lemonis: lauren. and, so, you handle... lauren: i take care of phones, and then i keep track of all the refunds. lemonis: "sender was not happy with the bouquet. not enough color. flowers were dead." lauren: it's either a complaint or having trouble placing something online, on our website. lemonis: so, let me look at that. lauren: yeah. they're gonna type in the zip code of where they want the flowers to be. -lemonis: i just put mine in. -lauren: so you put in yours? pick any of the goodies or anything if they want any. lemonis: add.
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okay, now i want to check out. checking it back after i was checking out. lauren: yeah, i saw that. lemonis: it's not a great website. it's kind of ironic to be in silicon valley and have the website sort of be...average. well, i was hoping that i would find an unbelievable technology platform that would allow any product to be delivered through that infrastructure. i placed an order online. -christina: mm-hmm. -lemonis: it wasn't easy. christina: yeah, it's definitely too many steps and too many click-throughs. lemonis: why'd you call me here? christina: we've completely changed the way customers buy flowers online now, from the burlap to not getting to choose, to the bike courier delivery. but the benchmark for success here, in silicon valley, is if you've raised money. i did spend a good year of my life pitching to v.c.s. and to not be able to raise capital, and then to see competitors come in and raise $10, $12, $15 million and beat me to market, that does affect me. everything i do, i try to do it the right way --
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keeping all the employees in-house and giving them medical benefits. [ voice breaking ] so it is frustrating. i don't want to be that person that cries on tape. i really don't. do you mind if i just go calm down really quick? i'm really sorry. just let me -- [ sniffles ] okay. so, here's the thing. i want to do things that make a difference, and i want to do it the right way. lemonis: why haven't you been able to raise money? christina: because i'm a woman. i have less than a 5% chance. -lemonis: of what? -christina: of raising capital. it's just stats. i've been told by female v.c.s to take my husband in with me. why? so i can answer the questions? lemonis: i can sense that she's frustrated about the difficulty in women raising money in a very male-dominated world. you can tell that it's sort of taking its toll on her.
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christina: like, my dream job is to build a couple businesses, sell them for a lot of money, and then i would love to just invest in female entrepreneurs. lemonis: at the end of the day, your goal is to take your success and give other people a chance that you weren't given in your mind. christina: yes. and i did think about this in reaching out to you. do i really want the message to be that this guy had to come in and save our company? lemonis: there's nothing broken. christina: you're right. lemonis: except your e-commerce -- christina: i just need money to be able -- and i'm very aware that i can get that. lemonis: ah, you need more than money. you need knowledge. christina: i think i'm aware of my limitations. lemonis: okay. that's good. so, if i was a woman... -christina: mm-hmm? -lemonis: ...would you have a totally different perspective? be honest. i was the same person but a woman. coming up... christina: i think we have a phenomenal company. -lemonis: did i say you didn't? -christina: well, earlier, it felt like you were interrogating me. lemonis: i am. i'm doing due diligence.
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-christina: mm-hmm? -lemonis: ...would you have a totally different perspective? be honest. i was the same person but a woman. christina: if you were a woman, i probably would have reached out earlier. lemonis: the fact that christina admits that she considered my gender before reaching out to me is troubling. i'm not sure how that makes her any different than the venture capitalists she's criticizing. the fact that she went through these issues is terrible, and i'm sympathetic to it. but i don't want to be indicted for it. and i don't want it to affect her business judgement.
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that's gonna be even a bigger problem. you don't want to be dismissed 'cause you're a woman. christina: yes. lemonis: i don't want to be dismissed 'cause i'm a man. what matters to me is that you have a business, you're open to change, and you're willing to work hard. and so you can't play the gender card with me. christina: mm-hmm. lemonis: 'cause i'm blind to it. -christina: yep. -lemonis: plenty of men and plenty of women would invest in you, by the way. maybe i just know cooler people. or something. christina: maybe you hang out with -- lemonis: non ass(bleep)? christina: maybe not on san hill road, here. lemonis: okay. now that i've gotten a sense of her process and her business model, i want to dig into her financials and find out how well she's really doing. so, what do you want to take me through first? christina: do you want to talk about overall numbers? lemonis: i do. let's look at revenue. 2011 -- $56,000 in sales. 2012 -- $276,000. 2015 -- on your way to $4.2 million. $2.9 million as of now. where's the net profit? christina: here it is -- zero. [ chuckles ] lemonis: zero. christina: we have about $80,000 in debt right now.
