tv The Profit CNBC November 22, 2016 1:00am-2:01am EST
lemonis: tonight on at a family furniture business with nearly 40 years of history... ana: we have great people, we have great clients, we do a great product. lemonis: ...but the future is growing darker by the day. ana: february, march, april -- we almost couldn't make payroll. lemonis: their margins are paper-thin. what jobs are you making money on, 'cause you're not making money on this. their process is non-existent. lemonis: yeah, really bad. steve: they didn't sand it properly. lemonis: and the founder's poor health... ana: he was diagnosed with parkinson's a couple years ago. lemonis: ...has his daughter living in fear. ana: i don't want to see my dad one day just drop dead. lemonis: if i can't help them build a more stable foundation, this great american success story could come to an end.
my name is marcus lemonis. and i risk my own money to save struggling businesses. we're not going to wake up every morning wondering if we have a job. we're going to wake up every morning wondering how many jobs we have to do. it's not always pretty. everything's going to 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." in 1979, shortly after immigrating to the united states from mexico, gilbert martinez opened up pacific hospitality design, a commercial furniture manufacturing company located just outside los angeles. ana: so far, so good. that's good. lemonis: it was a true family business with gilbert's daughter ana growing up on the shop floor. ana: this one here. lemonis: these days, she oversees design, while her father oversees production. and over the years, they've built big accounts
with companies like the coffee bean, mgm, and caesars entertainment. ana: we've got to make sure that we send quality stuff. they're unhappy because we didn't catch it. lemonis: but a recent drop in sales has left the company with a serious cash crunch. ana: i do apologize. the order will be going out. we don't have an exact date yet. lemonis: bills are now going unpaid, orders are getting delayed, and with every passing day, gilbert and ana find themselves deeper in the hole. about a year-and-a-half ago, i invested in another family furniture manufacturing business -- grafton furniture, located in miami. since that time, the business has grown by about 50%. with their focus on residential furniture and pacific's on commercial furniture, i think they'd make a perfect match.
hi, there. woman: hello. lemonis: is ana here? woman: let me go get her. lemonis: let her know marcus is here. woman: okay. lemonis: thank you. i didn't really understand when i walked into pacific, why i was seeing residential furniture. i thought this was a hospitality business. if this is a showroom, i don't think they're showing the right stuff. ana: hi, marcus! lemonis: are you ana? ana: yes. lemonis: how are you? ana: nice to meet you. lemonis: it's really nice to meet you. ana: yes. very nice to meet you. lemonis: how long have you guys been here? ana: we've been in this location about 13 years. lemonis: wow. ana: yes. lemonis: how are you, sir? i'm marcus. how are you, sir? nice to meet you. gilbert: me too. lemonis: how long have you guys been in business? gilbert: 40 years. lemonis: 40 years? and what is your business primarily? is it hospitality? ana: mostly hospitality. we do guest room furniture, public space furniture, as well as restaurant furniture. lemonis: and how much of your business is hospitality? ana: probably like 90%. lemonis: 90%. what's the other 10%? ana: a mix of like retail, as well as residential. so pretty much everything you see here in the showroom,
we have manufactured. lemonis: beautiful quality. ana: these are some of the products that we're currently making. these frames are actually for planet hollywood. we're doing about, almost 400 of them. and then we have headboards that we're doing. we do these for -- lemonis: and who designs all this? ana: that'd be me. these are all my designs. lemonis: it's nice. you have a lot of talent. ana: that would be something that i would love to do day and night, but i don't do much of it anymore, because i do many other things. lemonis: and how much business will you do a year? ana: this year, we're probably about like $2.8 million. lemonis: and will you make money at $2.8 million? ana: i don't know the answer, because i'm not -- i know i should know my numbers. i say yes, but i'm not 100% sure. last year, we were on the red. lemonis: how much did you lose last year? ana: i think it was like $46,000. we would have orders where they're, "please make this for us," and then we would say yes, and there's no money in it. lemonis: who would say yes, you or your dad? ana: we would. lemonis: who's "we"? ana: my dad.
