tv The Profit CNBC April 1, 2019 3:00am-4:00am EDT
lemonis: what is that? why are you carrying the pillow around? amber: this is so awkward. lemonis: this is ridiculous. can we just start stein meats, please? why did you throw my face on the ground? in the last 5 years, i've visited over 70 businesses. it was delicious. and i've traveled the country trying to fix the people... woman: i don't want to be that person that cries on tape. lemonis: ...fix the process... i don't think you guys have any idea what's in your inventory. holy [bleep] ...and create a few products. welcome to your new store. man: oh, my god. woman #2: i owe my life to this company. lemonis: that is the rean that i'm here.
i spend hundreds of days a year working on these companies. why didn't you do it? man #2: i thought that we did. lemonis: holy [bleep] but we can't always fit everything i'm thinking into the show. so tonight i'm going to give you an inside look at an episode from season two, stein meats. why would you still sell to people that owe you that much money? i hate this episode. over the next hour, i'm going to take you behind the scenes to share with you what i was actually thinking during filming... jamie: they're almost bankrupt. lemonis: and when i said to you, "i don't know that i want to be here," your response was, "don't walk out on these guys. they're like our dads." ...share some secrets... donna: i don't feel respected. i don't feel you've taken me seriously. lemonis: i think donna finally felt liberated where she could speak her mind. she ended up getting fired. amber: wow. lemonis: ...and give you an honest assessment of my decisions. you said to me that you thought the business was worth $50 million. to me, i think it's worth 50 bucks. it's frustrating. i didn't go with my gut. i went with some other emotion. amber: right.
lemonis: that wasn't intelligent. my name is marcus lemonis, and this is "an inside look." man #3: all right. here we go. cameras rolling, camera speeds. man #4: audio speeds. man #3: all speeds. all right. guys, whenever you're ready. amber: let's do, like, a clean one without that pillow. lemonis: okay, let's tell them, "tonight on 'the profit'"... amber: tonight on "the profit"... lemonis: we're going to give you an inside look at one of my favorite episodes from season... amber: which...what show? lemonis: two. amber: oh, stein meats, that's right. lemonis: stein meats. amber: okay, this is not my favorite. this might be his favorite. lemonis: i said, "one of our favorites from season two." amber: all right. let's do that again. lemonis: no. amber: fine. man #5: watch your back. a. stein meat products is a prime-beef-wholesale business in brooklyn, new york. for 75 years, they've been selling quality meats to new york's finest restaurants and butcher shops... woman #3: that's beautiful. lemonis: ...and shipping their product all over the country. howard mora... howard: i also need about 20 prime loins.
lemonis: ...and alan buxbaum... alan: what are you waiting for? lemonis: ...are sons of the original two founders. together they now run stein meats, and over the last 18 years, they've grown their revenue from $4 to $50 million annually. $50 million is a lot of revenue. amber: it's the biggest business we've had to date. lemonis: and in terms of blood, it was the biggest business. meat is a competitive business, and sellers like stein work on a very low profit margin, and even with $50 million in revenue last year, stein meats showed a loss of over $400,000. howard: we're losing money. lemonis: if the losses continue, stein meats will be forced to close its doors in the very near future, but i'm positive with some tweaks, i can find a way to turn a profit. ♪ good morning. i'm marcus. tony: marcus, how are you? tony. lemonis: tony, it's nice to meet you. tony: nice to meet you. lemonis: lot going on this morning. tony: yeah, there was quite a bit going on.
this is when our usual action happens. lemonis: and where is all this going? tony: restaurants, butcher shops, diners. lemonis: can you show me around? tony: absolutely, but before you go in, you need a hairnet, a hat and a white coat. lemonis: okay. tony: this is where it happens. ♪ marcus is here. howard: nice meeting you. lemonis: nice to meet you. got a nice operation. howard: thank you. lemonis: do you love it? oh, my gosh. howard: after 40 years, i have to love it. i don't have a choice anymore. lemonis: do you remember being there when all that nastiness was happening? amber: i do, and i had nice shoes. lemonis: what did it smell like? you had nice shoes. amber: i know. they were disgusting after walking on those floors. lemonis: are you alan? how are you? i'm marcus. alan: good, how are you, marcus? lemonis: nice to meet you, sir. alan: pleasure to meet you. lemonis: it's a nice place. now, are you guys brothers? howard: no, partners. lemonis: just partners? howard: closer than brothers. lemonis: and are you guys 50/50 partners? howard: 50/50. our fathers were partners. they left the empire to us. lemonis: it's nice to see some multigeneration businesses. howard: and so walking through the process and how it works...
