tv The Profit CNBC October 18, 2016 1:00am-2:01am EDT
it was all about the money and whether they could get a discount on the value of my company. i won't be back. jeff: my son, taylor. tonigtaylor: taylor.it"... lemonis: taylor. how are you? behind the father-son team behind the texas tea chain, the only thing brewing is trouble. how much do you owe? jeff: right around a million. lemonis: they've failed to fully think through the concept. there's no coffee, there's nothing to eat. are you guys trying to kill this store? they've left their franchisees to fend for themselves. ryan: just struggling to make a living down there. dawn: we've been subsidizing this business for over 18 months. lemonis: and with their relationship steeped in mistrust from the start... jeff: how can i believe anything that comes out of your mouth at this point? lemonis: ...tensions have come to a boil. taylor: i never felt like you're my father. jeff: i don't care if we're in front of that [bleep] camera. i won't be disrespected. i'll put you on your ass.
lemonis: if i can't help them and their franchisees find a way forward... i'm pissed right now. i am record pissed. ...tea time will be over. and i am not gonna [bleep] around. 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 is "the profit." let's go to work. taylor: welcome to tea 2 go. how are y'all doing today? lemonis: in 2013, jeff hunt enlisted his son, taylor, to help him launch tea 2 go -- a franchise concept offering made-to-order drinks and loose-leaf tea by the ounce. taylor: you need sweetener in that one. lemonis: he wasted little time building stores and pitching franchises. jeff: to built out, to initially open it,
all the furniture, probably around $108,000. lemonis: and many folks bought in. ryan: cowboying doesn't have a good retirement program, and so we thought this would be a neat opportunity to get into. lemonis: but he had never actually proven the model, and of the 19 locations that sprung up, only 11 remain today. man: it's a tough location just because people don't know that we're back here. lemonis: jeff is now juggling a million dollars of debt. jeff: this store technically probably needs to be closed. lemonis: the two stores he does own are failing, and his nine remaining franchisees are twisting in the wind with little or no support from the parent company. as crowded as the coffee-shop space has become, tea still has tremendous room to grow. and with its 11 locations, tea 2 go already has a solid footprint. if i can help the hunts turn it around, i think we have a real shot at success. jeff: howdy. welcome to tea 2 go. lemonis: how are you? jeff: good, how are you? lemonis: i'm marcus. jeff: jeff hunt.
lemonis: hi, jeff, how are you? are you the owner? jeff: yes, sir. lemonis: nice to meet you. jeff: my son, taylor. taylor: taylor. lemonis: taylor, how are you? taylor: doing well. nice to meet you, marcus. lemonis: you're looking sharp today. taylor: thanks. i dressed up. lemonis: this is interesting. i wanted to get, like, a chance to just look around for a minute. look, if i had to describe this store in one word, it would be "barren." there are no accessories for sale, no point-of-purchase system, and zero food. it's almost like they did the absolute bare minimum and then said, "yeah, this is good enough." why'd you do a tea business? jeff: i just thought there was a need, you know. obviously, it was starbucks. i just feel that it's only in the upper 1% type malls and areas in our country, and i felt there was a need to bring it to the regular mother of four. lemonis: and so what is your relationship, the two of you? jeff: i'm still a dad first and a boss second. lemonis: how old are you? taylor: 23. jeff: 40. lemonis: so, he was born when you were 17? jeff: turned 17 three days after he was born. lemonis: okay. jeff: i didn't get to do a lot of stuff that i wish i had while he was growing up.
just wasn't around. lemonis: where were you? jeff: messing around, trying to figure out my life. i didn't get to watch him play t-ball, softball, soccer. taylor: i mean, it is weird. we started kind of going fishing when i was about 18. we're trying to learn each other. this has allowed us to build a relationship. jeff: you know, i wanted to bring my son on board not only to teach him -- lemonis: so you guys started this business together? jeff: well, i started it in 2012. lemonis: so, when did you come on board? taylor: the summer of '13, i left school. lemonis: you left college to start a tea business with your dad? where'd you go to college? taylor: university of texas in austin. lemonis: why did you think it was a good idea to leave college? taylor: because he asked me to. lemonis: that's why you left? taylor: i mean, that was the start, but then ultimately, i saw opportunity. lemonis: so, how far away were you from graduating? taylor: about two full semesters. lemonis: so you had basically a year left. taylor: yes, sir. lemonis: what were you studying? taylor: marketing and management. lemonis: things you need in business. taylor: if i could go back and make the decision again, i would make the same decision. lemonis: why don't you go ahead and get changed?
