Richard whats important to me is the most important thing. Michael youre not making any sense. Youre making stories up lemonis if i cant help this young man mature as a leader. Dont be frustrated. Michael im very frustrated. Lemonis . And get both sides back on the same page. Richard if we bought if we bought michael i got this. Richard you got it . Okay. Lemonis . Mr. Green teas growth could melt away. If michael told you that he was gonna leave, what would you say to him . Richard i guess id ask him when he was leaving. Lemonis my name is marcus lemonis. And i risk my own money to save struggling businesses. Were not gonna wake up every morning wondering if we have a job. Were gonna wake up every morning wondering how many jobs we have to do. Its not always pretty. Everythings gonna change. Everything. But i do it to save jobs, and i do it to make money. Lets go to work. This is the profit. Located in keyport, new jersey, mr. Green tea ice cream is a gourmet icecream manufacturer with a rich family history. Founded in 1968 by santo emanuele, the company is run today by his son, richard, richards wife, lori, and son, michael. When i met them in 2013, they were generating 2 million in sales, mainly coming from selling to restaurants. That green teas good. Lori isnt it good . Lemonis and if we hadnt made a deal. 600,000 for 35 of the business. Theyd probably still be at the same level. Thats because mr. Green tea was at a standstill. Richard we physically cannot fill our orders to distributors. Lemonis part of the problem is that mr. Green tea didnt have their own manufacturing facility. Instead, it used a copacker. By paying a third party, mr. Green tea was losing about 20 of its potential profit. Michael weve been talking about putting up a new facility for a long time now, and its just going slower than richard im not gonna put a facility up unless i know we have the business there. Lemonis but richard was cautious to a fault. Michael you are strangling the business. Richard back up. Youre crossing the line between father and boss. Lemonis it was a classic clash of generations, and i was stuck in the middle. How much money does this business need to go to the next level . Michael whatever it takes to build a facility. Lemonis have you looked at any . So we bought an old, abandoned warehouse. Lori whoa. Michael isnt it beautiful . Lemonis and we went to work and fixed it up. And thats when i learned that michaels enthusiasm had a downside. He had severely underestimated the cost. The building isnt gonna cost 600,000. Its gonna cost 1. 3 million. Michael it was a mistake. Lemonis it was a mistake with my money. Michael i know that. It is never gonna happen again. Lemonis but 1. 3 million later, we have a stateoftheart icecream factory. Michael this takes our pint, fills it with ice cream, heatseals it, daycodes it, and ejects it out the other end. Lemonis our sales more than doubled to about 5 million. And without the drag of a copacker, weve improved our profits, and weve been able to jumpstart our pint business and sell directly to retailers. And michael has grown a great deal, too. Look at how different his game is. You really have your act together. Lori okay. Very good. Lemonis but theres a lot more work ahead of us. Lori hey how are you . lemonis whats the good word . Lori how are you . Good. How are you . Its good to see you. Lemonis this is, like, our twoyear anniversary. Lori i know. Isnt that unbelievable. Lemonis did you think about that . Lori yes, of course. Lemonis how you doing, junior . Michael whats going on . Lemonis whats happening . How come your office is wider than your mothers . Lori [ laughs ] michael i designed the building, so. Lori thats okay. He honestly spends more time here. Richard hey. Lemonis how you doing, my man . We were just having a we were just having a discussion on how well hes doing. Richard okay. Lemonis what i wanted to do is understand how business is. I really want to focus on the pint business, cause that was michaels task. Can we taste some new flavors . I still have never gotten a sample of black sesame. Michael yeah, we can taste black sesame. Lemonis just to be clear. Good morning. Look how beautiful that is. So, remind me, when i met you guys, there was ginger, red bean, and green tea. So, these are the originals. Michael original three. Lemonis . And then Fortune Cookie launched, black sesame. Michael thats the newest. Lemonis . And chai latte. Over the last year, michaels been responsible to launch the pint business, and hes been developing a lot of the flavors. But i was never consulted on any of them. My guess is neither were the customers. Michael thats black sesame. Richard its very different. Michael very different. Richard i mean, you talk about polarizing flavor. Lori im getting you dont like it. Lemonis this has a really strange aftertaste. Never