this is the receiving area. we get all our fresh meat through here. and we also get lamb and veal in this way, too. alan: and those cuts will go into the other room next door where they'll be broken down into subparts. lemonis: oh, my gosh, he's using a chain saw. alan: they'll be packaged or shipped out as orders. lemonis: so how much revenue will you do a year? howard: we should do about $50 million. lemonis: $50 million? howard: $50 million. lemonis: wow. a big business like this comes with big overhead. how much is your rent? alan: about $32,000 a month. lemonis: wow. there's rent and cooling costs averaging over $60,000 a month. there's union labor costs. there's seven delivery trucks. that's a lot of money being spent. do you know how many times i had to ask them questions? it took me 45 minutes to get 5 basic answers after walking the place for, like, almost an hour. the reality of it is, is that when businesses are in trouble, they're not even able to explain to themselves what the root of the problem is. amber: right. lemonis: so this is almost a $50-million business. howard: correct.
lemonis: how much do you think you'll use this year? howard: about $400,000. lemonis: how much is in inventory at one given time? howard: probably between $800,000 and $900,000. lemonis: how much leaves here a day? howard: $150,000 to $200,000. lemonis: and you're turning your inventory pretty quick. howard: right. lemonis: and so do you guys have any debt? alan: right now our bank is lending us about $3.5 million. lemonis: $3.5 million. amber: mm-hmm. that wasn't a red flag to you then? lemonis: if they're doing $150,000 a day, then that's... what is that, about $4 million a month in business. amber: right. lemonis: so in my head, i was like, "okay, that makes sense. all the receivables were pledged against the bank loan, and so is the inventory, so let's call it $5 million, close to $5 million of assets to cover $3.5 million of debt." that's what went through my head. frank: hey, david, i got that order from wolfgang's. i need 40 short loins as soon as possible. lemonis: who's this guy? howard: it's frank,
our general manager. frank: come on. we've got to get these trucks out of here. let's go. lemonis: he seems to know what he's doing. alan: yes, he does. frank. lemonis: frank, i'm marcus. frank: hey, marcus, how you doing? nice to meet you. lemonis: nice to meet you. how long have you been here? frank: five years. lemonis: do you love it? frank: yeah, it's good business. you know, everybody has got to eat. lemonis: "do you love your job?" amber: eh. lemonis: "yeah, not really. it's just, yeah, i mean, no, i really don't want to be here. i just... kind of got to say 'yes.'" amber, do you love your job? amber: yes. lemonis: you didn't want to give me a, "eh"? amber: no, i love my job. lemonis: all right. do you mind giving me kind of a... we could walk through, give me kind of a rundown of what goes on here. frank: sure, no problem. this is our production room. we fabricate orders. lemonis: how do you measure the efficiency? frank: i've never really analyzed it, never thought about it. i just look and see what i can get done in a given day. lemonis: and so how many pounds can we generate a day? do you know that number? frank: no, i don't.
lemonis: so what other things could you guys do here to generate some money? alan: well, we started a new item. we made the brooklyn burger. it's a brand-new item. the conception of it was from some of the prime meat products that we don't get the top dollar for, make an excellent hamburger. lemonis: so is it something you sell to butcher shops or restaurants, or how does it work? alan: we sell it to the sports stadiums. we're the official hamburger of the new york yankees, the new york mets... lemonis: oh. alan: ...the brooklyn nets. lemonis: and how does that work? you have, like, a marketing arrangement, or... alan: corporate sponsorship agreement with the teams. lemonis: and how much does that cost a year? alan: about $400,000 a year. lemonis: oh, wow. where else did you hear $400,000? amber: right. lemonis: $50 million, and they lost 400 grand. amber: right. lemonis: and it's hard for me in that moment to just not be like, "yeah, okay, so you lost $400,000." amber: right. lemonis: "the marketing agreement is $400,000. let's just terminate these marketing agreements, and now we're at zero." amber: right. lemonis: what i'd like to see is how the brooklyn burger is made. alan: cut the meat here.
