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. Like, like, like that, like that the unique salon spa is a fullservice salon with four locations across long island, new york. Woman hey, what are we doing today . Lemonis they do everything from massages to nails. Woman 2 a Manicure Pedicure . Lemonis . But their primary focus is hair. Woman you look great. [ laughs ] lemonis 16 years ago, carolyn devito. Carolyn how can i help you . Lemonis . And her partner joe secreeti bought their first salon. And it expanded quickly, but there was trouble along the way, and their partnership blew up. Carolyn i cant stand him. I hate him. Lemonis they landed in an ugly legal battle. Carolyn negotiated to keep the chain of salons, but she walked away with a mountain of debt. Carolyn the first year of the company was really survival mode, because my partner left me in such a financial mess. Lemonis despite the fact that she pulls in over 4. 2 million in annual revenue, carolyn still struggles to pay down her debt. As a single mother of three, shes under enormous pressure to get it right. Carolyn such a headache. Lemonis if i can find a way to get this fading business a fresh new look and attitude, then unique salon spa will be a cut above the rest. When i pull up to unique, i can tell this is a great location. The area is packed with stores and shops. How are you . Im marcus. Jennifer im jennifer. Nice to meet you. Lemonis nice to meet you. Is carolyn around . Jennifer yeah, she is. Let me get her for you. Lemonis okay, great. The front of the stores been taken over by i dont know what, a jewelry store, and it looks like a secondhand clothing store. It is unique. Ill give her that. But im not so sure its a good thing. How are you doing . Im marcus. Carolyn how are you . Nice to meet you. Lemonis nice to meet you. Youre carolyn . Carolyn i am carolyn. Lemonis i mean, i have to tell you, there is a lot going on in here. Do you feel like you have to have all of this . Carolyn women love to come in and do onestop shopping. So i have boutiques in my locations. I have jewelry concessions in the location. Lemonis this isnt the only salon that ive ever seen with Retail Products up front, but this is ridiculous. To use your prime real estate to sell something other than your own haircare products . Big mistake. What percentage of your total comes from selling products . Carolyn 5 . Lemonis and how are your margins . Carolyn buy it for 5, you sell it for 10. Lemonis not bad margins. Carolyn thats why i started my own product line. I came up with my own name, my own brand. This is a normal to dry shampoo. Lemonis how do these margins compare to like carolyn theyre a much better margin than that. Lemonis okay. And so do you distribute this product anywhere outside of here . Carolyn no, not yet. Lemonis have you tried . Carolyn no, i havent tried yet. Lemonis you just didnt have the time. Carolyn i didnt have the time. Lemonis anytime i make an investment, im looking for a way to enhance it. Clearly, this product has great margins, but the fact that carolyn doesnt distribute it is a real lost opportunity. What inspired you to get into this business . Carolyn i grew up in the industry. I started this with a partner about 16 years ago. A gentleman by the name of joe called me and said, id like to become partners. I met him, and i decided, okay, lets do it together. 15 years later, i went to an attorney. I. Lemonis carolyns legal settlement with her expartner prevents her from discussing the details. But what i can tell you is it had a tremendous financial impact, not only the money that she owes, but the damage it did to her credit. How many total locations . Carolyn four. I have four locations, all on long island one here, two centre island, and then south shore is my massapequa location. Lemonis which is the biggest one . Carolyn this is the largest of the four locations. Lemonis can i have a tour . Carolyn absolutely. Lemonis thatd be great. Carolyn this is the color area. We do a lot of color. We get keratin treatments back here. We have an exhaust system for that up here. Lemonis thats disgusting. Carolyn that was here. It used to be a restaurant. Lemonis at first glance, its not the most inviting space. Carolyn yeah, i know. Lemonis is it easy to recruit new stylists here . Carolyn the problem is, hairdressers want to go to whats new and happening and exciting. And, you know, this location here, its 16 years old. You know, its falling apart. Lemonis when you go to a salon that looks rundown and dirty, how are you supposed to feel inspired . I dont want to go into a place that looks worse inside than it did outside. Thats why its empty. Carolyn this is the dispensary. These are the colors we use. Part of the challenge