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lemonis: how did you fund the $80,000 loss? -christina: credit cards. -lemonis: your personal ones? christina: no. business credit cards. lemonis: and the reason that you're showing a loss is why? christina: is because we decided to launch national shipping. lemonis: so, where's your wage for 2015? christina: i don't pull a salary. -lemonis: zero? -christina: zero. -lemonis: you make no money? -christina: no money. lemonis: how do you pay your bills? christina: my husband is very understanding, and we've decided to reinvest it into farmgirl's growth because we think we'll get it at the end. lemonis: the fact that she doesn't take a salary -- not acceptable. but i'm impressed by the growth that she's had, and i'm even more excited about how easily some of these problems can be solved. she has some debt. it's not terrible. it's easy to solve by paying it off. so, on a small burlap, retail of $38, cost of $27.79, gross margin, $10.21, -26.8% profit. -christina: mm-hmm. lemonis: and that's 30% of the business. christina: yes. this is with delivery. lemonis: but where have you actually put your delivery collection fee in here? christina: so, that's an extra $10. so that would bring our margins much higher.
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lemonis: right. instead of saying 38%, total revenue collected for this column isn't 38%. it's 48%, taking the margin from 26.8% exploding to 46.6%. christina: that's great. so that will help significantly. lemonis: it's gonna help. christina told me that she struggled to raise money because she was woman. but the fact that she's going in with margins that are lower than they really are -- mistakes -- could be a big contributor to why she wasn't able to raise money. and this is what i think's exciting. when i look at your projections -- july, $133,000 is what you did last year? this year, you've already done $337,000. christina: mm-hmm. mm-hmm. lemonis: so you're generating the top line. christina: like, next year, i know we're gonna hit $6 million. and if we actually had investment capital we'd be doing $8.4 million. lemonis: not in this space, you wouldn't. there's not enough labor and hours in the day. and so when when you say, "i know we're gonna do it," something's got to change, right? christina: i'll figure it out. i think we have a phenomenal company here. -lemonis: did i say you didn't? -christina: well, earlier,
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it felt like you were interrogating me. lemonis: i am. i'm doing due diligence. christina: yeah. you are. you are. lemonis: right? she's, like, annoyed that i'm asking her questions about her financials. did she think that somebody's just going to walk in and say, "oh, you have a beautiful flower arrangement. here's a check." i mean, no. christina: i called you here because... i'm really scared... [ voice breaking ] ...that our competitors are gonna beat us. i can't believe i'm crying. i don't cry. lemonis: who cares? christina: i'm not a weak woman. lemonis: i don't think you're a weak woman. christina: i'm worried that they're gonna beat us to market because of the money they've raised. lemonis: and why do you think they got it? christina: i know that part of it is that i'm a solo female founder. lemonis: are you a man hater? christina: no, i'm not. i'm married! -i'm not a man hater. -lemonis: okay. your confidence in your numbers makes me a little nervous. but i leave here today impressed. i am very impressed by her business model and even more impressed by her tenacity.
