tv The Profit CNBC February 19, 2016 7:00pm-8:01pm EST
lemonis: tonightlori: hey.rofit." lemonis: two years ago, i bought an interest in mr. green tea ice cream. young man: this is actually amazing. lemonis: and while we've been able to increase sales by nearly 100%... -is that your car? -michael: that's my car. lemonis: ...success has spawned a whole new set of challenges. michael: the entire future of the brand is based off of my vision. richard: that's something i'm not so sure of. lemonis: the owner's son is pushing for a piece of the pie. michael: i think 7% to 10% would be more than fair. lemonis: but his cavalier attitude isn't helping his case. michael: who cares about a $10,000 up-front cost? lemonis: i think we all kind of care about the $10,000. and now a family feud is brewing in the business. richard: what's important to me is the most important thing. michael: you're not making any sense. you're making stories up! lemonis: if i can't help this young man mature as a leader...
don't be frustrated. michael: i'm very frustrated. lemonis: ...and get both sides back on the same page... richard: if we bought -- if we bought -- -michael: i got this. -richard: you got it? okay. lemonis: ...mr. green tea's growth could melt away. if michael told you that he was gonna leave, what would you say to him? richard: i guess i'd ask him when he was leaving. lemonis: 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. let's go to work. this is "the profit." ♪ located in keyport, new jersey, mr. green tea ice cream is a gourmet ice-cream manufacturer with a rich family history. founded in 1968 by santo emanuele, the company is run today by his son, richard,
richard's wife, lori, and son, michael. when i met them in 2013, they were generating $2 million in sales, mainly coming from selling to restaurants. -that green tea's good. -lori: isn't it good? lemonis: and if we hadn't made a deal... $600,000 for 35% of the business. ...they'd probably still be at the same level. that's because mr. green tea was at a standstill. richard: we physically cannot fill our orders to distributors. lemonis: part of the problem is that mr. green tea didn't have their own manufacturing facility. instead, it used a co-packer. by paying a third party, mr. green tea was losing about 20% of its potential profit. michael: we've been talking about putting up a new facility for a long time now, and it's just going slower than -- richard: i'm not gonna put a facility up unless i know we have the business there. lemonis: but richard was cautious to a fault. michael: you are strangling the business. richard: back up. you're crossing the line between father and boss. lemonis: it was a classic clash of generations, and i was stuck in the middle.
how much money does this business need to go to the next level? michael: whatever it takes to build a facility. lemonis: have you looked at any? so we bought an old, abandoned warehouse. -lori: whoa. -michael: isn't it beautiful? lemonis: and we went to work and fixed it up. and that's when i learned that michael's enthusiasm had a downside. he had severely underestimated the cost. the building isn't gonna cost $600,000. it's gonna cost $1.3 million. michael: it was a mistake. lemonis: it was a mistake with my money. michael: i know that. it is never gonna happen again. lemonis: but $1.3 million later, we have a state-of-the-art ice-cream factory. michael: this takes our pint, fills it with ice cream, heat-seals it, day-codes it, and ejects it out the other end. lemonis: our sales more than doubled to about $5 million. and without the drag of a co-packer, we've improved our profits, and we've been able to jump-start our pint business and sell directly to retailers. and michael has grown a great deal, too. look at how different his game is.
you really have your act together. lori: okay. very good. lemonis: but there's a lot more work ahead of us. ♪ lori: hey! how are you?! -lemonis: what's the good word? -lori: how are you? good. how are you? it's good to see you. lemonis: this is, like, our two-year anniversary. lori: i know. isn't that unbelievable. lemonis: did you think about that? lori: yes, of course. lemonis: how you doing, junior? michael: what's going on? lemonis: what's happening? how come your office is wider than your mother's? lori: [ laughs ] michael: i designed the building, so... lori: that's okay. he honestly spends more time here. richard: hey. lemonis: how you doing, my man? we were just having a -- we were just having a discussion on how well he's doing. richard: okay. lemonis: what i wanted to do is understand how business is. i really want to focus on the pint business, 'cause that was michael's task. can we taste some new flavors? i still have never gotten a sample of black sesame. michael: yeah, we can taste black sesame. lemonis: just to be clear. ♪ good morning. look how beautiful that is.
so, remind me, when i met you guys, there was ginger, red bean, and green tea. -so, these are the originals... -michael: original three. lemonis: ...and then fortune cookie launched, black sesame... -michael: that's the newest. -lemonis: ...and chai latte. over the last year, michael's been responsible to launch the pint business, and he's been developing a lot of the flavors. but i was never consulted on any of them. my guess is neither were the customers. michael: that's black sesame. richard: it's very different. michael: very different. richard: i mean, you talk about polarizing flavor. lori: i'm getting you don't like it. lemonis: this has a really strange aftertaste. never put "black" in the word in anything with food. what i would have done is i would have put "toasted." lori: "toasted." richard: there would be no way i would ever launch that. lemonis: i didn't encourage you to do that. richard: and michael's tenacious, you know. lemonis: have you had a commercial focus group of black sesame? -michael: no. -lemonis: and so as we launched, ginger, chai latte, fortune cookie, and black sesame, we had no testing, no focus groups.
