Lemonis and the employees, theyve reached their limit. Miguel for the last 18 years, you have not raised me a penny. You dont know what kind of man i am. Lemonis if i cant help renew their passion. Nothings changed. Revamp their attitude. Miguel i love it so far. Lemonis . And most importantly, resolve their family issues. I know its hard for you. This longstanding new York Business will be shredded. I think im more excited about it than you guys are. Im marcus lemonis, and i risk my own money to help businesses. I love investing in american businesses. Woman these people are here because they care. Lemonis its not always easy, but i do it to create jobs, and i do it to make money. Do we have a deal . Lets rock and roll. Man yeah lemonis this is the profit. Today, im visiting ideal cheese shop, a neighborhood favorite on the Upper East Side of new york city. Michael you like brie . Youll find out, right . Lemonis and despite their multidecade success, theyre having trouble making ends meet. Michael weve got panforte, amaretti. Lemonis look, i love working with family businesses, but i never know what sort of relationship dynamic im walking into. Oh. The minute i walk through the door, im stunned by the smell. It didnt smell great. How you doing . Im marcus. Michael michael. Pleasure to meet you. Lemonis michael, nice to meet you. Theres an interesting scent in here. Michael yes, it is a pretty heavy aroma. I dont smell it at all. Lemonis its strong. Michael were cheese guys. We smell nothing. Lemonis how you doing . Im marcus. Josh josh. Nice to meet you. Lemonis nice to meet you. Julius hi, marcus. Julius. Lemonis julius, nice to meet you. Julius this is angela. Angela hi, marcus. Lemonis really nice to meet you. How long has the business been here . Julius in april, it will be 20 years. Lemonis in this location . Julius in this location, yeah. Lemonis but the company has existed for how long . Michael 1954. Lemonis and when did you guys buy it . Michael 16 years ago. We do kind of three businesses in one, so we have the retail shop. Second one is online, and then the third one is a wholesale business where we sell to restaurants and hotels. We have 5,000 restaurants in manhattan that we can sell to. Lemonis how many do you service . Michael probably, like, 65, so 0. 1 . Lemonis oh. A little smaller than i thought it would be. Michael yeah, but it still. Lemonis did you lose customers over the years . Michael thats the area thats, you know, spikes and valleys, depending on where we are in the time frames. Lemonis how many types of cheese are there . Angela oh, my god. Michael probably 10,000. France alone, theres over 5,000 cheeses. Lemonis whats your favorite cheese . Michael yeah, dont get scared. Julius you will like it. Michael its called brebis rousse. Lemonis its really good. Its your favorite . Michael one of my favorites right now. Lemonis how many total cheeses in the shop . Michael a couple hundred from about 17 different countries. One of the First Companies to really go heavily into european cheese. Lemonis i went to school in wisconsin, and i was wondering, like, where is all the wisconsin cheese . cause every cheese thats here is some sort of fancy cheese. Now, i know theres a market for that, but there has to also be a market for, like, regularpeople cheese. Right here. Can you give me a little tour of the store . Julius sure. Michael basic premise is that we work behind here. Manchego very popular. Angela nice. Manchego. Michael sheeps milk cheese from la mancha. Full array of cheeses here and behind. Our blue cheese selection back behind here. Lemonis why does it seem inventorylight . Michael i intentionally do it like that, you know, to pay the bills properly. Yes. Lemonis it is tight. I thought it was odd that he recognized that there was only a couple hundred cheeses out of 10,000plus, and hes a specialty cheese shop. That was alarm bell number one. Olives back here. Michael our charcuterie section. Dried sausages, sopressata, jamon serrano. Lemonis limited beer selection, limited olive oil. Michael so, we have four lines of different pastas. Lemonis a little grocery. Michael right. Lemonis of the total revenue for the store, which is how much . Julius about 1. 5 million. Michael right. Lemonis how much comes from dry goods, vs. Cheese . Michael 80 cheese. Lemonis when you have a storefront in a city like new york, where rent is extremely high, every square inch of your space matters. In this case, 80 of the store revenue is coming from cheese sales, while 20 is coming from packaged goods. But unfortunately, more than 50 of the space is dedicated to those dry packaged goods. Allocating floor space and the assortment of products is crucial to a business being successful. So, what was your business to be able to do this . Julius i was in the Courier Service business. Lemonis okay. Julius . 