tv The Profit CNBC September 4, 2016 4:00am-5:01am EDT
lemonis: tothis place is awesome... two business partners revive a beloved family restaurant chain... woman: i was so excited to see that it was back. lemonis: ...only to run it right back into the ground. mike: we've gone through hell. we've gone through hell together. lemonis: the c.e.o. is incapable of doing his job. why are you blaming everybody else? mike: i'm not blaming everybody. lemonis: what about you? the head of marketing isn't allowed to do hers. shauna: i feel like i try to take on things, and you try to take them back. -sandy: it's not that simple. -shauna: well, it is. lemonis: as the dysfunction gets worse and worse... mike: paul was handling the numbers. i trusted, but i didn't verify. lemonis: ...the day of reckoning gets closer and closer. $1,900,000 is the total debt, and you have no cash.
it's like a train wreck. if i can't restore some leadership in this legendary brand... mike: you've really got the wrong picture of this whole thing. lemonis: no, no, no. i got the very clear picture. ...it's going to melt down this time for good. get this right, or it's gonna die. my name is marcus lemonis, and i risk my own money to save struggling businesses. we're not gonna wake up every morning wondering if we have a job. we're gonna wake up every morning wondering how many jobs we have to do. it's not always pretty. everything's gonna change. everything. but i do it to save jobs, and i do it to make money. this... let's go to work. ...is "the profit." ♪ together: ♪ we, for farrell's, give you a cheer ♪ ♪ we'd like to wish you a happy birthday ♪ lemonis: in 2009, mike fleming and paul kramer brought back farrell's ice cream parlour...
shauna: hi! welcome to farrell's. how are you doing today? lemonis: ...an iconic family-restaurant brand known for its americana theme, its mini candy stores, and, of course, its oversized sundaes. -man: huge. -man #2: hoo! lemonis: founded by bob farrell in 1963, the company, at one point, had as many as 130 locations. in the '80s, bob retired, and the chain was sold to a group of investors. but they mismanaged the stores, lost the magic, and soon after, every last one of them was gone. eager to open up a family-oriented business, mike enlisted paul to help him restore farrell's to its glory days. they even put a new spin on the restaurant's famous birthday song. together: clap your hands! clap, clap your hands! clap! lemonis: but they moved way too fast, opening up six restaurants in just a few short years, some of them never generating a profit.
and thanks to high rent, more than a million dollars of debt, and a slew of operational blunders, one location is already gone, with the rest in deep trouble. mike: where are we gonna get that extra money? there's no money in here. lemonis: if i can't help them stabilize their stores, this great comeback story will come to an end any day now. shauna: i mean, we need help. there's no doubt. ♪ lemonis: i'm meeting the owners at the buena park restaurant, which apparently is one of their better locations. i've got to say i'm excited to get started. any time you can bring people together, families together, and have fun, that's a business worth investing in. -woman: good morning. -lemonis: hi. this place is awesome. this is really cool. mike: marcus. mike fleming. -lemonis: nice to meet you. -mike: oh, my gosh. and welcome to farrell's ice cream parlour. are you celebrating anything today? lemonis: i'm celebrating life.
[ siren wails, bell dings ] [ horns honking ] woman: whoo! together: it goes 1, 2, a 1, 2, 3. happy birthday! -woman: happy birthday. -lemonis: wow. out of nowhere, this big drum comes, and people are screaming, "happy birthday!" -i mean, it was crazy. -woman: happy birthday! lemonis: how does everybody feel about the awesome birthday songs? woman: it was just too loud. we couldn't have a conversation. -lemonis: too much? -woman: yeah. lemonis: i'm all for having fun and singing happy birthday and celebrating things, but there's a point where it's not an enjoyable dining experience anymore. man: well, this would be our menu. lemonis: okay. mike: the theme is a turn-of-the-century theme. lemonis: how many different items are on this menu? -mike: there's over 100. -lemonis: there's a lot on here. so, you've had a ton of restaurant experience? mike: i had very little restaurant experience. lemonis: why did you start this business? mike: it's hard to describe. farrell's is a place where lifetime memories are made. lifetime. it's all about family.