lemonis: he loves to say yes to everybody? ana: yes. lemonis: when i look at him over there making that chair, he doesn't look like he's ready to retire. ana: i know. lemonis: does he want to? ana: he says he does. he works monday through sunday. lemonis: that's seven days a week. ana: yeah. this actually, i'll have them flip it over so you can see it. lemonis: is this a sofa? ana: it is. so this is the outside back of it. it's going to have fabric and then the -- lemonis: is that for your house? man: [ laughs ] no. lemonis: no. that's a big pink chair. man: very big, very pink. lemonis: what does this cost to make? ana: papa, how much does it cost us to make this chair? ana: about $300? gilbert. yeah. lemonis: and what does it sell for? $500? ana: we have a price list. are we selling it for $500? i've got to check. lemonis: i would hope that one of them would know their numbers. ana: it's much worse than we thought. lemonis: what's much worse? ana: the price. it's $420. this one, i got the price. lemonis: it costs you $300, you sell it for $420. ana: yes.
lemonis: and you're making a 28% margin. this chair should be $675 to $700. so what jobs are you making money on, 'cause you're not making money on this. gilbert: not on the chair. lemonis: the furniture business in the u.s. is extremely competitive, which could cause some manufacturers to underbid, but furniture margins in this business need to be north of 55%, not only to make a product, but to leave yourself some gross profit to deal with quality control issues and damage. for example, if they were getting at 57% margin on $2.8 million of sales, they'd actually be generating $1.6 million of gross profit, instead of their 28% margin, which generates less than $800,000 of gross profit. i'm going to walk around and just kind of get the lay of the land, if that's all right? ana: absolutely. feel free. lemonis: thank you. there's a sense of chaos at pacific, and there's no flow to the way furniture gets made.
there's raw material everywhere, and a lot of it is damaged. and there's waste all over the place. you look around this place, you see margin leakage everywhere. but what i really want to do now is get gilbert's take on what he thinks the biggest problems are. how did you start the business? what was the first thing you started with? upholstery shop. you were how old, 20? and how old are you now? gilbert: 61. lemonis: what do you worry about? cash. where did all the cash go? who does the accounting here? so if i want to talk about the numbers, i'd talk about it with ana. i'll go talk to her about it. thank you, gilbert. thank you, my friend. gilbert: thank you. lemonis: why did you call me?
ana: february, march, april, like were really hard for us, like we almost couldn't make payroll. my dad's health is another one. i feel like when he's stressed, he just deteriorates more. sorry. i don't want to see my dad one day, just drop dead and be like, i'll feel guilty for the rest of my life. i mean, he was diagnosed with parkinson's a couple years ago, so the man you see now is not the man that was five years ago. there's days that he can't even move. lemonis: it must kill you to see him like that. ana: it does, and i try not to break down in front of him, because i know that if i do, he breaks down, especially when things are tough. he has really bad days, and he's here. he shouldn't be here. lemonis: how tight is money right now? ana: in march, we had to put money out our own personal, like my husband and i, and my husband was like, this is the -- this is it. we're not putting any more. lemonis: how much money have you put in personally? ana: personally, was $75,000. lemonis: thousand? ana: mm-hmm. lemonis: whoa. ana: there's definitely a potential. i think we have history, we have great clients,
we do a great product, we have great people. lemonis: you need help. you need help. is your balance sheet in here? ana: yes, it should be in there. lemonis: so, in january, you did about $220,000. ana: yes. lemonis: february, $175,000. march, $200,000. april, like $30,000. ana: ugh. $30,000. i think it was $30,000, and then it was the same. lemonis: may, $50,000. and june, back up. so what happened in april and may? ana: we didn't have any sales. lemonis: you can see why ana and her dad are now feeling the real pressure when it comes to cash flow. low margins, poor efficiency. now, when those things exist and business is great, you can just skim by, but when business drops, it's like putting a noose around your neck. there is no chance of survival. so you think you'll do about $2.8 million for the year and break even? ana: probably.