i appreciate you dressing nice. taylor: okay, yeah. lemonis: it's nice to know that jeff wanted to build a relationship with taylor, especially after the mistakes from the past, but to ask taylor to drop out of college? i wouldn't say that's exactly great parenting. lemonis: you look like you're in the tea business now. so, i want to taste the tea. i want you to pick two of your most popular teas on the whole wall. taylor: okay. lemonis: so, what is this that you're doing here? taylor: so, we are steeping your tea. this is the madagascar coconut white tea. lemonis: okay. which one's this? taylor: that's the coconut chai. lemonis: they're both good. so break down the cost for me. taylor: our cost on your actual tea -- lemonis: how do you buy it, by the pound? taylor: we buy it by the pound. lemonis: and so how many scoops go into a pound? taylor: 128. lemonis: and so, and how much is it a pound? taylor: the madagascar coconut, $15 a pound. so $15 divided by 128 is 11.7 cents,
roughly 12 cents, and so the cup is how much? taylor: okay, so your cup is about 12 cents, your lid and straw is about 2.5 to 3 cents, totaled up, 27 cents. lemonis: and what does that retail for, that exact size? taylor: about $2.89. lemonis: so it's got a 90% margin? taylor: yes, sir. lemonis: now you know why i'm interested in the tea business. the margins are spectacular. tea 2 go seems like takeout. i mean, why not tea 2 stay? people are sitting around here. why do you want people to go? taylor: we have been asked that question many times. lemonis: why don't you offer scones or -- there's nothing to enjoy my tea with, so there's no coffee as an alternative. there's nothing to eat. why don't you have that here? jeff: cost issue. lemonis: and this is the only loose-leaf container to take home? jeff: in this store. lemonis: do you guys like tea? jeff: i'm not a tea drinker. lemonis: you're not a tea drinker? jeff: no. lemonis: are you guys trying to kill this store? why get into the tea business if you don't absolutely love it? i mean, it's now really obvious to me why this place looks so half-assed.
if you don't have passion for it, it's gonna show to the customer. how much business does this location do? jeff: this one only is grossing right around $10,000. lemonis: so, how much does this store lose a month? jeff: $3,500, sometimes $5,000. lemonis: so, it can lose anywhere from $40,000 to $60,000 a year. jeff: yes. taylor: and currently, we own two other stores, this one and the one in austin, and i gm that store. lemonis: how many different teas do you carry? taylor: there's a signature set of 65 teas that are gonna have to be in every single store no matter what. lemonis: and so all of your tea comes from the same distributor? jeff: yes, sir. taylor: we have a tab that we've kind of gone too far on. lemonis: how much do you owe? taylor: around $75,000. lemonis: how much is really past due? jeff: all of it. lemonis: all of it. the distributor that they have now distributes essentially 100% of their product. if he wants to close the business down, he just stops shipping. the question that i have is, why hasn't he shut him down? so i wanted to meet him and find out what the real story was.
hi, i'm marcus. manish: manish, nice to meet you. lemonis: nice to meet you. you provide them all the loose tea? manish: everything, actually. we bring in all the loose-leaf teas. we bring all the flavors, all the ingredients. lemonis: so, you obviously know the tea business. manish: yes. lemonis: i mean, that's your thing. have you been doing it for a long time? manish: 18 years. 85% of all tea consumed in this country is cold, so it's a really nice tea concept. lemonis: who do you work more with? manish: taylor. lemonis: and how often do you work with jeff? manish: we probably chat about once or twice a week. if you're really not into tea, and you don't feel a sense of mission and vision, then it starts to fall off. things like the brand. it doesn't have the soul that it needs. lemonis: they need a stronger conviction. manish: yes. lemonis: you just want somebody to feel passionate about what they're doing. the only thing that has any passion here is the passion tea that i think is made of mango. at the holding company level, which is where you own the concept, is there debt? jeff: yes. lemonis: how much debt is there? jeff: rounded off, right around a million. lemonis: where'd that come from? jeff: $750,000 of it was from construction. went to our lubbock location, which is gone.
lemonis: what else? jeff: went to this one, the austin location, and then it went to our phoenix and tempe, arizona, locations that are -- lemonis: you built out your franchisees locations? jeff: no, they were originally corporate. lemonis: so you built it out, and then you sold it? so you put all your money in building out locations of which you don't own any of them anymore except this location and austin. and you're left with a pile of debt and no businesses to show for it. jeff: and right now, we're sufficing our debt with future franchise sells and -- lemonis: how many do you sell a month, franchises? jeff: i would average maybe one every three months. lemonis: so, what do you get paid? do you get paid from every franchise? jeff: the norm is $30,000. lemonis: up front? jeff: up front, and then 4% royalties. lemonis: okay, and what did you do with that money? jeff: paid off debt. lemonis: jeff hasn't really been building a business. what he's been doing is digging a ditch with a lot of debt. first of all, he borrowed $750,000 from a bank to build five corporate-owned stores to get the concept off the ground.