i've got my daughter working for me. lemonis: okay. i'd love to meet her. mike: let me see. shauna. want you to meet marcus lemonis. lemonis: hi. how are you? i'm marcus. shauna: i'm shauna. nice to meet you. lemonis: nice to meet you. father daughter working together? shauna: yeah, yeah. it's fun. lemonis: and have you been in the business a while? shauna: i have. i started right out of college. so, i'm the director of marketing now. lemonis: you're the person that gets everybody in the front door. shauna: yes, that's my goal. lemonis: what's it like working with your dad? shauna: i love working with him. i mean, my dad has always said that he started all of his businesses because he wanted to be able to pass something down to his kids, and, of course, i want to make him proud. mike: she's a huge inspiration for me and a motivation for me. lemonis: you can feel the affection between you guys. -shauna: yeah. -mike: oh, yeah. i'd like to have you meet my business partner, paul kramer. lemonis: okay. mike: want you to meet marcus lemonis. lemonis: how are you? i'm marcus. nice to meet you. paul: thank you for joining us here. lemonis: absolutely. how do you share roles and responsibilities? paul: operations for me. i have restaurant background. lemonis: what are the numbers here? paul: we're doing $4 million. -i can go back and -- -mike: no, we weren't that high. -paul: don't think so? -mike: nope.
paul: we did, yeah. lemonis: so the numbers aren't crystal clear? -paul: yes. -mike: yeah. lemonis: i don't know what just happened. paul answers my question, and then mike says he's wrong. and quite frankly, they both look totally lost. -how many stores exist today? -mike: there's five stores. bob farrell started the company back in 1963. when we started the company, he came up to the opening. he goes, "guys, you did it. -this is farrell's." -lemonis: oh, that's awesome. paul: my uncle would take me to farrell's growing up. and farrell's is part of families. it was part of mine, and it's part of millions as they grow up. lemonis: lot of childhood memories. mike: when we closed mission viejo earlier this year, it was one of the worst days of my life. bob had passed away at the time. [ voice breaking ] he was... he would not have been happy. 'cause he never -- bob never had a store close. lemonis: so, what happened in mission viejo? mike: a bunch of things happened. first of all, our rent was high. then there was another very popular restaurant
across from us. ultimately, we weren't able to pay rent. the other problem we had, we had operational issues. we were running high in food. lemonis: whose responsibility is that? mike: paul has handled all of that. paul: [ chuckling ] yeah. lemonis: okay. normally when you meet somebody that has business partners, they don't start ratting people out this quickly. i thought it was a little peculiar that, right out of the rip, he tells me, "well, we had this one location, and it didn't do well. oh, by the way, it was that guy's fault." and mike's supposed to be the c.e.o. what kind of c.e.o. does that to his people? paul: so, you've seen our fountain? lemonis: i have not. this is really what you guys are known for, right? -these giant ice-cream sundaes? -paul: it is. lemonis: so, who came up with the recipes for the ice cream? mike: well, bob farrell actually gave us recipes, but we don't make our own ice cream on premises. we have a third party. that is thrifty. lemonis: and so you give them your recipes, and they make them? mike: no. we use their particular brand.
we didn't have the money to be able to do the bob farrell recipes. lemonis: so none of this is, like, proprietary farrell's flavors or ice cream? mike: well, the containers are. lemonis: like, this container? mike: no, that is. [ chuckles ] lemonis: you got to be kidding me. this isn't just some ordinary ice-cream parlor. this is an iconic brand that's been around since 1963, and they're using an ice cream that i could buy at a local drugstore? if you're known for ice cream, you should at least have something that's special, and special to only you. so, can you give me a little tour of the candy store? shauna: sure. -sandy, this is marcus. -sandy: hi. lemonis: hi, sandy. i'm marcus. sandy: it's a pleasure to meet you. shauna: sandy's in charge of all of our candy and merchandise. lemonis: and so your full-time job is the candy store? sandy: no. h.r., payroll duties. this is last on my list. -lemonis: yeah. -sandy: yeah. lemonis: i've never seen a candy store or any retail business that has its h.r. director running the merchandise. i guess i shouldn't be that surprised. if they don't see the importance of having their ice cream be special, why would the candy be any different?
it's a nice attempt at a theme, but i'm not really sure that the theme's clear to me. when you walk in the front door, it looks like they went to the local convenience store and just said, "give me some lollipops and some sweet tarts." it's not nostalgic. there's nothing really curated. and what's this -- all this bacon? why do you have bacon cotton candy? sandy: people like bacon right now. same thing with the bacon soda. lemonis: i mean, i know the craze with bacon, but how does it connect to farrell's? shauna: it doesn't. there is no bacon connection. -lemonis: yeah. -shauna: and i think that there are a lot of things that could probably go away. sandy: well, i love the product. shauna: the barrels used to be filled with old-time candy, and that's what people really remembered. -lemonis: penny candy. -shauna: yes, yes. the create-your-own in this day and age is huge. so i would definitely put the barrels back. lemonis: that's clever. i like that idea. shauna: and i would love to see farrell's have its own branded everything. lemonis: there's nothing really branded farrell's. the candy store, that's marketing to me, because it's the first thing you see when you come into the store.
