And i risk my own money to save struggling businesses. Were not going to wake up every morning wondering if we have a job. Were going to wake up every morning wondering how many jobs we have to do. Its not always pretty. Everythings going to change. Everything. But i do it to save jobs and i do it to make money. This. Lets go to work. Is the profit. In 1979, shortly after immigrating to the United States from mexico, Gilbert Martinez opened up Pacific Hospitality design, a commercial Furniture Manufacturing Company located just outside los angeles. Ana so far, so good. Thats good. Lemonis it was a true Family Business with gilberts daughter ana growing up on the shop floor. Ana this one here. Lemonis these days, she oversees design, while her father oversees production. And over the years, theyve built big accounts with Companies Like the coffee bean, mgm, and caesars entertainment. Ana weve got to make sure that we send quality stuff. Theyre unhappy because we didnt catch it. Lemonis but a recent drop in sales has left the company with a serious cash crunch. Ana i do apologize. The order will be going out. We dont have an exact date yet. Lemonis bills are now going unpaid, orders are getting delayed, and with every passing day, gilbert and ana find themselves deeper in the hole. About a yearandahalf ago, i invested in another family furniture Manufacturing Business grafton furniture, located in miami. Since that time, the business has grown by about 50 . With their focus on residential furniture and pacifics on commercial furniture, i think theyd make a perfect match. Hi, there. Woman hello. Lemonis is ana here . Woman let me go get her. Lemonis let her know marcus is here. Woman okay. Lemonis thank you. I didnt really understand when i walked into pacific, why i was seeing residential furniture. I thought this was a hospitality business. If this is a showroom, i dont think theyre showing the right stuff. Ana hi, Marcus Lemonis are you ana . Ana yes. Lemonis how are you . Ana nice to meet you. Lemonis its really nice to meet you. Ana yes. Very nice to meet you. Lemonis how long have you guys been here . Ana weve been in this location about 13 years. Lemonis wow. Ana yes. Lemonis how are you, sir . Im marcus. How are you, sir . Nice to meet you. Gilbert me too. Lemonis how long have you guys been in business . Gilbert 40 years. Lemonis 40 years . And what is your business primarily . Is it hospitality . Ana mostly hospitality. We do guest room furniture, public space furniture, as well as restaurant furniture. Lemonis and how much of your business is hospitality . Ana probably like 90 . Lemonis 90 . Whats the other 10 . Ana a mix of like retail, as well as residential. So pretty much everything you see here in the showroom, we have manufactured. Lemonis beautiful quality. Ana these are some of the products that were currently making. These frames are actually for planet hollywood. Were doing about, almost 400 of them. And then we have headboards that were doing. We do these for lemonis and who designs all this . Ana thatd be me. These are all my designs. Lemonis its nice. You have a lot of talent. Ana that would be something that i would love to do day and night, but i dont do much of it anymore, because i do many other things. Lemonis and how much business will you do a year . Ana this year, were probably about like 2. 8 million. Lemonis and will you make money at 2. 8 million . Ana i dont know the answer, because im not i know i should know my numbers. I say yes, but im not 100 sure. Last year, we were on the red. Lemonis how much did you lose last year . Ana i think it was like 46,000. We would have orders where theyre, please make this for us, and then we would say yes, and theres no money in it. Lemonis who would say yes, you or your dad . Ana we would. Lemonis whos we . Ana my dad. Lemonis he loves to say yes to everybody . Ana yes. Lemonis when i look at him over there making that chair, he doesnt look like hes ready to retire. Ana i know. Lemonis does he want to . Ana he says he does. He works monday through sunday. Lemonis thats seven days a week. Ana yeah. This actually, ill have them flip it over so you can see it. Lemonis is this a sofa . Ana it is. So this is the outside back of it. Its going to have fabric and then the lemonis is that for your house . Man [ laughs ] no. Lemonis no. Thats a big pink chair. Man very big, very pink. Lemonis what does this cost to make . Ana papa, how much does it cost us to make this chair . Ana about 300 . Gilbert. Yeah. Lemonis and what does it sell for . 