is to keep a lid on the amount of waste. Lemonis oh. How much money do you think is in this room right now . Carolyn [ sighs ] probably about 25,000 worth of color here. Lemonis and how much do you think leaks out a month . Carolyn i always think its like a 10 waste. Lemonis a month . Carolyn a month. Thats my guesstimate. Lemonis the color room has about 25,000 worth of inventory, but it loses or wastes about 10 of that a month 2,500. On an annual basis, thats 30,000. We got a problem. Carolyn we grew so large that we needed a g. M. Who needs an office. And this is susan, the general manager. Susan nice to meet you. Lemonis im marcus. Nice to meet you. Youre the numbertwo person . Susan yes. Lemonis how many total employees report to you . Susan pretty much everybody 120. Lemonis what has having a general manager allowed you to do differently . Carolyn you know, theres a protocol to go to before they get to me, and my phone would ring 500 times a day. The employees would report straight to me. Susan you know, Little Things like that ordering, with communicating. Lemonis ordering products . Susan ordering products. Lemonis just at this location . Susan no, at all locations. Lemonis it seems to me that in a business of this size, there really shouldnt be a need for a layer of a general manager. Lemonis im marcus. Angela angela. Lemonis as i walked around and talked to all the employees in the company, there was one thing that was clearly consistent everybody hated the look of this place. Woman its just got to be. Woman 2 sharper. Woman . Revamped. Lemonis what should the look be . Woman [ laughs ] not that not to kill your ankles when you sit down, no. Lemonis and i also got a little more detail on carolyns exbusiness partner. When did you go into business with him . Carolyn 1998 i started with him. Lemonis how many salons does he have . Carolyn he has about 22 now. Lemonis really . Carolyn yeah. Lemonis and there was definitely confusion about roles and responsibilities. So, what do you do here . Debbie im actually the manager here, marcus. Lemonis you are . Debbie yes. Lemonis how is that different from susans job . Debbie um. Um. Uh. Lacey hi, guys. Is susan here . I need to talk to her. Debbie you need susan . Let me get her for you. Lacey okay. Susan hi. So you left your salon by yourself to come here to tell me that . Lacey definitely, cause i was trying to get ahold of you and i couldnt get ahold of you. Susan i have two phones. Lacey i know. And i emailed you. What happened on saturday when the a. C. S were broken down . Susan i had a guy that worked on them. Lacey no, you didnt. Susan and where were you . Lacey i was there. Susan exactly. And thats where youre supposed to be. Thats your job. Im here to help you manage, not manage your store, so dont start with me. Lacey the a. C. S not working in plainview, and she never took care of it. Were sweating our ass off. I got clients leaving the salon, staff upset. Lemonis whos supposed to do that . Lacey susan. Lemonis then why isnt she doing it . Carolyn im not sure. I dont know. She should have took care of it. Lemonis want to go talk to her . Carolyn yes. Lemonis lets go. Its obvious to me that carolyn hasnt established a chain of command. You can see it. You can feel it. You can hear it. What is the issue right now . Lacey i called her in the morning and said its not working. She says, ill get on it. Ill call a couple people. And i said, okay, great. Time goes on. Its dying in there. People are screaming and yelling at me, so i called susan again. I said, did you find anybody . Let me know. She was like, well, well wait till tomorrow. You know, its saturday, and were busy. Theres no excuse for it. Susan and you know what . You dont need to tell me what i need to do. Lacey youre supposed to be there to help out. Susan no, im not supposed to be there. Lacey youre not . susan you keep on mentioning my duties. Your job is to manage your salon. Lacey i did. Susan and my job is to know that youre doing your job right. Lacey i am doing my job right. Youre not doing your job right. Susan you have no clue how to manage your salon lacey no, actually, i learned. I study. Susan you dont study. Lacey yes, i do study lemonis if susan is the general manager and something at one of the salons isnt working, she should probably be onsite, making sure it gets fixed. Carolyn i think you should have been there, period, saturday, to have had peace of mind the whole time. Thats how i feel. Lacey you need someone to take care of this stuff, and i feel bad. You got a text message from a staff member that was clearly pissed off at me. I said, i called susan. Susan and why is she pissed off at you . Lacey why do you think . Were sweating our ass off. Lemonis a lot of these