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but what i'm unimpressed by is the way she glosses over the issues that exist in her business, and some of the amateurish math mistakes she's made. this business is not as tight as she thinks it is. ♪ -good morning. -christina: good morning. -lemonis: how are you? -christina: good to see you. lemonis: good to see you. first of all, i have to compliment you. the idea that you came up with is fantastic. -christina: thank you. -lemonis: you didn't walk in with a huge checkbook and a huge pot of money, and you have been able to do one hell of a job. christina: i really appreciate that a lot. i do have one quick question. i do know i'm not willing to negotiate on imports. i'm very confident in this area. it's not something i'm willing to negotiate on. and i hope that you would respect me. lemonis: it's never a good way to start by saying words like "nonnegotiable." that's not the greatest way to lead into a productive discussion about doing a deal together. lemonis: at any point in our time together,
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have you heard me talk about bringing flowers in from china? christina: no. lemonis: i haven't even talked about that. i think that the help that i bring to the table is different than you walking into a venture capital. it's just, "how much money can you bring, -and what do you want for it?" -christina: yeah. lemonis: and, so, i'm not that person. christina: mm-hmm. lemonis: and i'm a guy, by the way. christina: i do believe that part of not being able to raise capital is because i'm a woman. i have no bitterness over it. i really don't. lemonis: but you have resentment. christina: you know what i have? i want to share my story. wanting to be a champion for women is part of me. lemonis: i care about you and me. -christina: yes. -lemonis: i'm a guy, and i'm interested in investing. lemonis: christina doesn't want to let this gender thing go, and i'm trying to be sensitive to her feelings. but i'm here to focus on her business, not her personal hang-ups. -i want to make an offer. -christina: okay. lemonis: you have a business that has a good idea.
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christina: $900,000 is what i need in the next 12 months. $5 million is what i think that i'm gonna need in the next three years. lemonis: how many of the venture capital firms that you met with actually spent the day with you and asked you all those crazy questions? -christina: none. -lemonis: how many of them actually got on a ridiculous-looking bike? -christina: none. -lemonis: i do it because i want to build a relationship with you. i also really give a crap about what's happening. and, so, please don't respond to me as if you're sitting at a venture capital meeting. respond to me as if it would be good for you to have a partner who has the resources to grow more than just writing a check. coming up... you want me to really give a... you want me to use every resource. but i can tell you that the lower i have, the less excited i am.
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all computers on sale like this dell laptop. office depot officemax. gear up for school. gear up for great. remember here at ally, nothing stops us from doing right by our customers. who's with me? i'm in. i'm in. i'm in. i'm in. ♪ ♪ one, two, - wait, wait. wait - where's tina? doing the hand thing? yep! we are all in for our customers. ally. do it right. christina: $900,000 is what i need in the next 12 months. lemonis: i'm not we aa venture capital fund.mers. respond to me as if it would be good for you to have a partner and have the resources to grow
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more than just writing a check. christina: yes. i know that you can definitely help. but i'm building this amazing brand, so my ask... is $1 million for 5%. lemonis: uh, excuse me? christina: i -- -lemonis: did you say... -christina: yes. lemonis: did you say $1 million for 5%? -christina: yes. -lemonis: so you think your business is worth $20 million? christina: yes. i know what we're gonna do in the next five years, bootstrapped on my own. and, so, i do know that we're going to at least double every year without any investment. lemonis: if we're gonna make it about dollars and cents, let's do that. your business isn't worth $20 million. you know, i knew your valuation would be high because you live in silicon valley. and so you're giving me a technology-based valuation. everybody that thinks they have a technology-based company -- their company's worth a billion dollars. -lemonis: that's how i feel. -christina: okay. lemonis: and that's why, typically, i never invest in technology,
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because i think their valuations are preposterous. i don't like to burn money. if you were operating this business in indiana, i believe your valuation would be much different. -are you willing to admit that? -christina: i don't know. lemonis: if i make a small $1 million investment, and i have 7%, and it goes well, i'm gonna make a little bit. -if it goes bad, i lose a ton. -christina: yeah. lemonis: and so for me to make an investment in a business, i want to invest capital, i want to invest my resources, but i want to also be interested. -christina: mm-hmm. -lemonis: and 5% just -- just isn't interesting to me. i can't make a $1 million investment and feel insignificant. so my offer is a $1 million for 25% of the business. christina: 7.5% is the end. lemonis: i was sort of annoyed by her request. this isn't some software company where it's gonna solve something in the future. this is a real e-commerce business
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that has real revenue and real losses. you have no technology platform to speak of. why would you not want to bring on a partner who has resources, who is gonna respect your personality? christina: i see your point. i do see your point. but coming into this, i had very clear boundaries myself. i can go 10%. that's double what i thought i was gonna come in here. lemonis: you want me to really give a... you want me to call everybody, pull every string, use every resource. but i can tell you that the lower i have, the less excited i am. i can't be there making flowers with you every day, but -- christina: i don't want you to. no offense. just joking. i was trying to lighten the mood here, okay? your value is in other areas. lemonis: i feel like she's sort of looking at me like, "can you write a check, yes or no? i'm not really interested in what value you're gonna provide." i am putting value on me, just like you've put value on you.