lemonis: that's what it looks like to me. so $288,000 in payables. ana: mm-hmm. lemonis: $106,000 of them are past due. and $300,000 to a family member. that's $406,000 in liabilities. yikes. what do you ultimately want to do with the business? do you want to try? ana: i want to take it over, yes, i mean. lemonis: you do want to? ana: i don't -- i mean, that's what i've always wanted. i could've given up a long time ago. lemonis: why didn't you? ana: because i feel like it's like my dna. lemonis: all right. can i keep this just to study it? ana: absolutely. of course. lemonis: hi. how are you? ana: we're nervous. i'm nervous. i don't know. lemonis: what are you nervous about? ana: this whole day has been an amazing experience. lemonis: you did a good job today. gilbert: really? lemonis: yes. i'm very impressed. gilbert: why? lemonis: because any time one person over 40 years
can build a business in america and have it stay open and last, is a big accomplishment. you've fed a lot of people over the years and you have a lot to be proud of. gilbert: i never thinking about that. i thinking of something, i thinking with my heart, not, not with my brain. lemonis: well, that's why you're successful. gilbert: you think so? lemonis: yes. because business isn't just about thinking with your checkbook. how proud are you of your dad? ana: very proud. to have him be an immigrant that didn't go to college, to accomplish what he's accomplished is, i mean, it's amazing. lemonis: what worries you the most about your dad? ana: his health and, you know, having him -- gilbert: i'm okay. ana: i know you're okay, but some days, you're not okay. gilbert: don't worry too much. ana: i do worry. gilbert: okay. ana: i'm going to worry about you. he's so stubborn, you know. it's like... gilbert: don't cry.
ana: i know, you're making me cry. i don't want to cry. lemonis: you may not know, but i have an interest in another furniture business. it's in miami. it's called grafton furniture. it's similar, because you make a type of furniture, but they're in the -- you know, they're in the residential furniture business. ana: right. right. lemonis: like pacific, grafton's a family business, and they suffered from a lot of the same issues when i first met them. they had problems with their process and their efficiency, but in the last year, they've made a ton of progress and their business is up about 50%. they lose a lot of customers, because they can't handle the freight to the west coast. and i'm assuming that you lose a lot of customers 'cause you can't handle the freight... ana: to the east coast, right. lemonis: ...to the east coast. and i see that they could help you. and i feel like you could help them a lot. so i'm going to make an offer for $300,000. the $300,000 is going to go towards improving the facility and putting the rest in working capital in the business.
once we fix the margins, the company will have plenty of cash flow to service the debt. for that, i would want 40% of the business. grafton and i would be partners in this deal. but i think when you think about it, the decision you have to make is, do i want to be partners with marcus and grafton? ana: right. i mean, i definitely want to be partners with you. that's absolutely no question about it. but i'm not sure. steve: this should not have been upholstered prior to paint. this counter stool, really bad. steve: yeah, they didn't sand it properly. lemonis: are they capable of producing grafton-quality furniture here right now? steve: no, not right now. not right now.
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lefor that, i would wantke 40% of the business.0,000. grafton and i would be partners in this deal. and the decision you have to make is, do i want to be partners with marcus and grafton? ana: i mean, i definitely want to be partners with you, but i'm not sure. i mean, i just wish i would've been the first furniture manufacturer on your portfolio, you know, versus the other way around, but... lemonis: right. well, one thing we can do is we can up it to 45% and then i can give you 5% of grafton. ana: what do you think about that? i feel like that -- lemonis: so that you feel like you're a shareholder in their business, and they're a shareholder in your business. ana: that's a fair -- totally fair.
lemonis: does that feel better? ana: yes. lemonis: they're really good at custom, and you're really good at commercial mass production. and i want to be clear, you know he's still the boss, right? ana: absolutely. lemonis: i'm 100% in charge of you, but not of you. you're still the jefe. lemonis: we have a deal? ana: we have a deal. lemonis: i'm excited to go to work. ana: thank you so much. lemonis: thank you very much. gilbert: you happy? ana: just to see you be able to work less, it's going to make me very happy. lemonis: guys, i've been waiting for you. why you always late? grafton furniture is currently run by steve grafton, who also grew up in the furniture business, and it was founded by his late father esteban. now he's helped by his son steven, the third generation of the grafton family. in my time working with the graftons, they've implemented a new manufacturing process that not only changed the efficiency, but it changed the profitability.