Small Businesses get in trouble because they have too many layers of management, and it became more obvious to me when some of the stylists wanted to pull me aside. I feel like im about to get jumped in an alley or something. Woman [ laughs ] lemonis so, whats going on . Woman we have an issue. Lemonis okay. Woman um. Susan. We are kind of confused at what she does. Lemonis yeah. Woman 2 have you figured it out . cause we dont know. Woman shes off saturday, sunday, and monday. Woman 2 she should be here on saturday. Our biggest day shes not even a part of. I just dont. Lemonis how does this affect you in doing your job . Woman 2 misbooked appointments, lack of assistance, and just Customer Service and lack of product. Woman 3 we have never seen her once come up anything about inventory, about putting things in the computer. Lemonis nobody in here has ever talked to carolyn . Woman i think she has some idea. Woman 3 but shes the type of person that thinks with her heart. She never wants to, you know, hurt anyone. She wants to give someone the benefit of the doubt, you know . Lemonis communication doesnt exist here. Its like the inmates are running the asylum. Im hoping that she has a better feel for her financials. I need to understand the revenue. Whats the total revenue, and how does that break down per store . Carolyn annually . Lemonis yeah. Carolyn um. Say us, its probably 1. 2 million, maybe up to 1. 5 million now. Plainview is probably 1. 5 million. Massapequa is about 700,000 or 800,000. Lemonis okay. Carolyn bellmore is probably around the same, 700,000 or 800,000. Lemonis and so thats 4. 2 million . Which ones are not making money . Carolyn i think syosset. Lemonis this one . Carolyn right now, yeah. Lemonis so this location. Carolyn thats correct. Lemonis if you took a location like syosset, how does the revenue of 1. 2 million break down . Carolyn 70 of its color. Lemonis 70 of the 1. 2 millions color . Carolyn color. Lemonis [ laughs ] carolyn colors big money. Lemonis are there opportunities to grow that business . How do you grow that business, in your mind . Carolyn you can add to highlights. You can add toners and glazes and conditioning treatments and. Lemonis which is why the materials and the control of those materials and the waste can either make money or put somebody out of business. Carolyn correct. Lemonis thats good to know. This further proves the fact that that color room better be right. Current debt on the business . Carolyn 170,000. Lemonis okay. Total number of employees. Carolyn 120. Lemonis oh. And you look at payroll as a percentage of revenue in this business . Carolyn yes. Lemonis and so what is that number . Carolyn where id like to be, where i think would be fair, 50 . Lemonis is that actually what it is . Carolyn 62 . Lemonis well, thats a big difference. Thats 12 . In order for you to take out 12 , youre gonna have to take out more than 400,000 in labor. A lot of Small Businesses make a lot of mistakes when they start acting like a big business. And so all these basically broke even for the year. Carolyn for the last two years, yeah. I havent taken a paycheck in like six months. Lemonis wow. So, basically youre struggling. Carolyn the economy went down. My partner ended up, you know, not paying his bills. And everything was behind the scenes. But, you know, theres a constant reminder in these places, because im still doing business as unique within the walls of the old company. Lemonis how do you move past it emotionally . Carolyn i juggle every day of my life. [ voice breaking ] sorry. Lemonis no, its okay. That was a tough time. Carolyn very. It still is. My kids were affected. Now im behind on my mortgage, taxes and things like that. So, i put on a facade, and i put on a happy face every day, and wake up. As long as my feet hit the floor, i go out running. Failure is not an option right now in my life. Lemonis it appears as though carolyns looking for a hall pass for a business relationship gone bad two years ago, and i get it, but its probably time for her to get over it and move on. Why dont we just grab a seat . Carolyn okay. Lemonis i guess the question that i have for you is, why did you call me . How can i help you . Carolyn because my business makes money. Id like it to make a lot more money. I need somebody to help me take it to another level. You know, ive never in my life ever thought that my expartner, joe, would ever do what he did. So i have to open up to somebody and say, hey, i need a little help here. Lemonis part of the reason that im here is because i think you have your act together. Carolyn i do have my act together. Lemonis in some ways. In other ways, it looks like in some cases the inmates are running the asylum next door. You inherited