Ill have to put a clear process in place and fix whats broken. You cant tell somebody else how to run their house when you cant run your own house right. Otherwise, this wouldbe empire will be a big, fat bust. Kathleen tell him, this is my livelihood. Lemonis 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. Just about 15 miles south of pittsburgh in a small town called mcmurray, pennsylvania, theres a fast casual restaurant known as my big fat greek gyro. Michael what can i get for you . Woman gyro and fries. Lemonis husband and wife mike ference and kathleen kamoyerou. Kathleen they prefer our sauce. Lemonis . Started the business 10 years ago. Kathleens parents emigrated from greece. Man we used to make the gyro by hand. Lemonis and she wanted to celebrate the culture and enjoy the food she grew up with. Man its one of the best. Period. Lemonis and mike wanted to turn the gyro into the next big thing in fast casual dining. Theyve already sold four franchises around the Greater Pittsburgh area. Andreas if you could just sign that for me. Lemonis and now kathleens sons, michael and andreas, are in the process of buying the original flagship store. Andreas its what happens when you got two young, strong bulls who are ready to take the horns. Lemonis but the franchises are underperforming, and theres confusion about how to grow. Andreas mike hes not involved. Lemonis i love the concept, and my dad is greek, and ive always wanted to find an opportunity to share my culture. If this family takes my lead, i believe we can take this franchise to the next level. Hey, how are you . Andreas good. How are you . Lemonis im marcus. Andreas im andreas. Lemonis nice to meet you. Andreas nice to meet you. Lemonis it was kind of hard to find. Andreas yeah, it is. Its a hidden treasure. This is my mother. Lemonis [ speaks greek ] andreas [ speaks greek ] this is my brother, michael, by the way. Lemonis how you doing, michael . Andreas this is my stepdad. This is big mike. Mike mike ference. Lemonis how you doing, mike . Michael my pleasure. Lemonis nice to meet you. Im marcus. Mike pleased to meet you. Andreas come on in. Lemonis you guys are married. Mike we are. Lemonis so, you own the business together. Kathleen together. Were partners. Mike and then were gonna concentrate hopefully more on franchises. Lemonis legitimate franchises . Mike legitimate franchises. They actually have a 10year Franchise Agreement with us where they pay an upfront fee. Lemonis how much was that . Mike its 10,000 per store. And then they pay an ongoing royalty fee, as well. Lemonis okay. Franchising is an incredibly attractive Business Model because it allows you to get paid once you perfect a concept. My big fat greek gyro only gets about 10,000 when they sign up a new franchise. In success, that fee could grow much higher. Better still, each of your franchisees pay the owner a royalty on a monthly basis. That could be anywhere between 4 and 12 of your monthly sales. Mike right now were making about 60,000, 65,000 annually on royalties. Lemonis they pay an upfront fee. Mike correct. Lemonis you control the branding. Mike correct. Lemonis who picks the locations . Who goes out and vets it cause its your brand . Mike i do. Lemonis who developed the menu . Kathleen we did. Lemonis i was gonna take a trip to greece this summer, and im looking for tater tots. Cheese sticks, cheddar balls, mushrooms. Hummus isnt greek. Andreas lebanese. Lemonis what do you actually make yourself . Mike we have the traditional gyro. We have steak. We have fresh chicken. And then we have souvlaki, which is a pork. And you can either have a sandwich, a salad, or a platter. Lemonis do you know how to handroll grape leaves . Mike absolutely, we do. Kathleen yeah, but we buy them frozen. Mike we dont have the Square Footage for it. Kathleen yeah, you cant did you see our kitchen . Mike here, well show you the kitchen. Youll get a better understanding. Kathleen this is our kitchen. Lemonis what kitchen . Mike its a broom closet with a refrigerator. Lemonis you guys said you were taking me into the kitchen. Mike we were being facetious. Lemonis oh. [ laughter ] a lot of frozen stuff. This food barely qualifies as greek. And worse off, most of its not even made fresh. Spanakopitas frozen . You buy it frozen . Kathleen yes. Lemonis im gonna teach you how to make some. I dont care how small the kitchen is. You want to have a Good Business . Dont serve food out of the freezer. I dont know any greeks, at least my yiayia and my aunts and uncles theyre not getting spanakopita out of the freezer, right . Frozen food is never gonna be as tasty as fresh