tv The Profit CNBC May 23, 2018 1:00am-2:00am EDT
i'll leave you here. steve: okay. al right. lemonis: i'll see you soon. i'll see you soon. tracy: bye, marcus. lemonis: thank you for everything. i'm very proud of you. tracy: thank you. lemonis: i'm very proud of you. ♪ you guys do a lot of fishing. -justin: as much as we can. -ray: yep. [ laughs ] lemonis: at a sports-apparel business in illinois, the product is top-notch. -justin: sun protection. -ray: completely custom shirt. lemonis: but something's fishy. why am i here? -katie: well, you're here because the business is out of money. lemonis: the facility is quite literally a sweat shop. katie: it gets really hot in here. -lemonis: no ac in here. -katie: no ac. lemonis: the employees are up in arms. marci: i actually have a video of a friday afternoon i think you would probably find pretty interesting. lemonis: and one of the owners has a troubling side gig. ray: i'm going to say what every other man wants to say that doesn't have the balls do to it. lemonis: if i can't get them to make some radical changes to their culture... i am a big believer that you are who you do business with. ...this company will capsize.
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 is 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 2010, justin romines started rayjus with his fishing buddy, ray odom. justin: if you take the graphic stuff out of there, -i bet you it's almost... -lemonis: as 50/50 partners, their goal is to bring professional-looking sports shirts to amateur fishermen. -katie: we only need five small. -justin: okay. but we're short this material for all this? katie: correct. lemonis: with little experience in the apparel industry, they set up a full-service operation in lawrence, illinois, where they cut, sew, and print customizable garments. katie: i expect at least two to three more of these today. justin: well, then, fine. we'll ship today.
lemonis: fishing fanatics started snapping them up, and sales eventually grew to over a million dollars a year. but fishing is a seasonal sport, and that means unpredictable revenue. ray: well, february, march isn't bad. april -- got our ass kicked. lemonis: and the slow months have led to a lack of funds while their debt continues to climb. justin: we also have no material here right now to get the lamb order done, so we got to figure out how to get more in the bank. lemonis: now, rayjus finds itself on dangerously thin ice. ♪ sports apparel is a $35 billion market in the u.s. i have a massive investment in the outdoor space with my acquisitions of gander and overton's, and this could be a great addition to them. hello? as i look through the warehouse, i-i honestly thought i was in somebody's storage garage that was just holding boats in there. ♪ -hello? -cathy: hello.
-lemonis: how are you? -cathy: good. how are you? lemonis: hi. and then i go into this area where i see all these women working, and, i got to tell you, it was -- it was hot as...in there. -hey. how are you? -nick: hi, there. -matt: marcus. matt thompson. -lemonis: how you doing, matt? -matt: nice to meet you. -nick: nick. lemonis: nick, how are you? brian: brian. lemonis: brian. nice to meet you guys. i didn't know where to walk in. -where are ray and justin? -matt: ray and justin? brian: ray is right at his desk in there. lemonis: i went into another area that felt like an air-conditioned office. ♪ ray: we already made a blue one that goes with it. lemonis: hello? -justin: hello. hi. -lemonis: hi. -justin: how are you? -lemonis: i'm good. justin: i'm justin. lemonis: justin, how are you? i'm marcus. -justin: that's ray. -lemonis: nice to meet you. -ray: hi. -lemonis: hey. -how are you? i'm marcus. -ray: good. -nice to meet you, marcus. -lemonis: nice to meet you. so is that what ray and jus is? -ray: exactly. yep. -justin: that's right. -lemonis: okay. -justin: it's a little bit of a play on outrageous. -lemonis: okay. justin: jerseys and crazy stuff we make. lemonis: they don't seem so outrageous. justin: if you wear it to the store, people kind of look at you funny.
lemonis: you guys have, like, a boat dealership in your garage. justin: yeah, that's my boat and his boat. ray: my roomate-in-college's boat and then two other rentals. lemonis: you guys do a lot of fishing, obviously. -justin: as much as we can. -ray: yep. [ laughs ] ♪ justin: we are kind of geared towards the fisherman and the boater. -sun-protection designed. -ray: completely custom shirt. so, this starts as plain white fabric. lemonis: so a customer calls you and says, "i want to make a shirt for my fishing tournament." ray: on our website, they can actually go on and build their shirt. then they can add their logos because we have a logo library online. lemonis: they can add their logos or other people's logos? ray: well, they're adding other people's logos. there's a lot of companies that either, "a," don't mind that they use their logo, but a lot of these guys that we deal with are sponsored by these companies. lemonis: it's almost like a dry-fit shirt from under armour or nike, so i'm thinking to myself, "this is really cool because, in all of my stores where i sell outdoor equipment, these products could do really well." so an individual customer that buys this, what does it cost? how many is the minimum they have to order?