now, i don't know if you wanted to try cutting a piece of meat. lemonis: i'd like to try it. i want to learn. i'll stand over here, okay, and we break it up into what? howard: three pieces is fine. just watch your fingers. it's all solid muscle. lemonis: brooklyn burgers only accounts for about $1 million in sales, and it's sold at three major sports venues as the premium burger, so it could be a great stepping stone for something big like getting into grocery stores around the country. the brooklyn burger could be our golden goose. what i love about it is the color. it really looks so fresh. howard: perfect flavor. lemonis: oh, it puts the paper and everything. where does it go? alan: you got one behind you. lemonis: holy crap! [ telephone rings ] donna! i'm marcus. donna: donna. nice to meet you. lemonis: how are you? donna: good, thank you. lemonis: what do you do here, you in charge? donna: i'm the office manager. i oversee the accounts payable, the accounts receivable, enter invoices.
lemonis: so do you have anything to do with accounting? donna: no. howard and alan take care of that or attempt to or try to. lemonis: and how long have you been here? donna: 20 years. lemonis: you're the one that contacted me, right, to come here? donna: yeah, i am. lemonis: what was your motivation? donna: it needs a whole overhaul. i'm... lemonis: what are the things that just eat at you? donna: absolutely the receivables. customers pay late. there's a lot of money out there. lemonis: so the money that the customers owe us, those are the receivables. donna: correct. lemonis: how much is our total receivables right now, like, a couple hundred thousand? donna: almost $4 million on the streets. lemonis: are you kidding me? amber: what does "on the street" mean? is it, like, is it illegal money? it's not illegal money. lemonis: no. "on the street" is just the same way of saying a receivable. amber: i see. lemonis: in the old days, what would happen? amber: someone would give you a paper bag full of cash. lemonis: no. you'd go there like, "where's my money?" amber: ah. lemonis: how much of it is old? donna: $1.1. lemonis: is any of it really old? donna: some could be well over 2 years old.
lemonis: you're not going to see that again. okay. all right. i'm going to go chat with them. thanks, donna. donna: you're welcome. lemonis: that was probably the most important thing that she told us, is that $1 million of the receivables were no good. amber: why does it take so long for someone to pay a business? lemonis: because the restaurant, if it's not making any money, it doesn't have any money either, and so it's this domino effect, right? the primary wholesaler sells meat to stein. amber: right. lemonis: stein then trims it and cleans it and resells it. if the ultimate user of the product, the restaurant, isn't doing well, and it can't pay stein, then stein can't pay the vendor. amber: okay. lemonis: it's a reverse domino. amber: right. lemonis: so i got the receivables list. there's $4 million of receivables, but i think what's more alarming is, of the $4 million, of the money the customers owe us, $1 million of it is over a month old. alan: we know that. howard: we know. lemonis: that's your...that's the best response you got? howard: well, a lot of them have been paying us down.
lemonis: but i saw a couple in here that were huge, like [bleep] packing $117,000. alan: he's a little slow or a lot slow. he buys every week. lemonis: but they're still a customer of yours? alan: yes. lemonis: why would you still sell to people that owe you that much money? $117,000, this guy owes you, whew. in the first day, i said to you, "i don't know that i want to be here." alan and howard, if those receivables and those payables don't start matching up, you will not be in business in the next year. you know that, right? you guys did not exaggerate this. they literally sat there and just stared at me.
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that owe you that much money? $117,000, this guy owes you, whew. in the first day, as i learned more about the business, i wasn't sure if i really wanted to invest, and when i said to you, "i don't know that i want to be here," your response was, "don't walk out on these guys. they're like our dads." amber: right. lemonis: and both of our dads were very much blue-collar guys trying to grind it out. amber: i felt bad for them, and i felt for donna. this is her livelihood. it just makes you feel for these people. lemonis: i should apply for a loan with you guys. you want to know why? i don't ever have to pay it back. how much do we owe in payables to our vendors?
how much is that approximately? alan: probably about $2 million. lemonis: how much of that is past due by your definition? alan: probably about a half a million. lemonis: i'll see you guys in a little bit, okay? howard: okay. lemonis: i'm shocked at what i'm seeing at stein. stein's assets consist of less than $1 million of inventory on the floor and $4 million of receivables of which $1 million is past due and maybe not even collectible. stein's total liabilities are made up of a $3.5 million bank loan that they use to fund expenses and make up for receivables that they don't collect and about $2 million in outstanding payables that are owed to companies they buy meat from. right now, stein owes more money than it has by about a half a million dollars. is it scary that... donna: oh, absolutely. i see the bills, and it's like, "wow, i don't know. i don't know how much longer we're going to be here." lemonis: do you feel like you guys are pretty close to that? you're scared about that? donna: i am because i was selling my house and purchasing another house, and i told my husband,
"let's not do it now," just because i didn't want to not have a paycheck or worry about it. lemonis: this is one of our better scenes of the whole show, seriously. donna: these girls live paycheck to paycheck. i said, "if something happens," i'm like... one is buying a car, and i just wanted to tell her, "don't buy the car," because if something happens, she has two kids, and now she has a car payment. if you can't get a job... ♪ ♪ lemonis: the situation at stein is far more dire than alan and howard think it is... way more. ...and if i don't get involved to not only put some money in but force them to make some cuts, there is no way this business is going to make it. i know i can help, but it's going to take a lot of changes in order for this business to really make it. hey, guys. howard: hello. how are you? lemonis: good to see you. amber: we put a gopro in the car on the way there. they were talking on the way there.