and that new process also has strong quality control measures that ensure that every customer is happy. this is ana's father gilbert. this is steve grafton. i flew both of them out to california because i wanted them to be part of our first employee meeting. steve: my son steven. ana: very nice to meet you. stevie: nice to meet you. ana: ana maria. nice to meet you. steve: hola todos. man: hola. lemonis: so i wanted you guys to know that ana and gilbert and i made a deal, along with stevie and steven, to invest $300,000 into pacific hospitality, to buy a 45% stake. and so, going forward, these two businesses are going to be one company. putting the businesses together means more work, more business, and more money for everybody. but i'm 100% in charge. okay? let's go to work.
what do you see here? you see opportunity? stevie: absolutely. i see us a few years ago, five, six years ago. lemonis: is that what it feels like? stevie: almost exactly. lemonis: what do you think of the quality of their work? steve: for hospitality, it's fine. for residential, it's not fine. lemonis: it's not fine? so what are you noticing that would make it not fine? steve: well, when the leg is not perfectly smooth like i could show you on a finished product on the other side -- lemonis: show it to me. as we're touring the warehouse, steve is pointing out flaws on some of the furniture. steve: this should not have been upholstered prior to paint. this counter stool... lemonis: yeah, really bad. steve: yeah, they didn't sand it properly. hospitality is different. line furniture is different. lemonis: yeah, but we have to be able to make hospitality in miami and custom residential here. steve: correct. lemonis: or we've totally made a bad investment. are they capable of producing grafton-quality furniture here right now? steve: no, not right now. not right now. i would be scared.
lemonis: i'm sure this isn't a lot of fun for ana, but in order for her company to go to the next level, she has to really change the way she operates. you want to get this business going, you got to get your ducks in a row now. who here is actually designated specifically to not let something leave here before it's right? ana: mmm. it's norm-- well, i -- we don't -- we don't have a specified person. lemonis: you're dealing with big corporate clients like coffee bean, mgm, caesars palace, and there's nobody checking this furniture before it leaves? so if there's a problem, who actually finds it out, the customer? and when i look at that chair right there, why would he be fabricating it before the legs are stained? ana: yeah. they shouldn't have done that. steve: do the workers normally have an order that they look at? ana: they don't. lemonis: there's no work order status, so one chair, you don't know where it is in the production cycle? ana: no. lemonis: that's an easy thing to put in. drop the process in, literally drop the template in.
to create an environment where efficiency is maximized and mistakes are minimized, it's not that hard. it's called a "production line." what we need to do is create dedicated stations so that every single part of the process has its place and they're in the right order. framing, upholstering, finishing, staining, top coating, quality control. when we get things right the first time around, we're not compressing margin by every mistake that we make. while this is a good idea, now what we have to do is make room for it. what is all that? ana: yeah, leftover stuff. i mean, it's prototypes. there's frames from a project. it's just accumulated. i kind of say, we can upholster, we can finish it. lemonis: no bs, ana. if you threw out everything that you haven't used in five months, this place would be more able to breathe and more functional. all this stuff has to go. ana: i know.
lemonis: and so i'm going to call, and i'm going to bring as many trucks and as many dumpsters and as many men as i can find, and every single part of this warehouse that you haven't touched in months is going in the garbage. [ truck beeping ] today, it's time to take out the trash. whatever we're not giving away to the employees, well, it's going right in the dumpster. ana: i don't know if i want to see this. lemonis: this isn't just a quickly tidy-up, we're throwing everything out so we can entirely revamp the place, then we can make furniture efficiently and profitably. come on. we're also cleaning out the showroom up front. gilbert: everything goes? lemonis: huh? gilbert: everything goes? lemonis: todos. want to grab this cushion? ana: uh...hold on, don't. lemonis: you all right?