but then he went out and rushed and sold 14 different franchises and collected those fees, only to be able to service the debt that he had borrowed. but with 30 grand per franchise, he was barely collecting enough to cover the interest on the loan. instead of owing less, he owes more, like a million dollars. and instead of owning five stores, he now owns two stores, and he clearly didn't put his franchisees in a position to succeed because there's only nine left. this is a giant mess. in order to learn a little bit more about the franchisees and their troubles, i wanted to meet some of them, so i headed over to the coppell location. i'm marcus. randy: randy. lemonis: good to see you. this store is big. randy: it is. lemonis: isn't it? randy: yeah, it's a good size. lemonis: wow. how is your store set up differently than the other stores? sarah: well, if you know about tea, if you like a certain tea, we introduce you to our tea wall. dawn: would you like to smell?
lemonis: yeah. see, you love it. look how passionate you are about it. this smells so authentic and so -- dawn: for the people that are true green tea lovers, there you go. lemonis: yeah. what does this store mean to you and your family? sarah: it means everything. i mean, my dad and i started this from the beginning. we laid the tile. lemonis: you guys built this store yourself? sarah: yeah, me and my dad and my brother. lemonis: i mean, there's more than just money invested here. there's a lot of heart. sarah: heart, yeah. lemonis: there's what? shayla: it's a family business. we take it very seriously. lemonis: and how much money do you have invested in this location? randy: $150,000. dawn: and the equipment is probably $80,000. lemonis: so you have $230,000? dawn: at least. lemonis: that's a lot of money. dawn: it's everything we have, so it has to succeed. lemonis: so, what type of revenue will this store do? randy: it's averaging about $28,000, $29,000 a month. lemonis: how much gross profit will there be? dawn: we're not making a profit. lemonis: look, the store's brighter than colleyville, and there's much greater attention to detail. there's a lot of thought being put into it.
for me, that means there's passion for the business. i think what's most disappointing is that with everything this family's put in, they're still not making money. i learned that there was another franchise location not too far away in fort worth, so i wanted to drop in there, as well. how are you? i'm marcus. ernie: yeah, ernie. really nice to meet you. lemonis: this is a really nice store. ernie: thank you. lemonis: i notice that you have a lot of accessories. ernie: i basically try to get as much retail as i can. lemonis: this comes through corporate, or this comes -- ernie: no, this we did ourselves. i've had to add more products to meet the rent kind of thing. lemonis: do you work with taylor at all? ernie: no. lemonis: never. ernie: i've been told i shouldn't e-mail past 5:00, i'm intruding upon his time. lemonis: he tells you that. ernie: yeah, we don't really have a good working relationship. lemonis: look, i'd been planning to hang out around dallas, but after hearing what ernie had to say, i wanted to see taylor's store in austin.
honestly, my first impression, i wasn't even sure if it was open for business. as the owner of the business, you have one your managers convince you to open up a store in austin. you get here, you decide to tour the parking lot because you want to experience it as the owner. it's got no drive-through pole. you get up here, there's a blank sign. what's the first thing you think? jeff: i wouldn't allow him to open it this way. lemonis: then why did you allow him? jeff: 'cause he's my little squirt. you know, i wanted to put him where he wanted to be, obviously. lemonis: did guilt play a role in you allowing this? jeff: possibly. lemonis: if he wasn't your son, what would be happening? jeff: he would no longer be a part of my company or be an employee. lemonis: can you make me some tea? i'm hot. jeff: that's why i don't like austin. lemonis: man, it's hot. what's at stake here for you? jeff: i've put all my chips into this. i took my son out of college for this. i've got to live with that right now. lemonis: you feel like this is a chance for you to make amends with him or fix things? 'cause sometimes that's hard. jeff: i was hopeful.
that's part of it, yes. i feel like we're friends. he finally calls me with dad questions, just fatherly advice that i know he never had. just a bad dad. lemonis: you were a bad dad? jeff: yeah. if they were handing out awards, i got an f. i love my son, you know, and i'd do anything on this planet for him. lemonis: it's becoming clear to me that the relationship between father and son is a much bigger issue than i originally thought it was. if i'm gonna partner up with them, i have to get to the bottom of it. so, why did you leave dallas? taylor: honestly, i kind of wanted to get away. our personal relationship is very interesting. lemonis: whose personal relationship? taylor: jeff and i's. lemonis: why do you call him jeff, just out of curiosity? taylor: he never earned the father role. like, at the end of the day, that just isn't our relationship. i know he wants it to be, and i feel guilty, and i feel like i'm obligated to be that son for him, but honestly, he missed it. lemonis: you don't think about him as a dad? taylor: not really.
