tv The Profit CNBC February 17, 2016 1:00am-2:01am EST
lemonis: tohow you doing, buddy?... ...a progress report. welcome to the general store. norton: how you doing? good to see you. lemonis: in the past 2 1/2 years, i've taken you into 41 businesses and made a deal with 26 of them. i've spent nearly $40 million. man: thank you for saving us. lemonis: it's money that kept them from closing. jess: you don't know if you're gonna have a job in another couple weeks. lemonis: it's money that helped them grow. what do you think of when you see that symbol? ashley: dollar signs coming in -- plus, money. [ laughter ] lemonis: but at the end of an episode, that's when the real hard work begins. all: shuler's! lemonis: let's go to work. tonight, i'm back at a southern california wine bar, amazing grapes. i gave the place a massive facelift.
-looks great. -man: unbelievable. lemonis: and i gave the employees a 25% equity stake. you now have more ownership and authority than he does. but after seeing real growth, some parts of the business are now struggling. dan: we have 6,000 square feet. it is not busy enough. lemonis: and the problem may just be the staff. why does he still work here? dan: it's like pulling teeth to get him to do anything. lemonis: remember shuler's? a tiny little roadside barbecue restaurant in south carolina? norton: if the fat ain't dripping on the coals, it's not barbecue. lemonis: it's still got charm, but it's no longer so tiny. oh, my gosh. i made one of my biggest investments. it's gonna be about $1.9 million. but now the business may be so big that it might just be overwhelming my partners. you guys have zero experience in setting up a retail store. zero. ibuenos días! all: ibuenos días! lemonis: i'm back in miami to visit grafton, a father-and-son furniture business
that looked as if it wouldn't make it to the next generation. if this came to my house, i'd send it back. but we rebuilt the factory floor, improved our manufacturing process... oh, my god. this is totally different. steve: totally. lemonis: i'm hoping it's an investment that pays off. holy cannolis. and while i may never go on tour with a rock band... that was pretty good. ...i did buy into a boston-based drum business, sjc drums, that was started by two brothers. great product... jack: a really consistent tone and sound from it. lemonis: ...but major financial questions... chris: we don't have enough money to cover payroll for next week. lemonis: ...and even bigger family issues. scott: what did i ever do to you? lemonis: but while i brought the business back from the brink, the bad blood remains. what's your relationship like with him these days? chris: i honestly don't want to talk about it. lemonis: why? mike: i'm done talking about it. lemonis: it's another progress report, tonight, on "the profit." my name is marcus lemonis, and i risk my own money to save struggling businesses.
we're not gonna wake up every morning wondering if we have a job. we're gonna wake up every morning wondering how many jobs we have to do. it's not always pretty. everything's gonna change. everything. but i do it to save jobs, and i do it to make money. this... let's go to work. ...is "the profit." ♪ amazing grapes is a combination wine bar and store in southern california. when i first visited, amazing grapes did just under $3 million in revenue. but it was anything but successful. the store was bursting with inventory that wasn't selling. why is there crap everywhere? -too much inventory? -man: exactly. lemonis: and the bar, which had the best margins, was relegated to a hidden corner in the store. after nine years, the owners were still looking for a winning formula. man: we have never seen a profit from this store. lemonis: i actually thought it might be better to just shut the doors.
i don't know that i have a deal to make. cut your losses, liquidate your inventory, pay your vendors, work your way out of your lease, and go home. but i was inspired by the staff at amazing grapes. there was geri, the chef who turned out delicious food, despite being forced to work in a closet-like atmosphere with two hot plates. geri: this is someplace i love, i love coming to every day. this place just means a lot to me. lemonis: and dan, the wine buyer who brought enthusiasm and passion. dan: what i brought to the business was a book of business that i'd built over 20 years. lemonis: whoa. and mike, who was the bar manager. i was so blown away by their dedication that i made a deal, but one with a catch. i put in $300,000 for 76% of the business. but 25% of my share would be handed over directly to the employees. [ laughter ] people, for me, is the only reason that businesses fail or they survive.
man: guys, to a new beginning. lemonis: cheers. with the staff now truly empowered, we went to work. i spent an additional $350,000 renovating the entire restaurant... there you go. man: aah! lemonis: ...the real moneymaker. and while there were some bumps along the way... well, greg's not in charge anymore. -i'm in charge. -man: yeah, i understand. -lemonis: do we understand that? -man: absolutely. lemonis: ...the new amazing grapes was amazing. mike, this is crazy, how busy it is. mike: yeah, it's -- yeah, it's been unbelievable. lemonis: : with our seating now doubled, our weekly revenue went from $11,000 a week to $34,000 a week. and with our new customer-friendly layout and our new website, wine and beer sales went up by 12%. dan: it's actually better than it used to be. -lemonis: how much? -dan: by 10% to 15%, and i just see it growing from there. lemonis: all right, great job, buddy. amazing grapes was a restaurant on the rise. man: thank you for saving us.