lemonis: without me? amber: mm-hmm. lemonis: let's get the footage. amber: yeah, we have that. that just takes money. lemonis: everything with you is about money. amber: it... well, i have a good teacher. lemonis: okay, i don't have a comeback for that. alan: i appreciated the first time when we met, and he says, "i like to do things with a handshake. i don't need lawyers and documents and everything else." howard: i mean, you and i both run our business basically that way. you know, we never, you know, we never try to fool anybody. we don't try to maneuver or anything. it's going to be very lucrative negotiations. lemonis: this steak is ridiculous. you guys have heard me talk about people, process and product. i know that there's great people. the product, i don't know that i've had a better steak, but the last part is that the process is broken. if you don't collect the receivables, your business is wildly vulnerable.
your employees, they're all scared. you know that, right? you guys did not exaggerate this. they literally sat there and just stared at me. amber: they just looked shocked, to me. lemonis: you have a fear that you guys could lose it all? alan: yes, i do. there are nights that i don't sleep. lemonis: so what is the number that you guys want, and what can i have for it? howard: we were actually discussing a $5 million input into the business. lemonis: and how much... and what's the share of the business? howard: a third share. lemonis: did your calculator break? how'd you come up with that? howard: not through any math or anything that we did. lemonis: obviously. obviously. amber: [ laughs ] lemonis: i think the business needs so much lifting and so much capital to dig itself out of a half a million dollar hole
and $2 million of payables. my offer is $1 million to provide working capital for the business and bring the payables into an acceptable range. the percentage that i own will be 50%. should have said, "for 100%." alan: um... could we have a minute? lemonis: yeah, you can have a minute. if you pay attention literally from the beginning, and you keep a tally sheet of all the questions that i ask around money, you could probably predict what my offer is going to be. it's like a good... it'll be a fun game to play. amber: i'd rather play a drinking game. lemonis: so what do you guys think? howard: we decided we would do the deal at $4 million.
lemonis: no. alan and howard, this is... we're here. if those receivables and those payables don't start matching up, you will not be in business in the next year. i am not writing a check for more than 1 million bucks. do we have a deal? alan: yeah. howard: yes. lemonis: okay. come here, big guy. by the way, it took about an hour to get to that yes. amber: it did. lemonis: see you in the morning. good morning. my name is marcus lemonis, and i fix failing businesses. this business last year did $50 million of business. unfortunately, we didn't make any money. you guys sell a lot, but there's one thing that you don't do very well. what is that? alan: collect. lemonis: collect money. so last night at dinner, i made a deal with alan and howard,
and i'm putting in $1 million, but you know what they forgot to do last night? they forgot to ask me for my money. it's a theme, but it's not funny because your paychecks and the rent all get paid when we collect the money, not when the stuff leaves on the truck. there's the money. alan: thank you. lemonis: okay. amber: this was our biggest plan of action. it's just nice to see a business with this many employees. lemonis: i know, but we got it. like, okay, pan them, you could see there's a lot of employees. we don't need to spend 3 minutes... amber: it hasn't been 3 minutes. lemonis: well, it feels like 3 hours. amber: look, i'm tired of listening to you talk, too, but it has not been 3 minutes. lemonis: we have to make more money because we're going to change the marketing strategy. we've invested a lot of money building this brooklyn burger brand. it's got a lot of brand value, and we're going to get behind that name.
