You dont always think things through. Tonnie really . Lemonis yeah, really. Tonnie welcome to tonnies. First time here . Woman yeah. Lemonis tonnie rosier has always loved to bake, and he learned the craft from his mother. In 2006, he opened his first bakery in new york city, and he was able to land big accounts with retailers like macys and bloomingdales. But his business skills well, they were halfbaked. Tonnie im a little lost as to a notice of cancellation. Tamika didnt i just pay that yesterday . Lemonis tonnie was constantly borrowing money from his wife to cover rent and payroll. Erenisse whats the plan to recoup the money and at least break even . Lemonis hes already been forced to shut down two stores. And his current shop . Well, its already losing money. Tonnie we are at a breaking point. Lemonis the gourmet cupcake business is still thriving, and its a business i know well. And while fixing tonnies minis wont be a cakewalk, hes got an idea that ive never seen before a buildyourown cupcake. Inwood is at the northern tip of manhattan. Its an upandcoming neighborhood with a lot of renovation, and theres a lot of new restaurants and new retail, and you feel like its really growing. But tonnies minis has the worst retail entrance ive ever seen. I mean, theres scaffolding everywhere. The places on either side of them look like theyre in really bad shape. This buildyourown cupcake better be great. How you doing . Tonnie how are you . Lemonis are you tonnie . Tonnie i am. Lemonis im marcus. Tonnie pleasure to meet you, sir. Lemonis nice to meet you. Its a small space. Tonnie yes, its been challenging. Lemonis im expecting to find a bright, fun retail environment. And what i end up seeing is no display and a bunch of packaged cupcakes that are made in the back. Its crowded. Its not inviting. I mean, who would want to come here . Tonnie how are you . Woman good. Tonnie welcome to tonnies. What can i do for you today . Woman let me get the cream cheese. Tonnie can i offer you a cupcake, marcus, at the same time . Lemonis you surprise me. So, thats the base . Tonnie traditionally, you walk in marcus, you have my another guy named marcus marcus, you have my steribag . Marcus no, it should be in the front. Tonnie never mind. I got it. So, the beauty of tonnies minis is you walk in, you pick your cupcake out, you pick your topping. Woman i like it. It means make your own cupcake, essentially. Lemonis you a cupcake eater . Woman yes, actually. Thank you so much. Have a wonderful day. Tonnie take care. Lemonis cupcakes good. Tonnie always happy to hear that. Lemonis the frostings good. The process seemed a little. Nonexistent. I would have thought there would have been a bit of an assembly line, like base, frosting, topping. I dont necessarily see that. Tonnies idea of a buildyourown cupcake, quite frankly, is phenomenal. But the idea i thought i was coming for i just dont see. Somebody takes a cake off a rack and then the toppings are, like, hidden under the counter. I mean, its terrible. How much business are you doing in this location . Tonnie average is 500 a day. Lemonis and what are your margins on that 500 . Tonnie um. Cupcake costs me a quarter to make. Lemonis wrapper, frosting, labor, everything . Tonnie so it, uh. Lemonis one cupcake what does that cost to make . Tonnie so, the cost of the cupcake would be closer to. 33 cents. Lemonis are you winging it . Tonnie im estimating. Lemonis i wouldnt call it estimating. Im gonna call it guesstimating. Tonnie touche. Lemonis what are you selling them for . Tonnie starting at 2. 25. Lemonis okay. If youre selling 500 a day worth, and you and i do a deal and we sell 5,000 a day worth, i still want to know what it costs to make one. If it costs tonnie 33 cents to make a cupcake and he sells it for 2. 25, hes got great margin. The worry here is that hes shaky on his numbers, and at 500 a day in sales, there is no room for error. Kind of a tight space. Tonnie this is the oven. Lemonis this is the only oven you have . Tonnie this is the only oven i have, yeah. Lemonis there is no workflow in this place, and its cramped and its hard to maneuver, and their ingredients are just stored randomly everywhere. I dont know how theyve been able to bake here. Tamika hi, marcus. Tamika. Lemonis tamika, nice to meet you. Tamika you too. Lemonis how are you . Are you the sister . Tamika yes. Lemonis id love to kind of spend a few minutes with you if you dont mind. Tamika okay. Lemonis whos the manager here . Tamika im on again, off again. Lemonis walk me through that. Tamika i worked for, like, really, really low pay, which was okay with me. Lemonis for how long . Tamika like a year. Lemonis wow. Tonnies basically relying on free labor. And the fact that his sister is willing to help out shows that he has real backing from his family. Thats a big advantage when youre struggling. So, whos doing the Quality Control on