food. And, in fact, its a lot more expensive. Buying frozen fries from a distributor costs my big fat greek gyro 48 cents per serving. But if they buy raw potatoes and prepare the fries themselves, that cost drops nearly 71 to 14 cents per serving. If they sell 200 orders of fries every day, theyve just earned an additional 68 for that day. And over the course of a year, thats almost 25,000. Thats money in the bank. Frozen grape leaves. Lemonis they taste. Theyre actually terrible. Andreas you dont like them . Lemonis no. Do you . Michael i cant eat them like that. Lemonis for a restaurant to be successful, they need to manage their food costs. Im wondering if mike and kathleen know how to make healthy margins from their biggest seller the gyro sandwich. What does this actually cost . Mike about 16 cents apiece. Lemonis how much is the foil . Mike foils about 4 cents apiece, so we have. Lemonis 16 cents for the bread, 4 cents for the foil. Mike correct. Were putting about 1. 20 worth of meat on there. Lemonis okay, how much is that sauce . Mike its about 22 cents to make. Lemonis so now im at 1. 52 . Mike mmhmm. Lemonis okay, whats next . Mike then were gonna sprinkle a little bit of onion. Lemonis okay. What else . Mike and then lettuce, and then tomato, as well. Lemonis were at 1. 52 now. How much does the lettuce, onion, and tomato cost . Mike probably about 9 to 10 cents. Lemonis so were at 1. 62. Mike correct. Lemonis what do you sell this for . Mike we sell it for 7. 50. Lemonis okay. It appears as though it costs about 1. 62 to make a gyro sandwich. And they sell it for 7. 50, a 78 margin. Now, i know the other products that are frozen and sourced from other manufacturers they dont come with the same margins, which is all the more reason to add more fresh, homemade, authentic items. Who came up with the name . Kathleen you did. Mike yeah, i did. Kathleen we have issues with the name, too. Lemonis what are the issues . Mike well, there was a company in california that actually trademarked my big fat greek. Lemonis you ever had any dialogue with them . Mike one email conversation. Lemonis no phone call. Mike no. It was very short and very brief. Lemonis go pound sand. You go pound sand. Mike pretty much. Lemonis normally, when theres a trademark dispute in a name, its something you can work through, especially if its a single location. But in this case, weve sold the rights to the name to franchisees. Now were finding out we cant actually use the name. You got a problem. How many franchisees do you have . Mike five other stores. Lemonis including this one . Kathleen yes. Lemonis and so the other four, in addition to this one, how do they do . Mike they do they do. Okay. Lemonis so, who has the best location . Mike the Market Square store. Kathleen Market Square. Lemonis wheres that . Kathleen downtown. Lemonis downtown. Who has the worst location . Kathleen right now . Mike probably mt. Lebanon. Kathleen mt. Lebanon. Lemonis how often do you see them in person . Mike a couple times a month, we try to, at minimum. Lemonis okay. So, heres what i want to do. Im actually gonna spend some time just with them. Since andreas and michael are now franchisees, i want to get a feel for their relationship with both their mom and mike and find out if theyre getting the support that they really need. Andreas so far, marcus, i can show you. Lemonis how you doing . Welcome. Andreas come on in. Lemoniti kanis. So, thats one thing that i would do instead of saying hello, i would just change it. Make it straightup, like, greek. Michael at one point, we started playing greek music here, and mike didnt like it. Lemonis what do you mean, mike didnt like it . Michael hes very stubborn, very. Lemonis its a greek restaurant. Andreas my brother and i would like to, like, pop in each store once every two weeks and let me taste the sauce consistency, everything. Lemonis what is one thing thats broken in this Overall Concept . Andreas one thing thats broken is conformity. Mike hes not involved. Lemonis how is the relationship between him and your mom . It seems a little strained right now. Michael its the way that he talks to you. It drives her crazy. It drives the other Franchise Stores crazy. Lemonis whoever hes talking to. Michael anybody. Lemonis i keep hearing from everybody how mike talks to people, but i have to be honest. I havent seen it. Maybe hes on his best behavior for me. That wouldnt surprise me. Growing up, did you did, you know, mike and your mom done a good job raising you . Michael well, when you said, growing up, it wasnt growing up. I was 15, he was 13 when our father passed. Lemonis