guys, now that we've made the deal, i want to find out how much money we can actually recover. i want to get on those phones and collect some of this money, okay? all right. let's go to work. woman #4: manager speaking. donna: hi, this is donna at stein meat. we still have a balance of $2,300. woman #4: well, i'm sorry, but somebody from billing is going to have to get back to you. donna: okay. ira: this is ira from stein. man #6: let me call you back. donna: bye. not in. he's not in? ira: there's an old balance, 60 days today. woman #5: i just don't have it right now. woman #6: the number you dialed is not in service. donna: out of business. amber: let me ask you, what should someone be doing in this situation in general, if you wouldn't come in? lemonis: what i would recommend is that you start tightening up people's balances. instead of doing $50 million of revenue, you may do $30 million of revenue,
but if people are always paying late, and you keep shipping them, then they're going to start using you as a bank. what you're doing now is ringing the register but never collecting it. what's the point? everyone on the team clearly understands the importance of collecting this money except for frank. frank: hey, kelly. it's frank over at stein meat. i need two cases of 18-by-20 and two cases of 14-by-24 bone guard. p.o. number is 986822. thank you very much. donna: what are you ordering? frank: plastic bags. donna: you have to get an authorization for payment. frank: no, this is something i do all the time. whenever i see my inventory running low, i get the guys to give me the inventory, and then i order what i need. donna: i have to get an authorization. lemonis: frank, as the general manager, you have to know that cash is a finite resource. we just don't have a lot of it, so donna has got to know all the money that's coming in and all the money that's going out. as the general manager, you got to know that. frank is showing some signs of being unqualified at being a general manager. there are things that he should know that he just simply doesn't know.
frank: that's what we'll do from now on, not a problem. lemonis: so, guys, i need you to get my mind wrapped around frank being the general manager here. howard: he runs the show downstairs. lemonis: yeah, here's the problem that i have. i have general managers all over the country, and i want them to be able to run the entire business, which means understanding things like workflow and cash flow, and i don't sense that from him. i think this was the one episode where you actually didn't worry about making a television show, where you got caught up in how they felt, and you were really feeling for these people, and it wasn't about television. amber: yeah. lemonis: it wasn't about emotion. it wasn't about anything for you. amber: yeah, i feel like these are real blue-collar people, and i don't feel like we go into many jobs like this. i feel like that there's only one person that could help them, and that was you. lemonis: what about you? amber: what do you want me to do, give them $1 million... lemonis: well, that's what you ask... amber: ...stop the bleeding? lemonis: well, that's what you ask me to do. amber: no, but you have it to stop the bleeding.
lemonis: you're a guest on my show. amber: oh, okay. lemonis: you're a guest. amber: no, i'm not a guest on your show. that's not how this works. lemonis: you are. are you permanently on the show? amber: i am now, baby. lemonis: oh, god. okay, guys, i wanted to show you guys a few things. while we're cutting costs, recovering money and building more efficiencies, i want to stay focused on growing the business, and i think brooklyn burgers just might be our secret weapon. with new packaging, i think we can sell a lot of units at retail stores. donna: i like it. lemonis: i don't know if you guys heard or not, but this is the official burger of new york. want to know why? because there is no category. howard: no. lemonis: who do i have to ask permission for, for that? howard: no one. lemonis: who do i have to pay? howard: no one. lemonis: no one.
all right, guys. i'm going to run. bye-bye. ♪ i'm at the barclays center in brooklyn with alan at a basketball game. were you here for this? amber: yeah. lemonis: howard and alan are paying $400,000 a year... amber: i was. lemonis: no. ...to be the official burger of the mets... amber: i have pictures of it with me in the stadium. lemonis: ...the nets and the yankees. freeze. let me see them. amber: oh, my god. i remember being there because i was eating a burger. lemonis: no, no, no. amber: i was totally there. lemonis: it says, "brooklyn burger cheeseburger, barclays signature prime beef." that's not barclays signature beef. alan: it's ours. lemonis: did you see that before? alan: no. lemonis: see, these are the details that matter. we're spending $180,000 a year. as i walk around the stadium, i don't even see $18,000 worth of value. i see the batchagaloop burger. alan: it's made with a brooklyn burger. lemonis: so they have a burger in here that's not called the brooklyn burger.