-justin: one. -ray: one is the minimum. justin: one is the minimum. lemonis: where does the bulk of the revenue come from? justin: essentially that. lemonis: and so your entire business is individual consumers going onto the website, making a custom shirt? -ray: 80 percent of them. -justin: 80 percent of it, yeah. -lemonis: wow. -justin: yep. lemonis: you're in the custom-printing business one consumer all the time. i think that the customizable shirt business is a nice-to-have. it's a nice little side business -- in my opinion, not a core business. what experience do you guys have in this space? -ray: none. -lemonis: oh. ray: i was a disc jockey. justin: i'm in management information. -lemonis: disc jockey. -justin: it guy. lemonis: what are the roles that you guys have? ray: design, product development. justin: and i do some sales work. lemonis: can you show me the factory? -ray: sure. -lemonis: well, how did you make that transition from radio to here? ray: i always built websites for myself and designed t-shirts for myself 'cause i was a disc jockey. lemonis: okay.
ray: and i'm still on the radio now. it was always my creative outlet. lemonis: you're still a disc jockey today? ray: yeah. lemonis: and how often do you do that? ray: i go twice a week, but i'm on every day. -lemonis: so you're good. -ray: i like to think so. so it just kind of transitioned from i get to be creative on the radio and write stupid songs and fake commercials, and, here, i get to draw. lemonis: oh, very cool. justin: here's our factory, marcus. this is our area where we do sewing. this is cathy, by the way. -lemonis: hi, cathy. i'm marcus. -cathy: hi. -lemonis: how are you? -cathy: nice to meet you. lemonis: nice to meet you. what are you sewing? cathy: jockstraps. lemonis: [ chuckling ] jockstraps? okay. so, this is part of your lineup? justin: we do this for a client. the seasonality of the business, this is to help us keep these guys working all year round. katie: you can laugh out loud because everyone does when they hear that we make jockstraps. lemonis: i don't feel like i've met -- katie: oh. i'm katie groves. nice to meet you. i'm manager in charge of special projects, so i'm over jockstraps, lamb and goat products, as well as... lemonis: wait. what? [ laughter ] katie: sorry.
this is a lamb blanket. they put it over their wool to keep them clean. they're mainly used for state fairs, all that sort of thing. lemonis: so, this is also contract-made? -katie: correct. -justin: correct. katie: this is for goats. they are leg warmers. -lemonis: these are for goats? -justin: goats and lambs both. it stops them from biting on their leg. lemonis: jockstraps, lamb coats, and goat leg warmers? like, richard simmons goat leg warmers. like, there's nothing else you could have come up with? how much revenue will you do in jockstraps a year? justin: close to $30,000 a year. lemonis: and how much will you generate in revenue from the lambs and the goats? justin: lambs and goats so far this year are at $80,000. -lemonis: 8-0? -justin: yeah. lemonis: so how much revenue will you do in those custom t-shirts? justin: about $1 million a year. ray: about a million bucks. lemonis: i like the fact that they are trying to fill these voids of the irregular cash flow, but the products that they're making are such a small percentage of their revenue, it's so off the mark of their core business that it's not even really scalable.
all right, guys. i'll hang out here with them. -justin: okay. -lemonis: i don't need you. justin: all right. holly: hi. i'm holly. nice to meet you. lemonis: nice to meet you. what do you guys think about them cutting and sewing things like lamb and goat and jockstraps? katie: it takes about three times as long to do a lamb product as a shirt product... -holly: mm-hmm. -katie:...just because the shirt construction is super simple. lemonis: and how much money do you make on the lamb product versus the shirt product? katie: oh, shirt is way more. i mean, it cost us, what, about $30, i'd say, to make a shirt, and we sell it for over $100. and, a lamb product, we sell for $17. lemonis: and it costs three times the amount of time -to make it, takes three times? -katie: yeah. yeah. lemonis: have you guys gotten together and had an opinion with the two of them and said, "this is ridiculous"? holly: it doesn't really matter. lemonis: at all? holly: we're kind of, like, on our own out here. nobody really comes out here. it gets really hot in here. -lemonis: no ac in here. -holly and katie: no ac. holly: every friday, they're gone fishing. lemonis: they're gone fishing. holly: they go fishing all the time. lemonis: well, how do you make payroll through fishing? katie: yeah, well, those are questions we have, as well. holly: yes.
lemonis: did they tell you why i was coming? katie: they didn't actually tell us why you were coming, but it's a real small company, so we know why you're here. -holly: we know all the gossip. -lemonis: why am i here? katie: well, you're here because the business is out of money. there's nothing left to pay anyone. our vendors are maxed out on their credits. we can't order more material, and if they don't make a deal with you, we'll all be looking for jobs. we have payroll due, and there were at least three to five people who hadn't cashed their checks from last pay period. lemonis: you guys hold the paychecks? -holly: yes. -lemonis: have you ever -had a check bounce? -katie: yeah. lemonis: maybe one of the reasons that the business is struggling is because these guys are only putting in 4 days of effort. all right. i'll see you guys in a little bit. -holly: okay. -lemonis: thank you so much. -katie: bye, marcus. -lemonis: bye. ♪ is it warmer in here than it was in there even? marci: oh, yeah. the thing is the press runs at 390 degrees, so it's always hot. lemonis: yeah, but, i mean, they could pump some cool air in here. marci: it would be a little more enjoyable.