richard: exactly. lemonis: how has this done in food service? michael: this is not a food-service item. lemonis: why not? michael: it just -- to get new flavors into the restaurants is very difficult. they want their green tea, red bean, vanilla. that's what they want. lemonis: have you introduced that to them? michael: no. lemonis: because the restaurants provide some level of feedback. it's always good to get other people's opinions, but sometimes i feel like, with michael, he feels like it's only his that matters. what does it cost to experiment? michael: it's not expensive to just launch a new flavor. it's all cost of goods. richard: you're spending, you know, probably, you know, $10,000 just for that one, which may never work and may sit on all the shelves. lemonis: it's a cost of good that if it doesn't work, those goods have no value. michael: who cares about a $10,000 up-front cost? lemonis: i think we all kind of care about the $10,000. michael: i'm sorry, $10,000 is not -- richard: no, it's not $10,000. you're printing 125,000 of these, which is gonna run you probably $30,000.
so it's $40,000. and if you have two or three that fail, that's a major hit. lemonis: what about the slotting fee? the slotting fee is the fee that you pay the grocery store to basically buy the shelf space. how much are the slotting fees? michael: it was $200,000 for six. lemonis: that's, like, a real investment. so it's $33,000 a pint. if, for some reason, this doesn't work out, how much money, between raw ingredients, packaging, and slotting fees? michael: if it ended today? lemonis: if it failed, failed? richard: minimum $70,000. lemonis: so one mistake could be a $70,000 disaster. richard: that's a failure. lemonis: and i'm worried that we're getting sloppy. mr. green tea makes around $400,000 a year in profit. and to invest almost 20% of your entire earnings for the year in one flavor without being sure it's the right thing, it's like playing russian roulette. what does it cost you to make this -- everything all-in?
michael: the packaging is $1.33. lemonis: uh-huh. michael: and then, what's milk at right now? richard: just under $8 a gallon. michael: so that means it's 1.25 gallons of milk in there. so 10 bucks. and then your ingredients, which is 70 cents? lemonis: $1.33 for the container, $10 for the ice cream, 70 cents for the ingredients. that's $12. richard: i did michael high 'cause it's extremely high right now. but it changes every week i buy milk. -lemonis: okay, we'll use $11. -richard: right. lemonis: what does it cost to deliver it for every one of these? -richard: $3. -lemonis: so now i'm at $14. you're selling this for $28? so basically, i have a 50% margin on this. you may disagree with this, but a 50% margin on this product just isn't good enough. richard: [ sighs ] lemonis: if you're looking at the margins on the 2 1/2-gallon product, just on the surface, they look good. but after you factor in all the labor, the cost of the machinery, the cost to run the business, the margins aren't that great. so 50%'s not good enough. we need to be closer to 60% to absorb the labor. in order to drive down the cost or improve the margins,
the single-biggest ingredient has to be resolved, and that's the cost of the cream. richard: when i can buy my milk right, i get this down to the $6 range in milk, we're doing this for under $9. lemonis: well, i want to get that milk price down. -richard: but it fluctuates. -lemonis: i understand, but i want to get some sort of contract price based on volume. richard: i would love to work the numbers with you. lemonis: what i would like to do is sit down with the financials. richard: okay. lemonis: what were our total sales in pints in 2014? okay. $1,630,457. okay, what's the trend for 2015? richard: probably about $2.3 million. lemonis: okay, so... michael: which means i'm not gonna get a raise january 1st of '16. lemonis: you were given a grid, and there was a guarantee established, as well. michael: correct. lemonis: we set up these different tiers -- zero to $2.5 million, $2.5 million to $3.5 million.
michael's done a pretty good job improving the pint business, but i believe that pay plans drive behavior. and performance-based pay plans are exactly what i've set up for michael. his salary is fixed at $75,000, and he doesn't receive a commission until pint sales achieve a $2.5 million level. and then michael starts earning a commission of 3.25%, taking him to $81,250. and it stays that way until sales reach $3.5 million. and then his percentage is bumped up to 3.5%. and so on, and he rises along with the business. so that grid was clear. it's 100% commission plan with a guarantee. -richard: exactly. -lemonis: okay. michael: the pay plan is very good. i'm fortunate to have it. is it bothersome to me? yeah, a little bit. every revenue dollar increase, the benefits are reaped by the people that have the piece of the pie. i want a piece of it. i want skin in the game. richard: employment does not equal ownership. lori: i agree. it's two completely separate things.
richard: it just doesn't. michael: that's not fair to me. i have zero protection when i spent my career here, all right? i'm a mechanical engineer. i can go do anything i want tomorrow. lemonis: meaning that if you don't like the sort of plan -that's put in front of you -- -michael: correct. i can go do something else, yes. lemonis: michael, you seem frustrated about some -- michael: i'm very -- yeah, it's a frustrating day 'cause i thought we all agreed with this. richard: if you don't get it right now, you're never gonna change it down the road. michael: i don't care.