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lemonis: and i'm sorry to make you do this. ana: no, no, no. no, it's fine. i mean, if you asked the girls, our plan was to expand our offices all the way here and get rid of this. lemonis: so we have a jump start. ana: yeah. lemonis: so -- ana: it's just sooner than i thought. lemonis: all right. are these all your work? ana: yes. lemonis: so what did you design on here. show me. ana: these pieces here. lemonis: yeah? beautiful. that? you did that? ana: yeah. lemonis: oh, you really like designing. ana: oh, i enjoy it. lemonis: you may actually be a better designer than steve. we're just getting ready to remodel pacific. and i know ana has a ton of passion for design, so i thought i'd give her a chance to draw up the plans. but first, we need to take a little field trip. welcome to grafton. ana: i'm excited. steve: hi, there. lemonis: good seeing you, buddy. i want ana to see what we've done at grafton
and what's worked, so that as she's making changes, she can incorporate all of them at the pacific. steve: this is our design lab. we have designers coming in to go over a project. ana: do you make a profit, i'm assuming, on the fabrics? steve: yeah. and the designers like that, because it's all one-stop shop. lemonis: we're going to take a little tour of the warehouse. steve: this is the shipping area. stevie: no yellow dot, doesn't go out the door. ana: i like that. lemonis: that's his seal of approval. keep going. steve: and so this is our frame shop. lemonis: everybody's got their own station. the materials are where they're supposed to be. ana: it's a lot more organized. lemonis: ana got to work on the plans as soon as she left miami and what she came up with in only a week blew me away. ana: so this is the floor plan, and now the furniture will come out through there. this would be our offices. lemonis: not only is the shop floor design accomplishing maximum efficiency, but the front office design is the kind of first impression you want to give corporate clients.
it's beautiful. like, it's literally stunning. this looks like a designer did this space. who did this design? ana: myself. lemonis: i mean, honestly, i want to work here. we started the renovation immediately, but i wanted to do one half and then the other, so we can still keep making furniture. now that the remodeling is underway, it's time to focus on the most important thing, growing the business. i've asked ana and steve to meet me at my office in los angeles. hi, guys. how are you? ana: hey, marcus. how are you? steve: marcus. lemonis: i own a restaurant franchise concept called the simple greek, and we're in need of a furniture supplier for all of our franchisees. so i'm looking for ana and steve to bid on the business together. we have one concept that's really taken off, and that's the simple greek. we have about 250 franchises sold. the last thing that's left to getting these franchises open is getting the furniture package right. and so i'd like you to lead the design process, ana.
ana: okay. this is totally up my alley. lemonis: okay? i know that typically, you lead the design process. steve: yeah. of course, 'cause i've got more experience and i've been working in this industry for many years. i should be design, you be lead sales, hospitality. ana: i mean, i'm going to disagree. i am a designer, i'm a furniture designer, but, i mean, i think it should be a team effort, definitely. i mean, i would like to run things by you. steve: well, it -- it -- okay. lemonis: are you pissed off right now? you look a little fired up right now. steve: i am. i am fired up. i do think it's fresh and it's clean. sam: it's a nice look. i don't want to say it's not. but it's not, i think, what we're looking for. it's just there. lemonis: okay.
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stevana: i mean,be design, you bi'm going to disagree.ity. lemonis: are you pissed off right now? you look a little fired up right now. steve: i am. i am fired up. ana: i know you're an interior designer, so am i. i've done a couple design houses throughout like pasadena showcase, philharmonic. i feel like i have more of an experience in that, because i see aesthetic and what's out there and what's new. steve: [ chuckles ] okay. so let's do that. let's do that. let me see, let me see what you can come up with, and i don't know, maybe i'll surprise you and come up with something myself.