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i can't -- i can't just minimize this as if i'm just, like, a piece of...i just can't do it. -christina: um... -lemonis: and so my final offer is $1 million for 20% and a half a million dollar credit facility. christina: and you need to know now? lemonis: i need to know now. ♪ for exclusives, extras, and business advice, visit theprofit.cnbcprime.com. don't bring that mess around here, evan! whoo! don't do it. don't you dare. i don't think so! [ sighs ] it's okay, big fella. we're gonna get through this together. [ baseball bat cracks ] nice rip, robbie. ♪ raaah! when you bundle home and auto insurance through progressive, you get more than just a big discount. i'm gonna need you to leave.
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final days! -ends sunday. know better sleep. only at a sleep number store. r 20% and a half a million dollar credit facility. christina: and you need to know now? lemonis: i need to know now. ♪ christina: i'm sorry. i can't do it. lemonis: you know what the challenge for me, christina, is? and this is maybe the disappointing part, is that basically you just made it about money and not the partnership and not the resources and to expose you to new things and to come up with new ideas. you didn't see any of that. christina: 20% is too steep for me. lemonis: you probably would have done anywhere from 5% to 10% for $1 million -with a lot of people. -christina: no. i wouldn't have gone over 5%. lemonis: well, okay, so, you just said, "well, i'll just throw you a little extra 5 points," basically saying that you see no value in me, after i just told you how much value i see in you. christina: i'm really sorry it seems that way.
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lemonis: well, it doesn't seem that way. it is that way. ♪ nice meeting you. good luck to you, by the way. christina: thank you very much. lemonis: i think what i didn't necessarily feel with christina is that she really wanted a partner. if you sort of let go of your pride, and you have an open mind, you're gonna experience success. like you're experiencing at the simple greek. ♪ just over a year ago, i met mike ference and his wife, kathleen kamouyerou, the owners of a fast-casual greek restaurant just outside of pittsburgh called my big fat greek gyro. they opened their flagship restaurant 11 years ago. and when i met them, an additional 4 franchisees had opened in the greater pittsburgh area. andreas: what can i get for you? woman: the gyro, fries. lemonis: kathleen's two sons, michael and andreas, were in the process of buying their original location. andreas: if you could just sign that for me. lemonis: and though the family had dealt with tragedy... michael: i was 15 when our father passed. lemonis: oh, my gosh. michael: they were ran off the road by a semi-truck. -you were in the car? -kathleen: yes.