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i'm a mechanical engineer. chase for business. i can go do anything i want tomorrow. lemonis: meaning that if you don't like the sort of plan -that's in front of you -- -michael: correct. i can go do something else, yes. you know, i get offers all the time. i can go start my own business tomorrow. whatever i put my mind to, i know that i can be successful. so that's my point. it's like what's keeping me here? lemonis: while we're going through the financials and trying to understand the performance of the business, michael brings up the necessity to have equity, almost like it's been brewing inside of him. michael: this company isn't the same if i'm not here. you're still peddling 2.5 gallons to restaurants only. the entire future of the brand is based off of my vision. richard: that's something i'm not so sure of, michael. michael: would there be pints if i didn't come in? richard: there was. -lori: there would not be pints -if michael was not here. -michael: thank you. lemonis: you feel like you're bringing such value to the table. michael: i'm adding new brands to the business. lemonis: look, i understand michael's point here,
and he has contributed to the business nicely. but what i don't like is this grandstanding. he's acting as if he's being treated unfairly, or things aren't good for him. it's his parents' company, and he's ultimately gonna own it. it's time for him to act like an adult. michael: do you understand what i'm saying? lori: i understand what you're saying, michael, but i do have a problem with you not being able to separate the fact that you're an employee, and you're being compensated very well versus that, you know, there's this equity that's somewhere going to be yours. -lemonis: potentially happening. -lori: right. how about this crazy scenario? how about you marry some crazy bitch that we don't like and that something happens to you and now we have to deal with her? lemonis: i think your dad's point is the best one. equity and employment are two different things. it's important to me as a shareholder that one of the key employees feels vested in the business. richard: i have a hundred reasons why i'm not comfortable with that. lemonis: michael, can you and i take a walk? -michael: sure. -lemonis: okay. i really think it's important for me to take michael outside
and have a one-on-one with him without rich around, without his mom around to really get inside his head and understand what he's really thinking. is that yours? michael: it's a nice car, isn't it? -lemonis: is that your car? -michael: it's my car. lemonis: kind of a big player now. [ chuckles ] that's a nice car. michael: yeah, it was used, so... lemonis: the porsche definitely fits you. michael: yeah? lemonis: i wanted to talk to you away from them. michael: mm-hmm. lemonis: i sort of understand how you feel. michael: mm-hmm. lemonis: and i understand that, you know, ultimately, you just want to have a path. michael: that's the only problem i have with any of this is i'm not saying, "i need this, or i need to leave." i love it here. i love mr. green tea. but i would like to have a piece of the pie. you always say, you know, "you're an employee of mr. green tea." and i am. but i don't think i work like one. you know, the employees -- 5:00 hits, and they go home. they, you know, spend time with their friends and their family, and i don't do that. you know, it's 24 hours. lemonis: tell me exactly what you want. michael: i think 7% to 10% ownership of the business
would be more than fair. lemonis: and if he said to you, "no, i'm not comfortable doing that"? michael: then i guess we're back at keeping my ear to the ground for potential other options, i guess. i got a book of ideas for the food industry. many are ridiculous. some would work in our current infrastructure. and it's like, "all right, well, am i gonna continue to give these ideas that i have to a company that's not mine?" lemonis: i've never thought of you, from the day i met you, as an employee here. i thought of you as the future of the business. i sort of understand why he's feeling this way. he believes that his contribution is more impactful to the business than just a wage. but i think that the reward has to be commensurate with the performance, and that has to come with time. -i would tell you to be patient. -michael: yeah. lemonis: we have to do it in a way that's got a plan behind it, you know? michael: mm-hmm. seven years i've been here now. lemonis: who wants to try some ice cream?
i was pissed at michael for launching new flavors without doing the research and getting the data. but i was also upset with richard, as the c.e.o., for letting it happen. they didn't do their research. they didn't ask customers. they just went ahead and paid the slotting fees. well, we're gonna go to shoprite today, and we're gonna get feedback whether they like it or not. michael: this is ginger. that's my favorite. woman: it's quite good. michael: good? you like it? his eyes say, "ohh!" man: that is pretty good. young man: wow, this is actually amazing. -woman #2: it is. -michael: good. lemonis: michael did good on two of the flavors -- the chai latte and the fortune cookie. but... woman #3: black sesame. lemonis: the name throws you off a little bit? -woman #3: the color. -lemonis: the color. which ones do you not like? man #2: the black sesame. boy: i don't like the black one. richard: you don't like the black sesame? okay. lemonis: what didn't you like about it? boy: it tasted disgusting. lemonis: [ laughs ] disgusting? black sesame got some harsh reviews. and if they would have gotten some feedback in advance, they would have saved themselves $70,000.
