And if you dont get the quality right, this business wont be here for you. Miami is my hometown, and its also home to over a million cubanamericans. Since the castro revolution, cuban families have come here to build their homes and their businesses. They bring their culture while embracing something that is distinctly american the American Dream. Grafton furniture is a shining example. Started in 1964 by esteban grafton, the Custom ManufacturingCompany Makes everything from sofas, chairs, to tables. Steve this ones 154 by 96. Lemonis his son steve now runs the business and designs most of the furniture and is 50 50 partners with his wife, mary. Their son, also steve, is there to learn the business and keep it going for another generation. But when the economy turned in 2009, so did the companys fortunes. Steve the market was soft. Finances were really bad. Lemonis when business slowed, the company and the family began piling up debt to keep the doors open. Today, with limited funds, they work in an outdated facility thats strangling production. Thirdgeneration businesses have a high fail rate, and without some dramatic changes, the future of this business is in serious doubt. Hopefully, i can get a deal done and have lots of reasons to come back to miami, including making some money. My First Impression of grafton furniture is that i like what i see. I like the look and feel of the place. How you doing . Steve marcus. Lemonis how are you . Steve im great. Lemonis are you steven . Steve im steve grafton. Lemonis i was just trying out some of your furniture. Steve nice. Lemonis who do you primarily make your furniture for . Steve interior designers. Lemonis and so a customer cannot come here and buy this stuff . Steve this is stuff that ive had from years ago, and i just put this showroom together over the last six to nine months. And what i need is to merchandise this with current inventory that we sell today. Lemonis so this is essentially a showroom that has furniture that you cant buy. Theyre a custom manufacturer, so this warehouse is not a showroom. Its just a bunch of unclaimed furniture. How long have you been in this building . Steve since 1964. 50 years. My dad, my dad. Lemonis oh, your dad. Okay. Steve hes here, actually. Lemonis i would love to meet him. Steve i would love for you to meet him. Go ahead. Papa esteban hey lemonis how you doing, sir . Esteban so far, so good. Lemonis your name . Esteban esteban grafton. Lemonis nice to meet you, sir. Esteban nice to meet you. Lemonis wow. Esteban well, ive been here since 1953, and im an american. Lemonis youre an american. Im american. Were both americans. Esteban [ laughs ] lemonis and so youre the true american success story. Steve they call him maestro around here. Lemonis yeah . Maestro . You come to work every day . Esteban most of the time. Lemonis you in your 60s . Esteban im 82. Lemonis 82. Steve and this is steven. Steven hey lemonis how are you . Im marcus. Steven nice to meet you, marcus. Lemonis youre a steven, also . Steven yeah. Its a terrible story, really. Steve im steve, hes steven, hes esteban. Lemonis okay, so three generations right here. Steve right here. Lemonis the thing that i love the most about grafton furniture is the fact that its a threegenerational business. That tells me that theres a lot of love and a lot of passion here. What worries me is that generational businesses often struggle. We know that secondgenerational businesses fail at about a 60 rate, and we know that its even worse for thirdgenerational businesses that fail at almost 90 . How is it working for your dad . Steven its great and stressful. Lemonis grafton has a crew of 28 employees. They do everything from design, build, paint, and upholster. Today, steve owns 50 , and his wife, mary. Mary hi. Lemonis how are you . Im marcus. Mary nice to meet you. Lemonis . Owns the other half. Their key employee is louis, the general manager. Louis, how are you . Nice to meet you. Im marcus. He understands the process better than anyone. Louis what you need to do is do it multiple times, cause you can see the difference, how this is smoother and this is still rough. Lemonis so why doesnt that machine do it all in one . Louis cause its not, like, one of the best planers. Lemonis do they make one that would do it all in one shot . Louis yes. Steve some of the machinery here are 50 years old. Lemonis look, its obvious to me now that the company isnt the only thing thats three generations old. And if this equipment doesnt work and its not up to date with the right technology, well, youre wasting a lot of