lemonis: 15 months later, i'm heading back to amazing grapes to check in on the business, but more importantly, check in on the staff. it looks nice in here. dan: how are you? lemonis: you got smaller. dan: maybe a few pounds. lemonis: by any definition, amazing grapes is a vastly improved business, and i've continued to invest money -- new equipment, more working capital, a new website, but a major category of the business has started to decline in sales, and i want to find out why. well, matt, you're at the table now. -matt: yeah. -lemonis: how's it going? matt: it's good. beer's doing great. -lemonis: is it? -matt: yeah. lemonis: beer sales, as a percentage of total sales, have actually slipped a little. is that because of the time of year? matt: um, time of year, but if you look at last year, it's slipped since last year, too. lemonis: about a year ago, i invested in a comprehensive tap system, and we doubled the number of beers that we stocked on the retail side.
everyone knows that craft beers are expanding in popularity, but our numbers are falling, and that makes no sense. we got how many tables and chairs in here? mike: about 145 people, yeah. lemonis: and so 145 seats should turn two times a night. that's 2,030 people a week should come through here. how many guests a week are you seeing? man: 600 to 700. lemonis: you're operating at less than 40% capacity. we need to have that retail restaurant bar be busier more often. so, the bar business and the internet business are operating separately, right? who buys the wine for the internet business? man: dan. lemonis: are we selling enough on the web? dan: no. we used to -- at its peak, was probably $50,000, $60,000 a month. lemonis: and what happened to it? dan: there is no web business. i think if we had everything online that we have in house right now, we would definitely sell more. lemonis: great. we need to sell more wine online, all right? -woman: great. -lemonis: all right. thanks, guys.
let's talk about your section of the business. i still don't understand where all the volume went. dan: matt has not done a great job getting things uploaded to the web. mike went and did a count of how many wines we had up there, and there was only a hundred and something out of all that we have. i've been on matt every week to get more up there, get more up there. he thinks it's cumbersome, and so he just avoids it. but i felt ignored, often. -lemonis: by him? -dan: yes. lemonis: so why didn't you fire his ass? at amazing grapes, we carry over 500 different wines in stock at one time, but only a fraction of them are on the website. you can't sell what you don't show. by the way, this is matt's job, the guy whose beer sales are also stinky. when matt didn't do this job, you should've let him go. you basically just said to me, "the reason our web business is off is we only have 20% of our total wine up on the website." it ain't that hard. i mean, either he does this job right or he does a different job right or he doesn't work here. ♪
geri: i got a shrimp taco solo. lemonis: i think one of the biggest holdbacks we have is this kitchen. the size limits the amount of food that she can prepare and the speed that she can get it out to the customer. if we really believe that this restaurant bar needs more, kitchen's still too small. you need a bigger menu and need the space to make it. dan: so you're talking about expanding the kitchen. lemonis: yep. i've invested a great deal of money already in amazing grapes, but expanding the kitchen is the right move. with just $75,000, we can buy new equipment and add new stations, allowing geri to create more ambitious dishes and get them out faster. that'll help us increase our check average, feed more customers, and, in the end, nearly double our sales. make the kitchen a little bigger, put the pantry in there, and then you could also have some extra space for you to store wine. dan: this, i believe, needs to become a cold box. lemonis: how do you feel about that?
-mike: i agree. -lemonis: okay, so... mike: yeah, it drives margin, and... lemonis: so change number one is... -geri: that's 100%. -lemonis: ...these bathrooms -need to turn into a cold box. -mike: right. lemonis: turning around a business takes time and patience, and i feel like everybody at amazing grapes is really pitching in, and they're coming up with ideas, and they're working together really well. well, almost everyone. where's matt at? the guy who isn't maintaining the website and isn't selling beer is a no-show. [ door opens ] how much does it cost to put that cold box in? matt: i have no idea. lemonis: that's not a good answer. how much more beer are you gonna sell if you put that room in? matt: uh, lots. lemonis: "lots" doesn't help me pay the bills. matt: okay. uh, the difference in margin? lemonis: how much in dollars? i can't pay my bills with percentages. matt: i would need to see the dollars. lemonis: how much inventory do you have in there? matt: not quite sure. lemonis: you're the beer guy. you need to know that.