richard: i'd like to ask you what you think of the packaging, you know, versus the name? young man: green tea! richard: okay. young man: right? lemonis: what do you think is in every one of these containers? woman: green tea. [ chuckles ] lemonis: green tea. woman 4: they all say "green tea." woman 5: the green tea -- the tea flavor. woman 6: i'm not a green tea lover, okay? so if i saw "mr. green tea," i might not say, "oh, i'm gonna buy that." me. lemonis: i think we have some work to do. most people would expect me to push you to change the name. that doesn't bother me. there's a legacy there. what bothers me is the presentation of it and having "mr. green tea" be the dominant brand. one of the best things that happened at shoprite is seeing the positive feedback about the quality of the ice cream. but we need to put a process in place that forces us to do research and development on new flavors. and we need to go back to the drawing board on the packaging so that customers aren't thrown off and think there's green tea in every flavor.
so, what i want to do is sort of take the actual packaging, and i want to basically move around some stuff. people don't want to think that there's green tea in the ice cream. -that's the feedback we got. -michael: yep. lemonis: pull that mr. green tea logo up. can you have these two live individually? michael: yeah, of course. lemonis: get rid of "mr. green tea." -michael: totally gone? -lemonis: yep. it's a lot cleaner. michael: well, what i was actually gonna do is i was gonna modernize the mr. green tea font. you put it really faintly somewhere. lemonis: the font's gone. michael: so, what are you buying? lemonis: sweet sesame ice cream. michael: no brand? lemonis: that brand. michael: i'm not on board with that. lemonis: i'm gonna go inside. just humor me. save this and send it to the printer. -michael: okay. -lemonis: okay? when you're collaborating with partners, the idea is to sort of let everybody have their opinion. instead, he just wants to battle. we just went to shoprite. people told you that they thought it was bad,
and we're gonna meet as a group. we're gonna get everybody's opinion on this. michael, you and i worked on that sweet sesame package. michael: i think this is a step in the right direction. it needs, obviously, a lot of time to -- lemonis: it doesn't actually need a lot of time. -michael: you don't think so? -lemonis: no. i have this background that's the same. i didn't change the fonts on here. this is so subtle that even you would be tricked. richard: no, you had to look twice to realize that wasn't there. michael: with just the logo on the top, it could be confused for a generic brand. richard: i don't think i have a problem with it at all. lemonis: michael, you seem frustrated about some-- michael: i'm very -- yeah, it's just -- it's a frustrating day 'cause i thought we all agreed with this. lori: that's why we need marcus. lemonis: michael, when it comes to packaging, believes that he knows better than everybody else. that's the sort of immaturity that doesn't lead him to being a partner in this business. but we also went to the grocery store, in fairness. i want to go with the feedback we got. lori: yeah, mike, it's not worth making a mistake. richard: if you don't get it right now, you're never gonna change it down the road.
michael: i don't care. ♪ how dare you sit there -- richard: it's a minor thing, but, michael -- michael: you're not making any sense! -you're making stories up! -richard: michael, what's important to me is the most important thing. michael: that's not fair! hundreds of crash simulations. thousands of hours of painstaking craftsmanship. and an infinite reserve of patience...
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some side effects can lead to dehydration, which may cause kidney failure. with trulicity, i click to activate what's within me. if you want help improving your a1c and blood sugar numbers with a non-insulin option, ask your doctor about once-weekly trulicity. and click to activate your within. lemonis: michael, seriously, you got to just let him have his feeling. but you can't let it sort of crank you up to that level. michael: i know. i know. lemonis: it's not healthy for you. michael: i know. lemonis: he's gonna think, "my kid is still, like, a hothead. you're not a hothead, are you? michael: no, i'm not a hothead. i'm passionate. i'm not a hothead. i work really hard at improving areas of my business life -- of getting better at certain things. lemonis: you are getting better. michael: i know i am. lemonis: my relationship with michael continues to be one that is a player-coach relationship. while i'm frustrated with him, i still know that he's the future of this business. i'm gonna have to see a literal attitude adjustment. ♪
leiby's creamery is a multi-generational creamery that's in the middle of pennsylvania. they're producing cream and milk for some of the biggest companies in the world. -richard: hey, jack. -jack: richie. -richard: how you doing? -jack: good to see you. -michael: what's going on? -jack: michael. -michael: nice to see you. -lemonis: jack, i'm marcus. -jack: it's nice to meet you. -richard: he's our man here. lemonis: one of the things that i wanted to accomplish is to improve our margins because the dairy -- the cream that goes into the ice cream -- is the single most expensive item. what do you actually produce here? jack: we produce over 80 different variants of ice-cream mixes. lemonis: what makes it sort of the different variations? jack: usually butter fat, sugar, and fat content. a haagen-dazs is a 16%. lemonis: and what are we? michael: a little bit above 12%, yeah. lemonis: okay, so our ice cream is lighter because it's got less butter fat. our flavors are more pronounced. and that's why our quality is so good. let's take a tour. jack: this is where all the raw milk and cream comes in, marcus. right now what you're seeing is they're filling this up with cream.