time. What does it cost to get a brandnew one that does it the right way . Louis a really good one, about, say, 3,000. Lemonis if it costs 3,000 to get a new one, how much time extra did he have to take to do it three times . Multiply it times the number of furniture that we make in a year. How long does it take me to get my money back . Steve this is the house in the hamptons, and here are the sales orders here. Lemonis what kind of margin will you have on this . Decent margin . Steve i think so. Lemonis you think so . Steve yes, because you dont know until you make it. Lemonis you dont know what your margins are on them. You kind of go into production with just a guess. Steve correct an educated guess. Lemonis the key to manufacturing is understanding that time and materials are the two big components that go into determining profitability. But if steve doesnt know how much time it takes to make something, maybe thats one of the reasons that theyre not as profitable as they should be. Louis this is what we call a master list. Lemonis master list. Louis this is everything that we have inhouse. Lemonis but why are all the wips zero . Steve cause they havent they dont put the wips into here. Lemonis why wouldnt you update this . This is nothing now. Why wouldnt i know the status of the job . Steve no, this is our bible. Lemonis well, you need to go to a different church. In any manufacturing business, the most important document is the workinprocess report. It tells you where jobs are in their life cycle. So if you had 10 jobs happening at one time, you would know if a job was 7 done, 87 done, or 100 done. At grafton, i dont have anything filled out. Theyre all zeroes, so i dont know what the hells happening. It could be me, but tell me what you see when you look down the barrel. Do you see a swell . Steve a swell right here. Lemonis do you see a swell on one side . If this came to my house, id send it back. George how are you doing, sir . Lemonis im marcus. George george castellanos. Lemonis what is your job here . George i do delivery and installation and then payroll. Lemonis you do payroll, too . George yeah. Lemonis which is very common, that the same person that does payroll does deliveries and installation, right . [ chuckling ] its very common. Steve he doesnt do payroll. Steven yeah, he does. Lemonis you say no, he says yes, he says yes. You said he doesnt help with payroll . Steve no, he helps her. He prints out all the time sheets. Lemonis yeah . Steve and he goes to them. What job were you working on . Which really should his job. Lemonis have you assigned him that job . Steve no. Lemonis so then why do you say it should be his job . Steve because thats one thing that he should be doing to help this lemonis but how is he supposed to know that . Steve i tell Chris Lemonis is he supposed to read your mind . Steven yeah. Here, yeah. Lemonis grafton handles all aspects of their production under one roof. Theres no logic to their work flow. Its totally inefficient. The facility feels really hot, and its messy. Thats not a good thing for the people that do the work. And its also not good for the furniture. Dust and heat thats not something you want around fine furniture. Steve all of these products these are orders to be done. Lemonis its not very clear what the process is. Its not easy to follow. Louis it is for me, cause ive been doing it for so long. And thats why i have stevie to help me. Lemonis and so are you training him to be a foreman . Louis yeah, to get to that point. Lemonis why isnt he at that point yet . Steven im not comfortable, because im not sure that this is the actual order, because something changes, and its all these two when they talk to clients, and then it stays in their heads. Lemonis for the last 14 years, steven and louis have been running this business with a secret sort of code where they just know whats going on. The problem is nobody else does, including stevie, whos ultimately one day supposed to be taking over this business. Steven it could have been changed. It could have been this. It could have been something they talked about. And they know. Lemonis theres not a changeorder process. Steve yes, there is. Steven no official. Steve there is. Esteban sometimes it doesnt happen. Lemonis sometimes it doesnt happen. Steve right, because hes being jumped over all the time. Lemonis well, cause he doesnt have a clear role, and youre making changes, and youre not bringing him into the loop. Would his role exist if he wasnt your son . Steve yes. Assistant production manager. Lemonis if hes out, is he in charge . Steve hes in charge if hes out. Lemonis Everybody Knows that . Steve i would hope so. Lemonis louis, is that true . Louis it will be steven to a point, but theyre gonna go to steve. Lemonis and so its the worst position you can put him in is when you give somebody a title, but you dont actually give them the stick. Whos in charge of quality here . Steven i would be more in charge of quality. Lemonis cause i think what happens is when you know that you need to collect the money, you start cutting corners to get it done faster. Steven i dont want to do that, and i think if were not gonna get a check cause were late, you know, i understand the business. You got to get the money. But i know what a good product looks like. Lemonis well, at the end of the day, heres how you should think about this. This is your grandfather was here. Now your father is here. Steven yeah. Lemonis and if you dont get the quality right, this business wont be here for you. Steven exactly. Thats my lemonis its got your name on it. Steven exactly. Lemonis total revenue last year 2,448,000. Gross profit at 1 million. So less than 50 . Steve yeah. Lemonis you said the margins were amazing. Amazing at under 50 . Is that considered amazing . Steve no. Lemonis the Industry Standard on customfurniture margins is around 70 . Grafton furniture is operating at about 50 . We have a lot of work to do to figure out where the 20 is leaking out. Lemonis the total liabilities that should be on my mind are 369,000 in thirdparty debt. 600,000 on the mortgage for the building, and 50,000 in a liability to the other shareholder of the property. Steve correct. Lemonis which happens to be your buddy. And so its about 1 million. Steve correct. Lemonis its a summary of all of it. That would clean up every piece of that. Steve every single year. Lemonis okay. So, when i look at the showroom buildout of 100,000, how did you fund that cash . Steve yeah. Lemonis ooh. Thats a lot of cash. Steve i dont have credit. You know, we lost a condo in the keys. Weve got cars repossessed. Lemonis what happened that caused cars to get repossessed . Mary the recession, everything. Lemonis the recession crushed you guys. Lemonis not only does grafton have a Million Dollars in debt, but its with three or four different lenders. The problem is, when they have a downturn, theyre not just in trouble with one bank. Theyre in trouble with lots of different lenders. In a downturn in the economy, this is one of the first affected. This business is good when its good, but its scary when its bad. And so a business like this should have no debt, cause you cant handle the recession. Steve correct. Lemonis today, grafton operating only with Custom Furniture is a very dangerous proposition. Youre dealing with highend clients and highend real estate. When the economy slows down, that could be the first thing to go. This Company Needs to be diversified not only in its offering, but in its price points. I think about this business in three distinct categories quick ship, mass market, fast production, turn it over, and go. Semicustom, where theres a couple of styles, and you can pick your wood finish and your fabrics, and then custom. Mary thats what we are. Lemonis youre not any of the first two. Mary i just feel like were custom and highend, and i kind of want to stay there. Lemonis all right, im gonna take some time to just kind of look at this. Steve okay. Lemonis ill see you in a little bit. Okay. Thank you. Steve thanks, marcus. Lemonis today, im meeting the graftons at one of my favorite restaurants in miami, joes stone crab. I have a lot of good memories here, and hopefully, after today, ill have one more. Do you feel like your business is run right today . Esteban no. [ laughs ] lemonis your dad said no pretty quick, didnt he . Steve well, no. Theres always room for improvement. Lemonis you know, generational businesses sometimes dont succeed. Second generation has a failure rate of 60 or 70 . Third generation has a failure rate of 90 . Mary wow. Lemonis and so its always very dangerous for me to think about investing in a, a cyclical business, which is the furniture business. Steve correct. Lemonis . And, b, a multigenerational business that doesnt have the smoothest of transition plans today. I get the sense based on a few things yesterday you feel like youre the only one with good ideas. Steve you have to convince me of what your asking or doing or saying. And if i think its totally wrong, ill tell you my opinion. Lemonis what happens if steven gives you his opinion . Do you process that, or do you dismiss it early . Steve no, i process it. I do dismiss it often. Lemonis are you confused sometimes, when you come in, what your role is . Steven yeah. Yeah. Lemonis so, when i think about your financials, it does look like a labyrinth of debt and mortgages and bank revolvers and steve right. Lemonis theres 1 million in debt, not enough working capital to sustain any sort of downturn. Fixing up the machinery in the buildings thats 1. 