lemonis: meaning that you want to compete with her on the design? steve: well, yeah. lemonis: yes? steve: yeah, i do. lemonis: so it sounds like that's what we're doing. we're going to set a timeline of, call it two weeks. steve: okay. lemonis: steve has done unbelievable residential work, but what i want him to do is learn to respect ana's understanding and knowledge of the commercial business. but if he wants to put his design against hers, a little competition could be good for the company, but as a whole. steve: i really want to talk about how we're going to work, because right now, i'm bidding a job in las vegas. forwarded the package to ana maria, she priced it. lemonis: what did you do with the price that she quoted? steve: i actually added 35%. lemonis: meaning that she left margin on the table? steve: yeah. ana: yeah, i would've thought that you would've called me to discuss maybe a little bit further, as far as like how much did you mark it up, what's your profit? lemonis: ana is better at design, but steve is better at business. that's why this merger makes sense. both of them need to help each other. that's what a partnership's about. and so, when you find a situation
where you feel like you could coach her on where you think the room is, i expect you to do that. the goal is for both boats to rise. while ana and steve work on their designs for the simple greek, construction continues at pacific hospitality. we're changing the layout and look of our office area to make it more practical and a much better first impression. the old showroom area is being turned into a design center so that the employees can use it and so can the clients. as for the warehouse, we've knocked down the wall separating the framing and the staining area, creating a more fluid work environment. and we're adding a new paint booth to not only improve efficiency, but dramatically improve margins. meanwhile, i'm working with ana and gilbert to improve their pricing issues. if the job costs $132, and you want to have a 50% margin, this has to be sold for $264.
ana: okay. lemonis: you were willing to sell it for a 41% margin. on $2.8 million, 9% is $252,000. how much money did you lose last year? ana: about $45,000. lemonis: right, and so that difference of just spending more time on the quoting process, you go from losing $50,000 to making $200,000. hi, guys. steve: hey, marcus. lemonis: how are you? steve: good, how are you doing? lemonis: it's been about two weeks since i tasked ana and steve with the simple greek project. and so i wanted to see what the two of them have come up with. i wanted you to meet sam lundy. he oversees simple greek concept. the simple greek job is more significant than i think they realize. each location would buy about $20,000 worth of furniture. there are about 250 franchises already signed up. that would equal about $5 million in business.
by the way, that's more than pacific and grafton do combined in a year. i want to get the job right, i want to get the presentation right, and i want to win the business. you want to take him through your presentation first? steve: basically, i thought of the simple greek concept, simple and greek. so i elected to do a blue and white and butcher block. small-scale, comfortable. i also did an all-wood, bent plywood, very durable. i have a banquette, so i did the detailed piping. and for value engineering, we could eliminate this component and put this back right on the wall. so this comes undone, it's on a cleat. sam: you know what i've found a lot, steve, is that when you have that kind of bench, it gets ripped easy. and once it rips, you have to get a whole new bench. and the colors, i'm not thrilled with the blues. steve: okay.
lemonis: so let's go over to the tables and chairs. sam: and to me, i've seen this before, steve, and that's my thing. we want to keep the traditional piece, to some degree, but we also want to modernize. and so, we want it to be a little different. steve: i do think it's fresh and it's clean and it's simple greek, so that's why i went with it. sam: it's a nice look. i don't want to say it's not. but it's not, i think, what we're looking for. it's just there. and we want something that mirrors what we believe we have as a concept. this is not it. steve: okay. maybe if you articulate clear vision, not just words. give me specifics. sam: but, steve, steve? i'm not a designer, either. steve: than what do you know about design? sam: if you want me to go out to 20 houses and find what i think i like, i can do that. that's not what i'm here to do. i'm here to give you feedback and tell you that this is not it. steve: okay. so then you -- sam: all right, i'll let you finish, i'm sorry. steve: let me just finish. lemonis: i mean, you're asking for feedback. no, but you're asking for feedback. steve: but that's the feedback i'm getting here. lemonis: it's funny for me to watch this.
because you're asking for feedback, like, i can make anything. just tell me what you want me to make. which is how we function here at grafton. that's different than what he's asking for. he's saying, there's nothing unique about this. it feels like a stock item. i know it's not, but it looks like it. in order for this deal to work for me, you no longer can be in charge of design. steve: i -- lemonis: so you have to let it all go. steve: no way. i'm not letting go.