put black in the word in anything with food. What i would have done is i would have put toasted. Lori toasted. Richard there would be no way i would ever launch that. Lemonis i didnt encourage you to do that. Richard and michaels tenacious, you know. Lemonis have you had a commercial focus group of black sesame . Michael no. Lemonis and so as we launched, ginger, chai latte, Fortune Cookie, and black sesame, we had no testing, no focus groups. Richard exactly. Lemonis how has this done in food service . Michael this is not a foodservice item. Lemonis why not . Michael it just to get new flavors into the restaurants is very difficult. They want their green tea, red bean, vanilla. Thats what they want. Lemonis have you introduced that to them . Michael no. Lemonis because the restaurants provide some level of feedback. Its always good to get other peoples opinions, but sometimes i feel like, with michael, he feels like its only his that matters. What does it cost to experiment . Michael its not expensive to just launch a new flavor. Its all cost of goods. Richard youre spending, you know, probably, you know, 10,000 just for that one, which may never work and may sit on all the shelves. Lemonis its a cost of good that if it doesnt work, those goods have no value. Michael who cares about a 10,000 upfront cost . Lemonis i think we all kind of care about the 10,000. Michael im sorry, 10,000 is not richard no, its not 10,000. Youre printing 125,000 of these, which is gonna run you probably 30,000. So its 40,000. And if you have two or three that fail, thats a major hit. Lemonis what about the slotting fee . The slotting fee is the fee that you pay the Grocery Store to basically buy the shelf space. How much are the slotting fees . Michael it was 200,000 for six. Lemonis thats, like, a real investment. So its 33,000 a pint. If, for some reason, this doesnt work out, how much money, between raw ingredients, packaging, and slotting fees . Michael if it ended today . Lemonis if it failed, failed . Richard minimum 70,000. Lemonis so one mistake could be a 70,000 disaster. Richard thats a failure. Lemonis and im worried that were getting sloppy. Mr. Green tea makes around 400,000 a year in profit. And to invest almost 20 of your entire earnings for the year in one flavor without being sure its the right thing, its like playing russian roulette. What does it cost you to make this everything allin . Michael the packaging is 1. 33. Lemonis uhhuh. Michael and then, whats milk at right now . Richard just under 8 a gallon. Michael so that means its 1. 25 gallons of milk in there. So 10 bucks. And then your ingredients, which is 70 cents . Lemonis 1. 33 for the container, 10 for the ice cream, 70 cents for the ingredients. Thats 12. Richard i did michael high cause its extremely high right now. But it changes every week i buy milk. Lemonis okay, well use 11. Richard right. Lemonis what does it cost to deliver it for every one of these . Richard 3. Lemonis so now im at 14. Youre selling this for 28 . So basically, i have a 50 margin on this. You may disagree with this, but a 50 margin on this product just isnt good enough. Richard [ sighs ] lemonis if youre looking at the margins on the 2 1 2gallon product, just on the surface, they look good. But after you factor in all the labor, the cost of the machinery, the cost to run the business, the margins arent that great. So 50 s not good enough. We need to be closer to 60 to absorb the labor. In order to drive down the cost or improve the margins, the singlebiggest ingredient has to be resolved, and thats the cost of the cream. Richard when i can buy my milk right, i get this down to the 6 range in milk, were doing this for under 9. Lemonis well, i want to get that milk price down. Richard but it fluctuates. Lemonis i understand, but i want to get some sort of Contract Price based on volume. Richard i would love to work the numbers with you. Lemonis what i would like to do is sit down with the financials. Richard okay. Lemonis what were our total sales in pints in 2014 . Okay. 1,630,457. Okay, whats the trend for 2015 . Richard probably about 2. 3 million. Lemonis okay, so. Michael which means im not gonna get a raise january 1st of 16. Lemonis you were given a grid, and there was a guarantee established, as well. Michael correct. Lemonis we set up these different tiers zero to 2. 5 million, 2. 5 million to 3. 5 million. Michaels done a pretty good job improving the pint business, but i believe that pay plans drive behavior. And performancebased pay plans are exactly what ive set up for michael. His salary is fixed at 75,000, and he doesnt receive a commission until pint sales achieve a 2. 5 million level. And then michael starts earning a commission of 3. 25 , taking him to 81,250. And it stays that way until sales reach 3. 5 million. And then his percentage is bumped up to 3. 