get them by the end of the day? -matt: sure. -lemonis: okay. i'm not gonna lie to you -- i'm frustrated, because he doesn't know the margins, he doesn't know how much inventory he has. but i'm willing to give him a chance to sort of get his act together, show some effort, show some enthusiasm. anything short of that i'm not gonna be happy with. ♪ how you guys doing? -woman: good. how are you? -lemonis: good? -have you been here before? -woman #2: yes. lemonis: what's your favorite thing? woman #2: oh, i think the seating is totally better than it used to be. now it looks a little more upscale. lemonis: do you ever buy wine here and take it home? -woman #3: yes. -lemonis: you do? thank you for coming. what we're ultimately doing today is trying to come up with creative ways to sort of learn how to cross-sell product. if people are in there and they're enjoying a meal, are they're gonna remember that experience and come back? we're trying sort of different marketing ideas but live, in the moment, and that's important to do when you're in a business like this, because it's a very competitive space.
is matt sitting at the bar? i don't want to ever see that. you know, he's just -- -he's just chillin'. -mike: right. lemonis: you know, while everybody on the staff is sort of working hard, i see matt just chillin' out at the bar, the same guy that doesn't even know what the return on investment's gonna be for the beer cooler. you got to be kidding me. hey, matt. did you get me those numbers we talked about? matt: no, i haven't -- haven't had time. lemonis: you can get it for me at some point? -matt: yeah. -lemonis: okay. -matt: definitely. -lemonis: okay. all right, thank you, buddy. i mean, i'm not looking to fire matt, but i'm looking to say, why does he still work here? dan: i've known for a long time that the guy's lazy. nobody wants to fire anybody, but it's like pulling teeth to get him to do anything. lemonis: so what is the solution on matthew?
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but i'm looking to say, why does he still work here?tt, dan: i've known for a long time that the guy's lazy. but, god, it's like pulling teeth to get him to do anything. the website, it's a mess. it should never have gotten this bad. lemonis: so what is the solution on matthew? man: i'm happy to let him go. you know, he's gonna be replaced. ♪ mike: go ahead. have a seat. we appreciate all that you've brought to the table in the past, but we're gonna make a break.
we're gonna let you go. performance and stuff has, you know, not been kind of up to par. marcus was looking for information from you. for all intents and purposes, you kind of blew him off. and the fact that he's coming back and requesting a second time is just a poor call. we've had the conversation before. you're given assignments, and you decide kind of what you want to do and not want to do, and we just continue to kind of circle back to the same points, and, you know, in my heart of hearts, i'm not sure that that doesn't happen again. these situations stink, but, you know, we wish you the best. -matt: okay. -mike: okay. lemonis: the reason that i made this initial investment is 'cause i believed in the people, but i want to believe in all of the people, and if there's somebody on the team that's gonna sort of change the culture that i have invested in, no, thanks. sorry. okay, guys, let's get out there and thank people for coming and move forward, okay? come on. the last year and a half has been good at amazing grapes. it's gone from under $3 million
to close to $4 million in business. but i'm not done. in any business, you can't be complacent. you can't just settle in. if you do, you're gonna -- you're gonna go backwards. and so there are continuous small tweaks and investments that you have to make. i'm committed to doing all those things, but my expectation when i come back next time is that we're getting close to $5 million in sales. i think you guys have matured as business owners. when i first met you guys, you were employees here. i know that you guys have a passion about stuff. you're focused on making sure the whole business works. i feel like you guys have made a lot of progress. okay, thanks, guys. great job. ♪ truthfully, latta, south carolina, isn't one of the biggest cities in the state, with the closest airport being 90 miles, but it's home to shuler's bar-b-que. and once you taste the food... this meal was amazing. ...you'll realize that it's a trip worth taking. woman: excellent barbecue.
some of the best i have ever had. norton: thank you, ma'am. lemonis: when i met lynne and norton from shuler's bar-b-que, it was operating in a small roadside restaurant, serving about 500 customers a night. despite being open just three days a week, they still managed to earn just under $1 million a year. $723,000 in sales. making $145,000, it's got a lot of potential. but they had problems. food costs were high, and their profits were low. $5.50 is what it costs us on lunch. so your food costs are actually closer to 61%. and they were feeling the pressure, because this business had a special purpose. it was something that they wanted to pass down to their adopted son shuler. lynne: this business is us, and we owe him part of it. lemonis: after trying their barbecue... these ribs are ridiculous. ...and lynne's famous biscuits... -i love it. -lynne: oh, good. great. lemonis: ...i was convinced that this business
had huge potential for growth, so i made a deal. for $500,000, i got 40% of the business. lynne: now we can really take this place and go with it. lemonis: 1, 2, 3... all: shuler's! lemonis: let's go to work. i found norton a new and less expensive meat supply. i built a new deck, adding an additional 100 seats, resulting in an increase of revenue of over $300,000 a year. -this looks unbelievable. -norton: it is massive. lemonis: but i saw shuler's as more than a roadside restaurant. i saw it as a destination, a south carolina landmark. so we decided to expand, doubling the size of the restaurant -and adding a general store. -lynne: that's great. lemonis: thank you, sir, very much. appreciate it. over the last year, i spent an additional $1.4 million, taking shuler's from 4,000 square feet to almost 20,000 square feet. shuler's is gonna have a general store, a brand-new kitchen and catering center,
a full-service bakery, and a huge banquet hall that can serve up to 170 people. today, i'm heading down south to see the finished building that's just about to open to the public for the first time. wow. even i was blown away. before, there was just an empty field next to a tiny restaurant. now there's a huge expansion, but it managed to keep the same roadside charm that i discovered on my first visit. i'm looking for the general store. lynne: i think you're here. -lemonis: holy moses. -lynne: [ laughs ] -lemonis: how are you? -lynne: i'm good. norton: how you doing? what you think? -lemonis: holy moses. -norton: what you think? lemonis: i haven't had a chance to take it in, but, oh, my gosh. i am shocked with how amazing it looks. it's warm, and it's inviting, something that i can see people loading up their family in the car and coming from north carolina, virginia, tennessee, florida.