lemonis: it's odd to me that marci is out in the warehouse standing and working with this very hot machine -- i mean, really hot. and right on the other side of the wall are a bunch of guys sitting in cubicles with plenty of light and plenty of air conditioning. so what is -- is this printed on paper? marci: yeah. so, this is printed on special paper. lemonis: okay. the girls inside were telling me that the business is somewhat disorganized. marci: it is a little frustrating, though, to know that they're out fishing and then we might not be able to make payroll. lemonis: as opposed to getting on the phone, -selling, making money. -marci: mm-hmm. fishing is more important. i actually have a video on my phone of a friday afternoon i think you would probably find pretty interesting. so this is just me. it's a quarter after 1:00. let's go see what's going on in rayjus. let's see who's all here. lemonis: nobody. ♪
-doesn't that piss you guys off? -marci: yeah. lemonis: you want to talk about morale being bad? when one of your employees feels the need to go video things that bother them. justin. justin, why don't you and i, -we'll go take a walk? -justin: okay. lemonis: let's get some fresh air. look, after all the things that i've heard from the employees, i thought it would be a good idea for me to grab justin one-on-one and get to the bottom of some of the issues. how much money do you have invested personally in this business? justin: right now, me personally, about $16,000 of my own personal money that was actually money taken from tax returns because of past payroll taxes that were due. lemonis: what? i don't understand. justin: so, they took from my personal tax returns. -lemonis: who is "they"? -justin: the irs. and applied it to tax liability for rayjus. lemonis: were you guys not paying taxes at the company? -justin: correct. correct. -lemonis: how come? justin: cash flow. lemonis: is the company past due on taxes now, too? -justin: yes. -lemonis: how bad? justin: $88,000. yep.
lemonis: holy... justin: they visited us two, three weeks ago. -lemonis: the irs did? -justin: yes. lemonis: i'm now starting to feel sorry for the people that are working in the warehouse. this heat, the conditions, and, at the end of the day, ray and justin are just literally, like, running a house of cards, it looks like. it would be nice if there was air conditioning in here. justin: yep. the only thing is, is you couldn't -- you would not want to air condition this guy because it's 390 degrees -- basically a giant oven. it's a heat press. lemonis: is that space air conditioned? justin: yes. well, to a certain extent. we blow air into there from the other room -because the girls complain. -lemonis: 'cause the ladies told me it's not air conditioned at all. justin: well, we leave the door open. lemonis:[ chuckling ] "we leave the door open." i can't believe that he just told me that they open the door a little bit so that the women can have air conditioning. i have a really mixed emotion here because i like the potential for what this product could deliver, and i know where i would sell it. but you don't want to judge a book by its cover, but the first couple of pages aren't looking good. ♪
what is cool is that you have people here in illinois making a product, and you're designing stuff. that is why i came. so, if i look at the financials for last year, you did $1,282,000 in business, gross profit of $596,000, which is not a great margin, especially when you're selling direct to consumer. you're not wholesaling the product. why are the margins so bad? ray: we need to raise the prices just if we want to keep selling. lemonis: the counter-argument to that is you don't just raise prices to fix margins. you have to find out what's actually causing the margins. -ray: sure. -justin: and i know exactly. lemonis: what is it? justin: we had, in the heart of our busy season last year, both of those printers go down. and, that happening, it just absolutely killed our momentum, killed our -- -ray: sales. -justin: ...our sales, -it killed our profitability. -ray: yeah. justin: we lost, printer time alone, $254,000 last year. lemonis: so how much would it have cost to buy a new printer? -ray: $30,000. -justin: [ sighs ] yeah. lemonis: and what could you guys have sold personally
to buy a printer? justin: nothing. ray: plasma? [ laughs ] justin: well, the company is on life support, and i know that. i've known it for several months, several years even. lemonis: how far do you guys think you are away from closing? justin: if some things don't turn around, within a month or two. lemonis: can you make payroll next week? -justin: not yet. -ray: not at this point. lemonis: how do you guys pay your bills? like, how do you pay your personal bills? this place makes no money. ray: i have the radio job. but that's why i reached out because it's time where we need to turn the ship around. i see the numbers, and they suck. i know that. lemonis: the numbers don't suck. the margins suck. ray: yeah. lemonis: and your employees think you guys suck. they think you guys are more interested in going fishing than you are making sure they get their paycheck. justin: that's a shock to me 'cause i feel like i'm the one that tries to settle differences with them. ray: i'll be honest. i'm shocked. -lemonis: [ groans ] -ray: no, really, 'cause i think i have a great relationship with the employees. -lemonis: you're on the radio. -ray: sure.
lemonis: and you have the gift of gab. -ray: sure. -lemonis: so i doubt that you're shocked by much. -ray: depends, yeah. mm-hmm. -lemonis: okay? ray: but the character that i'm playing -- lemonis: do you understand what i'm saying? he can get away with it. ray: the character that i'm playing on the radio is not the character i am in real life. lemonis: i don't want you do be a character. ray: i'm dad in real life. i'm a guy that cares about my family, about my employees. on the radio, this is not me. i'm a sexist, egotistical, racist pig on the radio. ♪ lemonis: did you just say that out loud? "i make a living telling people that i am a sexist and a racist." that just got uncomfortable really fast. ♪ if your business is in trouble and you need my help, log on to...
