My name is marcus lemonis, and i fix failing businesses. If you dont like money, dont follow my process. I make the tough decisions. Were closing the store. Were done. Im not talking about it anymore. I back them up, spending my own money. Its not always pretty. Man perfect flavor. Lemonis . But this is business. You got to trust the process. I do it to save jobs, and i do it to make money. Thanks for your business. This is the profit. [ bell rings ] west end coffee provides freshlyroasted Gourmet Coffee to local restaurants and specialty shops. Coowners Becky Schramm and john brown were in a relationship when they bought west end coffee for 500,000 in 2012. But a year later, their relationship ended in a nasty breakup, and trouble started brewing at the business. John youre ridiculous. You dont know what youre doing. Lemonis and their employees are constantly caught in the middle. Man i think theyre both good people. I just think they dont like each other. Lemonis with their business relationship strained and their losses mounting, time is running out. Theres a huge market for freshlyroasted Gourmet Coffee. If i can just get john and becky to put their claws away. John so, now you think you got a big [bleep] and you think you can run things, you know everything. Lemonis . And act as a team. John im done. Becky whatever. Lemonis . Well be making money in no time. Bryan welcome to another day in the west end. Lemonis [ inhales deeply ] smells good. [ sniffing ] [ sighs ] john tired of you blaming me. If you think youre so [bleep] great, go do it. Becky thats why im here. John [ sarcastically ] right. You want him to resolve our personal issues. Thats what you want. Becky im worried about the business, not our personal issues. Lemonis theres two things that i found when i walked into west end the smell of great coffee, which was nice, and the cursing not so nice. Hi, there. Becky hello. Lemonis im marcus. Becky im becky. Lemonis becky, nice to meet you. Becky very nice meeting you. John marcus, privilege. John brown. Lemonis john, nice to meet you. John nice to meet you, sir. Becky thank you for coming. Lemonis the smell when you walk in here is awesome. John it is. Thats what everybody says. Lemonis and so, is this whole warehouse is all the manufacturing . John it is. Everything is in this 3,500 square feet. Lemonis well, why dont we take a look around . John please. Please. This is our storefront. We have an extremely Loyal Customer base. People are coming in buying 7, 8, 9, 12 bags of coffee. Theres a lot of locals that live maybe 20 miles from here. They dont want to drive the downtown, so we do ship. Becky were in whole foods and earth fare and fresh market, as well, so they can just pick it up at the grocery store. Lemonis oh, you are . John yes. Lemonis thats nice. Who got that account . Becky the previous owner. John previous owner. Lemonis and what will the entire business do . John we did 840,000 last year. Lemonis how much profit . John i want to say, last year, it was 40,000 at the most. Okay. This is our production area. Lemonis how much is your rent a month . John 2,750. 2,750. Lemonis thats a bargain. John its a bargain. And it goes to 3,000 september 1st. Lemonis and then at the end of that period, it goes to becky hell jack it up. John we dont know. Thats the end of the lease. Lemonis any time you can have a longterm lease, it really gives the business an opportunity to know where its going. The longer the lease, the better the deal. Becky thats green. Thats cooked. Lemonis and so, this is what the seeds look like. John thats the seeds. Lemonis and so, theres a misnomer when people say coffee bean. John its a little green fruit that turns red when its ripe, ready to be picked. Lemonis but it tastes nothing like coffee. John no. Roasted coffee undergoes the same chemical process as baked bread. Lemonis how did you learn how to roast coffee . Becky we didnt. Lemonis why havent you learned . John just havent had the time. Lemonis why havent you learned . Becky um. I mean lemonis i mean, this is the whole business. Both it is. Lemonis you should really learn how to do that. It would be like owning a repair shop and not knowing how to change the oil. John youre right. Becky thats true. Lemonis roasting coffee is the single most important process of this company. Everybody should know how to do it. Becky we got the master roaster when we bought it. He stuck around. He only works one to two days, so thats when i got my son to start learning to roast. Hes our junior roaster, daily roaster. Lemonis its good you have a backup, cause if the other guy disappears, you have a plan. Becky marcus, this is my son, bryan. Bryan, marcus. Lemonis how are you . Really nice to meet you. How long have you been doing this . Bryan about two months. Maybe a little bit longer. Lemonis you like