how you doing, buddy? oy! what do you think of the store? -shuler: it's big. -lynne: it's big. norton: you know what i call it? marcusizing. lemonis: you marcusized this place? -norton: no, you marcusized it. -lemonis: okay. so, can you kind of give me a tour of the place? lynne: okay. we'll start off with our grilling section, which we're still adding to it. lemonis: what about -- lynne: this is our western wear. norton: i think they'll sell. lemonis: i just think this is a giant mistake. norton: you got to remember you're in south carolina. these things do sell here better than they will a lot of places. lemonis: i don't think it's about where we are. i think it's about what we're trying to be. getting in the apparel business is a totally different element. the problem with selling apparel is that if you're gonna get into the general-store business, you have to sort of walk before you run. and carrying things that require sizes and fitting rooms, i think let's -- let's slow down a little bit. nice to meet you. so, what is your role here? lisa: i am the manager. -lemonis: of the general store? -lisa: yes, sir. lemonis: and so who picked a lot of the products that are in the store? who selected them? lisa: lynne and i did.
lemonis: i don't feel a lot of shuler's branded stuff. i think the store feels very cluttered. there's too much merchandise. i feel like they should've called me or asked my opinion before thewent out and bought all this stuff. and whether it's the product or the layout, i'm seeing a ton of mistakes. how much do we have invested in the whole project? -norton: about $1.8 million. -lemonis: how much? -norton: about $1.85 million. -lemonis: how much? norton: it won't hit $1.9 million. lemonis: it's gonna be about $1.9 million. we need to get a return on our investment. norton: that's why we want your help. that's why you're here. lemonis: but you haven't asked for it. norton: well, we'd hate to bug you if you're busy. lemonis: norton, we always text. i really believe that you really wanted to do it yourself. not only do they have a whole store full of oddball apparel and knickknacks, but then i found a whole room of stuff that was even odder. a pink tie.
come to barbecue restaurant -- buying this or not buying this? yes or no? lisa: no. lemonis: no. okay. -this? -lynne: yes. that came -- that is from -- that is handcrafted out of barrels. lemonis: barbecue restaurant, belly full... norton: i don't want to buy it. -lemonis: what is this? -lisa: that's a book. lynne: this is for babies. lemonis: so, are we basically a department store? lynne: no. lemonis: while pink flamingos and orange ties are kind of funny in the moment, my humor's wearing off real quick, because i'm looking around at all this money that i have tied up here. you guys really just said, "we're gonna take it from here." lynne: i'm sorry. we did it, and we didn't ask for help. -i apologize. -lemonis: [ chuckles ] okay. you didn't ask me what i thought about the layout. you didn't ask me if i had any opinions on where you were gonna source product from. you told me you got it. if your business is in trouble and you need my help, log on to...
well, we have 30 years of customer records. our cloud can keep them safe and accessible anywhere. my drivers don't have time to fill out forms. tablets. keep it all digital. we're looking to double our deliveries. our fleet apps will find the fastest route. oh, and your boysenberry apple scones smell about done. ahh, you're good. i like to bake. get expert advice for your small business at att.com/small business. if you have moderate to severe ulcerative colitis or crohn's, and your symptoms have left you with the same view, it may be time for a different perspective. if other treatments haven't worked well enough, ask your doctor about entyvio, the only biologic developed and approved just for uc and crohn's. entyvio works by focusing right in the gi-tract to help control damaging inflammation and is clinically proven to begin helping many patients achieve both symptom relief as well as remission. infusion and serious allergic reactions can happen during or after treatment.