i mean, his name's not even on my birth certificate. he wasn't even there when i was born. i didn't find that out until about a month ago. lemonis: like, he wanted you to come join him because he wanted to try to build a bond with you that he knew he broke. taylor: and i agree. lemonis: and he's probably throwing money at the problem because he feels like, if the business fails, you're gone. why don't we jump in and look at the financials? so, in the last year, 2015, total revenue of the locations is $2,050,000. $272,000 of assets and $1,052,204 of liabilities for a negative tangible net worth of $780,204. making the company insolvent. jeff: it'll cause you to lose a few hours of sleep from time to time. lemonis: you started a concept, you sold franchises, and so, jeff, the business isn't worthless. on paper, it is, but i'm not a paper investor.
i see the bones of an idea. there's just no meat there. the company needs working capital. it needs to satisfy its relationship with its vendors. it needs to make sure that the locations look right, and they have the proper inventory in place. and that, at a minimum, one of the stores is truly what the concept should be. i know this concept will not work in its current form. it is the worst name i've ever heard of in my life. i don't ever want to tell somebody to go from my business, to leave. in addition, i think it's important that the franchisees, those relationships are repaired, and that they do see there's a plan, and they have to feel like you're invested in their business. not because you want a royalty check, because they're essentially buying and believing in what you're selling. my offer for a business that is essentially insolvent is $350,000 for 75% of the business.
because the risk for me is huge. i want to own 75% of the concept. taylor: i mean, the 75% is steep, but i don't know if we have an alternative. jeff: what would it look like -- what would a deal look like where we're 50/50? lemonis: it probably wouldn't look like a deal. coming up... taylor: i went out and got drunk. lemonis: i'm pissed right now. i am record pissed. i don't know that you're cut to work here, and i am not gonna [bleep] around.
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jeff: what would a deal look like where we're 50/50? lemonis: it probably wouldn't look like a deal. jeff: okay. i would like to do 65/35, if this is the direction we're going. lemonis: and i would like to do 100 and 0. jeff: okay, fair enough. how about settling in the middle? lemonis: 70/30? jeff: 70/30. lemonis: so my final offer after your back and forth is $350,000 for 70%. jeff: all right, you got a deal. lemonis: we got a deal? jeff: thanks, marcus. lemonis: you got it. taylor: thank you, marcus. lemonis: when i write this check, i really am 100% in charge. jeff: thank you, sir. taylor: thank you. lemonis: congratulations. jeff: thank you. lemonis: so i'll see you back at the shop, okay? taylor: okay. jeff: sounds good. lemonis: all right, everybody. ernie: good to see you again.
lemonis: i thought we could get some of your staff together, and let's give everybody a summary of what's happening so that people aren't in the dark. for me, the first order of business is gathering the franchisees and letting them know exactly what's happening because if they're not on board, we might as well shut the door. jeff, where is -- where's taylor? jeff: that, i have no idea. lemonis: okay, okay. so, i wanted to let everybody know, jeff and i made a deal for me to invest $350,000. that money will be used to develop a one-store, singular concept that we can all say, "okay, this is what the model is supposed to look like." new product offerings, and we're gonna change the name. tea 2 go feels like, come in, get your tea, and get out as fast as you can. taylor: how's it going, mr. marcus? lemonis: how are you? where you been? taylor: doing well. lemonis: okay, why are you late? taylor: we worked till late last night. lemonis: you should plan better because we all got here on time, and we waited as long as we could for you. i think with taylor, it's confusing for me
because one day, he shows up in a suit, and then the next day, he shows up late. i think what he's really struggling with is determining whether he's gonna be an adult or a kid. well, i don't need the suit. what i need you to do is be an adult and be responsible. any other questions? i'm excited. thank you for having me be a part of your family. let's go to work. [ applause ] jeff: how's it going, marcus? lemonis: good morning, how are you? today, we're at the international franchise expo. this place is packed with experienced operators -- people that have a proven track record of taking care of their franchisees and helping them grow. we want to give taylor and jeff a chance to learn from the best, well, this is it. how much is the attention to detail important in the coffee/tea business? man: incredibly important. lemonis: why is that? man: when people come into your stores, they expect it.