you want people to be wowed by this. you want it to be special, something memorable, not to mention that candy, typically, has amazing margins. so, do you know how much the store did in total sales last month? sandy: $2,000 in candy and about $4,000 in merchandise. -something like that. -lemonis: so $6,000 total? candy sales seem terrible for what it should be. and there's a history of farrell's being in the candy business. wasn't an accident that bob farrell was successful. -nice meeting you, by the way. -sandy: it was nice to meet you. lemonis: and these people screwed it up. have you ever asked sandy, like, why this isn't right? shauna: no, i haven't asked her. the frustrating part is, i feel like my a lot of either ideas or thoughts are kind of squelched. lemonis: even though you're the marketing person? shauna: yes. so, sometimes i feel like i'm still viewed as the boss's daughter. lemonis: it's common for the employees to be skeptical of the boss's son or daughter, because they believe that they're gonna get preferential treatment. but the only person that i've noticed that has any attention to detail is shauna. buena park has a ton of problems,
and it's supposed to be one of their better locations, so i've asked mike to actually show me what he considers his worst location, and i'm a heck of a lot less excited now. i'm marcus. how are you? travis: good. pleasure to meet you. lemonis: nice to meet you. you're the manager here? travis: yeah, i'm in charge of this location. lemonis: mike, let me spend a little time with travis. mike: absolutely. lemonis: so, how often are you actually in this location? this is your store, right? travis: this is one of my stores. so, i'm the regional director for the company. lemonis: how much revenue do you do? travis: well, last year, this location did $2.4 million -and lost $92,000. -lemonis: why is that? travis: the floor plan's not ideal, and, uh... in a little bit of a rougher area. a lot of it had to do with the management that we had in prior to me taking over this location. lemonis: and how long have you been here? travis: about three months. lemonis: take me back to the kitchen. -travis: yeah, absolutely. -lemonis: let's walk back there. travis: we need to replace a lot of equipment. we have a meat drawer underneath our charbroiler. that's gone out. every month, we have somebody come out that's repairing it.
our reach-in coolers, i can repair this piece of equipment, or i can purchase plates and silverware. i was in a truly amazing job. i worked for hilton. and farrell's came back. got the job, cost me about half of my salary. lemonis: you took a pay cut? -travis: yeah. -lemonis: big pay cut. travis: big pay cut. lemonis: travis really believes in what farrell's is doing, and he's got a good grasp on what's wrong and what needs to be fixed. i really was impressed with him. let's go see what this food looks like. ♪ if you look at the presentation... travis: it's boring. lemonis: i mean, this plate is too small for this setup. travis: to me, we're just not competitive. -it's loud. -lemonis: too loud. [ siren wails ] travis: and, you know, it's -- it's hard to compete. lemonis: it's cute once, and it's happening -every five minutes. -travis: yeah. lemonis: do people complain about it? travis: they just don't come back. lemonis: somebody needs to tell these team members
that are singing that it's not a tryout for a musical. if i make a deal here, the volume of the music's going down. you know what i thought we could do -- if all of us, including paul and sandy, -can go in the other room... -mike: sure. lemonis: ...and just go over financials. -mike: absolutely. -woman: e.j., party of three! e.j.! lemonis: let's look at the revenue. paul: let's go to the sales tab. lemonis: $17 million of sales across the company. mike: right. lemonis: buena park -- $359,000 in profit. brea made $200,000. riverside made $70,000. rancho cucamonga lost $92,000. sacramento lost $300,000. five locations of which three of them make money. where is the cash to fund the loss coming from? -shauna: buena park. -lemonis: where else? -paul: brea. -shauna: riverside. lemonis: every location that makes money. mike: yeah. we're trying to keep it afloat. paul: yeah. lemonis: i want to summarize the debt, as i understand it. it's made up of bank loans, legal bills,
the build-out loan for this place, taxes, and payables. you said that you -- man: ah, farrell's crowd, look this way! 'cause i got something very important to say! lemonis: so, the total amount of debt... [ drums beating ] you want to hear something funny? that's the reason people don't come back here. shauna: i know it is. lemonis: it's actually annoying. it can be done in a more elegant way. i don't want to come here and enjoy a meal if it's not my birthday, 'cause i don't want to listen to that nine times. $1,940,000 is the total debt for this entire company, and you have no cash. i mean, it's just -- it's like a train wreck. paul: yeah. lemonis: out of their five locations, three are making money, generating profits of just over $600,000 last year. but when you look at the two remaining locations, their losses take that profit down to just about $250,000. and then you factor in servicing debt of almost $2 million, it's obvious to me why this thing is in the red.