27 years. Lemonis did you work in that business with him . Michael yes. Lemonis and have you guys always worked together . Michael my entire life. Lemonis your dad seems like an easy guy to work with. Michael yeah, okay. [ angela laughs ] julius wait a minute. Did he hesitate . [ laughs ] michael no, hes not so easy. Lemonis hes not so easy . Angela no. Julius i think that michael would work better without me. Im ready to kind of take a step back. Lemonis oh. Michael not onsite. So, you know, he lives in florida, so im the daytoday operator. Julius last 2 years. Lemonis why cant he buy you out . Michael yeah, so, weve had some broadbased discussions over the years, but there was no motivation for him to do it as the controlling interest partner. Lemonis so, its 5050 . Michael 7030. Lemonis you have 70 . Michael no. Angela he has 70. Michael he put in 100 of the money. Lemonis and you get a wage in addition to your equity . Michael no. And it doesnt change year to year, so its like im an employee. Angela see, thats where he feels it. Michael so i am an employee. Lemonis okay. You can sense from michael that hes frustrated about his financial arrangement with his dad. Not a comfortable position for anybody to be in. Why havent you come up with a plan to transition the ownership of the business to your son . Julius i have. Ive been looking to see if i can find. Lemonis he says no. Julius no . Michael hes just looking to try to sell it. Julius no, ive been looking to find a partner for the last 2 years. Thats the truth. Lemonis but why havent you sat down with him and said, okay, i want to sell you the business . Michael right. Julius because im not sure if he would accept that as a possibility. Michael well, maybe 7 or 10 years ago, we would have done that. Lemonis what about now . Michael i dont know. Where the business has fluctuated a little bit, its probably turned me off a little bit than more turned me on, but. Lemonis interesting. Michael . I still see positives in what we can do to it. Lemonis is there a lot of debt in the business . Angela yes. Michael yes. Lemonis whered that come from . Angela the other cheese shop out on long island. Lemonis you had a cheese shop out in long island . Angela yeah, we had a restaurant, cheese, coffee, and takeout. Julius all in one. Lemonis what happened . It closed . Angela oh, yeah. Lemonis how much did you lose . Julius 300,000. Lemonis so, has it accumulated new debt . Michael oh, yeah. Lemonis and how much is the debt now . Julius about 400,000. Lemonis oh, wow. Theres a lot of debt on this current business, but the genesis was from another cheese shop that the family decided to open on long island, and when that business failed, the burden came back to the original cheese shop, and its dramatically hurting its ability to grow. Lemonis hi, sir. Welcome. Man hey. The best store in new york. Lemonis best store. Man great for the neighborhood. Angela thank you. Michael we appreciate it. Thank you, sir. Julius i paid him to say that. Lemonis yeah. You can go help him. Michael orders complete, ill box it up. What else for you . Thank you. Have a good day. Lemonis the validation of customers walking in and out of this store all day long is mindblowing. [ telephone rings ] michael this is michael with ideal cheese. How are you today . Lemonis but i thought it was odd that i see michael on his feet working, and julius, who owns 70 of the business hes fussing on his phone. Can i ask you a question . Michael yeah, of course. Lemonis i love the fact that youre committed to helping your dad. Michael i mean, i work here. I like it here, but i just need it to be different. Lemonis what does different mean . Michael its builtup frustration. 7 days a week. Its 12, 13, 14 hours a day, so its been a grind. Lemonis and what do you think your dad ultimately wants out of this scenario . Michael i think he feels some pressure right now, too. Ive told him that i want to quit. I tell my mom i want to quit. He goes, well, you own the business. I said, okay, you come and run it. Lemonis oh, by the way, are you thinking about investing . Well, thats good. I just want you to know im thinking about quitting. Can you do me a favor . Michael of course. Lemonis grab the financials and your mom and dad, and lets go around the corner. Well sit outside and go through it. This is a 50yearoldplus business in a great neighborhood in new york city with millions of people to serve. You and i will sit together. And at this particular moment, the lack of passion that michaels exuding is almost like a death sentence for the business. Alright, so, last year, 1. 