if it's not right, they'll tell you. lemonis: that's a really nice booth. how are you? man #2: good to see you. thank you. lemonis: how many franchises have you sold? man #2: about 68 open and about another 100 coming behind it. lemonis: so, these guys are in the tea business. what advice could you give them that you've seen as franchisors? man #2: the biggest thing is communicate, communicate, communicate. you cannot over-communicate. lemonis: do you struggle with communicating with your franchisees? taylor: there's been some past issues, but something that i've been really trying to -- lemonis: like what? taylor: respect for time was kind of one of mine. getting texts at 9:00, 10:00 at night. lemonis: i have a news flash for you. when you start to put yourself in the position as the franchisor, and you say to somebody, "i'd like to take your money. and every month as you do business, you're gonna pay me." i don't give a [bleep] if he e-mails you at 4:00 in the morning. taylor needs to be available 24/7 for these franchisees. they pay his bills. i don't know if jeff is letting him slide because he's his kid, or he's letting him slide because he's the world's worst manager. i want you to treat him like an employee and not like your son.
he has to earn your respect and their respect, or he's gotta go. jeff: he almost got fired on sunday. lemonis: for what? jeff: you know, we had some stuff to do on saturday. lemonis: and he didn't show up? jeff: no. lemonis: at all? the whole day? jeff: he was a kid and stayed out the night before. lemonis: what's this that your dad's telling me about what happened on saturday? taylor: i went out and got drunk like a child. lemonis: so, all the franchisees are there, and you don't show up? taylor: no, sir. lemonis: i don't know that you're cut to work here. i'm pissed right now. i am record pissed. and i am not gonna [bleep] around. if your business is in trouble, and you need my help, log on to...
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and you can't wipe his ass. look, i don't care that taylor's trying to push limits with his dad because he doesn't know where the boundaries are. and their relationship has been such where he's been able to get away with whatever he wants. this [bleep] isn't gonna fly with me. when you're at a company function, and other people are flying in and spending their money to come to an event, that's a problem for me. taylor: i can't even process why i chose not to think. i would have preferred to have been fired. lemonis: do you prefer to be fired? taylor: no, i want to do this. i want to be challenged. lemonis: it doesn't matter what you say. it matters what you do. that's what's gonna matter to me. so get in here, and let's meet some people, okay? how you doing, brother? jeff: good to see you. lemonis: let's head in. we're back from new york, and i've arranged for us to meet manish, the tea supplier, at his warehouse. how are you, my friend? manish: good to see you. lemonis: good to see you. i want to learn what he does, how he does it, and how good he is at it. what else do you have in this warehouse besides tea?
manish: spices. we have cardamom, ginger, cloves, black pepper, and a lot of these spices are in our tea blends. lemonis: i mean, that doesn't seem like a huge leap to me to add another revenue source inside the store, does it? you ever thought about being in the spice business? jeff: we've had people inquire about it. manish is obviously a tea guy, so when i found him, i knew we could get different -- 100 different types of teas. lemonis: a good chunk of teas happen to be made with spices. so, we're already in the spice business, anyway. why not just now tell people about it and make money from it? so, you're holding a $70,000 receivable. i made a deal for 75% of the business, okay? and so what i'd like to propose is that we take the money that you're owed, and we roll that into equity, and you become partners with me, and we move forward. manish: we move forward. lemonis: and we're now gonna get into the spice business. manish: i think this concept has legs. lemonis: okay. manish: there you go. lemonis: let's make some tea. what i want to do is really hear from some of you from my perspective,
this is a failed franchisor/franchisee relationship. i wanted to get the franchisees together so i can give them an update on all the progress we're making in the business. but before we jump into that, i wanted to give them a chance to clear the air. it's obvious to me that there's been a lot of frustration that's built in over the years. these people put their hard-earned money into this concept, and if this concept's gonna move forward, we're gonna need to talk through it. how many people have asked for more product to be part of the concept? and what's the response been? heather: there isn't one that i know of. lemonis: anybody else had any issues? ernie: the training aspect. we definitely -- i felt like we've had to do our own training. ryan: when we first got in, jeff was our man we talked to. and then taylor got involved and started telling us what to do or how to do things, and to have a 21-year-old kid tell me how to run my business and make money was really frustrating. we were just struggling to make a living down there.