it . Bryan uh, yeah. Becky [ laughs ] you can tell the truth, honey. Bryan its a challenge sometimes, but its fun. Lemonis whats the challenge . Bryan um, the dynamics between them. I mean. Lemonis the dynamics between them are interesting . Bryan very interesting. Lemonis the coffees awesome. Lemonis whats a machine like this cost . John used, about 60,000. Brandnew, about double that. Lemonis lets crank this up. I want to see how it works. Im fascinated by it. Now its time for me to try roasting coffee. I want to have knowledge and an appreciation for it. And so, will i see that turn brown over time . Bryan yep. Lemonis how quickly can you get product . John three to four days. Lemonis because youre going through a distributor. And do you know how much margin youre losing through that distribution . Between going to the actual farm to here . John i do not. Becky we do not. Lemonis the fact that john hasnt taken the time to find out how to improve margin is troubling to me. He doesnt seem to see the importance of finding out what his cost would be by eliminating the distributor and going directly to the source. How many pounds do you roast a year today . John a little over 100,000 pounds. Lemonis i always look for ways to save money. If we could just pick up 30 cents a pound, over 100,000 pounds, thats 30,000 a year. If you ran this like a tight machine with two shifts using every square inch of the place, whats the maximum you could roast in a week . John probably around 7,000 pounds. Lemonis so thats about 364,000 pounds a year. Youre only producing 33 of the capacity of this facility. West end coffee roasts over 100,000 pounds of coffee a year and generates about 840,000 of revenue. But its highly unproductive, operating at only 33 of their total capacity. If they would get sales in line, the same facility with the same equipment and the same labor could generate over 360,000 pounds of coffee, yielding them over 3 million in sales. With 50 margins, thats why this is an attractive business. [ machine beeping ] thats pretty awesome. Theyre good, though. Bryan its cause you loaded them right. Lemonis but, of course, tasting the coffee will be the most important test. Im not a big coffee drinker. John okay. Lemonis i like coffee ice cream. Does that count . Becky yes. John sure. Becky it might be a little bit strong for you. John might be a little bit strong for you, and we make it pretty strong. Lemonis oh, its good. John but its good. Lemonis but its really good. John and its fresh. Lemonis its obvious that they have a good product, and beckys son bryan shows me that the employees are motivated and they enjoy their work. The tension between john and becky could be the reason this business is really struggling. Tell me the story of how you met. John she became friends with my wife. We would hang out together. My wife and i my exwife and i had problems. I went to my wife, and i said, if you want to try to work this out, you need to get rid of becky. Lemonis why did you want her to get rid of becky . John so that my exwife and i could work it out. We were like an inner circle. There was like the three of us that were, you know. Lemonis yall were having, like, a there was like a triangle thing going on . John sort of, yes. Lemonis sort of. Okay. John yes. Cohorts in crime, maybe. I dont know. Lemonis [ laughs ] [ laughing ] let me check out these recipes. [ laughter ] this is a classic case of t. M. I. I dont know what sort of graph or chart we could put up for this one, but i think we should move on. So, how many total employees . John seven, counting us. Becky we have bryan as a roaster. We have brandon who does repairs. John lets go back to bryan for just a minute. I had a plan. She came in, overrode it, put him in there. Becky he wanted to interview a guy that worked at home depot in the garden department. John i wanted to interview anybody that might have been qualified. Becky whereas bryan at least knows how we run our business. Lemonis this is how you guys coexist all the time . John all the time. Lemonis how does it make the employees feel . John like [bleep] lemonis and when you guys were together in a relationship, was it normal . Becky not since we got here. This kind of really was the downfall. Lemonis can the relationship be repaired if youre not working together . John i no longer want to be with her. Im looking for a wife eventually. Becky theres news, cause he told me he was never getting married again. John i told you i was never gonna marry you. Becky [ laughs ] lemonis well, its an interesting place. How do you work in this environment . I mean, i only got a dose of it. Man very carefully. Bryan its been calm today. Lemonis todays been calm . Man 2 todays been calm. Bryan nice and calm. Man 2 mmhmm. If they ever get on the same page, they can do a lot. Its just. Hate. Hate