Lemonis i make the tough decisions. Lemonis were closing the store. Were done. Im not talking about it anymore. Lemonis i back them up, spending my own money. Its not always pretty. Man perfect flavor. Lemonis . But this is business. Lemonis you got to trust the process. Lemonis i do it to save jobs, and i do it to make money. Lemonis thanks for your business. Lemonis this is the profit. Queens, new york, is a dense and diverse world of cultures and businesses. And its home to artistic stitch, an embroidery and silkscreening business run by sal loretta and nick meola. The Company Started 18 years ago in sals garage. Sal where we at with this job . Fabio itll be done today. Lemonis today, its become a 2millionayear business, the bulk of that revenue coming from uniforms, hats, and custom shirts. Fabio hey, thats one down. Here we go. Here we go. Lemonis two years ago, sal and nick decided to move their business into a 28,000squarefoot warehouse. Sal built out the space using his savings. Sal i put in a half a Million Dollars of liquid cash. Lemonis and to increase revenue, he decided to start a few new businesses. Sal i felt it was a pretty unique concept that i had. Lemonis now he has a restaurant, a sign company, and a Sports Complex with Basketball Courts and batting cages. But the new businesses have struggled, and the new building and its remodel has the company 1. 5 million in debt. Sal i got to take from paul to pay peter and move this down here and kind of finagle everything. Lemonis i know that embroidery and silk screening has high margins, but if sal and nick cant find a way to pay down their debt, this company will become unstitched. When i go into artistic stitch, i see racks of clothing, but behind the racks of clothing, i see Basketball Courts. And i look to the right, and i see an italian restaurant. I feel like ive just entered the worlds weirdest minimall. I thought i was coming to an embroidery and silkscreening business. Their primary business looks like its shoved in the corner. Its an unusual setup, to say the least. How are you doing . Im marcus. Fabio how are you doing, marcus . Fabio. Lemonis hey, nice to meet you. You guys doing a big job . Fabio we got jobs. Lemonis thats really good. Fabio its amazing. Like, these machines are really amazing. Lemonis how long have you been doing this . Fabio 18 years. From day 1, we worked out of the garage. Lemonis are you a oneman band in here . Fabio i am. I am. If im not here, this doesnt run. Sometimes it does get a little its overwhelming. Sal hi, marcus. Sal loretta. How are you . Lemonis nice to meet you. Sal nice to meet you. Im one of the owners here. How are you doing . Lemonis good. I was just getting to meet fabio. Sal fabios been with me a long time, so hes a my brotherinlaw. I started the business when i was 17 years old in my garage, and it just exploded. And look at this. I mean. Lemonis so its been a very profitable year so far . Sal yeah. I mean, when i mean profitable, the businesses do well. The only problem is the debt. This place took a lot of money to build. Lemonis how much debts on the books . Sal about 1. 5 million. We couldnt pay the contractors, and we would have to use credit cards. There was no financing here. You go to the bank, and they say, what are you building . A Sports Complex, embroidery . Sal, what the hell is going on over there . Flatout no. Too risky. Lemonis fabio, how do you describe the business to people . Fabio hmm. The business itself, its complicated. There is a lot going on in here. Its hard to really just put it all in a nutshell really quick. Sal its a multiplex of businesses that really work together. You get somebody coming in that wants to do shirts. He looks right out to that thing. Now, on a friday and saturday night, hes coming in with his family and his kids, and hes gonna actually eat in the restaurant. Lemonis and so the family comes in and they eat dinner, and they realize that they have a problem with their sink at home. What do you know . Theres a plumber here, as well. Lemonis and by the way, thats whats called a mall. Its not really as clean a vertical integration as it could be. Vertical integration is growing a business on a common platform. For example, an auto dealership not only do you buy the car there, but you service it, you buy parts, you get financing, you get insurance. They all center around the same thing. Embroidery and silk screening has nothing to do with batting cages. Can i get a tour . Sal yeah, absolutely. So, this is the production part of the facility. Lemonis for screening . Sal for screening. Lemonis how expensive are these machines . Sal that machine there is 55,000 to 60,000. Lemonis its a nice space. Sal thank you. This is the sign shop. This is nick, my partner. Lemonis hi, nick. Im marcus. Nick pleasure. How are you . Lemonis so, you guys are partners in the whole place . Sal 50 50 across the board. Lemonis how do you guys split your partnership duties . Who does what . Nick he does basically all the daytoday operations, and i do the sales part. Lemonis youre the pitchman . Nick yes. Sales is something that i love to do. I love talking with people and stuff. Lemonis okay. And so how much revenue will this particular part of the business do a year . Sal this did 170,000. Lemonis and how much business did the embroidery do . Sal 1. 