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even a stag pool party. (party music) (splashing/destruction) (splashing/destruction) (burke) and we covered it, october twenty-seventh, 2014. talk to farmers. we know a thing or two because we've seen a thing or two. ♪ we are farmers. bum-pa-dum, bum-bum-bum-bum ♪ lemonis:you didn't ask mee what iif i had any opinionsyout.
on where you were gonna source product from. you told me you got it. you guys have zero experience in setting up a retail store. -zero. -lynne: i'm sorry. i'm the kind of person that, when i go into a business, it's gonna work, and i'll just do what i have to to make it work. lemonis: if you take your original investment in here and the land and the original building you put in and the money that we've just recently put in, collectively, we have $3 million of your hard-earned money and my hard-earned money invested in here. lynne: well, we'll work on it. lemonis: i don't want to take anything away from lynne and norton's efforts to get the store open. it's not like this is a disaster. but i feel like if they would've called me or consulted me or asked me my opinion, we could've avoided a lot of these mistakes. i just want to be kept in the loop. but this banquet room, it came out great. what's the goal with this room? lynne: to have functions here that we can serve. we've got parties, rehearsals, weddings... -lemonis: company parties. -lynne: everything. lemonis: i estimated that it probably cost about $200,000 -to build this room. -norton: yep.
lemonis: if we just have this place book two nights a week, at an average of 100 people per night, at an average of $20 per person, that's $200,000 of revenue a year, just out of this room. you generate $200,000 -of gross profit. -lynne: right. lemonis: for a $200,000 room, is that -- i mean, where else -- where else -- can we do more of them? i'll do 10 of them. i wasn't thrilled that they didn't contact me about the merchandise in the store, but the banquet room turned out great. and i know we're on track to make really good money here. we're gonna open up the doors in about a half-hour, guys. we're gonna rearrange the entire store. tonight is the grand opening of the general store, but there's a long line of people waiting, and there is still a ton to do. norton, can you go around and find any shuler's branded stuff? from the time you walk in to the time you go to that front door, it's everything shuler's. -shuler? -shuler: yes, sir? lemonis: grab each one of these pigs and move them around the store in places that remind people where they are, okay? come on. norton: get savannah to help you with that.
lemonis: 15 minutes, guys. think we want to try to stay as pig-themed as possible. everything on this table, shuler's branded. we got about two minutes before we got to open these doors. what we want to have people see is sort of like a sampling of everything we have shuler's as they come through. all right, let's pick it up. norton: all right, y'all come on in. come on in. lemonis: how are you? welcome. welcome to the general store. norton: how you doing? good to see you. lemonis: make your way through the store. give us your feedback. -y'all been here before? -man: oh, yes, several times. lemonis: what do you think of the store? woman: i love it, i love it. it is very much the embodiment of who they are. lemonis: there you go. great. we're off to a good start with the merchandise for the general store, but we need to pare some things down and put a real plan in place. i'm confident we'll ultimately get it right. lynne: i would like to thank everyone for coming for our soft opening today. it's been a long, rocky road... -but -- -lemonis: but...? [ laughter ] why'd you look at me?
lynne: i'm just kidding. norton: this is a culmination of something i've always in the back of my mind had a dream of. my father had an old country store. i watch shuler run around here, and i see him doing the same things i did. it just brings back all the memories to me. lemonis: this store is not -- was not built for them. -lynne: no. -lemonis: who was it built for? lynne: shuler. lemonis: it was for shuler. so often i meet people where i give them some direction, and they go off to the left or the right, but these two, seriously, have not only become great friends but great business partners. norton: we thank everybody for coming. it's -- we've worked hard, a lot of people. we're glad to have marcus as a partner, because without him, it wouldn't be possible, not just for the money but encouragement he's given us all along the way. lemonis: enjoy yourselves, and, obviously, tell your friends and family about it, 'cause we're very proud of what we have. thank you very much for coming. [ applause ] i'm confident this is gonna be a wild success. with lynne and norton, i could give them every worldly possession that i have, and i know they're gonna respect it, but i do need to stay in closer contact with them,
because while they're unbelievably hard workers, there's some things that they just don't know, and that's where sort of having resources and the partnership makes sense. coming up... does it feel weird that he's gone? steven: yeah. lemonis: how has it affected your dad? steven: you know, i'm just trying to be strong and follow his lead. they say that in life, we shouldn't sweat the small stuff.
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yeah?cell phone vibrates. (sigh) you're okay... he's okay, he made it! jason.. what do you mean? we were very bad boys. alexa what's in the news? alexa: here's the news, "alec baldwin and jason schwartzman were seen mooning paparazzi. baldwin threw his shoe at photographers before making a run for it". my poor cashmere socks... alexa, will you order another pair of brescianis. reordering bresciani socks. okay listen... can you send some lawyers or something? (moaning) ...alec? (singing alougetting to know you. getting to know all about you...