and mistrust. Bryan i mean, i think we all do a pretty good job of knowing how to do everything. I think if you just kind of threw us into most spots, we could probably all just do it. Lemonis its interesting to me that the employees function at such a high rate despite the negativity coming from john and becky. I need to dig into the structure of their business relationship to find out if its the dysfunction thats holding this business back. Hows the equity allocated between 50 50 . John im 82, and shes 18. Lemonis how much money did you actually give to the seller . Becky 499,000. Lemonis 499,000 . John yes. Lemonis and how much of cash did you put in . John cash out of my pocket was 12,500. Beckys was 77,000, cash. Lemonis so, 500,000 is what the seller was given for the purchase of the business. Becky thats right. Lemonis when you handed them a check, 77,000 came from you, 12,500 came from you personally. Becky 100,000 from the bank. John shh. Lemonis a hu becky 100,000 from the bank. Lemonis so thats 200,000, about, right now. And where did the other 300,000 come from . Becky his 401 that got rolled over into the retirement pension plan, which then is a stockholder, shareholder. Lemonis slash lender. John yes. Becky yes. Lemonis john and becky told me that they paid 499,000 when they purchased west end coffee. Becky came up with 77,000 in cash. John came up with 12,500 in cash. They received a 100,000 bank loan, and the remaining 300,000 came from johns 401 k retirement plan. If you look at the numbers literally, becky would actually only own 18 and john 82 , but theyre acting like its a 50 50 partnership. Do you pay yourselves . John we have only taken a 5,000 officer salary once in those two years. I was living, like, off of savings, and thats pretty much depleted. Lemonis whoa. John yeah. Lemonis and why havent you listed it . Becky i dont want to sell. Lemonis do you want to sell it . John i really dont, but i cannot continue for her to control my money. Lemonis how does she control your money . John she has the ultimate shareholder voting majority. Lemonis how does that work . John because shes a director on that qualified pension plan. My mistake. Becky all i did was sign. John she could fire me as c. E. O. And president if there was a shareholders meeting. Lemonis its obvious to me that john didnt fully review the contract before signing it with becky. While john has put in most of the money either from cash or his 401 k plan, he gave becky the right to act as a director of his 401 k plan. This gives becky the right to actually vote him out and fire him. Whos responsible for keeping all this stuff straight the balance sheet, the p l . John i do. I look at p l almost daily just to see where were at with saleswise compared to last year. Lemonis 834,000 in sales. This is through. John this is 2013. The next page is 2014. Lemonis gross is actually down gross profit. Right . John correct. 83,000. Lemonis okay. Whats happened . John expenses. Lemonis when you say expenses, you mean cost john im sorry. Cost. Cost of consulting. Excuse me. Lemonis the bank loan. 100,000. John yes. Lemonis and so, youre trending down. Right . John correct. Lemonis well, ill give you a lot of credit, both of you, for putting together solid financials, but i dont know how responsible you are in managing the people here, and the biggest risk in this business right now its you guys. John oh, yeah. Were whats broke. Becky yeah. Thats why i called you. Lemonis but im not a guidance counselor. Becky oh, i know, but. Lemonis you know what i like about both of you . Becky [ laughs ] lemonis you have passion. Even if i dont agree with the content all the time, you have passion, and thats not something that you can teach people. The criticism that i have is that the business is bigger than both of you. John agreed. Lemonis you guys made this investment together. Youre either gonna go forward together, or youre gonna burn together. I want to do business with people that will always do the right thing without conditions. But i just cant understand it. I need you to explain to me again why it is that you think its okay that accidentally, you secured a right that gives you the ability to fire him from this business when you only put in 20 of all the money. I need to just hear from you, cause i think if i cant get a good explanation a true, honest explanation i have to leave. Becky he has threatened to fire me, and to me, thats the only thing that i have to hang onto. Lemonis you are taking his ability to control his destiny, which is what i think is driving the anger and the hate and the mistrust. Becky no question. Lemonis and you know it, and youre using it as a weapon. Becky it was a twist of fate, for sure. Lemonis it was an accident. Becky i dont think lemonis it was an accident. Becky totally. Lemonis