they can't make improvements, they can't make repairs, and their tabs with their food vendors are piling high. as far as i'm concerned, you might as well just turn the lights out after you do that math. shauna: i think we grew way too fast. by the time we realized where we were at, it was too late. paul: it's been stressful the last eight months. it's -- it's been -- it's been rough. lemonis: we need to get this right, or it's gonna die tomorrow. so what i want to do is take these numbers and think about them, okay? -i'll see you guys soon. -paul: okay. ♪ lemonis: what mike and paul have built really wasn't the farrell's of yesteryear. they've come up with some poor imitation of it. the customer experience, the ice cream, the candy store -- those are just not here. i believe in the original concept, but i don't know if i believe in them.
the scary thing for me as i sit here right now is, i don't really know what i'm walking into. what i see is a kitchen that's got kitchen equipment that's missing. i feel like i'm being asked to partner with people that don't know their numbers. it scares me. i mean, i hope you can appreciate that. how much ice cream do you buy a year? -mike: are you gonna add it up? -paul: yeah. mike: okay. 'cause i got the sheet. lemonis: the place is called farrell's ice cream parlour. you should probably know how much ice cream you sell. mike: paul was handling the number stuff. "trust, but verify" is what ronald reagan said. i trusted, but i didn't verify, and it's pulling this damn company down. lemonis: in order to be a leader, you don't blame people. you solve problems. take some ownership of your issues. when i think about making an investment, i think about investing in hard assets. -mike: mm-hmm. -lemonis: in this case, there's no cash flow,
there's no real assets, and so the only thing that's really left is, "what is the farrell's brand worth?" mike: okay. lemonis: so i have interest in investing in two things -- the trademark and the locations themselves so i can invest in the people. and if i make an investment in these locations, there is no money going sideways. they stand on their own, and they either make it, or they don't. so, my offer is $750,000. but i want 51%. if your business is in trouble and you need my help, log on to...
this is the new comfort food. and it starts with foster farms simply raised chicken. california grown with no antibiotics ever. let's get comfortable with our food again. lemonis: my offer is $750,000. but i want 51%. that money would go into the stores to bring the payables current, to get the equipment fixed. the most profitable location is buena park. so buena park is gonna be a prototypical concept that we're gonna come up with a model. we're gonna set a standard for the store. we're gonna set a standard for the ice cream. we're gonna set a standard for the menu. mike: golly. lemonis: so, do we have a deal? mike: yeah. -we have a deal. -lemonis: great.
mike: we have a deal, marcus. wow. lemonis: i'll see you guys tomorrow. -mike: thank you so much. -lemonis: yep. ♪ we're gonna head outside, okay? all the store managers and the people from the office. i wanted to meet with all the employees at another location so more people can hear about the deal that i made and find out what the direction of the company going forward is. so, yesterday, paul and mike and i made a deal for me to invest $750,000 into farrell's. going forward, these locations either win on their own or they die on their own. we're gonna dig in to the presentation, to pay the payables, to make sure that the equipment you have in your store actually functions. travis: we appreciate you having the belief in us. kim: if it wasn't for you doing this, none of us would be here in six months. lemonis: i got your back. okay? -everybody excited? -together: yes! lemonis: let's go inside and get to work. -paul: all right. -lemonis: all right, 1, 2, 3.
-together: farrell's! -lemonis: all right. ♪ [ people screaming ] [ growls ] -hi, guys. -travis: hi. -lemonis: how are you? -sandy: hi. lemonis: what's happening? travis: good, marcus. nice seeing you. lemonis: for me, farrell's needs to be more than just a restaurant. it needs to be an overall experience, and in order for them to learn that and see that, i'm gonna take them to universal studios hollywood, a place that really understands the guest experience. we're gonna head down to one of the coolest places here -- -mel's diner. -travis: awesome. lemonis: how are you? -i'm marcus. -eric: chef eric. i oversee the entire food operation. -lemonis: for the whole park? -eric: for the entire park. lemonis: so, one of the reasons that i wanted to bring this team here is, i've invested in a company called farrell's. eric: as a kid, i remember going there for ice cream and burgers and fries, and i remember it well.
lemonis: at a sit-down place like farrell's, how many menu items would you recommend, max? eric: i would have no more than 20. you know, it's great to have 50 items, but is it better to have 20 that you do flawlessly? lemonis: part of the reason we're here today is presentation. would you be able to maybe give us some inspiration? eric: for sure. all right, guys. this is one of our signature items that we often have for our guests. and the key to this whole thing is the plate. the thing with a rim, it gives you a border, gives you, like, a target to aim for. travis: absolutely. our portions take up the whole plate, as you saw -- overlap most of our plates. eric: and i say, if we make the portions too big, people can only consume so much. lemonis: thank you very much, chef. -paul: thank you, chef. -travis: we learned a lot. lemonis: why don't we go to the candy store? sandy: okay. lemonis: because when you come into our store, that's the first thing you see. travis: it reminds you of the old-school farrell's. when you walked in, it was just multiple rows of color.