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-you're steven, also? -steven: yes. lemonis: three generations right here. the quality of the product was underwhelming. their facility was outdated and filled with old equipment. steve: and some of the machinery here are 50 years old. lemonis: the company was almost $1 million in debt. a business like this should have no debt. but what i also found is a company that represented the pure definition of the american dream. so you're the true american success story. steve: they call him maestro around here. lemonis: maestro? three generations of a loving family were doing everything they could to keep their business afloat. i made a deal to invest $1.5 million for 45% of the business, keeping my share below 50% to ensure this remained a family company. -thank you. -steve: thank you. lemonis: i'm looking forward to it. we changed the entire layout of the building to improve efficiency and flow. we added new lighting, we added air-conditioning and ventilation, we even built out a design center
to help customers get inspired. this is a good investment right here. steve: this is awesome. lemonis: and we created a quick-ship chair line that would be available for customers to make a quick purchase. -target price point? -steve: $495. -lemonis: cost? -steve: $250. lemonis: grafton furniture was finally heading in the right direction. man: you got a great product. i think it's a wonderful partnership for the future. steve: awesome. lemonis: but shortly after we finished the first episode, esteban, the patriarch, the heart and soul of this business, passed away. today, i'm heading back to miami to check in on the grafton family and see the progress that they're making. -hey. -steve: hey, marcus. what's going on? lemonis: so, let's take a tour through the whole factory. steve: to the left, up here, we made our little break room for the guys, and so we named it abuelos café.
when i inaugurated abuelos café, i made a speech that this room is here because of my dad, and we stock it for them, free of charge. -lemonis: from him. -steve: from him. lemonis: it's actually the first time i've seen you -since he passed. -steve: i know. lemonis: as you walk through the warehouse, you feel this void of esteban. he was quite a character. he had sort of a personality larger than life, and you feel his absence. does it feel weird that he's gone? steven: yeah, yeah. lemonis: how has it affected your dad? steven: it's been -- you know, it's hard. he was the guy who taught him. it was his dad. i couldn't imagine. i'm just trying to be strong and follow his lead. lemonis: are you finding that you're using this room? steve: we are. lemonis: we built out the design room so that when designers come to grafton furniture, they feel like they're in a really professional environment. so, walk me through kind of what will happen here. steve: 90% of what we've done is c.o.m. -- -customers own materials. -lemonis: yeah. steve: so the interior designers
buy the fabric at kravet or robert allen or romo, and they'll ship it here. but if we cut them off at the path and we have kravet and romo and robert allen here, then they might just say, "well, let's use this fabric on that piece." lemonis: an extra margin when you do that here for you? -steve: oh, yeah. yeah. -lemonis: so you've really -- this room has given you the opportunity to sort of up-sell the services that you do. -steve: correct. -lemonis: okay. steve: i would say the margin could well exceed $250,000. lemonis: if this room can generate $250,000 of gross profit on a $75,000 investment, if there's any other space in the building that can do that, -i want to build it now. -steve: [ chuckles ] okay. lemonis: holy cannolis. i thought we were getting, like, a little one. steve: no. lemonis: like a little table with zzz! steve: no. no. no, no. this one's got the auto-feed. lemonis: one of the things that i wanted to work on in grafton was the margins on each piece of furniture. so we invested in a new cnc machine. the investment into the cnc machine was a big one --
about $100,000. but the production that we've seen out of it is that we've been able to lower our labor costs, ultimately resulting in a much higher finished margin. and so what did it cost, historically, to make one of those pacific coast highway chairs? man: about 25 hours a chair, the whole process. lemonis: at an average wage of how much an hour? man: about $17. lemonis: so it used to be $425 just in labor. now what will it cut that down to? man: half that price. lemonis: wow. i'm surprised by what i see in here. and i'm surprised by sort of the effect on margins. and so if it used to take four hours to make a chair and it now takes two hours, that's monumental progress. and basically, what that is is, four hours to two hours is just margin expansion. steve: correct. lemonis: because you're selling the chair for the same amount. steve: correct. lemonis: and you're just putting less into it. steve: correct. lemonis: i'll give steve grafton a lot of credit. he has done an amazing job. prior to my investment,
grafton furniture was doing just about $2 million in sales. since the renovation and the investment, it's gone up to an annualized $2.8 million in sales, a 32% increase. i think esteban would be really proud on where the business is going. what's your relationship like with him these days? mike: it's not, like, better, by any means. lemonis: it's not better? mike: i-i-i honestly don't want to talk about it. lemonis: why? mike: i'm done talking about it.