this kind of stuff . Tamika myself and tonnie. Lemonis yourself . And so do you think this looks right . Tamika no, that ones not going out. Lemonis i dont want to see paper. This wouldnt clear. Tamika and the more we go through, we realize how much is wasted. Lemonis when this happens, two from the same batch at the same time, theres no process. Tamika and let me tell you, i have fought with my brother on this process. Lemonis why are you fighting with him . Why arent you just fixing it . Does he listen to you . Tamika no. Lemonis no . Tamika no. Lemonis that looks nice. Are you a professional cake decorator . Marcus yeah, i am. Lemonis its a small space to work, no . And is tonnie easy to work with . Marcus yeah. Lemonis and how about her . Is she mean . Marcus [ laughing ] no, shes tamika [ laughs ] woman hi. How are you . Lauren what kind of cupcake would you like . Girl strawberry twist. Lauren you want a strawberry twist . All right, so, your totals gonna be 7. 50. Lemonis how many Staff Members do you have . Tonnie 12. Lauren will be the one wholl be in the front. Lemonis hi. Are you hi. Lauren im lauren. Lemonis hi, lauren. How are you . Lauren good. Nice to meet you. Lemonis very nice to meet you. Are you a baker . Lauren when i have to be. Lemonis so what is your primary role here . Lauren im in the front selling the product. Lemonis okay, great. Nice meeting you. Lauren you too. Thank you. Tonnie theres a lot going on with tonnies minis right now as we speak. Im doing a project in newark thats close to being finalized. The people who are giving me the space, theyre building out the store. Lemonis at their expense . Tonnie at their expense. So what i have to supply is equipment, the first months deposit, working capital. Lemonis and theyre giving you the money to do that . Tonnie theyloaning me the money to do that. Lemonis do you feel like youre ready for more expansion . Tonnie i am now. Lemonis the only time a business should be expanding is when its totally proven out its model. You have the product right, you have the right people, you have the right process, and it makes money. So goodidea people are good, but goodidea people that dont know how to execute can be very lethal to a business. Hi. Erenisse hi. How are you . Lemonis how are you . Erenisse im erenisse. Lemonis are you tonnies wife . Erenisse yes, i am. Lemonis hey, nice to meet you. Erenisse nice to meet you. Lemonis you want help taking your coat off . Erenisse thank you. Lemonis you got it. Erenisse what a gentleman. Lemonis so, what do you think of the store . Erenisse i think it needs an upgrade. Thats why i wrote you. Lemonis oh, okay. Tonnie, i thought it was you. Tonnie no, it was it was it was her. Erenisse the Business Aspect of it has placed a lot of stress on our marriage. Its to the point that im not giving any more money. Lemonis how much money do you have invested in this business . Erenisse like 250,000. Lemonis 250,000 is what erenisse has put into that business. That money is gone. Erenisse altogether, weve been together over 10 years now, so Different Things helped with the rent, helped with materials. Lemonis did you win the lotto or something . Erenisse no, im trying to support him, you know, until the business can take off. Lemonis okay. Erenisse i think he needs you. I think he needs your expertise. If he hears it from you, maybe hell take it. Lemonis he doesnt listen to you . Erenisse not all the time. Not quite. Lemonis tonnie doesnt listen to his wife, whos invested a ton of money. He doesnt listen to his sister, who works there virtually for free. How do i know hes gonna listen to me . So, cupcake tastes great, but the fact that you dont know what it costs to make it is disturbing, cause you dont really know if youre making money here or not. What does it cost you to open up the place every day . Tonnie the rent would be 100 a day. Lemonis all the employees how much do they cost a day . Tonnie average day is 180. Lemonis how about electricity . Tonnie 75 a day. Lemonis how about insurance . How about maintenance . How about Office Supplies . How about the phone . Youre already well over 350. With 500 a day in revenue, if you factor in all of the operating costs plus baked goods, paper supplies, et cetera, hes already operating at a loss. Tonnies been in business for 12 years, and he still struggles with the basics. But the big question for me is, is he willing to do what it takes to save the business and pay his wife back . I think the worry that i have is that you have two people ones your sister, ones your wife. Youre not listening to them. What confidence would i even have in the fact that youd listen to me if you dont listen to them . Tonnie but if someone is coming in that i think has done it before, it just gives me a different perspective. Lemonis were gonna do a little math. The total revenue that it shows on this b l is 250,000 for the