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lemonis: ...they were extremely tight-knit. andreas: come on, mikey. michael: come on, mike. you can come in. lemonis: the business on the other hand, was in absolute chaos. i quickly learned that the franchise model had never been properly established. mike: we just set up the llc. kathleen: it was a mess from the beginning. lemonis: every restaurant had its own look and feel. and there was zero consistency for the customer. mike: i'm more proud of this than i've ever been proud of anything. lemonis: you shouldn't be proud of this right now. it's a disaster. the company's name was in contention. mike: there was a company in california that trademarked "my big fat greek." lemonis: the menu was all over the place. i was gonna take a trip to greece this summer, and i'm looking for tater tots, cheese sticks, cheddar balls. and hardly any of their food was fresh. my aunts and uncles, they're not getting spanakopita out of the freezer. they're actually terrible. all of this had infuriated the franchisees. they felt like mike had sold them a bill of goods and then left them high and dry. woman: we have yet to make money. the only help we ever got from them
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was on the first of the month, they came and picked up their royalty check. man: i've lost respect for mike as an individual. lemonis: i had major reservations. but my big fat greek gyro had no debt and made a good return on capital. this location did $300,000 in sales and made $100,000. the concept can work. i knew if i simplified the menu and re-imagined the branding, this fast-casual franchise could really take off. so i made deal. for $350,000, i bought 55% of the business, a controlling stake. kathleen: i'm waiting for new beginnings. lemonis: we have a lot of work to do. we overhauled the entire concept, from the look of the stores to the food we served, even down to the name of the business. it wasn't always easy to get everyone on board. kathleen: i hate this name. lemonis: but you're not a branding expert. and i was never quite sure that i could really rely on mike. i need to get convinced that you're the right guy to lead,
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or i'll have to fire you. but we ended up with a new concept that uses fresh ingredients and has cohesive branding. well, i want to get the greek flavors up in all the food. man: more dill, less cucumber? -lemonis: i think it's perfect. -man: opa! kathleen: that's it. you got that. lemonis: after the episode aired, we received thousands of franchise applications from all over the country from people looking to have a piece of the simple greek. but i wanted to perfect the concept and the food before launching more locations. mike: here's to mr. lemonis, and here's to the simple greek. lemonis: today, all of the simple greek locations are making money, and i spent more than $400,000 renovating all of them. and now we're getting ready to open up our first location in chicago, driving toward making us a national brand. today, though, i'm heading back to pittsburgh to see our latest conversion in market square. mike: what's happening, my man? how are you? -lemonis: it looks good in here. -mike: it does. yeah.
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lemonis: it came out a lot better than i thought it would. where's sasha at? -there you are! -sasha: good to see you. lemonis: look how packed your restaurant is. sasha: yeah, i know. it's doing well. i think it's a testament to the fact that we set up a really good concept with fresh food that allow people to eat a good, balanced meal during lunch. it's the middle of winter. it's freezing outside. and you can't fit any more people in here. rich, how are you, buddy? good to see you, my man. i don't want to get your hands dirty. all right. let's see the process happen. sasha: hi. would you like a bowl or a pita today? lemonis: bowl? i'm gonna give you a lot of protein. what type of meat would you like? man: can i do the traditional? lemonis: we need more gyro meat, please. -sasha: it's coming. -lemonis: all right. let's pick it up. what type of meat do you want? let's knock these out, guys. come on. does everybody like the food? -man: it's awesome. -all: yeah! lemonis: chicken? need more chicken! i'm going a mile a minute serving food, but i can't help but notice mike's just lounging around at one of the tables. the last time i was here, i told him he need to step up.
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i hope this isn't his definition of stepping up. i want to ask you a question, and i want you to be as brutally honest with me as you can. sasha: mm-hmm. lemonis: how often is mike here? sasha: it's kind of the same. they pop in. he'll come here probably three times, i guess, a month. -lemonis: pick up their check. -sasha: well, yeah, but, i mean, actually, sometimes i bring it to them. lemonis: do you think he's here right now 'cause i'm here? sasha: i mean, i don't know. maybe. lemonis: whether or not mike showed up because of me, well, i'm happy that he came. there's something i've been wanting to talk to him and kathleen about. you know, i thought it would be good for us to sort of talk about what's transpired, how we sort of move the ball forward. we're now at the point where we're gonna invest in the chicago market. your son andreas is gonna sort of help get us open -and off the ground there. -mike: excited about that. lemonis: and that's a big investment. -kathleen: yes. -lemonis: and so, since the mt. lebanon store has converted, since the mcmurray store has converted, and since the market square has converted, i have $410,000 out -- i'm sort of getting no return on that investment, as we speak,
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like literally nothing. i asked rich a couple weeks ago why he hasn't been paying his royalty fees, his franchise fees, and he said he has been paying. and i asked andreas, and he said that him and mike were paying them. i asked chase, and he said they've been paying them. kathleen: right. lemonis: so, you sort of caught me off guard. i thought that the deal i had with mike and kathleen was very straightforward. once all the original locations were converted to the simple greek, i would start receiving my share of the royalties from those locations. well, they've been converted. and i'm still not receiving anything. i put all this money out, redid all these stores, and i'm collecting, like, literally... like, nothing. coming up... mike: you question my integrity a lot. lemonis: i do. you could see why people don't want to work with you. mike: i get it. i'm the bad guy. lemonis: this isn't about you being a bad guy. it's about you being a dick.