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lemonis: there's nothing unique about this. it feels like a stock item. steve designed some perfectly simple, standard furniture for simple greek, but that's the problem. it was just plain. sam didn't like it. he's the one making the decision. at this point, i just hope that ana does better, because if she doesn't, sam has the right to go out and find an alternative supplier. and pacific and grafton, along with me, can kiss that revenue goodbye. i'm not going to make sam do business with one of my companies just because i own it. it's got to be good enough to win the business. ana: so this is my interpretation of simple greek. i kind of started the process with what reminds me of greece or greek restaurant. so i just went through so many inspiration images that kind of inspired me to design the furniture.
and i really call these "mood boards." i feel like this puts you in the mood like, when you walk into a space, what's the mood? the table, what i designed was in a powder coated metal, and again, bringing in those colors, the blue, the green, and it has a bar top finish. lemonis: and that's cool, that's different. ana: and then for the chair, i wanted to bring in the logo of the simple greek and then the texture pattern fabric on the seat, and it's all laser-cut, and then finished in a green powder coat to have that olive color. and then for the bar stool, i decided to kind of powder coat it in the blue, just to be able to have like that contrast color of the blue and the green and so everything can sort of color-coordinate. with the booth, it's just again, like resembling a lot of the arches and like, greek architecture. and then it has that nice, little shape with scoop ports, arches on the bottom. all the fabrics here have nanotechs and they're a moisture barrier. steve: yes. ana: so they're all basically -- steve: and this is...? ana: this is vinyl. steve: yeah. sam: i got to tell you, it's cool.
lemonis: it's different. sam: it's different, and it's cool. ana: when i walk into this space, i want to feel like i'm captivated by a lot of elements. sam: it's a good approach. very nice approach. steve: well, i think your boards are beautiful. i think you did a great job. it's just that i disagree with him, and i disagree with her. the furniture ain't as beautiful as the boards, personally. i think the banquette is ugly. lemonis: let him go. steve: let me go. the colors, i'm not that fond of in that. i don't see these colors there. and i think the scale of the chair is too big. sam: but it's not about the furniture as much as it's about what we're trying to create and as an overall brand and image, and then the furniture comes into it, and i can see by looking at this, i like it. i like that it's got a little element of a curve, it's got the textured bottom and a textured top. it's -- it catches my eye. i like the way you think. we want to be unique, and a lot of the things you have will meld very well with the elements we've already created from the standpoint of the walls and the signage and things like that.
lemonis: you think the franchisees would be pleased with this? sam: i think if we set this up in a store and we put a board together and show them, i think they'd be blown away. lemonis: why don't we just set it up in the first prototype? let's do it. thanks, sam, for coming today. appreciate it. sam: real pleasure, real pleasure. ana: thank you so much. lemonis: great job. lemonis: hello, guys. steve: hey. ana: hey. good morning. lemonis: how are you? after seeing the presentations that both steve and ana put on for sam for the simple greek, it's clear to me that each of them have their strengths and their weaknesses. so i wanted to sit down with them and discuss how we're going to handle design going forward. you know, ana, initially, when i first came to you, it was a pretty simple idea. invest in pacific, have it be part of grafton, and go on down its merry way. but things, i think, have taken a different turn for me, especially after seeing the simple greek pitch.
ana really opened my eyes. your presentation was what i'm always looking for in business leaders. what sam felt and what i felt is that you had one goal in mind, and that was to make that business successful and add value in any way that you could. so, ana, the way i'd like to be have it structured going forward is pacific and grafton will be one company. you'll be in charge of design for that whole business, and steve will be in charge of the manufacturing and the sales side of things and some of the administrative things. steve: i just think you're wrong taking design away from me. lemonis: i think you're a fantastic manager, but i don't think you're a fantastic designer. steve: what do you know about the furniture business? design and sales go hand-in-hand. how are you going to take away design from me and give it to her, when she's in california and i'm servicing my clients in miami? lemonis: you are no longer in charge of design anymore. you have to let it all go. steve: no way. i'm not letting go.
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steve: no way. i'm not letting go. how are you going to take away design from me and give it to her, when she's in california and i'm servicing my clients in miami? i think you're dead-wrong. lemonis: look, steve, i don't think you really bring to the table what ana brings to the table. steve: i've been doing this for 30 years, marcus. she has no idea what goes on at grafton. she doesn't know how my carpenters work, she doesn't know how our cabinet makers work. no offense, ana. i mean, but let's --
can we walk before we run here? ana: well, you know, i mean, i'm not a bully. you know, i'm always a team player, no matter what, and i always feel like i -- lemonis: do you feel like he's a bully sometimes? ana: maybe a little bit. like, you know, just kind of like, hmm, is this the true steve, you know? what's better for you, not better for both of us kind of thing, you know? steve: i -- i -- just taken aback. i... if i ever come off as a bully, it's not who i want you to think i am. for that, i apologize. so if i come across that way, just say, "excuse me?" just stop me, stop me, please. lemonis: you really understand manufacturing. would you agree? steve: yes. lemonis: what would you say your strong suit is in the business? steve: sales, managing, client relationships. lemonis: and so your talent and your skill has to be shared across the enterprise. steve: okay.