lemonis: and what you'd be able to do is have what's called a cyo -- a create-your-own container, branded farrell's, that they could fill up. mike: that would be great for birthday parties as an option where the kids can come into the candy store. lemonis: and get a cyo container. mike: right. and that's their goody bag. sandy: this is a great idea, but for our stores, it just means mess on the floor with the kids spilling it. we've got issues of opening them at the table. lemonis: so you don't like this idea for your store? sandy: for our store, no. lemonis: respectfully, i don't agree. sandy: travis, operationally, do we have staff to be able to keep up with that on the floor, what that's gonna look like on a friday, saturday, and sunday? travis: to me, it works. -lemonis: so you like that. -travis: i do like it, yeah. lemonis: and you're worried about? sandy: the mess. lemonis: i have no idea why sandy was assigned to be in charge of the candy store. she's -- she's not good at it. i want their store to look exactly like it looks here -- fun and colorful and stocked. or is it just a restaurant that sells candy? paul: no, it needs to be an experience. ♪
lemonis: it was great to see the candy store at universal. we learned a lot. but what i really wanted to do is customize what our current customers want, so i arranged for a focus group back at the brea location. how does the candy store, just the general merchandise, feel to you? woman: it holds no interest to me. -woman #2: yeah. -lemonis: no interest? woman #3: so small and so cramped, it's almost like you want to get out. -lemonis: what's missing? -woman #4: chocolate. lemonis: okay. what else? woman #2: like, where you can get, like, a little bag of candy and do penny candy. lemonis: penny bags, penny candy, okay. woman #2: like, these aren't special. i mean, you can get these candies anywhere. lemonis: shauna's in charge of marketing for the company. shauna: hi! nice to meet you. lemonis: and what do you think about the candy here? shauna: i think we need a lot more of that old-fashioned candy. we used to have a lot of the barrels lining. sandy: um, we're trying to get away from this 10-cent candy, but that's... shauna: well, i think it's about wanting to share something with your child -that you had as a kid. -woman #2: yeah. lemonis: shauna's coming up with creative ways to make the business better and really seeing the candy store as visual marketing for the customers.
sandy's thing -- "i like the way my candy store exists." and i got a news flash for you, sandy -- it's not working. i thought maybe the three of us could talk outside. -shauna: sure. -sandy: sure. lemonis: after seeing the tension between the two of them in the candy store, i thought it would be a good idea to go outside away from everybody and have a good conversation between sandy and shauna. one of the things that i thought we could do is have some really open dialogue about the dynamic between the two of you. shauna: i feel like i try to take on things, and you try to take them back. i don't know if that's your lack of trust in me or you think i'm not gonna get things done. lemonis: who do you report to? do you report to sandy? shauna: yeah, and i think that's one of the reasons that i feel really held back. i don't get full control over things that fall under marketing. you don't want to make the changes that will positively affect the way we do things. i brought it up multiple times. sandy: yeah, unfortunately, it's not that simple. -shauna: well, it is. -sandy: it's not that simple. shauna: just the way things are brought up and shot down
shauna: just the way things are brought up and shot down is really frustrating. sandy: it's not that simple, though. it really isn't. lemonis: it's important for people to recognize how others are feeling, especially in the workplace, and address people's concerns. and so i asked paul to join, as well. shauna: it's frustrating that it's taken this long to really sit down and say, "okay..." lemonis: so, they were just talking. i wanted to sit them down 'cause i feel like there's this elephant in the room. i mean, they don't like each other. shauna: i feel like i bring up things, and it's just like, "well, it's just not that simple. you go back and sit down. -you know, leave that to us." -sandy: i'm your boss. but it is awkward when something doesn't get done and i don't want to say something because you're mike's daughter.
paul: one thing i'll add is, sometimes, in the meetings that we have, i don't feel you're completely open and say exactly what you feel, and then you tell your dad later, and it circles around, and your dad tells me. shauna: i think it goes back to kind of who i am -- "it's mike's daughter." so a lot of things that i bring up get brushed under the carpet, and sometimes i kind of feel like it's just, "paul and sandy just shot it down. they don't like the idea." paul: sorry you feel that way about me. we should have sat down a long time ago and had the conversation. i've never done a review. mike's never done a review. lemonis: you guys haven't had a review. paul: we're getting it now, aren't we? [ laughter ] lemonis: going forward, you are 100% in charge of marketing. okay? very good. -thank you. -shauna: thank you. ♪ lemonis: what shocked me most when i first went to farrell's is to find out that they don't actually have their own ice cream.