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♪ it's peyton on sunday ♪ mornings. ♪ e-man! what up, peyt. you know i have directv nfl sunday ticket. i get every game, every sunday. all in hd. yeah. i know that. so you wanna come over? i'll make nachos! i can't right now man. i'm playing. oh yeah. alright. i'll pencil you in for tuesday. (vo) get nfl sunday ticket included at no extra charge. only on directv. lemonis: i put all this money out, redid all these stores, and i'm collecting, like, literally, nothing. mike: it's a bad decision on our part. lemonis: the challenge that i'm having is how do we resolve it going forward? the way we're gonna normalize that is cash goes into the holding company's bank account, and it pays for whatever expenses exist to operate and run the franchises. when i did the deal with mike and kathleen, all of the locations would be remitting their royalty fees,
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and we would take those fees, and we would split them 55%/45%. instead, mike and kathleen have been keeping 100% of it. that was never our arrangement. mike: i think that we need to kind of, i don't know, maybe assume roles that -- that there may be compensation attached to. lemonis: you have to work to get paid for it. i have expectations that for your 45% of equity, you are required to do more than nothing. it's not a gift. i didn't just give you 45%. you have to show up on time. you have to be present. you have to help with recipes. you have to act like workers and owners. -lemonis: let's move forward. -kathleen: let's do it. lemonis: and make sure that you support andreas. -mike: absolutely. -kathleen: absolutely. ♪ lemonis: how you doing? i invested more than $400,000 in the pittsburgh locations. and with the new chicago location, it's about $240,000. so as of now, i have well over $600,000 invested into this concept.
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there is a lot riding on it for me. this is a beautiful store. you should be proud of this. andreas: thank you. it was a team effort, for sure. lemonis: do you know where your parents are? andreas: yeah, they're on their way. lemonis: one of the silver linings in going to pittsburgh initially a year ago was meeting mike and andreas, kathleen's kids. i've asked andreas to move to chicago, because he had seen the magic work in pittsburgh. and he knew exactly what i was looking for. he breathes and lives the greek culture. and it was a perfect fit. -what time is it? -sam: quarter after. lemonis: they're an hour late. you know what sam's job is, right? he's the head of the operations in the franchise. and do you know why he was brought in? andreas: 'cause it wasn't getting done. lemonis: i didn't initially plan on having a guy like sam on board. that job was supposed to be mike's. with the amount of money i have invested, i couldn't take that risk anymore. mike was letting things fall through the cracks during the renovations, and he wasn't keeping me informed on a day-to-day basis.
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really, what prompted me to hire sam was all the nonsense that went on with mike. sam: every day, we're in this store. they should be a part of that. andreas: yeah, i mean, for owning 45% of the company -- lemonis: for doing nothing. this is not their idea. it's now a scalable model. -did they design the concept? -andreas: no. lemonis: did they spend any money? andreas: no. lemonis: did they build out the franchisees? andreas: no. lemonis: have they been here helping you get open? -andreas: no. -lemonis: so, for 45%, i wouldn't expect them to all the lifting, 'cause i'm 55%, but damn. -andreas: they should be here. -lemonis: mike and kathleen have never been to chicago. that was new information to me. i expect them to be involved in the process. they haven't been involved. i'd like them to have a little better attitude about coming here and not acting like i inconvenienced them. sam: it's a grand opening. it's embarrassing. lemonis: i hate the fact that they're late. i'm gonna literally blast them to the moon. ♪ hi, guys.