lemonis: just like i want her skill and her talent to be shared across the enterprise, as well. you are the leader of the global business. your job is to make sure that the manufacturing process, the quality control, the sales, those things stay intact. i see ana laying over the whole organization to review designs before they go to clients. i do not want a design to leave without her at least getting a look at it. just like i don't want a sales quote going to a customer without you signing off on it. steve: of course i'm fearful of letting go of some key aspect of the business. lemonis: yeah. steve: but i guarantee you, marcus, i will give her that -- that -- i'll let go. i'll let go. lemonis: i want to get the best out of both of you. ana, so going forward, you will be in charge of interior design for every business that i own. steve: wow. lemonis: you will have a hand at being, in my mind, my chief designer. ana: oh, my gosh. i'm about to pass out. steve: nice. ana: oh, my gosh.
are you serious? lemonis: very serious. ana: can i like give you a big hug, like...? lemonis: sure. ana's going to be involved with not only the design of the furniture, but of the entire interior space of every business i have, whether that's sweet pete's, bentley's, farrell's, anything. because i've been looking for somebody just to do this, and she brings something to the table that i just don't have. and you'll get to deal with all the people that i get to deal with on a daily basis. we finally finished remodeling pacific, so i wanted to stop by and see how it turned out. oh, my gosh. this looks totally different. i totally love it. ana: it's more of an open space. lemonis: what do you think? woman: i love it. lemonis: it's awesome. woman: it's so much better. lemonis: the office area has more space and a larger number of workstations, so they can work efficiently and have open communication
and feel good about their work environment. and before, when there was an old showroom with furniture just laying around, well, now it's a design center that can be used by employees and clients. wait a minute, this is totally different. ana: yes, we knocked the wall that was here, so this will be our new finishing department. lemonis: like a totally different business. in the warehouse, 6,000-square-feet of what used to be disorganized chaos has now been transformed into a framing department, a finishing department, and a brand-new spray booth. we spent over $150,000 transforming this entire facility. primary purpose was to improve efficiency, creative process, and eliminate mistakes. when we look at the annual business, $2,800,000, the goal was to pick up margin before we even thought about picking up any more revenue. with the new pricing process in place,
a new efficiency in place, my expectations is that we pick up at a minimum, 20 points of margin. 20 points of margin across $2,800,000 a year in business is $560,000 in gross profit. that's one heck of a return on $150,000. steve: hi, ana. ana: hi, steve. lemonis: also, in order to cut down travel and enhance communication, i linked up pacific hospitality and grafton furniture with at&t collaborate. ana: did you get the files i sent you about the simple greek project? steve: yes, i did. lemonis: ana and steve will be able to make calls, hold conferences, and even share designs with one easy-to-use platform. and with simple greek franchises set to open all across the country, it's imperative that pacific and grafton stay connected and communicate. ana, i mean, the reason that this business is successful and will be successful is because you're a big driver.
ana: you kind of brought this out of me, which i knew was there, but i never really applied it. you like, kicked my butt and woke me up and in a way. lemonis: you should be very proud because she is who she is because of her, but also because of you. gilbert: i don't think that i can live without this. lemonis: yeah, i know. we can't be without you. ana: he's like a different man. he's not as stressed anymore. and, i mean, he went on a vacation for a whole week. lemonis: i'm very proud. ana: aw. thank you so much. lemonis: very proud of you. ana: you have no idea how -- what this means. lemonis: pacific hospitality has been around for 40 years, but with ana and her new structure and assistance from steve, well, i can see pacific growing nicely over the next 40 years. ana: i love you, papa.
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