3 million. But thats all embroidery and silk screen combined. Lemonis and the margins on the two of them are. . Sal 75 . Lemonis and so almost 900,000 in gross profit . Sal gross profits, yeah. Lemonis thats a lot of gross. Lets finish the tour, okay . Sal yes. Lemonis nice meeting you, sir. Nick nice to meet you. Well see you. Sal so, this is the restaurant. I wanted sort of a unique feel to it. Lemonis what kind of revenue will the restaurant do . Sal last year, about 300,000. Lemonis less than 1,000 a day in sales . Sal yes. Lemonis thats tough. Lemonis its lunchtime and theres nobody in this restaurant, but quite frankly, im not that surprised. Who wants to sit here and watch kids play basketball and pay for fine dining . Sal so, this is our baseball facility. Lemonis so, how much revenue actually comes from the Sports Complex . Sal anywhere from 350,000 to 400,000 a year. Lemonis sales, not profit . Sal sales, correct. Lemonis so, how can you break that down for me . How much does baseball generate . Sal between 300,000 and 325,000. Lemonis is it profitable . Sal no. No. Lemonis okay. And how about the basketball upstairs . Sal sales up to this date, i would probably say about 10,000. Lemonis i see how busy the embroidery room is, i see how busy the silk screening is. Sal mmhmm. Lemonis why are you investing in this stuff . The principle business has to be what am i . And right now, it feels like an identity crisis. After hearing that the embroidery and silkscreening business does 1. 3 million a year in sales and generates 900,000 in gross profit, 75 margins, and the restaurant, the batting cages, the Basketball Court dont even equal half of that in revenue, why would you waste your time with anything else other than expanding and growing your embroidery and your silkscreening business . How much is the rent here a month . Sal currently 13,000, plus with the realestate tax, another 4,000, so about 17,000 a month. Lemonis whoa. Sal its a big facility, though. Lemonis right, but you built it out, and so you paid 17,000 essentially for a ground and an empty building lease. Sal yeah. I made my bed, and i got to deal with it. Lemonis im gonna walk around and talk to some other people. Ill see you in a little bit, okay . You know, as i spoke to all the people that work in the company, i can tell that they were really feeling the pressure, especially sals wife, joanne, who runs the Sports Complex. Joanne everything we ever worked for and, you know, saved for is all here. Lemonis despite all the problems, there are some really dedicated people that will do anything to make sure this place survives. Fabio i do what i got to do. Like, ill put this in front of my sometimes, my wife will say, like, what are you doing . You got a family. Relax. Donrun over there. But i do it because i know how it is right now. Its hard for him, and i want to keep this going. Lemonis and while their heart may be in the right place, all too often, they were very foggy on the critical details. How much money does this business make a year . Nick i mean, as far as that, ill be honest i dont know the exact numbers of that. Lemonis even though youre a 50 partner . Nick yeah. Fabio only three with logos, right . One of them with no logos . All right. Lemonis how are you . Im marcus. Giovanna giovanna. Lemonis nice to meet you. Are you responsible for the books . Giovanna yes, i am. Lemonis and so is it possible to get a Balance Sheet and pnl . Giovanna yes. Lemonis if i can get that, that would be great. Im impressed by the fact that embroidery, silk screening, and signs generates 900,000 in gross profit. But i need to dig into the financials so i can figure out how it is that theyre not able to pay down their debt. When you add up all the businesses together, do they make money collectively . Giovanna yes. Lemonis okay. Giovanna the most money would be the embroidery and the silk screening. Lemonis total revenue 1. 