we fill the totes. lemonis: so does it come to you like this? richard: exactly like this. lemonis: it's like a water bed. what does this cost? richard: today, $2,100. last week, $2,800. lemonis: i have a lot of work to do in building a case with rich that michael deserves equity. i want to show his father that when michael's intelligence and salesmanship comes out, he can be very impressive. jack: typically, our margins are between $1.50 on the gallon to $3.00 on the gallon. and it depends on how large the customer is. lemonis: how much do we currently buy today? jack: right now you buy about 60,000 gallons a year. lemonis: what do you project it to be in the next 12 months? richard: if we're assuming ahead, we should be -- michael: i got this. i got it. richard: you got it? okay. michael: if these slots turn over the way we're expecting them to at our projections,
we're gonna have a 40% increase. hopefully, we'll be purchasing 100,000 gallons next year. lemonis: maybe one of the reasons that michael is the way he is is because he hasn't really had an opportunity to learn because rich steps in and saves the day. lemonis: what do we pay per gallon? richard: as of right now, we're at $7.50. lemonis: could you drop your price, if we make a volume commitment, by $1.00 a gallon? jack: when your volume gets to a certain level, yes. michael: so, if we make a commitment to 100,000 gallons next year, can we do this? lemonis: the risk here is that we're committing ourselves to buying a lot more cream than we may necessarily need. but if we commit to buying 100,000 gallons and we get the better price of $6.50, the reward is an additional $100,000 in gross profit. i'm comfortable taking this risk. that's a pretty significant savings for just building the relationship. michael: yes. absolutely. ♪
lemonis: today i want to work the line in our pint production facility. and i want to understand our productivity. michael told me that he wants to get new machinery, but before we do that, i want to make sure it's necessary. so, how many can you crank out in a day? matt: about 9,000. lemonis: have you ever done that? matt: no. i've never needed to. lemonis: this machine, according to matt, could crank out 9,000 a day. then why would you need more machinery if you're not doing more than 3,000 a month? richard: this is what i feel about michael -- -he has great ideas. -lemonis: unbelievably. richard: he wants to implement them. but sometimes he forgets there's a cost and how much we actually have to spend to get to that perfect state. lori: yeah, you need to be a little bit more of a penny pincher, the way i am. and you're not. richard: it's the little things. when we want a sample from a vendor, you'll give them our u.p.s. number to send us product. it's like i'm enraged at that. michael: sending a u.p.s. bill is not something. -lemonis: don't be frustrated. -michael: i'm very frustrated.
-lemonis: don't be. -michael: no. there are things that i have to improve on. lori: this is you. he takes after you. michael: i agree with you. i need to learn certain things, but you're beating me up on stuff that is not true. richard: this is not a beat-up. lemonis: this is not an attack. this is a discussion. michael: but how dare you sit there and say sending samples -- -if that's an issue -- -richard: it's a minor thing. michael: i'll tell you what, i'll write you a check for the samples, all right? lemonis: michael told me that he wanted to be a 10% owner of the business. look, i want to make a case to richard that michael should have equity, but he's not making this easy. michael: if you guys are calling me cavalier with money, i want to see an example of it. and you guys are making stuff up that's not true. and then you want me to not get mad at it because -- richard: michael, michael, michael, michael, what's important to me is the most important thing. michael: then you're not making any sense. you're making stories up. that's not fair. lemonis: if your business is in trouble and you need my help, log on to...