that's a problem, right? what i got frustrated with, with alan and howard, was that i think that they ultimately did all these sports contracts because they thought it was cool. they would go to the ball games, get free tickets, and all of these agreements, whether with the brooklyn nets, whether with the yankees, with the mets, they all came with tickets and autographs and all this nonsense, but these marketing contracts cost them $400,000 a year, and so why are they even doing it? amber: right. they get nothing out of it. lemonis: did they think people were going to go to the game, taste the burger and be like, "this is amazing. i'm now going to go to a store that doesn't actually carry it"? amber: right. lemonis: their products weren't even carried in stores at the time. amber: yeah, it was pointless. lemonis: pointless. look, i'm as enamored as you are by the glitz and the glam, the logos and all the fun stuff that goes with it, but at the end of the day, it's a business decision, right... alan: correct. lemonis: ...so it just doesn't... although nice, the economics just don't work. ♪
donna: who gave you the p.o.? okay. let me check with frank, and i'll get back to you. okay, bye. frank? frank: yeah. donna: you're still giving your own purchase order. you're approving your own purchase and giving your own purchase order. frank: right. donna: for instance, this day, no one knew you ordered this. frank: then i will not purchase any more beef items then. that's the way...if i'm only to purchase only supplies, then i'll only purchase supplies. donna: i still need to see it! you can't... you're still missing the point. you cannot just pick up the phone and say, "so-and-so, i need 10,000 plastic bags." lemonis: by the way, that's how donna talks to me. donna: no! you need to check with somebody and say, "is it okay that we purchase these 10,000," and then that somebody is going to give you a p.o. do you pay the bills here? frank: no, i don't. donna: okay. everybody you order from wants their money in 10 days. we don't have the money to pay them. frank: but when i need bags or boxes, i'm... donna: you need to get an approval.
frank: so then how would you want me to do this? donna: you're supposed to be giving me the p.o.s. what are you missing? frank: so either i need to either look through those bills or... donna: you're not looking through the bills. you're not...again, you're missing my point. you can't give your own p.o. out. frank: okay, fine. donna: how's that? frank: that's fine. donna: how's that? point-blank. frank: that's fine. donna: you aren't entitled to give your p.o. out. that's it, case closed. frank: okay, no problem. donna: okay? frank: no problem. ♪ lemonis: donna, you doing okay? you look a little stressed. donna: i don't know how much more of this i can take. amber: there's the sweater. we had to go out and get a new one. lemonis: yep. we shot all morning. and then we went to lunch somewhere, and i put my sweater down, and then i couldn't find my sweater again. amber: i know, so we had to, like, send a... lemonis: and then we had the rest of the day. you had to guy buy a new sweater. amber: send a p.a. from brooklyn into manhattan. lemonis: do you know how much that sweater was? amber: yeah, you want to go there? lemonis: i had gotten it on a promo. it was on sale, and the replacement, you had to buy it full price.
donna: i'm tired of frank. i personally feel i do more work than he does, and i feel like i don't want to be here. i'm feeling that i really have a lot of thoughts that i just want to quit. my husband said, "why don't you just quit? why don't you just quit?" it's something he's been telling me for 2 years now. it's not something he's been telling me... but i feel like... lemonis: i'm going to fix that today. do you think that those guys know that if it wasn't for you, i wouldn't be here? donna: no. lemonis: okay, well, that [bleep] is going to stop. donna: right. lemonis: come with me, donna. jamie: i really need to talk to you about what i'm seeing in the company's financials. lemonis: okay. jamie: they're almost bankrupt. lemonis: wow. jamie: i would run. lemonis: i wanted to run. amber: you wanted to kill me at that moment.
i wanted to talk to the two of you guys, and i had donna come in. you can have a seat, donna. she's upset. she doesn't want to work here anymore. donna: i don't feel respected. i don't feel you take me seriously. lemonis: you know why she's comfortable saying it? because she feels like she's got nothing to lose. that [bleep] is going to change. amber: it's funny. like, i feel like donna needed you, like, to have that conversation. lemonis: she ended up getting fired over it. amber: oh, she did? lemonis: yeah. since then, donna has worked for me for 4 years now. amber: in new york? lemonis: mm-hmm. amber: do you have donna's cell? lemonis: yeah. one second.
[ cellphone rings ] donna... i'm sitting here with amber. we were just thinking about you. amber: hi, donna. we're watching the stein meats episode again and doing our commentary on it. sure. what are you doing now for marcus? yeah? is it very similar stuff to what you were doing with stein meats? right. lemonis: and there's money to pay bills. amber: do you ever talk to the guys anymore, howard and alan? never? lemonis: what's happened with them? amber: all right. well, we just wanted to call and say hi. lemonis: bye, donna. amber: bye. see, you're welcome. if it weren't for me, you would never have met donna.