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and green day swear by. but three years ago, the brothers had a falling out. mike: we are 50/50 partners. lemonis: how much did you pay to buy him out? mike: to buy him out -- $533,000. lemonis: the brothers stopped talking, and the cost of the buyout was putting a huge burden on the business. mike: our relationship has been so far gone for so long. lemonis: mike, along with his friend chris, who ran the manufacturing and finances, did their best to keep the company going. who generates the actual sale order, -the quote? -mike: i do. lemonis: and who makes sure that it's priced properly? chris: i created the pricing tool, and mike said, "these prices are too high." lemonis: the margins on their drums were way too low, and the manufacturing process was way too slow. man: every time we try to set a schedule, you're constantly stopping and going back because this kit ends up being more of a priority. lemonis: and while their drums had amazing quality, the high prices put them out of reach for the average consumer. how much is a setup like this? man: this set is about $6,000. lemonis: high prices, debt, and not enough sales coming in the door?
chris: we don't have enough money to cover payroll for next week. we're at zero right now. lemonis: sjc was bleeding money. margins are terrible. this is a bad deal. it would've been easy to walk away, but sjc drums was special. if we can come up with a less expensive drum without compromising quality and sound, this company could be a winner. so i made a deal for 33% of the business. $400,000 check. -we have a deal? -mike: we have a deal. -lemonis: what i say, goes. -mike: understood. lemonis: our first order of business -- lowering the cost of the drums, both to the consumer and what it costs to manufacture. they hit a wall. how you guys doing? chris: we're having some trouble trying to get the price down. lemonis: so i reached out to mike's brother, scott, who started the company and knew the drum business better than anybody. you were the artist. let's just call it like it is. scott: yeah, when it came to putting your hands on it and doing it, that was all me. lemonis: bringing back scott meant opening up old wounds.
scott: what did i ever do to you? lemonis: but i didn't care. it was about fixing the business. scott: i think you go one flat finish, but it's a natural satin stain 'cause then you're eliminating the cost of the laminate, and you're eliminating an extra step when you're doing the baring edges. lemonis: he's got some crazy [bleep] in his head. he's very smart. i spent over $50,000 on new equipment to get their shop in shape. working together, mike, chris, and scott developed a new drum kit that could be retailed for under $900. matthew: that's not a beginner kit. lemonis: but it's beginner price. matthew: yeah. lemonis: we took the new kit to a major music retailer, and with a handshake, mike landed a brand-new account. -richard: we'd love to do it. -mike: thank you so much. lemonis: sjc is now making money. mike's now going out on the road and traveling on the alternative press magazine tour. he's there to support the bands that use sjc drums, but he's also there to drum up new business. mike: dude, yeah, our turnaround time last year was like six or seven months. right now, it's only four weeks, so... brendon: that's insane.
lemonis: the plan is, mike would set up shop and display his drums at each one of the tour stops. mike: make sure the shirts are visible, make sure you're getting e-mails on the ipad. lemonis: i'm investing $53,000 in this idea. in order for this investment to make sense, mike would have to generate $100,000 worth of drum-kit sales. those drum kits range from under $900 to $6,000, and they have 50% margins. i'm going to sjc today to make a little bit of a surprise visit. i want to see how things are going, but more importantly, i want to see what the shop looks like. hey. how you doing, buddy? -mike: good. how are you? -chris: how are you? lemonis: what happened to your beard? what is this? chris: yeah, i'm growing it out. -lemonis: what's happening? -chris: not too much. we're in the middle of a huge transition right now, -moving a lot of stuff around. -lemonis: what does that mean? chris: we needed more room for a lot of the parts that are coming in, so we're getting a big shipment of parts today. lemonis: so, really, you've had to stock up so much more parts and pieces that you had to shift around the space. chris: right. we're shipping a lot more drums.
we've been shipping 50 shells a week. lemonis: so we used to make 20 a week. -now we're up to 50 a week. -chris: yep. lemonis: you have a lot of new equipment. chris: a lot of new sanding equipment. lemonis: oh, this is the cnc machine? -chris: yeah. -lemonis: how much was this? chris: $115,000. lemonis: so, walk me through why it wasn't a mistake, please. -chris: okay. -lemonis: oh, jesus, please. chris: before, matt would take the drum, and he'd put it on a layout mat. he'd put pieces of tape on it everywhere where it needed lines. he'd bring it over to the drill press. he'd drill it all by hand, go over to the edger, edge everything by hand, sand it down. lemonis: so, how much time did that take? in labor hours? matt: anywhere from 45 minutes to an hour and a half, depending on the kit. lemonis: that's just for one set? matt: one three-piece set. lemonis: what does it take with this machine? matt: nine minutes. lemonis: since we spent 115 grand on this machine, i would just like to actually see how it works. it used to take 45 minutes to an hour and a half to sand, drill, and trim down one set of drums. now it takes them nine minutes. that's an 80% increase in efficiency.