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'cause of this packaging, then i guess i'm cavalier. lemonis: can you change your tone? we're in a work environment. it's not good delivery. if you and i actually worked for him, in this building, he's your boss. michael: i understand that. lemonis: you probably would have gotten fired in this last argument. ♪ you can't change people's perceptions unless you change your behavior. an argument's never gonna change it. it's just not. so let it go. michael: okay. lemonis: what kind of flavors are you guys thinking about? michael: we can "develop" our mango. lemonis: think about making it sort of spicy. richard: we need, like, some kind of cayenne or -- michael: a basic powdered chili. i wouldn't go cayenne. lemonis: in order to grow our pint business, as well as our food-service business, we're gonna have to develop more flavors to appeal to more customers. not everybody wants asian-influenced flavors. you know, if you look at all of our flavors, right,
this is more of sort of more of an international flavor -- something that would be maybe in the more spanish, latin american -- richard: exactly. you know, you go down to mexico, wherever you get the mango, and they put on a little cayenne pepper and a little lime juice and it had me start thinking. so i got some stuff. lemonis: so, spice. mango, lime. you know you're having fun, rich. richard: oh, i love doing this. this, like, brings me back to the root. lemonis: phase one of the focus group -- start with your employees. richard: grab a spoon. man: late heat. late heat in the back of your throat a little bit, but, yeah, i feel it. -lemonis: would you buy that? -woman: i'd buy it. -lemonis: you'd buy it? -woman: of course. -lemonis: do you like green tea? -woman: yes. but i like this one. i like spice. -lemonis: you like spice. -woman: yes. lemonis: do this as, like, a group exercise once a month. woman: yeah, come up with ideas. lemonis: you come up with one flavor. if you like it, it goes into the library. you may use it, you may not. go ahead and box it up. and we're gonna take this to do some testing. ♪
so, guys, what i want to do here is sort of think about growing the business differently. tonight we're going to 10th avenue burrito, a food-service customer of mr. green tea. they currently only buy one flavor. but i want to give them a sample of our new spicy mango and try to pick up more business. and i also want to give michael a chance to shine and show his sales skills. you start to think about being the leader of this business. you have to also ask for the sale. i want people to see how good you are all the time. michael: all right. lemonis: i need to put one on the board for michael because i'm working towards making this argument with rich for michael for equity. and i need a win here. richard: hey, brian. how are you? -you know marcus. -lemonis: hi, i'm marcus. -nice to see you. -richard: you know michael. -lori: hello. how are you? -richard: you know us. lemonis: michael wants to sort of have an opportunity to present to you new flavors and some ideas. and we made one specifically to try to match your menu. michael: so what we brought here today is a few of the products that i think might work with your menu and then one, like i said, that i specifically tailored for you.
richard: so, down in miami or in, i guess, maybe mexico, they just cut the mango open, put cayenne pepper on it, -squeeze a lime on it. -brian: yeah? michael: so give that a try. go ahead. yeah, so, it's a little soft 'cause, like, i said, that was made today. lemonis: there's a little kick at the end. brian: there it is. that's great. it's real subtle, too. michael: if we started producing this on a large scale, is it something you would think about bringing on your menu? brian: for here, probably not. -probably not. -lemonis: you would not. brian: probably not. like, what we do here is very simple. it's a very simple thing. right now we love the vanilla. -lemonis: just vanilla. -brian: yeah, just the vanilla. yeah. lemonis: i wanted to give michael the opportunity to make the sale, but it's not going as well as i had hoped, and, quite frankly, rich isn't doing that great either. but then michael really stepped up. michael: would you guys like to try some mango ice cream samples? free samples. lemonis: it was the best idea of the day.
would you guys like to try some ice cream? i want to see when the flavor hits you. young woman: oh, my god, that's so good. michael: would you like to try some mango ice cream? -lemonis: would you order that? -woman: i would. lemonis: would you buy it at a grocery store? so we had people sample the mango line. great responses. brian: i know they're loving it. they're chewing away over there. yeah, yeah, yeah. michael: so, brian, would you consider putting the mango line cayenne on your menu? brian: absolutely. yeah, absolutely, absolutely. michael: all right, great. that's awesome. brian: i think it would be a nice compliment, yeah. -absolutely. -lemonis: you like that? brian: yeah, i love it. i think -- like i said, man, i think it's a nice, clean flavor. i think it's perfect. lemonis: this presentation started off really shaky, but in the end, michael really delivered. -good job at the end, though. -michael: all right. lemonis: okay? this simple exercise proved that with a little bit of effort, you can double the business from just one customer. mr. green tea does $2.7 million in food service. if we just improve our business by 10%,
well, that's an extra $250,000 in revenue. at a 60% margin, that's real money. -richard: we did a good job. -lemonis: you did a good job. richard: no, you -- you did a good job. lemonis: okay. ♪ mr. green tea is really growing. instead of going out and buying more trucks to meet increased delivery demand, i've installed the fleet management solution from at&t. we can track our drivers, helping them to avoid traffic, ensuring that deliveries will be made on time. [ beeps ] man: might need you to come back. tim: all right, sounds good. lemonis: the system monitors refrigeration units in each truck which helps to ensure that our product never melts and avoids unnecessary waste. so we'll save money on fuel, on labor, and most importantly, on inventory.
richard: hey, marcus. lemonis: i called rich and asked him to meet me in new york city. -richard: is everything good? -lemonis: very good. ultimately, my goal was to get rich to see it my way that michael should have the opportunity to earn equity. you know, rich, i want you to know how much i appreciate your leadership. this is a generational business. it started with your father. richard: right. lemonis: and then your brother took the business to a different level and then passed away, and you were sort of thrown the keys. i think michael's key to the business, and i do feel like he runs the business as if it's his own. so what i want you to consider is that he will be able to earn equity. he said to me he wanted 7% to 10%. richard: [ laughing ] where does he come with these numbers? okay. lemonis: it's in his head. richard: you don't inherit equity. you don't get things if you didn't work for them. and he can't. it would set a horrible precedent. lemonis: yeah. he sometimes comes off as entitled to me. but i'm a big believer that michael will perform at a different level
that you and i will ultimately benefit from if he has just a small taste of the equity. richard: um... you know, i don't know. i don't know -- lemonis: if michael told you that if you didn't give him equity, he was gonna leave, what would you say to him? richard: you see, i don't work well under pressure. lemonis: well, what would you say to him? richard: i guess i'd ask him when he's leaving. they say that in life, we shouldn't sweat the small stuff.