and so, what reassurance does she have that youre not gonna sign the paperwork, play nice for a week, and then blow her up and blast her to the moon . John that i absolutely will give her that right and that opportunity for us to Work Together and build this as it originally was envisioned. Lemonis are you willing to say to him, im willing to take the chance, john, to fix this issue, but i have something that i shouldnt, and im gonna give it back . Are you prepared to do that . Looking to simplify your skin care routine without sacrificing results . Try olay total effects. One dose provides more vitamin b3 than 50 cups of kale and improves 7 key areas of visibly healthy skin. Try olay total effects. No coverup spray here. Cheaper aerosols can cover up odors in a flowery fog. But febreze air effects eliminates odors. With a 100 natural propellent. It leaves behind a pleasant scent youll love. [deep inhale] freshen up. Dont cover up. Febreze. Lemonis you secured a right as a director in his 401 k plan that gives you the ability to fire him from this business when you only put in 20 of all the money. Are you willing to say to him, im willing to give it back to you . Are you prepared to do that . Becky i am. Lemonis right now . Becky sure. John that would go a really long ways, cause you hit the nail right on the head. That is what is causing the hurt and the anger and the frustration. Lemonis and the mistrust. John and the mistrust. Absolutely. Lemonis im all about getting this business from 1 million to 5 million or 6 million. The product is good. I believe that i can create sales and generate revenue that you guys couldnt, and i feel like i bring that to the table. So, heres my offer. John okay. Lemonis im willing to put up 200,000 for 51 of the business. 200,000 gives you the ability to buy inventory that you dont have today. Out of the 200,000 that i offered them, i want 100,000 to go towards paying the debt off that they used to acquire the business. In my opinion, Small Businesses need to be less burdened and more focused on growing. The second 100,000 will go into working capital. As the business goes from roasting 100,000 pounds of coffee to roasting 364,000 pounds of coffee and we improve the productivity of the business, receivables will grow, and the need for more Raw Materials will grow, as well. John im just not sure that 200,000s enough. I mean, thats valuing our business at less than 400,000. Lemonis i put the wild card discount. John so thats tdiscount price. Lemonis i have to discount it cause i have to mitigate my risk. And so, the wild card in this situation is you guys. If you guys destroy and blow this place up, i can mitigate my losses. If im wrong, then we all make a lot of money because id rather have 49 of something that does 5 million than i would own 100 of nothing. John can we take a few minutes to talk about it, or. Lemonis sure. John yeah. Like he said, the big thing is, we have to start fresh, regain that trust and respect for each other. Im willing to come in here fresh as a daisy and say, hi, rebecca schramm. Im john brown. Thank you for being my business partner. Can we run this thing together and Work Together . What do you think . Becky i agree. This is a good business. Theres money here. Lets get out of our own damn way. John okay. We appreciate the opportunity. Were both willing to put all that energy, all that effort, all that passion, all that emotion, and well put it into fighting for our business and building our business with you. Lemonis okay . John yes, sir. Lemonis do we have a deal . Becky we have a deal. John we have a deal. Thank you, marcus. Lemonis great. We have a lot to do. Hey, john, id like to get everybody together. Its a new day, and im feeling hopeful. I want to get the entire Team Together so i can let them know the deal that i made with john and becky and also give them the new direction. John and becky and i have made a deal for me to invest 200,000 into the company. Ill have 51 of the business. Theyll share 49 . Im 100 in charge. The nonsense has to stop. Were gonna run this like a real business. Were gonna look at packaging. Were gonna look at sales. Were gonna look at delivery. I want to add new accounts, and if we cant handle the local people, then were not ready for the big leagues. I believe in the product. I think the product is great. So i am here to sell coffee. I am not here to babysit. cause if we sell coffee, what happens . Man we make more money. Lemonis thats it. And if we make more money, what happens . Man we retire earlier. Lemonis we retire earlier. [ laughter ] exactly. Now its time to get this warehouse and inventory in shape. I want to take the top 10 skus, and i want to see this inventory to the brim all the time so if youre off for a day or the other roasters not here, we can still function. Because im g