lemonis: i'm a big believer in having the right people in the right job, so, donna, i'm going to make sure this gets fixed. can you give us a minute and send frank in? donna: frank, you're up. lemonis: frank is not the general manager. alan: he's more of a manager downstairs. i don't think he's a manager up here in the office. lemonis: that's the reality of it. hey, frank, can you have a seat? frank, you are no longer the general manager. ♪ amber: why did you feel like you needed to demote frank? lemonis: i felt like frank needed to be taken out of that role so that it would force alan and howard to go into that role. amber: uh-huh. lemonis: did you notice that these two guys, 90% of the time we saw them, they were in their office? amber: yep. lemonis: it felt like they were managing the entire business from this ivory tower while all the action was happening on the floor. amber: yeah. lemonis: it just didn't make any sense to me. the way i see it and the way the bank sees it is
that you guys are really the general manager. you're the floor manager. that was my point. in addition, you have to take a pay cut. i'm sorry. i want you to be here. i felt terrible doing it to him, but i didn't have a choice. and you have to prove it to them, and you have to prove it to me. frank: i'm on board. lemonis: i appreciate you being open-minded about it, okay? frank: not a problem. ♪ lemonis: well, i brought you to brooklyn. jamie: hi, how are you? lemonis: how are you? whenever i invest in a company, especially one the size of stein, it's standard practice for me to bring in somebody to come in and analyze the financials, so i've flown in jamie, an accounting expert, to do an audit and validate the numbers. jamie: hi, nice to meet you. donna: same here. lemonis: jamie is a portfolio manager for me. anything that she wants, just give it to her, okay? donna: okay, great. lemonis: great, thank you. donna: no problem. this is the open payables. jamie: so when you receive the invoices,
it goes on this list, or just... donna: no. jamie: so does this break out how much you're paying in payroll? no? does it interface into your system? no? do you have an aging of your payables? no. ♪ lemonis: i checked in with jamie, and she told me she wanted to speak to me privately. right then i knew that there was a problem. jamie: their payables are about $3.8 million. lemonis: that's several million more than i thought it was. the numbers that jamie is giving me now are dramatically different than the numbers that i was given when i made the deal. they told me the total amount they owe to meat suppliers is $2 million. it's actually $3.8 million. jamie: their bank loan is $4 million and completely tapped. lemonis: jamie found an additional $500,000 on their bank loan, which means that stein is actually obligated to pay back $7.8 million, not $5.5 million.
jamie: the bank wants to end... amber: wow. jamie: ...the relationship immediately. lemonis: to make matters even worse, that $4 million is the bank's limit, and they're demanding payment on that loan. jamie: they have no cash. we have about $30,000 of cash to cover the expenses. honestly i don't know how they're making payroll on a weekly basis. lemonis: i hate this episode. i mean, this business is insolvent. jamie: they're almost bankrupt. lemonis: depending on how much they can collect of their receivables, their total assets are no more than $5 million. because their total liabilities are almost $8 million, the level of insolvency they have isn't $500,000. it's nearly $3 million. that's six times what i thought i was signing up for. jamie: it's almost financially impossible to figure out how they're going to be in business 10 to 14 days. lemonis: wow. jamie: i would run. lemonis: hey, guys, we got to talk. we got a problem. there's a $3-million hole that you can't explain. are you guys aware of that? howard: we had no idea.
amber: right. lemonis: and what i genuinely was concerned about was i had built up a relationship with donna and the other young ladies that work there and some of the guys on the floor, and i felt like, "okay, now i have to figure out how to solve the problem whether i'm involved or not because these guys either are the biggest liars in the world, or they have absolutely no idea what they're doing or somewhere in between." amber: right, yeah. lemonis: hey, guys, we got to talk. we got a problem. i just got through talking with jamie, and there's a $3-million hole that you can't explain, and you have $30,000 in the bank. are you guys aware of that? howard: we had no idea. i knew the bank account was low, but i didn't know the gap was that large. lemonis: what did you think it was? alan: i didn't think it was $3 million. lemonis: the deal that we made was based on $2 million in payables, not $4, right? alan: right. howard: i mean, this puts us in a very precarious position.
lemonis: guys, this is bad. all these people out here that are scared to buy a car because they're scared they're going to lose their job, well, they have a reason to be scared because this business is two weeks away from closing. lemonis: two weeks, my ass. it was two minutes. alan: i know it doesn't look good. i don't want you to think that we knew it and we're hiding something from you. this is new to us also. lemonis: things are way worse than you think they are. alan: where do we go from here? lemonis: you said to me that you thought the business was worth $50 million. to me, i think it's worth 50 bucks. it's frustrating, and i've lost confidence. from a business standpoint, right now, i don't think this is a good investment for me. i need some time to think about this. amber: yeah. lemonis: what? amber: i mean, you know, when i was telling you to do the business, i never thought that this was where we would, you know, where we would be. that's for sure. lemonis: i think in this particular thing, it all happened very fast,
and the fact that the numbers were so wrong didn't feel like an accident to me anymore. i didn't go with my gut. i went with some other emotion. amber: right. lemonis: that wasn't intelligent. normally i'm always rooted in facts and figures, and i think i had the same mind-set you did, which was, "well, these older guys, they're really trustworthy." amber: yeah. lemonis: "i mean, they're good guys. maybe they're just mistaken. maybe they're rounding errors off by $50,000." but it ended up being millions. amber: right. lemonis: and you don't make a mistake by millions. amber: no, big mistake. howard: we're in a much more desperate situation than we thought we were. i mean, we've been together almost 40 years, and for it to come down to this, we have to do something. we have bills to be paid, payroll to be met.