today, that's gonna change. what do you pay for ice cream today? paul: $17.50 for a 3-gallon tub. lemonis: all right. let's go to work. i'm taking mike and paul to fosselman's, one of the oldest and most beloved ice-cream manufacturers in los angeles. -i'm marcus. -john: nice to meet you. lemonis: and we're gonna see if they can help us bring back bob farrell's original recipes. john: growing up as a kid in the ice-cream business, i'm familiar with farrell's. lemonis: bob farrell had a number of recipes. they found those. they didn't do anything with them. john: fantastic. no, that's great. so, i mean, we could truly make it true to form, spot on. lemonis: what's pricing look like if bills are paid on time? john: sure. $30 per 3-gallon tub. lemonis: so, they're paying $17.50. can we see what it's like in the back? john: okay, yeah. so, this is basically where we make everything here. the key is keeping it at the right temperature. it should be zero degrees in the dipping cabinet, negative-10 for storage. lemonis: what are you in the dipping cabinet? -paul: 10. -john: 10 fahrenheit? -paul: correct. -john: so high. lemonis: so, what's happening with that? john: you're giving away product. the ice cream isn't hard enough.
you're not getting the air in the scoop. it compresses on itself. the yield of a 3-gallon tub -- you should get 60 4-ounce scoops. -lemonis: 60 4-ounce scoops. -john: 4-ounce scoops. if i have that product at 10 degrees, -i'll be lucky to get 40. -mike: yeah. lemonis: look, i was willing to bite the bullet and actually pay more for ice cream, but now that we know we're gonna get more scoops per tub, we're actually gonna come out pretty close to even. right now, farrell's is paying $17.50 per tub, but because we're serving it at too high of a temperature, we're only yielding 40 scoops. that means we're paying 44 cents per scoop. fosselman's is going to charge us $30 per tub, but because we now know the right temperature to serve it at, it'll yield 60 scoops, meaning that the new cost per scoop is around 50 cents. we're only gonna pay 6 cents more per scoop, but we now have the original recipe, and it's also proprietary. -thank you, my man. -john: thank you. -lemonis: really appreciate it. -mike: john, thank you so much. john: thank you. great meeting you guys.
-lemonis: thanks, guys. -john: take care. lemonis: part of being a leader is trying to figure out a way to crack the code on ice cream, bringing bob's recipes back. mike: i had people that i thought were doing those kinds of things. lemonis: who did you think was doing that? mike: paul, for one. lemonis: you're saying paul's the wrong person to do the job? mike: some of the areas that paul is in, he is not good at. paul: like what? mike: i think, first of all, just dealing with the products. paul: you're telling me that i don't have a background or understand product costs and where we should be? mike: no, i'm not -- i'm not saying that. lemonis: you just told him that he wasn't capable of doing his job. mike: no, i did not say that. -what i said -- -paul: you did. lemonis: yeah, you actually did say that. why are you blaming everybody else? mike: i'm not blaming everybody. lemonis: well, you said, "paul should have done this." what about you? the money that i committed to invest was not enough to solve the problem. you miscalculated by $200,000.
this is the new comfort food. and it starts with foster farms simply raised chicken. california grown with no antibiotics ever. let's get comfortable with our food again. monis: why are you blaming everybody else? mike: i'm not blaming everybody. lemonis: well, you said, "paul should have done this." what about you? your job, as the c.e.o. of the business, is to be the coach. rather than running people under the bus, you got to get them on the bus with you. mike: you've really got the wrong picture of this whole thing. lemonis: no, no, no. i got the very clear picture.
i'm confident that mike has a big heart and his intentions are in the right place, but i'm not sure he knows what to do, and because of that, what he does is ultimately just point fingers at everybody else, and that's not gonna work. c.e.o. has one job, and that's to lead and communicate. i'll see you guys back at the shop. mike: okay. ♪ shauna: i really would like to see this being completely knocked out, extending the candy store, and creating an entire build-your-own section. sandy: i actually think that it could just be in a much smaller footprint. lemonis: it's time to work on the candy store, and we're gonna figure out what merchandise stays and what merchandise goes. what are the things that you don't want here anymore? pull some things off, and let's put them in a pile somewhere. sandy: that's a great gift opportunity, you know? just... lemonis: farrell's is supposed to be an experience that's fun and happy things, and shauna seems to get the direction that i want to go to -- back to where it started.