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♪ dance party boom. ♪ simple. easy. awesome. come see how you can save $400 or more a year with xfinity mobile. plus, ask how to keep your current phone. visit your local xfinity store today. i'm a sexist, egotistical, racist pig on the radio. lemonis: i knew ray had a side job, and i thought it may be a distraction. but i didn't realize that the focus of it was to demonize minorities and degrade women. what do you think a woman would think of your radio show? ray: that i'm a pig. i'm going to say what every other man wants to say that doesn't have the balls to do it. justin: i don't like sexist or racist things. absolutely not. so my hope with having you come here was to eliminate the tax burden. lemonis: but i'm just trying to understand this.
ray: okay. lemonis: when you go onto the radio... ray: mm-hmm. lemonis: ...and you're doing your thing, and you said sexist, racist -- are the people that are listening also the same? ray: yeah, i think so because i put a humor spin on everything. lemonis: but what's funny about racism? ray: it's not the dick joke you tell. it's how you tell the dick joke that makes it funny. lemonis: i don't understand that. i am a big believer that you are who you do business with. and so the fact that you think i would do business with you because you do that, whether it's your personality or not, i just can't. i can get over business problems. fix the process. make it safe. put the air conditioning in. figure out how to pay the taxes. create a better work environment. sell more. diversify the product. i can fix those. i can't fix you from being a racist and a sexist. but here's the good news. i won't have to fix it 'cause i'm not gonna be here. -nice meeting you. -justin: nice to meet you, too. -lemonis: i wish you guys luck. -justin: all right. lemonis: thank you so much, okay? ♪
sometimes, you deal with people that don't have their head screwed on straight, then they have a perspective about others that isn't right. and, sometimes, you deal with others that only think about other people, like my friends at bentley's. and so, while i'm here in illinois, i want to see what they're up to. in 2015, i invested in a seven-store pet chain called bentley's corner barkery. it was started by lisa and giovanni senafe. lisa: we do all-natural food, no by-products, corn, wheat, or soy in our foods. lemonis: lisa, the president of the company, oversaw the product assortment and the merchandising while gio, the head of business development, hunted for new locations. giovanni: i have been calling stores to see if they'd be interested in selling. lemonis: giovanni was expanding the business faster than they could handle it without a clear plan. giovanni: i go get the deals and then go, "hey, we'll figure out how to pay for it afterward." lemonis: the locations lacked a cohesive look. this store looks totally different than arlington. the operation was a mess... this is how you manage your inventory?
...and the company was losing money. we can't run a business that way. giovanni: hey, bud. lemonis: the senafes had recently adopted a little boy. -giovanni: sebastian, say hi. -lemonis: hi, buddy. and they were desperate to stabilize their situation so they can give him the life that he deserved. giovanni: i'm not gonna put him through what we did. lisa: we don't want to move him all the time. -lemonis: because it's tough. -giovanni: yeah. lemonis: my initial investment was $400,000 for 40 percent of the business and to loan the company an additional $1.3 million for future growth with a caveat. -giovanni: okay. -lemonis: i wanted them to prove to me that they could follow a process and do things the right way before they expanded the brand. and they did. with my help, they organized distribution. they gave the shops a cohesive look. so i gave them the green light and the money to start growing again. turns out, it was quite a leap. in the past 2 years, my investment went from around $1 million to almost $50 million.
we've grown from 7 stores to 81 locations. we've taken on a new name -- bentley's petstuff. and lisa and gio, they've done a phenomenal job overseeing a rapid expansion without compromising their values or the culture that got them where they are today. ♪ i'm here in chicago so that i can meet with lisa and gio and really dig into their numbers and their business. but, first, we're going to their new location in schaumburg, a store that they're in the process of opening. and gio wants to show me this new prototype item that he's come up with. hi, guys. how are you? man: good. how about yourself? lisa: so, we've changed up some of the fixtures, redone the snack wagon. we kind of gave it a fresher look. so, people can come in and use this self-wash machine. they can pick shampoos, dry the dog, rinse the dog. everything is kind of self-contained. lemonis: how much did this cost to do? giovanni: i mean, the machine is $17,000. -lemonis: $17,000? -giovanni: yeah.