5 . And so on, and he rises along with the business. So that grid was clear. Its 100 Commission Plan with a guarantee. Richard exactly. Lemonis okay. Michael the pay plan is very good. Im fortunate to have it. Is it bothersome to me . Yeah, a little bit. Every revenue dollar increase, the benefits are reaped by the people that have the piece of the pie. I want a piece of it. I want skin in the game. Richard employment does not equal ownership. Lori i agree. Its two completely separate things. Richard it just doesnt. Michael thats not fair to me. I have zero protection when i spent my career here, all right . Im a mechanical engineer. I can go do anything i want tomorrow. Lemonis meaning that if you dont like the sort of plan thats put in front of you michael correct. I can go do something else, yes. Lemonis michael, you seem frustrated about some michael im very yeah, its a frustrating day cause i thought we all agreed with this. Richard if you dont get it right now, youre never gonna change it down the road. Michael i dont care. Save without even leaving your house. Just keep your phone and switch to xfinity mobile. You can get it by ordering a free sim card online. Once you activate, you only have to pay for the data you need, starting at just 15 a month. There are no term contracts, no activation fees, and no credit check on the first two lines. Get a 50 prepaid card when you switch. 5g is now included with all new data options. Switch and save hundreds. Xfinity mobile. Im a mechanical engineer. I can go do anything i want tomorrow. Lemonis meaning that if you dont like the sort of plan thats in front of you michael correct. I can go do something else, yes. You know, i get offers all the time. I can go start my own business tomorrow. Whatever i put my mind to, i know that i can be successful. So thats my point. Its like whats keeping me here . Lemonis while were going through the financials and trying to understand the performance of the business, michael brings up the necessity to have equity, almost like its been brewing inside of him. Michael this company isnt the same if im not here. Youre still peddling 2. 5 gallons to restaurants only. The entire future of the brand is based off of my vision. Richard thats something im not so sure of, michael. Michael would there be pints if i didnt come in . Richard there was. Lori there would not be pints if michael was not here. Michael thank you. Lemonis you feel like youre bringing such value to the table. Michael im adding new brands to the business. Lemonis look, i understand michaels point here, and he has contributed to the business nicely. But what i dont like is this grandstanding. Hes acting as if hes being treated unfairly, or things arent good for him. Its his parents company, and hes ultimately gonna own it. Its time for him to act like an adult. Michael do you understand what im saying . Lori i understand what youre saying, michael, but i do have a problem with you not being able to separate the fact that youre an employee, and youre being compensated very well versus that, you know, theres this equity thats somewhere going to be yours. Lemonis potentially happening. Lori right. How about this crazy scenario . How about you marry some crazy bitch that we dont like and that something happens to you and now we have to deal with her . Lemonis i think your dads point is the best one. Equity and employment are two different things. Its important to me as a shareholder that one of the Key Employees feels vested in the business. Richard i have a hundred reasons why im not comfortable with that. Lemonis michael, can you and i take a walk . Michael sure. Lemonis okay. I really think its important for me to take michael outside and have a oneonone with him without rich around, without his mom around to really get inside his head and understand what hes really thinking. Is that yours . Michael its a nice car, isnt it . Lemonis is that your car . Michael its my car. Lemonis kind of a big player now. [ chuckles ] thats a nice car. Michael yeah, it was used, so. Lemonis the porsche definitely fits you. Michael yeah . Lemonis i wanted to talk to you away from them. Michael mmhmm. Lemonis i sort of understand how you feel. Michael mmhmm. Lemonis and i understand that, you know, ultimately, you just want to have a path. Michael thats the only problem i have with any of this is im not saying, i need this, or i need to leave. I love it here. I love mr. Green tea. But i would like to have a piece of the pie. You always say, you know, youre an employee of mr. Green tea. And i am. But i dont think i work like one. You know, the employees 5 00 hits, and they go home. They, you know, spend time with their friends and their family, and i dont do that. You know, its 24 hours. Lemonis tell me exactly what you want. Michael i think 7 to 10 ownership of the business would be more