500 . Ana we have a price list. Are we selling it for 500 . Ive got to check. Lemonis i would hope that one of them would know their numbers. Ana its much worse than we thought. Lemonis whats much worse . Ana the price. Its 420. This one, i got the price. Lemonis it costs you 300, you sell it for 420. Ana yes. Lemonis and youre making a 28 margin. This chair should be 675 to 700. So what jobs are you making money on, cause youre not making money on this. Gilbert not on the chair. Lemonis the furniture business in the u. S. Is extremely competitive, which could cause some manufacturers to underbid, but furniture margins in this business need to be north of 55 , not only to make a product, but to leave yourself some gross profit to deal with Quality Control issues and damage. For example, if they were getting at 57 margin on 2. 8 million of sales, theyd actually be generating 1. 6 million of gross profit, instead of their 28 margin, which generates less than 800,000 of gross profit. Im going to walk around and just kind of get the lay of the land, if thats all right . Ana absolutely. Feel free. Lemonis thank you. Theres a sense of chaos at pacific, and theres no flow to the way furniture gets made. Theres raw material everywhere, and a lot of it is damaged. And theres waste all over the place. You look around this place, you see margin leakage everywhere. But what i really want to do now is get gilberts take on what he thinks the biggest problems are. How did you start the business . What was the first thing you started with . Upholstery shop. You were how old, 20 . And how old are you now . Gilbert 61. Lemonis what do you worry about . Cash. Where did all the cash go . Who does the accounting here . So if i want to talk about the numbers, id talk about it with ana. Ill go talk to her about it. Thank you, gilbert. Thank you, my friend. Gilbert thank you. Lemonis why did you call me . Ana february, march, april, like were really hard for us, like we almost couldnt make payroll. My dads health is another one. I feel like when hes stressed, he just deteriorates more. Sorry. I dont want to see my dad one day, just drop dead and be like, ill feel guilty for the rest of my life. I mean, he was diagnosed with parkinsons a couple years ago, so the man you see now is not the man that was five years ago. Theres days that he cant even move. Lemonis it must kill you to see him like that. Ana it does, and i try not to break down in front of him, because i know that if i do, he breaks down, especially when things are tough. He has really bad days, and hes here. He shouldnt be here. Lemonis how tight is money right now . Ana in march, we had to put money out our own personal, like my husband and i, and my husband was like, this is the this is it. Were not putting any more. Lemonis how much money have you put in personally . Ana personally, was 75,000. Lemonis thousand . Ana mmhmm. Lemonis whoa. Ana theres definitely a potential. I think we have history, we have great clients, we do a great product, we have great people. Lemonis you need help. You need help. Is your Balance Sheet in here . Ana yes, it should be in there. Lemonis so, in january, you did about 220,000. Ana yes. Lemonis february, 175,000. March, 200,000. April, like 30,000. Ana ugh. 30,000. I think it was 30,000, and then it was the same. Lemonis may, 50,000. And june, back up. So what happened in april and may . Ana we didnt have any sales. Lemonis you can see why ana and her dad are now feeling the real pressure when it comes to cash flow. Low margins, poor efficiency. Now, when those things exist and business is great, you can just skim by, but when business drops, its like putting a noose around your neck. There is no chance of survival. So you think youll do about 2. 8 million for the year and break even . Ana probably. Lemonis thats what it looks like to me. So 288,000 in payables. Ana mmhmm. Lemonis 106,000 of them are past due. And 300,000 to a family member. Thats 406,000 in liabilities. Yikes. What do you ultimately want to do with the business . Do you want to try . Ana i want to take it over, yes, i mean. Lemonis you do want to . Ana i dont i mean, thats what ive always wanted. I couldve given up a long time ago. Lemonis why didnt you . Ana because i feel like its like my dna. Lemonis all right. Can i keep this just to study it . Ana absolutely. Of course. Lemonis hi. How are you . Ana were nervous. Im nervous. I dont know. Lemonis what are you nervous about . Ana this whole day has been an amazing experience. Lemonis you did a good job today. Gilbert really . Lemonis yes. Im very impressed. Gilbert why . Lemonis because any time one person over 40 years can build a business in america and have it stay open and last, is a big accomplishment. Youve fed a lot of people over the years and you have a lot to be proud of. Gilbert i never thinking about that. I thinking of something, i thinking with