3 million. Steve correct. Lemonis so, the product to me and i showed you yesterday, when i look at the detail of a chair and i notice the fold. Esteban yeah, yeah, yeah, yeah, yeah. Lemonis . I am crazy about the details. Steve okay. Lemonis and im adamant that theres clarity for steven. And so my offer is very simple. Im willing to put up 1. 5 million. Thats a lot of money, right . Steven absolutely. Lemonis and so for the 1. 5 million, i would want 45 of the business. Full financial control, and i want to be able to have 100 say on his path without any question from you. Im bushed ive been on my feel alyea me too. Excuse me. Coming through ride the gel wave of comfort with dr. Scholls massaging gel insoles. Theyre proven to give you comfort. Which helps you feel more energized. All day long. I want what he has. People love me for saving them over half a grand when they switch to progressive. So im dabbling in new ventures. It was boardgame night with the dalai lama. Great guy. Terrible player. 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Lemonis and so for the 1. 5 million, i would want 45 of the business and 100 say on his path without any question from you. And so if i say this is his job and he doesnt like it, too bad for him. And im a lot harder than you are. Mary thats what he needs. Lemonis i want to pay off the mortgage. I want to ensure that the facility is acceptable and make sure that theres plenty in the bank so that you guys feel like you can take care of your family and your bills so that you dont ever have to feel like 2009 and 10 again. Mary i think im gonna cry. [ chuckles ] lemonis does that help, mary . Mary yeah, absolutely. When banks turn you down and when people turn their heads on you, to know that somebody with your knowledge and experience believes in us and my son youre taking him under your wing. Im ecstatic. Lemonis we have a deal . Steve we have a deal. Mary im supposed to do a round of applause now . Lemonis thank you. Steven thank you. Steve im looking forward to you helping us. Mary i feel like im in a dream. I dont even know that any of this is real. Esteban we have what he needs. Lemonis you all right . You got pit stains cause youre so nervous . Steven yeah. A little warm in here. Lemonis its not that warm in here. I think you were just. Your pants. Steven yeah. [ laughter ] lemonis ibuenos dias all ibuenos dias lemonis see . You thought i was gonna break out good morning, didnt you . [ laughter ] yesterday, i made a deal to invest 1. 5 million into this company. The reason that im investing in this business is not only because of all of you, but because it was important for me to come back to miami. My family owned a chevy dealership in miami for 40 years. I learned a lot from my time there. I learned how difficult it is for family to work together, how difficult it is to pass a business on to generations. And so im hoping to be able to share those mistakes so that we dont make those same mistakes. Today, we make Custom Furniture, but thats not enough. We want to create a furniture line that has a brand behind it. We want to see if we can prove that generational businesses can last forever. And so to plan for the future, we want to take steven, and we want to teach him so that he can lead us into the future. I dont want to be average, and i dont want to be small. We want to be the best. We already know we have the best people. Esteban yeah, yeah, yeah, yeah [ applause ] lemonis where are you from . Honduras. Where are you from . Woman nicaragua. Lemonis nicaragua. Man dominican republic. Lemonis dominican republic. Man ecuador. Lemonis ecuador. [ laughs ] esteban cuba lemonis the most beautiful part of america is that they give us a chance, including me im from lebanon to come to this country to make a living, to provide for our families. Esteban, 50 years ago, you came to this country, and you said you wanted to become something. Esteban yes. Lemonis i would say that if you look around, youve become something. Esteban this is what i wanted to do. So, i have my dream. [ applause ] lemonis you have a lot of work to do. Everybody excited . Woman yes whoo lemonis lets go to work. Graf