3 million. Expenses. Wages and salaries at 276,000. Equipment lease, artistic stitch 3,500 a month, 3,400 a month. Even though they generate 900,000 of gross profit in their embroidery and silkscreening business, after you factor in operating expenses on all the other businesses, it looks like the actual profitability of the business is around 100,000. How much total debt is on the business . You told me there was 1. 5 million. How much is the debt to outsiders people other than the owner of the business . Outstanding construction bills which hasnt been paid. Realestate taxes youre past due on those . Sal yeah. Lemonis how much . Sal 52,000. Lemonis and so, between credit cards, the construction bills that havent been paid, and the realestate taxes, theres 660,000. So, made money on paper, but once you service the interest and the principle payments on all of this debt, its cashflow negative. Giovanna correct. Lemonis the current principle and Interest Payments on the debt are 240,000 a year, but the final profit is only 100,000, leaving them 140,000 short, and theres nowhere to get the money from. What have you sacrificed to this point, sal, to kind of keep the doors open . Sal its been a lot. My wife, she calls me. Sal, this is the second electric bill. What are we gonna do . This is at the house. I said, just dont pay it. She comes home. She sees a red sticker on the door. Were gonna shut the electric. Every month, that 400, 500, was one more person that i could pay, and i didnt want to jeopardize my employees. Dont worry about me, i say. Lets just keep this place going. Thats it. Lets pay everybody. Everybody has mortgages, everybody got bills. You know what . Whatever i can do, im gonna sacrifice. [ sighs ] i didnt want nobody to, at the end of the day, feel uncomfortable and jump ship. Its crazy. [ sniffles ] lemonis how many weeks away do you think you are from telling the employees theyve lost their jobs . Sal about one month. Lemonis you know, the character of a businessman isnt defined by his bank account. Its defined by what hes willing to do for his people. You know, youve made a lot of personal sacrifices so that the team can be here. You do have something to be proud of. How are you guys doing . Sal good. Lemonis well. Whats the Partnership Like between you guys . Sal well, weve been partners for 18 years. Lemonis whats that piece of paper right there, nick . Nick this is the shareholders contract that has me and sal 50 50 shareholders. Lemonis you guys are just. Sal well, i havent seen this yet. Lemonis after 18 years, you guys dont have an agreement between you guys . Sal no. Nick i mean, youre right. This shouldve been probably done a long time ago. Lemonis it feels like he wants to get everything right as of yesterday, which is what this is dated. Who owns 100 of the shares today . Sal its 50 50. Lemonis nothings signed. Sal as we grew, we grew together. It gives him interest, it gives me interest. Nick a lot of artistic stitch is where it is cause of my sales. Sal were together on this. Weve been together 18 years on this, and were gonna continue to be together on all this, so. Lemonis well, why dont you guys tell me how much money you want from me and what it is that ill get for it . Sal [ sighs ] wiping out the debt obviously, thats the biggest problem right now. Lemonis so, what does all that total . 660,000 . Nick yeah, i mean, thats what somewhere around six. Lemonis all these contractors 300,000 . Have they put a lien on the building yet . Sal no. Lemonis but they have the right to . Sal right. Absolutely. Lemonis why did you think this building, again, was a good idea . Sal i think, the options that i had, what i negotiated was pretty strong. Lemonis the option that you have to buy the building five years from now is 2. 5 million. Sal correct. Its obviously worth a lot more money now. Lemonis how much is it worth . Sal 4 million to 5 million range. Lemonis oh, really . Sal yeah. Lemonis so, thats really the business play, is the building, isnt it . Sal yeah. I mean, the building is lemonis cause theres no way that you actually thought that putting meatballs and basketballs and baseballs and embroidery and silk screening and signing was actually a Good Business idea. You liked the realestate play. Sal well, the realestate play is always lemonis but this is a realestate play . Sal yeah. Lemonis the realestate play is sal working to keep the business alive long enough so that he can have the option to buy the building at or below market. If he is successful and able to turn the building around, he could stand to make millions. So, really, if you can figure out to keep this business open with somebody elses money. Sal right. Lemonis . That when you said right, right . Sal the point im trying to make lemonis you said right, didnt you . Sal for me lemonis you think thats funny, dont