472 million in revenue, gross profit of 542,000, so just a little over 34 . Creditcard interest 11 grand. Finance charge 8 grand. Julius yeah, just keep going. Lemonis line of credit 11 grand. Total interest expense 31,000. Your rent is 185,000, and so, on paper, the business only makes 28 grand. Michael correct. Julius right. Lemonis and what is the revenue done over the years . 16, it did 1. 7 million. 17, it did 1. 7 million. 18, it did 1. 4 million. In the last 12 months, its down 300 grand. Angela yeah, we lost a big account. Lemonis total cash right now in the bank. Julius about 10,000. Lemonis and what are the total payables . Julius 70,000. Lemonis what about receivables from vendors . Julius 70,000. Theyre almost equal. Lemonis how much debt is there . Julius about 400,000. Lemonis about 400,000 . Julius yeah. Lemonis okay. People could argue that the company is insolvent, which means, essentially, bankrupt. If you dont solve the debt or put money in, the business is closed. The debt is suffocating the business. Michael correct. Lemonis and that debt wasnt really generated from the business mistakes. Michael i say that every day. I shouldnt be getting phone calls that i owe money to people. Lemonis the problem is that youre in quicksand right now, and unless the business has an infusion in capital, its going to close. Michael i dont disagree. Lemonis if the gross profit and earnings of the business are the only mechanism to solve the debt in this particular scenario, theres no way out, so either new money comes in, the debt gets reorganized, or the business closes. And if the business closes, what happens with the debt . Julius id probably declare personal bankruptcy. Lemonis your wife is totally freaked out that you said that. Angela yes. Lemonis am i right . Lemonis cause he said it very casually. Angela yeah. I you know, i. Julius uhoh. Lemonis well, its a serious thing. Julius im taking it a day at a time. You know, try to find more business through wholesale accounts, basically. Michael see how it keeps coming back to the business is not doing enough, but if you take the debt out, is the business still okay . Lemonis its not doing as well as it used to. Michael correct. Lemonis and the fact that the business is down, and theres debt is a perfect storm. Michael correct. Lemonis ive seen enough. Let me come back with some ideas and see if theres something to do. Okay . Michael thank you, sir. Angela its been a pleasure, marcus. Lemonis youre a good guy. Michael thank you. Lemonis ill see you in the next week or so. Michael thank you, sir. Julius thank you. Michael how are you . Angela well, hello, there. Lemonis how are you . I asked the family to meet me for lunch to really sit down and find out if there is a deal to be made. Now, in this particular case, theres one problem to solve whats gonna happen with the debt . I left concerned. Whats the business worth . Michael maybe a tip over 1 million bucks. Lemonis subject to the debt. That would lead you to 600,000. Michael thats correct. Lemonis i dont think your business is worth 1 million bucks. The challenge that i have is, as an investor, i dont want to fund into your previous problems. Michael sure. Lemonis i want to fund into the growth. I would like to do some business with you guys. Angela well, we would love to have you. Lemonis im willing to invest 100,000. For a 100,000 investment, i would want to own no less than a third of the business. Angela [ laughs ] his face. Julius so hes valuing it at 300 grand. Lemonis does michael care . Miguel hes just burnt out. Theres no motivation. He is a dead piece of meat. Lemonis for a 100,000 investment, to feel exhilaration. It all starts with an invitation. 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From smarter atms, to after hours video tellers comcast business is connecting thousands of banks to technology that turns everyday transactions into extraordinary experiences. Hi there. How are you . Do you have any lollipops in there . laughing no, sorry. Were helping all kinds of businesses go beyond customer expectations. How can we help you . Mmmmm. Like a good neighbor, state farm is there. ® in getting key nutrients peopfrom food alone. One a day, covers all of them. In just one serving. One a day, and done. I would want to own no less than a third of the business. Julius so hes valuing it at 300 grand. Lemonis no, im valuing it at 700 grand, which is way more than its worth, and im taking the debt of 400,000 off of it. If you use the 100,000 offer for 33 of the