my heart, not, not with my brain. Lemonis well, thats why youre successful. Gilbert you think so . Lemonis yes. Because business isnt just about thinking with your checkbook. How proud are you of your dad . Ana very proud. To have him be an immigrant that didnt go to college, to accomplish what hes accomplished is, i mean, its amazing. Lemonis what worries you the most about your dad . Ana his health and, you know, having him gilbert im okay. Ana i know youre okay, but some days, youre not okay. Gilbert dont worry too much. Ana i do worry. Gilbert okay. Ana im going to worry about you. Hes so stubborn, you know. Its like. Gilbert dont cry. Ana i know, youre making me cry. I dont want to cry. Lemonis you may not know, but i have an interest in another furniture business. Its in miami. Its called grafton furniture. Its similar, because you make a type of furniture, but theyre in the you know, theyre in the residential furniture business. Ana right. Right. Lemonis like pacific, graftons a Family Business, and they suffered from a lot of the same issues when i first met them. They had problems with their process and their efficiency, but in the last year, theyve made a ton of progress and their business is up about 50 . They lose a lot of customers, because they cant handle the freight to the west coast. And im assuming that you lose a lot of customers cause you cant handle the freight. Ana to the east coast, right. Lemonis . To the east coast. And i see that they could help you. And i feel like you could help them a lot. So im going to make an offer for 300,000. The 300,000 is going to go towards improving the facility and putting the rest in working capital in the business. Once we fix the margins, the company will have plenty of cash flow to service the debt. For that, i would want 40 of the business. Grafton and i would be partners in this deal. But i think when you think about it, the decision you have to make is, do i want to be partners with marcus and grafton . Ana right. I mean, i definitely want to be partners with you. Thats absolutely no question about it. But im not sure. Steve this should not have been upholstered prior to paint. This counter stool, really bad. Steve yeah, they didnt sand it properly. Lemonis are they capable of producing graftonquality furniture here right now . Steve no, not right now. Not right now. Its versus the other guys. Eese cheering clearly, velveeta melts creamier does scrubbing grease feel like a workout . Scrub less with dawn ultra. Its superior greasecleaning formula gets to work faster. Making easy work of tough messes. Dawn is a goto greasecleaner throughout the kitchen, too. Keep a bottle in the laundry room to pretreat greasy stains. And keep dawn in the garage to lift grease off car rims. Its even gentle enough to clean wildlife affected by oil. Dawns grease cleaning power takes care of tough grease wherever it shows up. Scrub less and save more. With dawn. vo the flock blindly flying south for the winter. They never stray from their predetermined path. But this season, a more thrilling journey is calling. Defy the laws of human nature. At the season of audi sales event. Why do wrinkles happen at the worst times . Showing up here here and even here . With new bounce rapid touch up spray, you can fight wrinkles anywhere. Spray smooth and youre fresh and ready to go wherever you are. New bounce rapid touch up spray. Bounce out wrinkles anywhere. Lefor that, i would wantke 40 of the business. 0,000. Grafton and i would be partners in this deal. And the decision you have to make is, do i want to be partners with marcus and grafton . Ana i mean, i definitely want to be partners with you, but im not sure. I mean, i just wish i wouldve been the first furniture manufacturer on your portfolio, you know, versus the other way around, but. Lemonis right. Well, one thing we can do is we can up it to 45 and then i can give you 5 of grafton. Ana what do you think about that . I feel like that lemonis so that you feel like youre a shareholder in their business, and theyre a shareholder in your business. Ana thats a fair totally fair. Lemonis does that feel better . Ana yes. Lemonis theyre really good at custom, and youre really good at commercial mass production. And i want to be clear, you know hes still the boss, right . Ana absolutely. Lemonis im 100 in charge of you, but not of you. Youre still the jefe. Lemonis we have a deal . Ana we have a deal. Lemonis im excited to go to work. Ana thank you so much. Lemonis thank you very much. Gilbert you happy . Ana just to see you be able to work less, its going to make me very happy. Lemonis guys, ive been waiting for you. Why you always late . Grafton furniture is currently run by steve grafton, who