this isn't a revenue generator as much as it's more about traffic. lemonis: $17,000 investment just for the machine. what did it cost to build out this space? giovanni: about $8,000. -lemonis: $8,000. -giovanni: yes. lemonis: it's not a revenue generator? giovanni: just brings in more frequent traffic. lemonis: give me the return on investments. -giovanni: 18 months. -lemonis: walk me through it. giovanni: the four we have are averaging about $1,000 a month in sales. lemonis: so you have $25,000 invested in this idea? giovanni: yes. lemonis: so how did you get the 18 months if it's $1,000? giovanni: i can't remember if it's $17,000 all-in with the room. it's 18 months. we did it. lemonis: gio gets so excited running around the country opening stores that he forgets to just take a minute and sit down and actually run the numbers through a machine, like, a calculator. grand opening would be at the end of next week or no? lisa: october. october 15th. lemonis: that's, like, a month from now. lisa: we were going to do it the weekend before, but, i mean, you've changed it. lemonis: what do you mean, you've changed it? giovanni: i definitely put more of my energy
on opening a store in georgia that is opening in four weeks. lemonis: you said to lisa, "i got this." giovanni: yes. lemonis: if lisa has a certain way that she wants to run the business, why would you come behind her and change it? the stores aren't getting to cash flow positive quick enough. you delaying these grand openings four weeks, that's affecting the overall return on the investment because your rent is how much a month here? giovanni: $11,000. lemonis: and how much is that a day? -giovanni: $400 a day. -lemonis: great. the thing that makes me crazy is why everything that was for this store wasn't sitting in shrink-wrapped pallets... -giovanni: already stickered. -lemonis:...waiting. from the minute this store opened, it showed up, and it got unpacked. there's not proper planning happening. there should be a new-store-opening team, and it should be done on a very tight calendar. -bye, guys. thank you. -lisa: bye, guys. ♪ lemonis: part of the reason that i wanted to get everybody together is to really understand the new-store-opening process from your perspective to try to fix this system.
so i think this is the one that's at it's rawest, right? -man: yes. yeah. -woman: yes. lemonis: i'm checking out another location that gio says he wants to open, but i've added a little twist by asking his team to come there because i want him to see for himself how they really feel about this process. what else is out there right now? giovanni: we have wauwatosa. that's next march. i don't think they know about wauwatosa. lemonis: did you know about wauwatosa? -nevine: no. -dan: no. -lemonis: did you? -man: no. -lemonis: did you? -woman: no. lemonis: did you sign a lease? -giovanni: yes. -lemonis: how do people in the office legitimately not know? giovanni: it's not like they need to do anything. it doesn't exist yet. it's being built. lemonis: what if somebody had an opinion prior to its signing? -how would you know? -lisa: we wouldn't. lemonis: this is the visual in my mind when i think about your business. there's you with a pen and the lease running in circles. giovanni: i so disagree. lemonis: and there's everybody chasing you. giovanni: i totally disagree. lemonis: but it may be -- you disagree how? giovanni: i can tell you -- lemonis: you signed wauwatosa, and nobody knew it. giovanni: do you think that i don't listen?
lemonis: am i the only person that thinks you don't listen? giovanni: i don't know. nevine: well, when you're talking too much, you can't hear what others are saying. dan: i think he reverts to what it took to run six stores, knowing everything that's going on. and that doesn't work at 80-plus stores. giovanni: the fact that eight people are even here talking about this is laughable to me. lemonis: no, what's laughable is that you don't see the value of having more people in the tent. there's a process problem. you cannot drive this bus by yourself anymore. giovanni: you want me so far out of the business. lemonis: i do not. and nobody here wants to say it. just stop. nobody wants to say it to you, including your wife. giovanni: we don't know this space. lemonis: when you say "we," are you saying lisa or you? -giovanni: bentley's. -lemonis: but you just said that she's the only one that picks products. -giovanni: correct. i don't -- -lemonis: okay. then you say, "we don't know what we're doing," which is the same as saying, "she really doesn't know how to do this."
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you cannot drive this bus by yourself anymore, and nobody here wants to say it. just stop. nobody wants to say it to you, including your wife. so, going forward, what we are going to do is that you and i are going to get a group together. we just have to create that process. i want him to now accept the fact that they need to be involved in every step of the process. if he would just trust in some other people, the end product could actually end up being better. and once a month, hold a meeting in order to prevent people not feeling included. woman: increasing communication. -nevine: engagement. -woman: yep. ♪ lemonis: how many stores exist today? 81? giovanni: 81, yeah. so, this is the balance sheet through the end of june. lemonis: i wanted to sit down with lisa and gio and go over their historical financials, and, while they're doing amazing,
i want them to see that there's room for improvement. so it looks like the business is on pace to do somewhere around 88 million bucks in revenue. it looks like the business will make about $4.6 million. the margins are coming in around 47 percent, which is really three points less -than it needs to be. -giovanni: yeah. lemonis: look, there's no golden rule that says what the margins need to be in a retail store, but i don't like to be in the retail business with margins that are less than 50 percent. by the way, when bentley's gets to 50, i'm gonna move it to 55. and when it gets to 55, i'm gonna move it to 56 because we always need to be thinking on how to improve the business. because you're $88 million now, going to $100, $115 million. so you start talking about three percentage points on $100 million -- it's real money. and so i think what we should do over the next week or so is to really start to dig in and see where our margins can get better. you remember i did that bid deal with murchison-hume where i bought best in show? -giovanni: yes. yeah. -lisa: yeah. right. lemonis: so i want to actually put that to work.