business, you would assume that it has a 300,000 value, but it actually has a 300,000 net value. After i take the earnings and the assets, i put a multiple on them, and then i deduct the amount of debt that it has. I would want that 100,000 to clean up the pastdue payables first, additional inventory second, and refresh the store third. I do not want any of my 100,000 to service any of the debt. Angela okay. Now, we want 150,000 for the same percentages. Lemonis howd you come up with that . Angela i didnt. [ laughs ] i just asked for more money. Julius no, no, no. Lemonis your counters 150,000 for 33 . Thats 50,000 more. That puts the valuation at. Julius 850,000. Lemonis yeah, and i just dont think the business is worth that. Julius how about if we split the difference . Michael 125,000. Lemonis do you know what a preferred investment is . Are you familiar with the concept . Michael not really. Lemonis so, a preferred equity is essentially being a shareholder, but getting a guaranteed return on capital, meaning that if the business doesnt do well, i still get paid. Michael right. Guaranteed rate of return of what . Lemonis i would say 15 . Julius thats fine. Lemonis so, let me clarify. Were gonna settle on 125,000 for 33 . But that 125,000 would come with a preferred return of no less than 15 on my capital, and if the business ever sells, i get my money out before anybody else. Angela correct. Julius thats fine. Lemonis okay . Julius yep. Angela okay. Its a deal. Lemonis okay. So, because i know who really runs the family, ill give it to the person that i know really. It ended up where it belongs. Angela thank you. Lemonis we got a deal . Julius we have a deal. Lemonis we have a deal . Angela we have a deal. Lemonis we have a deal. Okay, thank you. Michael thank you. Lemonis one of the first things that i want to do is work with julius to understand how this business is going to grow its revenue, and youve got to start by making sure that the curb appeal of this business is the most important thing. Do you see how clean their storefront looks . Julius yeah. Lemonis and then you go to the nice flower shop. Look at how beautiful their curb appeal is. Look at how clean their windows are. Julius yes. Lemonis then you come here. Look how [bleep] the windows look. I mean, lookit. The awning started falling down. Theres rust everywhere. The windows are dirty. This store should do double what it does. Somebodys got to be accountable for the way it looks, so is it you . Is it michael . Is it. Julius really didnt take a good, hard look at this. Lemonis michaels gonna work on changing the assortment and doing all these other things, so this kind of stuff has to be yours. Julius okay. Lemonis michael is questioning his dads commitment to the business, so ive asked julius to take care of the front of the store, probably the easiest task of all of them. Miguel miguel. Lemonis miguel. Marcus. Nice to meet you. How many years have you been here . Miguel in this location, 18 years. Lemonis 18 years. And in the previous location . Miguel about a year and a half. Lemonis is this a better location than the previous one . Miguel i will say the other location was better. Lemonis whats the difference . Miguel there is no stuff that people are looking for. Lemonis we dont carry what people want . Miguel there are so many good cheeses out there that we could sell here, but we dont have because he just doesnt want to buy. Lemonis why doesnt he want to buy it . Miguel he doesnt care. Lemonis does julius care . Miguel he does, but hes never here. Lemonis does michael care or less than julius . Miguel used to. Lemonis not anymore . Miguel hes a dead piece of meat. Lemonis and why do you think michael stopped caring . Miguel hes just burnt out. Lemonis ive seen michael work bell to bell with customers, but i do understand what miguels perspective is about them not really caring about the business, and i want to get to the bottom of that with some of the other employees, as well. In business, the question of why is one that i have for everybody. Tell them, why do you have this business . Michael well, its to make a living for me first, actually. Lemonis okay. Julius well, i like the margins, and the business is unique. Lemonis okay, so, the two things that they just said were, i want to make money, and, i like the money. And if you open a business purely to make money, your business more than likely will fail over time. Why are you why do you work here . Be honest. Nicholas because i have a love and passion for good food. Lemonis okay. Josh i love working with cheese. Lemonis okay. Miguel i have the heart for it. Lemonis okay. Why do you have this busine