i mean, we had a 2,200-square-foot store with lots of blue sky with nothing for sale in it. lemonis: does everybody agree with that? woman: yes. dawn: we have an issue. lemonis: okay. randy: we had to do a lot of work on our own to get things going, and we were working 86 hours a week. there were a lot of issues with that store. we weren't gonna make it. lemonis: when people buy into a franchise, they're buying into a proven model, and you're supposed to give them a path to success. these people literally got nothing, but it cost them everything. that's gonna stop today. this is your sole income today. dawn: he took less of a retirement because we thought it would make so much more money than staying with his job, and we've been subsidizing this business for over 18 months. retirement income. lemonis: with your savings. dawn: and our savings. randy: they were rude. they wouldn't visit with people. jeff: i'm not gonna -- i'm not gonna get thrown under the bus right now because that is not entirely accurate. lemonis: coming up... taylor: i never felt like you're my father. jeff: i don't care if we're in front of him
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randy: they were rude. they wouldn't visit with people. jeff: i'm not -- i'm not gonna get thrown under the bus right now 'cause that is not entirely accurate. lemonis: i don't know what gives jeff the right to be defensive right now. it's obvious to me and everybody else that he's not giving them any direction, any support, any resources,
and he's the one that's annoyed? how many of you would like to see some ideas for the new concept? man: yes. woman: love it. lemonis: going forward, we will not just be carrying tea. we will be in the spice business. most of you know that you're already in the spice business, and so we want to capitalize on that. and so we're gonna build a giant spice wall. we're gonna come up with gift sets, and at this point, the concept is to call it the american tea and spice shop. woman: i love it. lemonis: okay? what do you guys think of the concept? does that seem too far off? dawn: not at all. lemonis: let's give our group a round of applause. all right, guys, thank you. the best way to prove to the franchisees that i mean business is to start right away by building the prototype store, and the shop that i've chose to remodel is randy and dawn's store in coppell
because they deserve it. in the meantime, what i want to do is figure out what accessories and supplies we're gonna carry. so we found a vendor in dallas. taylor: we really want to focus on bringing our average ticket up. the retail space is where we're really, really lacking. julie: okay. taylor: we could make a full gift set, including the markers. lemonis: short mugs, the coasters, anything cooking, spices, tea, or americana. julie: got it. lemonis: we'll take all of those, as well. our next stop is empire, one of the premier bakers in all of texas. dawn: hi, how are you? lemonis: not only are they gonna make the product for the stores, but they're going to distribute it, and dawn and sarah have some great ideas about what to carry. lemonis: dawn, look at this trail mix cookie. dawn: that could be so healthy, and we want healthy alternatives. lemonis: okay. right now, the average spend per customer is about $3, typical price of a cup of tea, but going forward, after adding food, accessories,
i'm hoping to take that to $10, more than tripling the revenue, and improving the customer experience. taylor: i wanted to apologize about some lack of respect. in general, this being included, y'all have had a lot of ideas. i mean, y'all have sent in, "hey, we have these cool drinks." that was my responsibility to get that out to everyone, and i kind of went with the, "no, we have to do this, this, and this." i apologize for it. lemonis: i'm cautiously optimistic about taylor's path, but he's definitely taking a step in the right direction by owning his actions and apologizing to dawn and sarah. dawn: we appreciate it, and we understood, you were trying to do your job, too. taylor: i'm excited at what's next. dawn: yeah, we are, too. [ cellphone rings ] lemonis: hello. hi, manish, how are you? yeah, i do, thank you.
yeah, all right. i appreciate it, buddy. thanks. bye bye. manish: you bet. lemonis: i'm hearing from manish that you're still out selling franchises. is that right? jeff: yes. lemonis: right, but what are you selling them? jeff: the current concept in its state. lemonis: but what contract are they signing up? jeff: our current franchise agreements. lemonis: yeah, and who -- so you have your lawyer drafting those? taylor: i draft the franchise agreements. lemonis: what do you mean, you're doing it? you're not a lawyer. what do you know about franchise agreements? taylor: what i've researched. lemonis: jeff is out selling our franchises, and i know nothing about it, and his son, who's not a lawyer, is basically copying contracts from the internet for people to sign.
i mean, you want to talk about insanity? we're here. the franchise agreement that people are signing now is going to be materially different than the franchise agreement that's going to exist going forward. what happens if they don't like the model that we come up with? taylor: up [bleep] creek without a paddle. lemonis: you guys are gonna be [bleep] i don't know what's going on with jeff, but it's obvious to me that he's in desperate need for some personal cash because he's out there selling tea 2 go franchises even though the concept he's selling doesn't exist anymore. have they all paid you? you haven't gotten money from them? jeff: no. lemonis: thank goodness these didn't close. we would get in serious trouble. taylor, why are you doing business this way? taylor: i don't know, it's my job. i don't know the alternative. lemonis: you're selling somebody a franchise as a security. it's regulated by the securities and exchange commission. did you know that? taylor: no. lemonis: they will put you in [bleep] jail. it's not like you go to court, and you get sued.