lisa: so we're going to start out with a dog spot and odor remover and a cat spot and odor remover. lemonis: so, do you have the formulas and everything? giovanni: you vetted out a couple formulas, correct? lisa: i did. yeah. lemonis: you remember best in show from a previous business? i paid $100,000 for the trademark. it's a brand that i bought specifically to launch a line of pet products to not only sell in bentley's but in the entire industry. and now i'm gonna make some money on it. lisa, i think we need to crank up your ability to say no because your husband is very persuasive. -giovanni: sure. -lisa: mm-hmm. lemonis: do you guys remember what you told me in the basement when we first met, what you guys wanted out of life? lisa: i know that we were looking to grow the business and be able to provide for our kid. lemonis: and so what's different at home now? lisa: now we have two boys. in february, we adopted our second son, miles. lemonis: the one thing that lisa and gio have consistently done is put their employees, their customers, and their family in front of profits. i think that's the big reason that they're as successful as they are.
all right. i'll see you guys tomorrow. lisa: all right. ♪ -lemonis: i'm marcus. -tracy: hi. nice to meet you. lemonis: nice to meet you. gio told me that he's contemplating making another acquisition, and i thought, rather than just approving it, i would go along for the ride. you've been a long time, haven't you? tracy: 13 years. lemonis: what inspired you to start it? tracy: i had a golden retriever. he had arthritis really bad. he couldn't walk up and down stairs. and after 2 weeks on fresh food, he was up and down the stairs. and that's how i came up with this idea. lemonis: similar to how lisa did it. giovanni: she's got a great reputation in the business. tracy: i do like educating people. -lemonis: you do? -tracy: yeah. i love it. i have consulted with other stores already. giovanni: so, what was the revenue in '16? -tracy: it was almost $900,000. -lemonis: wow. -$900,000? -giovanni: yeah. tracy: in '17, it went down. giovanni: but you're still at about $61,000, $62,000 a month? tracy: oh, yeah, easy. giovanni: so it's still about $720,000 a year? tracy: yeah. lemonis: how much inventory is in here? -tracy: about $80,000. -lemonis: oh, wow. i love that tracy shares the same values
as lisa and the rest of the company, and she could be a killer asset to not only train customers, but train our employees. giovanni: in your mind, what number? tracy: for? giovanni: the purchase. tracy: $285,000. -giovanni: $80,000 in inventory? -tracy: mm-hmm. lemonis: so maybe a different way to think about this is... giovanni: yeah. lemonis: ...new store, acquisition. giovanni: sure. lemonis: compare and contrast. there's the cost to open up a new store. -giovanni: so, $218,000. -lemonis: okay. that's a starting point. now compare it to this transaction sheet. giovanni: so, $285,000 is our purchase price. lemonis: included in that $285,000 is what? giovanni: $80,000 in good inventory. -lemonis: of assets. -giovanni: correct. lemonis: how much do you have to still spend? giovanni: that's what i -- okay. lemonis: how much do you still have to spend? giovanni: adding inventory, remodeling, $138,000. lemonis: historically, it costs us about $218,000 to open a store. tracy is asking $285,000 to buy her business. subtract the $80,000 of inventory that she's including, and our price is about $205,000.
we'd still need to spend an additional $138,000 to improve the store and build it out, which puts us at about $343,000 of total investment. so, at the end of the day, we'd spend about $218,000 to build a brand-new store or $343,000 to acquire tracy's, about $125,000 more. and while that's a premium, we'll be getting a business that has over $700,000 of revenue. and as a kicker, we'll get tracy with all of her experience, which is worth way more than $125,000. giovanni: so we're paying $125,000 for $50,000 in profit and tracy? lemonis: that's the question, period, end of story. giovanni: i got you. lemonis: i want you to make this argument before you do this deal to the team... -giovanni: okay. -lemonis:...because if they all agree collectively to put the money in, what happens to their pride of ownership over that location? giovanni: yeah, they own it way more. lemonis: i think the name "natural pet market" is really good. as you're working on private-label foods,
i would use that name. tracy: i do own the trademark on that name. i actually wanted to keep the name. lemonis: look, this deal is not going to be as simple as i thought. the name has to be part of this acquisition, and we're going to need to figure that out. we need to think about this. ♪ susan: so, lisa, what i did was that i kind of printed out what we spoke about. lemonis: lisa told me about this company, royal animal, out of new york, that specializes in soft goods, particularly pet clothing and accessories. in order for the overall margin to grow from 47 to 50-plus, we have to incorporate things that have a 60-plus percent margin. and so i want lisa to focus on things that are going to give her that. susan: this is, like, this kind of canvas material. lisa: and our chicago store, it would do great in. giovanni: i definitely don't think that will sell. lemonis: what's something like that cost? susan: we're wholesaling it for, like, $12.99. lemonis: what's the suggested retail? susan: i would probably go for $39.99.