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what would you say to him? richard: you see, i don't work well under pressure. lemonis: well, what would you say to him? i guess i'd ask him when he's leaving. lemonis: how come, rich? richard: it is very important to me that he earns the respect of the employees there -- you know, that he doesn't demand it because he's my son. lemonis: and so a way to fix that is to issue him equity in a way where the profit and loss statement has an impact on his equity and the growth of the balance sheet has an impact on him, as well. i completely understand why rich is reluctant to give michael equity. and if i didn't think it would help the business, i wouldn't be pushing so hard. but what i ultimately want to do is give michael just enough to be satisfied and not upset rich. that's the real goal behind this plan. the hard part is that i just need rich to agree. what i'd like to do, rich, is put a plan in place that allows him to earn up to 5%. but in order for him to start to see the benefits of that,
the debt that you and i have put in has to be paid back. richard: right. lemonis: the only way to do that is not spend money, not waste money, make more money. richard: exactly. lemonis: build the cash in the company and have him feel like he's getting it for not being your son. richard: exactly. lemonis: 'cause if entitlement creeps in, i'm gonna take it off the table. richard: yeah. i think it's an unbelievable opportunity. -lemonis: all right. -richard: okay. -lemonis: thank you, buddy. -richard: thanks again. ♪ -lemonis: hi, guys. -lori: hello. lemonis: i'm meeting rich, michael, and lori to go over the packaging changes that i asked michael to do based on the direction i gave him the other day. last time we did this, michael stormed out. it better not happen again. let's see what you got. michael: so, this is the stuff that you and i worked on. we're using the same background, similar colors. we just have the leaf logo. lemonis: and it still has "mr. green tea" here. michael: the website. yep, absolutely. lemonis: and it still says, "distributed by mr. green tea." michael: "distributed by mr. green tea."
lori: i like this. i think it's really clean. michael: the fonts are much, much larger. we have a different font. the colors are brighter. lemonis: you did a good job. i really feel like you're starting to take everybody's input. you bringing this here today is sort of a demonstration, for me, that you are making the steps that are necessary to be a partner in the business. i'm pretty impressed with the way michael has handled this assignment. not only did he do everything that i asked him to do, but even sitting here, he seems more collaborative and more open to ideas. and now we have something that all of us can agree to. but there's still one more test that michael needs to pass. so there's one last thing that i want to see you do. michael: okay. lemonis: i want to see you pitch and close. so we're gonna head over to 16 handles corporate office, which is one of the largest yogurt shops in all of the united states. you're gonna have to pitch to them the idea of mr. green tea the company owning one of their handles forever. michael: forever. lemonis: let's see what happens,
because the guy that owns it said to me, "look, i'm open to taking a meeting, but i'm not necessarily convinced that this is the right strategy for my business." i want you to take the entire lead. -it's a huge deal. -richard: wow. lemonis: all right, we feel like we're ready to go? -michael: yeah, absolutely. -lemonis: you nervous? michael: a little bit. all right, let's head there. ♪ richard: let's do it. -lemonis: sixth floor. -richard: sixth floor. lemonis: i'm taking richard and michael to 16 handles, one of this country's largest frozen yogurt chains. the reason that the company is named "16 handles" is that there are literally 16 different flavors in every one of their stores. so every flavor has a handle, like when you pull the yogurt down. what i'm asking for here today is for them to dedicate one of their handles to mr. green tea ice cream. -how are you? -solomon: good to see you. lemonis: good seeing you. -michael: hi, i'm mike. -solomon: mike. solomon. michael: nice to meet you, solomon. lemonis: the goal behind this exercise is to have richard
see michael perform in a pitch environment. it's about demonstrating that he's capable of delivering additional value to the company without me or his father. i appreciate you guys taking the meeting and even being open and willing to even hear the idea that michael has. michael: mr. green tea, for over 45 years, has been serving 8 million servings a year, in manhattan alone, of our ice cream. so we have quite a large customer base. we want to bring that customer base into your stores, and we want to reverse-engineer some of our more popular flavors and get that flavor signature into your yogurt. we don't want to hide that it's yogurt 'cause obviously, yogurt has a very different, tart flavor compared to traditional ice cream. so we want to kind of combine the best of both worlds. the idea that we have is to take one of your handles in each of your stores and make it a mr. green tea flavor of the month, where each month, it's a new, unique flavor. dolores: we've never actually talked to anybody about giving up one of our handles before. -so it's -- -lemonis: scary.