sandy: i think we're missing a market here. lemonis: sandy, meanwhile -- not so much. guys, i-i think we have to change things up. sandy, i think, going forward, really, you just need to be focusing on the h.r. function and staying out of the candy business. sandy: i don't like it because that's the thing i enjoy doing. that's what i have the background in. lemonis: and so, if that's your background, why does stuff like that exist? empty shelves. sandy: because it's last on my list. shauna: it should be one of the things at the top of the list. lemonis: this is a revenue-generating department. these stores have to have the right inventory, the right buying process. you can't do it anymore. it's clear to me that sandy is not qualified to run this part of the business, so i think it's time to move on. your job is to make sure this place gets good traffic, and when people come here, they have an unbelievable experience, and they want to come back. all right? -thank you. -sandy: got us going. shauna: thank you. ♪ lemonis: with shauna now in charge of the candy
and merchandise store, and ice cream squared away, we're ready to take farrell's to the next level. we've started renovating the buena park location, both outside and inside. but we've also started expanding the candy store. we're also trimming our food costs. mike has been using a middleman to negotiate pricing with vendors, so we're gonna go direct to the distributor and see how much margin improvement we can actually secure. how much total food do you buy in a given year? mike: about $4 million. lemonis: if we brought you all of our business, what could i expect to save on an annual basis? erik: at least 8%. lemonis: this is a no-brainer. we're gonna save 8% on our food costs on $4 million worth of purchases. that's $320,000 a year, which is almost enough to wipe out the losses for their two locations in the red. speaking of savings, we're buying new kitchen equipment so we can stop wasting money on repairing the broken stuff. travis: so, we are missing three cold wells, but we need to go a little bit bigger. this is 48.
lemonis: and travis continues to impress. travis: a new unit like this is gonna pay for itself in two years. lemonis: and we're finally whittling down the menu. fish tacos or no? i don't think, "farrell's -- fish tacos." -paul: it's not a big seller. -lemonis: okay. so that'll put us at 19 items. limiting the menu will allow customers to make decisions quicker, and once they do, the tables will actually turn faster, generating more revenue. -okay, guys, thank you. -mike: thank you, marcus. ♪ hey, marcus. how are you? lemonis: mike, how are you? what's going on? i've been getting all these e-mails and texts from you. mike: what we've got is a cash crunch. we were unable to make rent. lemonis: cash crunch? i put in all the money that i needed to to stabilize things, and now he's asking me for more? did he make another mistake? i'm gonna get to the bottom of this. -hey, guys. -mike: marcus, how are you? lemonis: how are you? good to see you. -mike: nice to see you again. -lemonis: good to see you. [ sighs ]
so, remember that my offer was only to put $750,000 into the business. mike: well, you know, it was not enough. -we have payables and rents. -lemonis: can i see this? paul: sure. lemonis: so, you need another $200,000 to keep the doors open in rancho. right? so the money that i committed to invest was not enough to solve the problem. you miscalculated by $200,000. mike: i approached paul, and i said, you know, "what's going on with this?" and he goes, "you knew about it," and i said, "i did not know about it. i'm telling you, i did not know about it." paul: i've never hidden anything. i've never -- i've -- i've... integrity is incredibly important to me. it's all, really... it's the only thing. mike: yeah, i know, i know.
paul: it's the only thing that can't be taken away. [ sighs ] [ sniffles ] mike: paul and i have been through a lot. we've been through so much. i mean, we've gone through hell. we've gone through hell together. lemonis: but you've trashed him since i've been here. mike: you know what? lemonis: you kind of have, and he's been professional about it. nobody wants a leader that blames them. what is it that causes you to blame people? mike: probably, uh -- probably an insecurity. i get frustrated, and i want to do the best that i can. lemonis: we're at a real crossroad here, -so what do you want me to do? -mike: i understand. lemonis: what is your suggestion? mike: i'd like to have you -- i'd like to have you help us. i want to see this thing work. would there be a way that you would consider loaning... -not even -- -lemonis: no way. i'm not loaning the company money.
than we originally talked about. you guys need $200,000 more mike: would there be a way that you would consider loaning -- not even -- -lemonis: no way. -mike: okay. lemonis: i'm not loaning the company money. mike: what would you do? if you were sitting in my seat right now, what would you do? -lemonis: is travis here? -mike: travis is here. lemonis: i'll tell you exactly what i'd do. i'll go get him.