♪ susan: i think these were on your list. lisa: i like the puff coat. giovanni: i don't think they'll ever sell. -lemonis: oh, that's cool. -lisa: that's really cool. i love the raincoats. giovanni: i don't see somebody putting this on their dog. we've done that, and we've seen that it doesn't move the needle. we do have to get -- pick and choose. i think -- i think this will sell. i could picture a corgi in it. and i'm not the merchandiser. i'm just saying. lemonis: well, you seem like it. giovanni: yeah, i definitely don't think that will sell. this is at least cute. lemonis: gio has an opinion, but his opinion sometimes comes without any information. you never once asked lisa what she thought. lisa: it's ultimately my decision on the products. lemonis: this is a $100 million business that's making great money. we want to pick up three more points of margin. at the end of the day, we have one person that has to be in charge of the business, and that's not me, and that's not you. giovanni: we don't know this space, and we make guesses. lemonis: when you say "we," are you saying lisa, or are you --
giovanni: bentley's. i talk about bentley's. lemonis: no, but you just said that she's the only one that picks product. -giovanni: correct. -lemonis: okay. then you say, "we don't know what we're doing," which is the same as saying, "she really doesn't know how to do this." ♪ giovanni: we have been working on acquiring natural pet market. she wants $285,000 for the business. moment of truth -- yes or no? ♪ lemonis: you just said that she's the only one that picks product. i had a very minor fender bender tonight! in an unreasonably narrow fast food drive thru lane. but what a powerful life lesson. and don't worry i have everything handled. i already spoke to our allstate agent, and i know that we have accident forgiveness. which is so smart on your guy's part. like fact that they'll just... forgive you... four weeks without the car. okay, yup. good night. with accident forgiveness your rates won't go up
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-giovanni: correct. -lemonis: okay. then you say, "we don't know what we're doing," which is the same as saying, "she really doesn't know how to do this." i wish that lisa felt like she had the freedom to try different things without having to hear, like, "oh, i told you that wouldn't work." lisa: we all know not every set is going to sell, but, like, i know gray has been very popular. susan: so this is our gray coat this year. and these are two of our best-selling coats, by the way. lisa: i love the raincoats. these, i think, would actually do well. lemonis: what's something like this cost? susan: $9.99. lemonis: and what do you suggest retail on this? susan: it could really go up to, like, $39.99. lemonis: okay. if you were able to get it to $8 because you did some volume, you just went to 72 points. those extra seven points start adding up. as we work on growing the margins from 47 to 50, we need to find things that have 65 and 70 percent-plus margins, so i love the things that lisa is picking
because it naturally is just going to pull those margins up to where they need to be. i feel like we have good momentum. lisa: yeah. for sure. lemonis: and we're headed in the right direction. susan: i'm very excited to work with you. thank you for coming up. lemonis: thank you, susan, as always. susan: it was so nice seeing you. ♪ lemonis: we're here at american bottling, a co-packer that's going to help us launch best in show, a high-margin cleaning product for pets. ♪ lisa: the biggest factor for us is a lot of people with pets have kids, so they want something that they can clean, especially carpets. kids are running around on their carpets. they don't want a bunch of chemicals that are stuffed in the carpet. korie: it's designed to do something very effective and be all natural. it has no ammonia, no bleach. -lemonis: there's no chemicals. -korie: no chemicals. lemonis: so it fits in your whole -- lisa: it fits perfectly. yes. i love it. lemonis: let's go look at the packaging options. lisa: oh, look. very cool. korie: so, we have our dog and our cat.
giovanni: i love the white. it's so simple. -don't you like this one better? -lisa: i kind of like this 'cause it stands out a little bit more. giovanni: really? this one is just so much cleaner. lisa: the white, to me, kind of cheapens the look. giovanni: you don't think the kids' part should be bigger? lisa: no. these little icons work perfectly. -it makes sense. -giovanni: but i like the white. lemonis: look, it's obvious to me that lisa is really struggling with taking control. gio continues to walk all over the situation and her. she's going to have to step up. can we have a minu the t lisa, i just want you to feel like this is your business, and i think gio definitely needs to hear from you. giovanni: i have stayed out of 97 percent of the meetings that you've held. lisa: you may have stayed out of the meetings, but then you had your own meetings without me. giovanni: well, not about the same topics. lisa: no, no, no, but you've changed some things that i had to find out later.
♪ lisa: after looking at the numbers, i think it's a great deal. giovanni: but we have the expectation of the name natural pet market, and i'm sorry because this didn't come up. tracy: no, it didn't. giovanni: i have stayed out you're gonna do great! thanks, dad! break a leg! aflac?! not that kind of break. oooh! that had to hurt. aflac?!
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giovanni: i don't want to help in stuff that i'm a distraction on. lisa: but sometimes you do. when i need you involved, i'll bring you in. otherwise, we got it. giovanni: okay. i got you. lemonis: this is what i really wanted out of lisa -- her ability to take control of the situation and be a leader. so, we really need to go to work, and i definitely want to see something... -lisa: okay. -lemonis: ...in the next... -lisa: week? -lemonis: yeah. lisa: yeah. that's fine. we'll get started right away. i'get started right away. giovanni: i'll be out of it. lemonis: okay. see you, buddy. -giovanni: thanks, sir. -lemonis: bye. ♪ things are moving forward at bentley's. giovanni: we have been working on acquiring natural pet market in wheaton, illinois. her best year was about $850,000. this year, she's on pace for about $720,000. she wants $285,000 for the business.