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kathleen: sorry. we got a little lost. lemonis: when they finally do get there, they're late, not by five minutes -- by over an hour. it's more hurtful than upsetting to me, because i invested in them as much as i invested in the business. so, what do you think of the place? mike: it's, um... -kathleen: i don't like these. -mike: i'm not a fan of the -- kathleen: the way they're sitting. mike: yeah, they just stand out a little bit too much, and it looks like every other gyro shop in the country. the pictures, the santorini -- i think if there was more pictures of foods and maybe people and places that, you know -- maybe even, you know, grayscale instead of color. lemonis: you know, i haven't seen this scenario very often where people feel entitled. but i go from being disheartened to angry. and so i want them to sort of understand the magnitude of the opportunity and the severity of how i'm feeling about it. i'm angry at you. kathleen: okay. lemonis: i built your mcmurray store with my money. -kathleen: yeah, you did. -lemonis: okay.
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i built the market square store. with my money. kathleen: right. lemonis: i paid for him to come here, paid all of his expenses, paid all of his salary, he's making more money now than he was making in pittsburgh, right? andreas: than i've ever made. the issue is that you guys should trust marcus at this point and appreciate what he's done. what this guy's done for us is incredible. kathleen: yes. i totally agree with you. mike: we know that. lemonis: but he's been here for... -four months? -andreas: 3 1/2. lemonis: why is this the first time that you're coming here, to see this the store, to see a business that we're supposed to be building together, to see your son? why have you never been here before this week? sam: you own 45% of this company. i shouldn't be here. all this stuff could have been done without me. -how come i'm here? -mike: to be honest with you? -my gut feeling? -sam: i hope so. mike: i think, originally, that marcus and his team looked a gift horse in the mouth. lemonis: are you the gift horse? mike: no. i just think there are resources that i have... kathleen: he has a lot of resources. mike: ...that i was told not to contribute. lemonis: can you and i, just you and i, take a walk?
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mike: sure. ♪ lemonis: mike, i'm gonna ask you this question, and try to be as honest as you can. you remember the conversation we had, when i said to you, if you couldn't do the things that i thought you needed to do, i would get somebody else? -mike: yeah. -lemonis: that's sam. mike: yeah, but, initially, i wasn't sure what sam's role was. lemonis: is there any part of you that's a little resentful that he's doing the job that you thought you were supposed to be doing? mike: yeah, but, out of all fairness, i was told to kind of step back. lemonis: "step back" was a polite way of saying, "you're pissing people off." i mean, honestly? [ chuckling ] come on, man. the frustration that i have, is that i can't keep having these conversations with you. i need you to be more supportive of what other people are trying to do. i need you to turn into a cheerleader and not a skeptic. mike: i get it. i'm the bad guy. i don't know. you question my integrity a lot. lemonis: i do question it a lot. i waited for you guys for an hour. you're criticizing everything.
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-mike: what am i criticizing? -lemonis: you walked in there. "i would have done this differently, "i would have done this. the pictures aren't right. this isn't right." you could see why people don't want to work with you. and so this isn't about you being a bad guy. it's about you being a dick. let me ask you a question, 'cause i brought my checkbook. do you want to be part of the simple greek, or do you want me to buy you out? -'cause i'll write you a check. -mike: i'm sure you would. lemonis: if your business is in trouble, and you need my help, log on to theprofitcasting.com. poallergies?reather. stuffy nose? can't sleep? take that. a breathe right nasal strip instantly opens your nose up to 38% more than allergy medicine alone. shut your mouth and say goodnight, mouthbreathers. breathe right.
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lemonis: let me ask you a question, 'cause i brought my checkbook. do you want to be part of the simple greek, or do you want me to buy you out? -'cause i'll write you a check. -mike: i'm sure you would.