okay. my original deal with these guys was $750,000, and it was gonna solve all of the problems. but now we need another $200,000 to keep the doors open in rancho. so they asked if i would lend them the money. travis: well, as much as i hate to do it to the community and to our staff, i think, for the sake of our company, i think we have to close the doors. since you last left, we've had a lot of structural maintenance issues. we have a roof that needs to be repaired, we have an hvac system that needs to be replaced, we're in the $650,000 to $700,000 range, and i think we could easily hit $1 million. i think the investment's gonna be too high. lemonis: i've always been impressed with travis, and i had a feeling that putting more money in rancho is a bad idea.
but for him to put the health of the company in front of himself, those are the kind of people i want to do business with. it shows me the kind of guy he is. this is a big blow for him. paul: travis is an incredible guy. lemonis: in order to grow this company, i think we need travis on the team in a bigger way. so i'd like to have you be partners with all of us, where you'll have 5% of the whole thing. -paul: wow. -lemonis: okay? -travis: thank you. -lemonis: you've earned it. and the equity's gonna come from me. it's not gonna come from you guys. you're not gonna get diluted anymore. it's gonna come out of my share. travis: i don't want to be anywhere else. i couldn't imagine being anywhere else. i'm in my dream job. -thank you. -lemonis: all right? mike: help me with the numbers, will you, please? [ paul laughs ] travis: i'll make you proud. lemonis: all right. ♪ mike may joke about needing help with the numbers, but the reality of it is, it's just not his strong suit. and so i thought it might make sense to redefine his role.
travis, i want you to be in charge of the general managers -in the stores. -travis: okay. lemonis: they report to you, and the buck stops with you. mike, you love the brand, and you love the guest experience. you are gonna be responsible to get out there and sell the brand. mike: that's what i love the most. that's -- that's who i am, really. lemonis: meanwhile, my crew is working around the clock to put our prototypical store in buena park back together. shauna has taken full control of this candy store, and she has sourced some amazing products. and we finally got around to fixing that long birthday song. mike: we want them to have the birthday of their life, but we don't want to be overboard. excited, but we're not screaming. lemonis: i'm feeling really optimistic. ♪
today is the grand reopening of farrell's in buena park. but when i walked in, there was no way we were close to ready. mike, give me a summary of what's not done right now. mike: um, so far, pretty much, we're close. lemonis: candy store wasn't ready. they were still painting outside. the kitchen hadn't prepped everything. the dining room was still a mess. i was worried. they have tons of people coming. this is not gonna work.
lemonis: of farrell's in buena park,g and there's a line of customers already gathered here. we got to get everybody moving. all right, so, listen. i'd like you to check the stations, let's check the kitchen, let's make sure the candy store's cleaned up, and let's get everything set up, tables set up. the new store is amazing. the candy store before was nothing more than an afterthought. what exists there now is an experience. instead of being jammed into a small corner, it's basically taking up the whole front of the store. what was once a cramped, small seating area is now dedicated to bulk candy with really good margins. and we refreshed the look of the outside, brightening it up and changing the sign. in all, we spent $75,000 making the improvements. so, walk me through what changed over here. shauna: one of the things we're trying to do
is all the bulk candy. people can do bags. they can do little containers. we have ready-made gift baskets. lemonis: oh, look at that! that is awesome. shauna: take to a party... lemonis: i really feel strongly now that putting shauna in charge of the candy store was the right decision. woman: 1, 2, 3! together: let's go, farrell's! [ cheers and applause ] mike: welcome, welcome! -man: yeah. -man #2: this place looks great. lemonis: how are you? folks, the candy store is over here, if you're waiting in line. -woman: this store is so great. -lemonis: isn't it fun? woman: this is amazing. lemonis: how is it? -good? -man: oh, it's great. lemonis: good. food came out in time? -man: yeah. -lemonis: came out quick? good. tonight, that kitchen was on fire. the portions are smaller. travis did a great job sourcing new plates so that the food had a better presentation. watch out, watch out, watch out. who wanted ice cream? together: it's your birthday. but you're so shy.
but you're the sweetest thing. i can't imagine why-y-y. [ cheers and applause ] lemonis: i'm excited for the future of farrell's because we have the right people in place. -mike: yeah. -lemonis: i got to run, buddy. mike: oh, man. lemonis: mike is like a totally different person. he's happier, he's calmer. he's now able to focus on one thing, and that's representing the brand. don't let anybody mess with you. paul: i won't. i won't. lemonis: and with mike out of his hair, i'm sure paul's gonna flourish. lemonis: okay, my man. travis: bye. thank you for everything. lemonis: we'll see you, brother. but what's made me the happiest is seeing shauna and travis come into their own. and once the people are right, takes care of everything else. thank you very much for coming tonight. tell your friends and family that farrell's is back. [ cheers and applause ]
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