a store that is tired, and you did not have the money to fix it up. Today, its hard to get somebody to come into that salon. I wouldnt get my hair cut here today. I do not want to run a flea market where theres lots of different operators. Those look like bad business decisions. I have no interest in being a big partner in a hair salon. Carolyn if i see a value, i think it will be big if i can get something going. Lemonis its just not something that i can scale across the country in a way that i really want to. Lemonis i have no interest in being a big partner in a hair salon, but i buy off on your idea of having the products really be what could actually generate some real cash, but i dont like your packaging today at all. Carolyn okay. Lemonis i think its terrible. So heres my offer. Im willing to put up 200,000. Number one, i want to invest in redesigning and relaunching the product line. Number two, i believe the place looks very tired. And i want to start with one location, and i want to get it really right. We want to have a beautiful experience, but its effective and efficient, and its a good return on our money. Carolyn correct. Lemonis and, number three, the Business Needs working capital. So i want to put the right amount of cushioning in the business that i believe has you not looking over your shoulder every morning. Carolyn right. Lemonis and so, for the 200,000, i would want to be 20 of the salons and 51 of the product company. In the short term, im 100 in charge of everything. Carolyn well, i was thinking. What ive built so far, based on the numbers that im doing, would be worth a little bit more than 200,000. Lemonis so do you need more working capital . Carolyn i probably would like some sort of value for what im selling you or what youre, you know . Lemonis oh. So you want to be able to take some money off the table . Carolyn correct. Lemonis put some money in your own pocket. I like the fact that you had no problem pushing back with me. Ill go to 250,000. Carolyn [ sighs ] i want you as a partner, so, and i want to make a deal. I want nothing more than that. Lemonis so well do the 250,000. Because you came back and you bumped me. Carolyn [ chuckles ] lemonis this is by far the most expensive haircut. Carolyn . Youve ever had. Lemonis [ laughing ]. Ive ever gotten. Carolyn it will be the best haircut youve ever had. [ laughs ] lemonis we have a deal . Carolyn we have a deal. Lemonis congratulations. Carolyn thank you. Thank you. Lemonis so, heres the deal. Earlier, carolyn and i made a deal for me to become a partner in not only this business, but in her haircare products, as well. So, here are the things that are gonna happen here. Im putting up 250,000 to put some working capital in this business to renovate this entire facility to be the first renovation of all of them. Debbie yeah. Lemonis one of the benefits of designing a new space is your ability to add more chairs. With the new, updated design, we should be able to add eight new chairs and eight new stylists to go along with it. If each stylist can generate approximately 1,500 a week in sales, on an annual basis, those eight stylists would generate 576,000 in additional gross revenue. The styling of hair and hair color is our core focus. We need Everything Else that goes along with that. Whether thats fixing the product or adding other products and services, were gonna do that. So, a big chunk of the money were gonna spend is to build a new color bar and really increase our distribution of the product. In order for this business to be successful i want to make sure that we have clarity in the end on whos in charge of what. Whos in charge of this location . Raise your hand if you know whos in charge. See the problem . For the next period of time, there will be no question im 100 in charge. All right, we have a lot of work to do. All right, lets get to work. Thanks, guys. Woman thank you. Lemonis hi. Susan hi. Lemonis how are you doing . Susan good. How are you . Lemonis you look like youre waiting to talk to me. Susan oh, no, no, no. Im good. Lemonis how are you feeling right now . Susan i dont know. Confused. Lemonis well, what are you confused about . cause i want to make sure that we have leave here unconfused. Susan im just trying to do my job. Lemonis i know. Everybodys got to know what their job is. Its unclear what your job is. Its not clear to me. Susan um. From color to supplies to staples to anything. Lemonis so youre like the purchasing manager. Susan yeah. Lemonis and has there been an inventory issue in this location in the past . How bad . Susan well, we run out of supplies. We shouldnt run out of supplies. So we couldnt do a client today. Lemonis but we ran out of supplies, but dont you control the inventor