oh, my gosh. Your father died. Michael yeah. Lemonis how did he die . Michael my mom and him were going on a trip to vegas. They were ran off the road by a semitruck. Lemonis your mom was in the car. Michael my mother survived because she had her seat belt on. Really think it changed her life. Lemonis do you think your moms recovered from that accident mentally, emotionally . Michael i think she feels blessed to just be here. Andreas she lives for us. She its all about us. Lemonis this family suffered a terrible tragedy, and its left them all in, i would say, a very tough place. This business is important to them not just because its the way they make their living and its a way that they pay their bills, but its a way they keep their family together. Its a way that they spend time together. And i think kathleen needs it, and so do the boys. How did you get past the accident . Kathleen my kids. Its huge for me and my kids. I never got to mourn any of that. I hold a lot in. Lemonis you were in the car. Kathleen yes. Its hard. But they these kids are what keep me grounded. They keep me whole. And mike knows that, as well. Lemonis how can i help you . Kathleen im very frustrated. I just feel like i built something so great here, and to put it out there and not see it do as well as i want it to do, its frustrating. Lemonis you mean with the other locations . Kathleen its our biggest argument. We fight all the time about the other franchises. That was, like, a mess from the beginning. I think it was very mismanaged, and thats hard for me to say. cause i have a lot of respect for mike. I just want things to be the right way. I dont feel like im being heard. I just feel like im being held back. Lemonis whats becoming clear to me is that the franchisee model that mike set up seems to be pretty dysfunctional. I need to look at the numbers to see the big picture. What im looking for is what does the Parent Company look like . And then what do all the individual franchises underneath him look like . And so wheres the Parent Company financials . Mike that would be just our personal returns. We were acting as a franchisor through our personal income. Lemonis right, but what is the legal entity . Where is the Parent Company . Mike we just set up the my big fat greek gyro llc as the franchise, or model for the franchisees. Kathleen but we just did that. Lemonis and so this is kind of a new business. Who does these financials . Mike we have an accountant. Lemonis okay, the most recent year, this location did 300,000 in sales and made 100,000. Mike correct. Lemonis great return on capital. How much debt does the business have today . Kathleen no debt. Lemonis no debt. And does the business have a lot of cash today . Mike on hand . No. Lemonis even though this place is mismanaged and the menu is largely uninspired, it still makes 100,000 on 300,000 in sales. And while im impressed with that, im frustrated with the fact that the franchisees arent getting the guidance that they deserve. So i want to go meet some of the franchisees and get a better understanding of how this operation actually functions. How you doing . Jace good. How are you . Lemonis im marcus. Jace jace. Lemonis according to mike, the mt. Lebanon franchise is the one thats struggling the most, and i can see why. Its dark. Its dirty. The menus confusing. Do they serve hamburgers and hot dogs, or do they serve gyros . You wonder why people arent coming here . Youre not giving them a reason to come. How long have you been here . Jace a little over three years. Lemonis how much do you interact with your franchisors . How much do you interact with them . Jace uh, not too much. They come in the first of the month to get their check, and then i dont see them too much after that. Lemonis they dont come in and help and talk about ideas and help market the place . Jace not really, no. Like, i dont see them unless its the first. Lemonis make good money . Jace no. Not the money we want to be making. Lemonis so, how do you keep the doors open . Jace were just skin of our teeth right now. Lemonis all right, my man. Nice meeting you. Jace it was very nice meeting you, too. Lemonis take care. Im on my way to the Market Square location. Its in the heart of downtown and gets a ton of traffic. How are you . Sasha hi. Lemonis im marcus. Sasha im sasha. Nice to meet you. Lemonis nice to meet you. Rich hi, marcus. Im richard. How are you . Lemonis nice to meet you. Market square serves gyros, but beyond that, there are few similarities to the other locations. The color scheme and seating are different. Even the layouts different. Same brand, different experience. Not