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doloresabout giving upctually one of our handles before. -so it's -- -lemonis: scary. dolores: it's a little scary. michael: we want to stay true to your roots. you know, your customers are walking into 16 handles not to get mr. green tea ice cream, but walking into 16 handles to get 16 handles frozen yogurt. and you have a lot of success with that. we want to improve upon it by giving you a new portfolio of flavors that don't exist. lemonis: i think for mr. green tea, this is an opportunity to put itself out in the marketplace
and brand itself in a whole new way. if people go to 16 handles and they love the flavors, the likelihood of them going to find the ice cream in the stores is exponentially improved. solomon: look, chocolate and vanilla are our number one and number two. and i don't know if that'll necessarily change. but what'll entice more people to come in is by providing more than what they can find anywhere else. types of flavors we'd be looking for, like the ginger -- we haven't played in that realm, so that really excites us. one of the things that's important for us at 16 handles is that we lead with the best taste. michael: we have a portfolio of 15 flavors, and developing more, that we have decades of data on. the most important aspect of it, obviously, is quality. my grandfather, my father founded the company on those principles. there are certainly no higher-quality alternatives. lemonis: would it be okay if we took some of the samples out? -dolores: we'd love to. -lemonis: okay. who wants to try ginger? dolores: that's pretty tasty. solomon: it's good. it's true to flavor.
michael: we import ginger root from australia. richard: when you do like chai... dolores: this is spot-on, too. solomon: this tastes like -- exactly like chai. this one excites me because this is a flavor that we've tried in the past that we couldn't get right. i'd put this in the handles. lemonis: it's obvious to me that 16 handles is really enjoying the flavor and the quality of the product, but we haven't gotten the sale yet. and that's what we came here to do. so, what do you think? are you guys comfortable moving forward, launching a cooperative arrangement with one handle? how do you feel? dolores: i feel good. i feel good. solomon: these are new flavors that our customers will get excited over. dolores: that's a yes. -lemonis: yes? -solomon: yes. -lemonis: awesome. -solomon: you guys were awesome. lemonis: thank you for the opportunity. -dolores: thank you. -michael: thank you, solomon. -thank you so much. -solomon: yeah, thank you. lemonis: it feels good to get the deal done with 16 handles because it's a nice cross-marketing opportunity for two great companies. you know, i don't ever want to give michael too much credit, but between you and me, i think he killed it.
♪ richard: hi. let's sit here. you go in first? lori: yeah. lemonis: it's time to sit down with the family and discuss the idea of michael having equity in the company. maybe not give him the whole thing, but give him an opportunity to sort of feel like he's getting a seat at the table. i wanted to get all of us together to really talk about michael's progress. not as a son, but as a manager in the business. what i'm proposing is that you're given 5% of the business and that you vest 1% a year based on your performance and, you know, everybody sort of agreeing that things are going the right way. your dad was not in favor of this equity plan. and i wore him down over time only because i do believe that you have worked and have earned something. how do you feel about this proposal? richard: i think it's fair. did he earn it? yes, i think so.
lemonis: you want to shake his hand? michael: yeah, absolutely. i own a multi-million-dollar company. lemonis: congratulations, buddy. michael: thank you. lemonis: congratulations. you've earned it. this is a huge step for michael. him having equity in the company should only make him hungrier and more ambitious for the future. with the savings that we've experienced by re-negotiating the cream and the new sales accounts that we've picked up, this business is scheduled to continue to grow at a very nice pace. and our new relationship with 16 handles not only gives us a ton of marketing exposure, but it forces us to develop new flavors. i'm excited for what's gonna happen in the business, but i'm more excited to see michael's grown. richard: so you're an owner now. lemonis: one thing that he should know for sure -- i'm gonna continue to push him. ♪
lsammy:: this is where the magic is.... lemonis: ...a burger business in new york city... tranchina: don't be shy with the sauce. lemonis: ...built by four best friends... sammy: we had a dream. we had a [bleep] passion. i don't know where the [bleep] it went. lemonis: ...who now can't get along. sammy: so, why the [bleep] wouldn't you open up the restaurant on time? -that's [bleep] -tranchina: hey! that's enough! lemonis: it's a dire situation... sammy: i build it for my brother, for my family. [ voice breaking ] i feel i failed them. i really do. [ sniffles ] lemonis: ...compounded by lagging sales and mounting debt. how much are you losing? covello: $5,000, $6,000 a month. lemonis: if these guys can't get on the same page, it's just a matter of weeks before this business goes belly up. todd: if we don't fix the problem, we're gonna have to close the doors. lemonis: new york city has a ton of energy,