you . cause i think its funny. Nick i mean. Lemonis he doesnt realize what he just said to me. Sal by putting capital into the business, its gonna stabilize the business. Lemonis well, the business shouldnt be burdened with all this debt. Sal right. Thats what im saying. Lemonis this debt is you guys playing highstakes poker with chase, citibank, discover so that you can have a right to buy a building that you dont own and cant afford that somebody else will finance for you. And if, five years from now, business isnt doing well, whether youll admit it or not, you dont really care because you can just sell the building and make yourself a couple Million Dollars. I have to tell you why im uncomfortable right now you never told me this was a realestate play. Sal i dont think i dont know where youre coming up that its a realestate play. Lemonis this is what you just admitted to me to keep the business alive so that you can get to this point. I think the challenge that i have, guys, is that my mission is to invest in Small Businesses, not realestate companies. I just dont think its something that im interested in. Lemonis you never told me this was a realestate play. My mission is to invest in Small Businesses, not realestate companies. I just dont think its something that im interested in. My main focus is making sure that this place stays open, that these employees get their paychecks, and that the business is successful. Sal thought i would fund the business to keep it going while he kept the option to buy the building in his back pocket. That aint happening. In order for me to move forward, i need to know that sal is equally committed fixing this business. So, my offer is 660,000 to satisfy this burdensome debt on the business, and ill have 50 of the business. Ill have full financial control. Sal so, how long are you planning to hold financial control . Lemonis forever. Sal oh, boy. Lemonis when the option gets exercised, im the first person to get my money out. And so, whats that called is last in, first out. Sal i just dont think thats fair. If the building is worth 6 million. Lemonis i get the money first. Nick you get that money back, the 660,000. Sal and then, from what i understand, half of the profits of that building become yours. Lemonis half of the profits of everything, including the successful business that were gonna have. But if its something that doesnt work for you, i understand. We dont have to do it. Sal lets just do whatever we got to do, and lets just get it going. Lets just do it. Can i ask you a question . I feel like, obviously, theres money invested this is equity that i put in. How do i get this money back . Lemonis if you think you should have more equity in the business out of the other 50 because you put more in, we can work it out right now. So, im gonna have 50 . Whats gonna be your allocation . We are gonna factor fabio into this equation, i can tell you right now. For me, cutting fabio in the deal is a form of insurance. Heres a guy thats running the only business thats making any money in this place the embroidery and the silkscreening business. Sal i believe he should at least, minimum, have 10 . Lemonis me too. Theres fabio for 10 . That leaves 40 . How are we splitting it . 25 , 15 , and 10 . Sal i think thats fair. Nick im only getting 5 more than fabio. Fabios i mean. Lemonis fabios been in business for how long with you guys . Sal since the beginning. Lemonis and so hes not any more or less important than you are. Youre getting more than him, which is, i think this is generous. Nick thats fine. 25 , 15 , and 10 thats fine. Lemonis okay . So. The money will be used to satisfy the taxes to the landlord, pay the contractors, and satisfy the credit cards associated with building out the building. Do we have a deal . Sal we have a deal. Lemonis do we have a deal . Nick yes, we do have a deal. Phew. Sal phew its a burden and pressure off right now, and i feel like i can now concentrate on the business and not concentrate on my financial debt in the company. Lemonis so, for those of you who dont know, ive made a deal to make an investment into this business. Today, the company is kind of a financial mess, and so the deal that i made was to put 660,000 into the business so that we can pay off the debt. I will own 50 of the business, and ill be 100 in charge. Sal will be my partner at 25 , nick will be my partner at 15 , and going forward, fabio will have 10 of the equity. [ applause ] fabio thank you. I really do appreciate it. I always kind of felt like i was a big part of this place, so it feels very good. Lemonis the Sales Organization has to have leaders, and if were not selling, were closing. We are a Sales Organizat