a good idea. Hows business . Tell me a little bit about it. Rich well, as far as business is concerned, we do about a half a million a year. Lemonis half a million in sales . Rich well, to break even. Lemonis so, how often do you see mike and kathleen . Sasha the first of the month, like clockwork. Rich theyre here to get their royalty check. Lemonis do they stay for a day and work on your business and help you . Rich no. We put 175,000 of our own money into it. We just gutted this entire building. Lemonis so, you put in all this equipment, the floors, the ceilings, the whole thing. Sasha everything. Lemonis 175,000s a lot of money to invest without getting support. Sasha yeah. Lemonis after visiting a number of the locations, its obvious to me that theres no system, theres no process, and theres no consistency. Its a bigger problem than i thought it was gonna be. You know, its a lot to take in here. Im a little disillusioned by what i thought i was coming to invest in. I thought there was a true franchisor franchisee model with a Parent Company on top that had franchisees underneath them that were successful, and that i expected to find a lot more authenticity. And, really, what i feel like ive come to is a nice concept that feels a lot more like a startup to a franchise than it really is a welloiled franchise machine. This is a startup. Mike for the Market Square store, i personally shopped for that particular location. There has been sweat equity that we invested in these particular stores. Lemonis you didnt invest any sweat into those other locations. You guys didnt do anything. Mike the volume of work that you lemonis have to do . Mike today is gonna be a fraction of what, in reality, you do. Lemonis are you kidding me . Mike no, im not. Lemonis you have to change the name, remarket it, rebuild the stores, come up with a new concept, figure out how to communicate with these guys, put in a system. Mike these are all very doable things. Lemonis well, you just now decided to stop procrastinating . Mike thats not a bad thing, is it . Lemonis im struggling with what it is that you would like me to invest in. This Business Needs structure, discipline, and, more importantly, leadership. Those other franchises they gave you a check for 10,000. They pay you on a monthly basis. What are you giving them in return . Kathleen what are we giving them . Mike not as much as they deserve. Lemonis nothing. You dont go visit them. Mike no, we do. Lemonis you dont provide the leadership that they need. You do not provide the structure. Kathleen we visit them, but we dont hes right. We dont. Mike no, we dont. We need to. Lemonis what were you gonna say . Kathleen i would like to stay there for hours and just tell them what theyre doing and not doing and how to do this and how to do that, taste their sauce. Lemonis do you feel like you know how to do that . Kathleen i know how to do that. Lemonis do you feel like you know more than mike on how to do it operationally . Kathleen hell say that he knows more, but i think i know more. Lemonis im asking you. Kathleen yes, i do. Lemonis okay. Why should i invest with you guys . Kathleen i think we have a great concept. Lemonis a new name has to be created. A new concept has to be created. A new menu has to be created. I have serious doubts about who im gonna partner with and how much of the lifting im gonna have to do. It scares me. And how much of the liftingubts about im gonna have to do. With it scares me. Kathleen i could be a leader, but ill be honest with you. I feel like you hold me back sometimes. Lemonis how . Kathleen i would love to go and implement the things that i tell you to do, but you put me in a situation like its something that you should be doing and i shouldnt. Fighting and arguing. Mike my intent is never to make you feel that way, and if i do, then i apologize for that cause thats not my intent. Lemonis i think the idea of the business is very smart. I think the execution is awful. What bothers me more than anything else is that we took money from franchisees, and we didnt deliver on what we said we were going to do. Mike what we sold them is something that we firmly, firmly believe in. Lemonis you dont believe it cause you didnt execute it here. You cant tell somebody else how to run their house when you cant run your own house right. Kathleen right. Lemonis let me tell you what i like about the business. When i look at the financials of this location and it does 300,000 in sales and makes 100,000, its phenomenal. And so youve proved to me that the concept can work. Thats what has kept me sitting here. And so my offer is 350,0