also grew up in the furniture business, and it was founded by his late father esteban. Now hes helped by his son steven, the Third Generation of the grafton family. In my time working with the graftons, theyve implemented a new manufacturing process that not only changed the efficiency, but it changed the profitability. And that new process also has strong Quality Control measures that ensure that every customer is happy. This is anas father gilbert. This is steve grafton. I flew both of them out to california because i wanted them to be part of our first employee meeting. Steve my son steven. Ana very nice to meet you. Stevie nice to meet you. Ana ana maria. Nice to meet you. Steve hola todos. Man hola. Lemonis so i wanted you guys to know that ana and gilbert and i made a deal, along with stevie and steven, to invest 300,000 into Pacific Hospitality, to buy a 45 stake. And so, Going Forward, these two businesses are going to be one company. Putting the businesses together means more work, more business, and more money for everybody. But im 100 in charge. Okay . Lets go to work. What do you see here . You see opportunity . Stevie absolutely. I see us a few years ago, five, six years ago. Lemonis is that what it feels like . Stevie almost exactly. Lemonis what do you think of the quality of their work . Steve for hospitality, its fine. For residential, its not fine. Lemonis its not fine . So what are you noticing that would make it not fine . Steve well, when the leg is not perfectly smooth like i could show you on a finished product on the other side lemonis show it to me. As were touring the warehouse, steve is pointing out flaws on some of the furniture. Steve this should not have been upholstered prior to paint. This counter stool. Lemonis yeah, really bad. Steve yeah, they didnt sand it properly. Hospitality is different. Line furniture is different. Lemonis yeah, but we have to be able to make hospitality in miami and custom residential here. Steve correct. Lemonis or weve totally made a bad investment. Are they capable of producing graftonquality furniture here right now . Steve no, not right now. Not right now. I would be scared. Lemonis im sure this isnt a lot of fun for ana, but in order for her company to go to the next level, she has to really change the way she operates. You want to get this business going, you got to get your ducks in a row now. Who here is actually designated specifically to not let something leave here before its right . Ana mmm. Its norm well, i we dont we dont have a specified person. Lemonis youre dealing with big corporate clients like coffee bean, mgm, caesars palace, and theres nobody checking this furniture before it leaves . So if theres a problem, who actually finds it out, the customer . And when i look at that chair right there, why would he be fabricating it before the legs are stained . Ana yeah. They shouldnt have done that. Steve do the workers normally have an order that they look at . Ana they dont. Lemonis theres no work order status, so one chair, you dont know where it is in the production cycle . Ana no. Lemonis thats an easy thing to put in. Drop the process in, literally drop the template in. To create an environment where efficiency is maximized and mistakes are minimized, its not that hard. Its called a production line. What we need to do is create dedicated stations so that every single part of the process has its place and theyre in the right order. Framing, upholstering, finishing, staining, top coating, Quality Control. When we get things right the first time around, were not compressing margin by every mistake that we make. While this is a good idea, now what we have to do is make room for it. What is all that . Ana yeah, leftover stuff. I mean, its prototypes. Theres frames from a project. Its just accumulated. I kind of say, we can upholster, we can finish it. Lemonis no bs, ana. If you threw out everything that you havent used in five months, this place would be more able to breathe and more functional. All this stuff has to go. Ana i know. Lemonis and so im going to call, and im going to bring as many trucks and as many dumpsters and as many men as i can find, and every single part of this warehouse that you havent touched in months is going in the garbage. [ truck beeping ] today, its time to take out the trash. Whatever were not giving away to the employees, well, its going right in the dumpster. Ana i dont know if i want to see this. Lemonis this isnt just a quickly tidyup, were throwing everything out so we can entirely revamp the place, then we can make furniture efficiently and profitably. Come on. Were also cleaning out the showroom up front. Gilbert everything goes . Lemonis huh . Gilbert everything goes .