than fair. Lemonis and if he said to you, no, im not comfortable doing that . Michael then i guess were back at keeping my ear to the ground for potential other options, i guess. I got a book of ideas for the food industry. Many are ridiculous. Some would work in our current infrastructure. And its like, all right, well, am i gonna continue to give these ideas that i have to a company thats not mine . Lemonis ive never thought of you, from the day i met you, as an employee here. I thought of you as the future of the business. I sort of understand why hes feeling this way. He believes that his contribution is more impactful to the business than just a wage. But i think that the reward has to be commensurate with the performance, and that has to come with time. I would tell you to be patient. Michael yeah. Lemonis we have to do it in a way thats got a plan behind it, you know . Michael mmhmm. Seven years ive been here now. Lemonis who wants to try some ice cream . I was pissed at michael for launching new flavors without doing the research and getting the data. But i was also upset with richard, as the c. E. O. , for letting it happen. They didnt do their research. They didnt ask customers. They just went ahead and paid the slotting fees. Well, were gonna go to shoprite today, and were gonna get feedback whether they like it or not. Michael this is ginger. Thats my favorite. Woman its quite good. Michael good . You like it . His eyes say, ohh man that is pretty good. Young man wow, this is actually amazing. Woman 2 it is. Michael good. Lemonis michael did good on two of the flavors the chai latte and the Fortune Cookie. But. Woman 3 black sesame. Lemonis the name throws you off a little bit . Woman 3 the color. Lemonis the color. Which ones do you not like . Man 2 the black sesame. Boy i dont like the black one. Richard you dont like the black sesame . Okay. Lemonis what didnt you like about it . Boy it tasted disgusting. Lemonis [ laughs ] disgusting . Black sesame got some harsh reviews. And if they would have gotten some feedback in advance, they would have saved themselves 70,000. Richard id like to ask you what you think of the packaging, you know, versus the name . Young man green tea richard okay. Young man right . Lemonis what do you think is in every one of these containers . Woman green tea. [ chuckles ] lemonis green tea. Woman 4 they all say green tea. Woman 5 the green tea the tea flavor. Woman 6 im not a green tea lover, okay . So if i saw mr. Green tea, i might not say, oh, im gonna buy that. Me. Lemonis i think we have some work to do. Most people would expect me to push you to change the name. That doesnt bother me. Theres a legacy there. What bothers me is the presentation of it and having mr. Green tea be the dominant brand. One of the best things that happened at shoprite is seeing the positive feedback about the quality of the ice cream. But we need to put a process in place that forces us to do research and development on new flavors. And we need to go back to the drawing board on the packaging so that customers arent thrown off and think theres green tea in every flavor. So, what i want to do is sort of take the actual packaging, and i want to basically move around some stuff. People dont want to think that theres green tea in the ice cream. Thats the feedback we got. Michael yep. Lemonis pull that mr. Green tea logo up. Can you have these two live individually . Michael yeah, of course. Lemonis get rid of mr. Green tea. Michael totally gone . Lemonis yep. Its a lot cleaner. Michael well, what i was actually gonna do is i was gonna modernize the mr. Green tea font. You put it really faintly somewhere. Lemonis the fonts gone. Michael so, what are you buying . Lemonis sweet sesame ice cream. Michael no brand . Lemonis that brand. Michael im not on board with that. Lemonis im gonna go inside. Just humor me. Save this and send it to the printer. Michael okay. Lemonis okay . When youre collaborating with partners, the idea is to sort of let everybody have their opinion. Instead, he just wants to battle. We just went to shoprite. People told you that they thought it was bad, and were gonna meet as a group. Were gonna get everybodys opinion on this. Michael, you and i worked on that sweet sesame package. Michael i think this is a step in the right direction. It needs, obviously, a lot of time to lemonis it doesnt actually need a lot of time. Michael you dont think so . Lemonis no. I have this background thats the same. I didnt change the fonts on here. This is so subtle that even you would be tricked. Richard no, you had to look twice to realize that wasnt there. Michael with just the logo on the top, it could be confused for a generic brand. Richard i dont think i have a problem with it at all. Lemonis michael, you seem frustrated about some michael im very yeah, its just its a frustrating day