lemonis: gio has genuinely done a great job of getting feedback from his team before he makes decisions. giovanni: moment of truth. yes or no? woman: yes. giovanni: you want to go for it. nevine? nevine: yes. -giovanni: mark? -mark: yes. -giovanni: dan? -dan: yes, i do. man: absolutely. lisa: i think we got to double-check, make sure the name's involved. let's tighten up the numbers, but i'm good with the $285,000 as the final number. giovanni: we'll move forward. i'll take the next step. i'll set it up today. thanks, guys. nevine: thank you. ♪ lemonis: meanwhile, we've gotten the packaging settled for our best in show line, and the product is now in production. soon, we're going to have another high-margin item that will help us get our overall margins up. ♪ -team's on board. -giovanni: all right. we'll go in the back with tracy. lemonis: now that gio has met with the staff and he's gotten lisa on board, i want to head back to natural pet market
and see the negotiation with tracy. but i want to see how they do. giovanni: so, for bentley's, the acquisition is more than a store. it's you and the future that we hope you have with our company. for me, i think, the way the deal stands, the $285,000 number is fair for both of us because i think there's upside for you. and there's upside, but there's also a lot of risk, for us. i mean, what are your thoughts? lisa: after looking at the numbers, i think it's a great deal with you involved with training, doing some videos, and working with us -to help educate our staff. -tracy: yeah. giovanni: but we have the expectation of the name natural pet market. and i'm sorry 'cause this didn't come up. tracy: no, it didn't. giovanni: i'm kind of throwing that in the valuation just 'cause i feel like we have to reinvest a lot. tracy: good question, and that's something to seriously consider. lemonis: would it be better for you to get your $285,000, or would it be better to take $30,000 less
in the purchase price and get a few percentage points on the food possibility or anything that has npm on it? what i'm open to doing is put you as the face of the product and give you a royalty of 2 percent that should far exceed the $30,000. tracy: well, let's say this. if you are looking into private-labeling foods and if my 15-year reputation name is going to be on it, let me have a say what's in those foods. lisa: i just would say keep an open mind, too, because we have to look at affordability, so i think -- giovanni: no, no, no. there is one elephant in the room. we would be supplying the kibble component, but would be controlling it and then bundling it. lemonis: this would be all the stuff that lisa would be doing, not you. giovanni: um... lemonis: for exclusives, extras, and business advice, visit...
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♪ ooh, heaven is a place on earth ♪ giovanni: no, no, no. there is one elephant in the room. we would be supplying the kibble component, but would be controlling it and bundling it. lemonis: this would be all the stuff that lisa would be doing, not you. -i'm following lisa's lead. -giovanni: okay. lisa: it's going to be our private label. we're not going to do anything against our food promise that you're -- it's the same concept you have here. tracy: right. right. and if we're aligned anyway, it should be an easy deal. -lisa: yeah. -giovanni: yeah. -i mean, that's easy for us. -tracy: sure. lisa: i just would say having a little bit invested in the long-term growth will keep you way more engaged. does that work with you, that that includes the name and everything we talked about? -tracy: yeah. i think so. -giovanni: great. perfect. -tracy: awesome. -lisa: thanks. lemonis: thank you. it was really nice meeting you, by the way. tracy: it was nice meeting you, too. lemonis: what i'm noticing about lisa
is that she truly is starting to get comfortable putting her stake in the ground that she's the president, and i feel like we got a good deal. this process, gio, that you did... -giovanni: i like it. -lemonis: ...was better. the other thing that i liked is that you went over this -with the staff. -giovanni: yeah. lemonis: so they understand it now, and you actually let lisa make the decision. -lisa: yes. -giovanni: i learned my lesson. lemonis: i love working with you guys. -lisa: [ chuckles ] -lemonis: thanks, lisa. ♪ things are going great at bentley's, and the schaumburg store is now open. wow. holy cow. after i visited schaumburg, lisa got the store open in 5 days. this store looks ridiculous. lisa: i'm pretty excited about it. lemonis: oh, my god. giovanni: it was 2 years in the making. lemonis: now that we have a process in place, once construction is complete, the stores will open in no more than 7 days. is this the new royal animal stuff?
lisa: yes. just in time for the winter. lemonis: the new royal animal products are on the shelf, and with a 65 percent margin, this is going to help us raise our overall margin. what i like is that you put all the high-margin product right up front. it looks unbelievable. sike! [ laughter ] but, most of all, i'm noticing a huge difference in these two. what's changed about your life? giovanni: i mean, everything. i think i'm calmer because i don't have a stress that we had before. lemonis: look, of all the businesses that i've invested in the show, it's the biggest investment with the biggest risk to lose it. but that risk is dramatically minimized because i'm investing in people who respect what we're doing and who give everything that they possibly can. and the reward? it's going to be huge. -giovanni: hey. -lemonis: hey.
for online trading academy. you've heard it over and over again. if you want financial freedom, you have to invest in the markets. it's true that the wealth created in the financial markets has transformed more people into millionaires and billionaires than ever before. why is it that only wall street and a select few investors get richer and richer while the everyday investor lags behind? how is this possible when both groups are investing in the same market?