i don't know what we're going to do now without him. alan: we should have been watching it more carefully, going to be scary, right. howard: it's a scary situation. hope we can work something out. lemonis: with what i just learned, i realize that i have some real thinking to do. if i go through with this deal, i don't know how big the hole is. look at that. i don't know if i'll ever get my money back. amber: i was there, too. lemonis: i also know that if i back out, it would be devastating to howard and alan and 37 employees who work there. i don't think they can survive. it's a very tough dilemma.
amber: i need coffee. i didn't sleep well last night. lemonis: do you need coffee? amber: no, i have coffee right there. i'm good. lemonis: why didn't you sleep well? you were excited to see me? amber: no. my baby was up, your godson... lemonis: oh, you're going to play the baby card. amber: no, it's a real card. lemonis: okay. ♪ alan, howard. howard: hello, marcus. lemonis: hey, guys, how are you? alan: hey, marcus. thanks for coming back. lemonis: good seeing you. alan: glad to see you. lemonis: good to see you. look, guys, i thought about what's happening here, and normally in a situation like this, when the numbers are wrong, completely wrong, i would normally just walk away, but there's too much history. there are too many employees. you guys have too much at risk, and i'm not going to let the bank take it from you. alan: thank you very much. howard: thank you very much. alan: we appreciate that. thank you.
lemonis: i'm going to help you as much as i can, but i'm not going to invest what i said i was going to invest. i want to make sure that i'm clear about that. howard: but we need money to make payroll and for our working capital. that's very important at this point because we want to be here tomorrow. lemonis: and how much do you need? howard: about $200,000. lemonis: you know, i can't just give you the money. i can't just write you a check and give you a gift, as much as i like you guys. you know, i'm not a consultant. i do things to save jobs and to make money. i don't just kind of hand money out, and so in order for me to give you that money, i'm going to need to get a return on my money, and the only thing that i can think of is that i buy brooklyn burger from you, and i'll repackage it, and i'll get it back on its feet. howard: we're willing to do whatever it takes. lemonis: no, you're not. howard: but with your guidance now, i think that things will work out much, much better. lemonis: okay. howard: and i think we can make money.
lemonis: we...no, no. howard: we will make money. lemonis: you will make money. my hope is that brooklyn burgers can start turning a profit quickly. we got a lot of work to do. howard: oh, yes, we do. lemonis: let's get to work. and my money is not fully investing in stein meats, but i am. we'll get this company back on its feet. they closed shortly after we left. amber: they did? lemonis: yeah, and another company that happened to be across the parking lot worked out something with the bank and took over the company, and i think they worked there for a little bit, but i don't think that they still work there anymore. amber: and what happened with brooklyn burgers? lemonis: okay, here's the long and short of it. after i wired them the $200,000 so they could make payroll, i expected them to transfer me the asset, transfer me the trademark, transfer me all of the stuff, and months went by, and months went by, and months went by. they never transferred me the asset. and then all of a sudden, what they said to me was, "well, you just gave us $200,000 because you wanted to make payroll," and i was like, "i did in exchange for something."
amber: right. lemonis: so when i took them to court, the judge basically said, "i don't care what footage you have. i don't care that you wired them 200 grand, because it all happened on a reality-television show. i don't think it's real." i was like, "wait, wait, what?" the brooklyn burger, it's now in 4,000 grocery stores. amber: oh, it is? lemonis: uh-huh. amber: who did that? lemonis: the company that bought this business from them. amber: oh. lemonis: i think probably what still irks me about this is that when i go to a grocery store, and i see brooklyn burger in the marketplace... amber: yeah, that could have been you. lemonis: it was supposed to be me. i paid for it. amber: that's a shame. lemonis: it's a shame for who? amber: for you. lemonis: i didn't eat burgers for two years literally. i don't even think i might eat a burger today. i was going to, but i'm not now. ♪