jeff: if it went the wrong way, yes, i'm up [bleep] creek, but i've protected him against any -- lemonis: how have you protected him? he's an officer of the company. they'd come after him, too. taylor: i didn't actually know that. i should not be an attorney. i shouldn't be involved in all this kind of stuff. i don't trust what's going on. how the hell -- lemonis: do you trust your dad? taylor: on a business standpoint, no. lemonis: what did you tell me in the car in the drive-through? taylor: i told him that i never felt like you're my father. he asked me about it because i say jeff, like, i use your name when i talk to most people professionally. jeff: don't ever reference me by my first name, or i'll put you on your ass. i don't care if we're in front of him or in front of that [bleep] camera. i'm dad. you ever refer to me as jeff in public or anywhere else, this giant physique is going to put you down. i won't be disrespected.
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for just $199 a month. habenera (from carmen) by andre rieu -- beat renditionition habenera (from carmen) by andre rieu -- classical rendition habenera (from carmen) by andre rieu -- beat rendition habenera (from carmen) by andre rieu -- classical rendition habenera (from carmen) by andre rieu -- beat rendition when you see beautiful design... do beautiful work... you see what delta can do. jeff: i'm dad. you ever refer to me as jeff in public or anywhere else, this giant physique is going to put you down there. i won't be disrespected. taylor: it's not a matter of disrespect. jeff: calling me by my first name is disrespectful. taylor: i think it's professional when we deal with new franchisees. jeff: you want me to refer to you as a mistake? lemonis: jeff. all he's worried about is his feelings.
the pressure that he's put on taylor, it's inexcusable. and by selling the old concept, jeff is not only putting the company at risk, but he's putting me at risk. so you're comfortable signing an agreement from a guy who drafted the document who happens to be your son who's not a lawyer, and who knows nothing about franchise law? you gotta have a little bit of respect. until we get the final concept right, we don't want to sell any concept to anybody. do you agree? jeff: dutily noted. lemonis: i don't want to get caught in the middle of this. but i'm also not going to let it affect the business. we have one goal here, getting the prototype ready for grand opening. counters are being replaced, new displays are being put in place, new wall treatments are being put in place. the only thing that's not getting redone is the floor that randy and dawn put in with their own hands.
i've asked jeff and taylor to meet with me. i want to find out what's going on after our last unpleasant conversation. how you doing? taylor: doing really well, actually. lemonis: good. so, what's gone on since we talked the other day between the two of you? have you guys had a chance to talk? taylor: we haven't really talked at all. lemonis: is that normal for you, not to talk in several days? taylor: no. jeff: it's been a doozy. taylor: i don't know, i feel like we needed to be real. i felt like i was playing a role, the idea of being a son instead of us building an honest relationship on who i am, who you are. like, i originally -- i called you dad because i knew you wanted to hear that. jeff: so you're full of [bleep] taylor: i mean, i'm sorry. try to move forward. i don't know what that looks like. i don't know how it works. jeff: my answer to that is, that seems like an awful chicken [bleep] way out of it. playing fake son and everything.
i don't think there's an excuse for that, personally. that's where it ends for me. how could i ever believe anything that comes out of your mouth at this point? lemonis: jeff, in fairness, he's trying to explain himself. jeff: if that's how you decipher it, okay. lemonis: unfortunately, at this point, i don't think jeff and taylor's relationship is gonna get better any time soon. jeff: i tell you right now, i'm done. no phone, no car payments, no house, no nothing. he wants to give you a job, you can ask him. i'm done. manish: some of you know, some of you don't, but we're gonna talk about tea itself. the leaf, herbal teas. lemonis: manish is taking over all the educational aspects of our business, and his responsibility is to get the franchisees up to speed on everything tea. everybody is firing on all cylinders to get this store open, especially taylor. and after his dad cut him off, i guaranteed him that he'd get a paycheck. everybody's working except jeff.
he's totally mia. i called jeff and asked him if we could chat before we opened the store. so, what's happened since i left? jeff: some changes are being made. with tea 2 go's direction, we formed a franchise council. everybody's given 30 days to decide if they want to stay with tea 2 go or not. lemonis: jeff. i'm sorry, did i just hear that right? stay with tea 2 go? i didn't know that was an option. now jeff thinks he's gonna run a competing company to the new concept? okay. good luck to you. tea 2 go is not a legitimate franchise right now. jeff: at that meeting, i do have quite a bit of support from the people at tea 2 go. lemonis: coming up... so you ready to go in? okay, ready, hold on, don't look yet. everybody in? okay, take a look. sarah: oh, my god!