the increase in sales at sjc is now requiring them to have a lot more raw inventory, and i mean a lot. chris: got to sell some damn drums 'cause this is a lot of [bleep] lemonis: how would you rate the tour? mike: uh, i sold 25 grand on the tour. we had a 20-foot trailer full of drums -- empty. -lemonis: you sold all of it? -mike: all of it. got about 80 solid leads. out of those, i feel half of them will actually pull the trigger. i'll sell another $80,000 to $100,000. lemonis: okay, so, you're gonna do over $100,000 worth of sales. -mike: yep. -lemonis: cost $50,000 to go, so you probably got your money back... mike: right. lemonis: ...from all your investors, plus all the leads you generated. i was pleased to hear that mike did $25,000 in sales while he was on tour, but i was more impressed with the 80 leads. if he's able to close just 1/3 of those leads, we'll average an additional $75,000. what are these? mike: these are the cajóns that scott made. lemonis: scott made these?
mike: yeah. sit on it and play it. lemonis: while scott may no longer be working with his brother at sjc, he's still making other percussion instruments and wholesaling them. one of his customers is mike. lemonis: what's your relationship like with him these days? -mike: um... -lemonis: be honest. mike: yeah. it's different. it's not -- it's not, like, better by any means. -we're, like -- -lemonis: it's not better? mike: i-i-i honestly don't want to talk about it. lemonis: why? mike: i'm done talking about it. lemonis: for exclusives, extras, and business advice, visit... so you're a small business expert from at&t? yeah, give me a problem and i've got the solution. well, we have 30 years of customer records. our cloud can keep them safe and accessible anywhere. my drivers don't have time to fill out forms. tablets. keep it all digital. we're looking to double our deliveries. our fleet apps will find the fastest route. oh, and your boysenberry apple scones smell about done.
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mike: i-i-i honestly don't want to talk about it. i'm trying to just have a very clear relationship with my brother outside of money and... business stuff because that got us into where we were before. i had nothing to do with these, but we owe him money for them. lemonis: if the goal was to rebuild the relationship and not worry about -the personal side... -mike: yeah. lemonis: ...but just have the business side -be right... -mike: right. lemonis: ...then why are you not executing on that? mike: i-i tried executing on that. lemonis: you guys agreed to the numbers before he made them? mike: chris and him did, not me. lemonis: where's chris at? grab chris. -mike: yo, chris? -chris: yeah? -lemonis: hey. -chris: hey. lemonis: what's the story with these? chris: i try to use the "good, better, best" model -for cajóns, okay? -lemonis: yeah. chris: i placed an original order with scott. lemonis: how many? chris: for six good and six better. lemonis: 12 total. 6 good and 6 better? -chris: yeah. -lemonis: and the six good -- -how many did you get of those? -chris: zero. mike: and scott brought all of these and handed us an invoice for a lot of money. lemonis: what was the bill for each of them? chris: he charged us $195.
lemonis: and so, if any other vendor had delivered us what we didn't ask for, what would we do? -chris: i would return it all. -lemonis: right. chris: i didn't want to ruin that relationship. it seems like scott hasn't gotten over some of the...past when mike is trying to bridge that gap and move on. lemonis: you should be able to go to bed at night -- i'm just being straight with you -- and feel like you've done your part because i know how hard you genuinely tried. the product is beautiful, and it's well-made, and it's branded properly, but it doesn't give scott the right to just decide to do what he wants to do. and we all have an agreement he's got to follow that process, and the fact that he did that and mike just took it is a sign of mike still continuing to try to make things work. i was hard on you about the way things were with your brother 'cause i wanted you to work it out. you did everything and more than anybody would ever do, and you should -- when you lay your head down at night, you should feel good about that. i think chris feels that way, too, about it.
i think we both feel like you did everything you had to. and you've been the bigger man. and you should never stop being that person. namm is the national association of music merchandisers. it's an annual convention in anaheim, california, that displays the best of the best of musical instruments and all the components that go with it. mike: hey! what's going on? lemonis: this is, like, a revisit of the first time we met. -mike: full circle. -chris: yeah. lemonis: you know, we met right here a year ago. -mike: yeah. -lemonis: the booth looks good. chris: thank you. lemonis: what's sort of the response that you're getting? mike: awesome. lemonis: sjc has been going to namm for 9 or 10 years, and it's a big part of their business because there are dealers there that represent their product all over the country. so, like, last year, what did you sell in total? chris: at namm, we sold about $25,000. lemonis: what are you projecting to do here this year?
mike: well, yesterday we landed a deal. there's a dealer that wants to do 100k a year. -so -- -lemonis: $100,000? mike: a year, so if we get that deal, we'd be -- we'd be... lemonis: how do you like the sound? man: it sounds great. like, there's a nice thickness to them which you can't really find much place else. lemonis: when i first invested at sjc, it was doing just under a million dollars a year. with the continued enhancement of inventory, i would expect that our business gets to $2 million by the end of 2016. with mike and chris, what you see is what you get -- good effort, good commitment, good passion. now it's turning into good results. they're two guys that i can see myself being partners with for a very long time.
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