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lemonis: that would be a very painful check to write, because i'm buying him out of something that he did nothing to contribute to. but i'm not gonna move forward and allow him to share in 45% because he happened to be in the right place at the right time. this isn't the lottery. this is business. mike: i'm not here for a check. i'm here for the long haul. lemonis: mike, i think in order for us to move forward together, i need you to be more supportive of what other people are trying to do, and whether that's sam or andreas -or the other franchisees. -mike: sure. lemonis: i need you to turn into a cheerleader. get enthusiastic. get behind the counter. help the guys out. give them a pat on the back. because your approval, to andreas, it means something. -mike: sure. -lemonis: he doesn't have a dad. he has you. any sort of encouragement that you could give him would help. it's important for mike to be present, to help andreas out for two reasons -- one, he's a 45% owner of the franchise concept. and so he should be showing support to any new store opening, to any existing franchise. the second thing is, it's his wife's child.
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and so it's important for him to show support, because, quite frankly, you know, this whole concept was developed by their family, not just mike. how do you feel about seeing andreas here? kathleen: i think it's great. it's a good feeling. i love seeing him interact with his employees. and he's just, like, so excited about it, and it makes me excited to see him so excited. andreas is so much like his father. lemonis: how proud would his dad be right now? kathleen: if i could go to heaven tomorrow, and tell him and show him what his kids have become, he'd be so proud. ♪ he loved, loved, loved his kids, so... lemonis: i mean, i'll just tell you, andreas doesn't maybe hear from you enough or feel that you're supportive and proud of him. he shared that with me. -kathleen: he doesn't? -lemonis: no.
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-kathleen: okay. -lemonis: i brought up the fact that you haven't come, from two perspectives. one is, i'm annoyed that you haven't come. but i also feel bad that his mom hasn't come see him. kathleen: right. lemonis: a mother telling her son that she's proud of him goes a long way. -kathleen: i should go do that. -lemonis: let's go back inside. kathleen: thank you. ♪ lemonis: so, i wanted to talk to you guys about the yogurt bar and why i like it and the concept. as we kind of looked at the economics and the cost to build out, we weren't getting enough hours in the day of business. and so this yogurt concept really came out of, we already have the rent, we already have the labor. we already have the lights. we already have the management. we already have everything. what else could we add to the ticket, add to the line-up that would allow people to spend a little bit more or get to them to come earlier or later? the idea came to me based on the recent phenomenon of greek yogurt -- to introduce yogurt onto the same line with the same rent factor, the same staffing,
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but bring people in the morning for breakfast and bring them in at night for dessert. you're seeing an average of $1,500 a day. and i'm looking to get to $2,500 a day -- $400 in the morning for breakfast, $300 in the middle of the day for snacks, and another $300 in the day and evening for dessert, taking that total day from $1,500 to $2,500 without adding any additional expenses. so, we wanted to test it here with andreas, 'cause he can kind of tell us what's working and not. and i think the next one we're gonna do is market square. mike: i love it. i think it's a great addition. andreas: i think the only issue is that we're not really making our margins, because i eat so much on a daily basis. [ laughter ] sam: that's the truth. every day. -lemonis: he does? -sam: every day. lemonis: make him pay for it, sam. let's take care -- hi, folks. come on up. would you like a bowl, or would you like yogurt? -man: bowl. -lemonis: okay. let's go. -let's get going. -andreas: let's get this guy. lemonis: okay. yogurt? small or large? woman: small. lemonis: there's a lot of businesses that i've invested in on the show. my chips are all-in on this concept.
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are you guys sharing? okay, great. how you doing? lunch is on me. thank you for your service. appreciate it. don't charge him. chicago went unbelievably well. and i want to give the credit to andreas and sam for getting all of that done. i've never really seen lines out the door. how is it? -man: very good. -lemonis: it's good? the future of the simple greek is measured and steady and stable growth. this is a learning process. you've made a ton of progress. -i'm very proud of you. -andreas: thank you. lemonis: i also know that we've perfected the model. wouldn't surprise me if there was 500 franchises in five years. would not surprise me. -it's about being focused. -andreas: yes, sir. lemonis: okay? you feeling good? -andreas: i feel good. -lemonis: good. -i'm proud of you. -andreas: thank you, man. -lemonis: get back to work! -andreas: all right. -lemonis: fill up the rice. -andreas: [ laughs ] ♪
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