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jeff: at that meeting, i do have quite a bit of support from the people at tea 2 go. lemonis: despite all the work that i've been doing for american tea and spice, i now find out that not only is jeff having a meeting with existing franchisees, but he's now talking about keeping tea 2 go going in a separate company, and he's still selling franchises, so we're gonna run two separate businesses, and he's gonna keep the original one? what? do you even want to be part of this? jeff: i think this'll work in middle america, smaller towns, i think it'll be tough. tea 2 go is proven in these smaller little markets, is actually successful. lemonis: so your position right now is that you'd like to continue to clean up the tea 2 go stuff.
jeff: yes. lemonis: this is all unexpected, and quite frankly, maybe a blessing in disguise. i'm fine dissolving our deal, and jeff can move on and continue to sell his old tea 2 go franchises, and what i'll do is i'll set up a brand-new entity called american tea and spice, and this store with randy and dawn will be the first store. the other franchisees who are part of tea 2 go can make a decision. they can stay with tea 2 go, or they can come be part of this chain - whoever they think is gonna give them the best chance of success. jeff: i want to see that through. i started it. this whole experience for me has been tough. what happened with my son, maybe getting away from me and being his own thing will teach him versus me trying to help all the time. lemonis: i mean, man to man, i think you just gotta be careful that you don't get yourself into trouble. i wish you luck. jeff: okay, thank you. lemonis: good luck to you. jeff: thank you. lemonis: okay, big day!
[ applause ] big day. taylor: how's it going, mr. marcus? lemonis: how you doing, buddy? taylor: i'm doing well, man. lemonis: today's the day of the grand opening, and to be honest, i haven't been this excited about the unveiling of a new concept in a very long time. so, are you ready to go in? okay, i'll guide you in. okay, ready, hold on, don't look yet. okay. everybody in? okay, take a look. sarah: oh, my god! lemonis: this place has been completely transformed. dawn: this is amazing. it's so beautiful. lemonis: i give randy and dawn credit. they did the best they could with the resources they were given before, but now this place feels warm and inviting. honestly, this one's a home run. dawn: that's what i wanted the feel to be. walking into a kitchen, and you're our guest. lemonis: the store is now stocked with a wide variety of food and beverage options. taylor: y'all negotiated a good price point, so we're gonna be right about a 60% margin on each of these guys.
lemonis: the shelves are full, accessories and books and other gift items. dawn: these are so adorable. lemonis: taylor picked out all these products himself. taylor: check out these tea cubes. dawn: as a customer, that's what i want. lemonis: and manish has done a spectacular job coming up with an assortment of spices from around the world. manish: the actual cost of goods is fairly reasonable. lemonis: so $9.95 retail price, this is probably somewhere around 3 bucks in cost. our tea wall now has a great assortment. this is the green tea section. there's a green tea book. dawn: this is, like, 6,000 times better than what we had before. lemonis: there's not one item that's been brought into this store that has less than a 55% margin. dawn: y'all have encapsulated the entire dream that i've -- i don't know how you did it. lemonis: you guys are really the type of family that embodies what this brand's gonna be about. this entire team has done a spectacular job. i couldn't be more proud, but one person has gone above and beyond.
the reports that i got back from everybody was that you were here early, and you stayed late, and that you were really contributing in a meaningful way. so i'm very proud of you. but you need to go back to school. and so the company's gonna pay for you to finish your schooling. that may be the biggest transformation yet. it's better than any wall you can put up, or any product you can bring in. dawn: welcome! [ applause ] randy: come in, come in! lemonis: there's old customers, and there's new customers, and there's other business owners from the area that made the drive to come here, as well. [ applause ] so, this store -- this store is officially the first american tea and spice shop in the country. it is the prototype. it will be the training center. this is the training family. what we really wanted to do is build a business that's about the people that put their money on the table, the franchisees, and really build a business around people
being able to make a return on their money. randy: i want to thank y'all first. so grateful. and i'm gonna cry, i tell ya, i'm gonna cry. [ applause ] dawn: marcus, we absolutely cannot thank marcus enough. this is his first business in texas. i think he needs a texas cowboy hat. lemonis: yeah! [ cheers and applause ] i think i spent, like, $350,000, and i got the best damn cowboy hat ever. thank you. [ applause ] you can see from the look on people's faces that they're blown away by what they've seen. and more importantly, you can tell that they like what they see because there's a line at the register. there's several concepts that i've launched over the last few years, but this one has something special about it.
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