year, and you lost 76,000. Theres the 250,000 that you put in. For this discussion, i consider that equity. Because you guys are married. Thats your business. Thats the fact that you own, today, 100 of the business. Erenisse i agree. Lemonis theres 134,000 that is owed to other people. And so what do we owe other people . Tonnie the payroll tax is 11,000. The state tax, 35,000. Theres 15,000 in arrears, of which is february rent and water escrow. And then late fees. Erenisse 15,000 . Tonnie then theres denise, 12,000. Robert is 25,000. My mom for 13,000. Michelle for 7,000. Erenisse wait a minute. Is this for her services, or she lent you money . Tonnie no, this is this is her loaning me the money. So [bleep] is the person who i borrowed money from and he picks up a weekly payment from me. Lemonis like a like a like a loan shark . Tonnie yes. Lemonis it can be tough for a business like tonnies to get a bank loan virtually impossible. So you end up going to small lenders with very high interest rates, and if you cant pay them back, their methods of collecting are very unorthodox often dangerous. This is a much bigger number of debt than i originally thought for a singlelocation bakery. Whats wrong . Erenisse im just upset, cause i didnt know about all those people that we owe money to. You know how i feel about that. Sorry. Tonnie i mean, you know i would never do anything to have you sitting here crying, but i did whatever i could to keep a door open, to keep from closing, to pay staff, whatever it took. So me hiding these numbers was not intentional. It was a mistake. It was foolish. Would it happen again . Never again. Lemonis if im gonna invest in this business, tonnie has to understand that everything is gonna change. The fact that he was willing to come clean with erenisse is a good first step, but hes got a mountain to climb. Theres 134,000 worth of debt, and so for this business to really have a chance, and for the 250,000 that youve put in this business to be worth something, we have some work to do. The reason that i came to this business was because i liked your idea. And so now that i understand these numbers a little more clearly, im prepared to make an offer. And so heres my offer im willing to put up 100,000. For that 100,000, were gonna satisfy some of the debt that is a real problem. And the balance is gonna go into getting this location really right, from the layout to the process to the way we organize ourselves. And were gonna understand every cost and every corner and were gonna have an inventory process. Were gonna know our pricing. And so, im interested in investing in this particular idea. So my offer is 100,000 for 20 of the business. Tonnie im having a really hard time with that. The number i had in my mind was 600,000. Lemonis 600,000 for how much . Tonnie id say 33 . Lemonis you thought i was gonna write you a check for 600,000, everybody was gonna get paid, and i was gonna have a third of the business, and i wasnt gonna tell you what you could or couldnt do . Tonnie no, no. And, again lemonis wrong show. Were closing the store. Do you think im taking advantage of you . Tonnie yes. Lemonis i dont want to be in a relationship where somebody feels like theyre getting taken advantage of. I tabut with my back paines, i couldnt sleep and get up in time. Then i found aleve pm. Aleve pm is the only one to combine a safe sleep aid plus the 12 hour pain relieving strength of aleve. Im back. Aleve pm for a better am. But its actually a triumph of predictive analytics. Because of optum. 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Switch your business to tmobile work today. eeeeohmumohweh hush my darling. dont fear my darling. the lion sleeps tonight. hush my darling. man snoring dont fear my darling. the lion sleeps tonight. woman snoring take the roar out of snore. Yet another innovation only at a sleep number store. Lemonis you thought i was gonna wreverybody was gonna get paid, and i was gonna have a third of the business, and i wasnt gonna tell you what you could or couldnt do . Tonnie no, no. And, again lemonis wrong show. So, what are you thinking right now . Erenisse im thinking that now i see why your mother is uncomfortable sometimes, cause she probably wants to ask you for the money, but since i didnt know about it, she cant ask you in front of me. Lemonis well, your mothers 13,000, right . If my offer was 100,000, i have no problem going to 113,000, since if moms happy, everybodys happy. Do you agree . Tamika yeah. Erenisse im uncomfortable with [bleep] lemonis you mean the loan shark . Erenisse yeah. I dont know what these people are about. Im uncomfortable with that scenario altogether. Lemonis so it would make you happy if that got paid. Erenisse yes. Lemonis i agree with erenisse that its a good idea to get rid of all these sort of unscrupulous lenders. And if im gonna be associated with the business, i dont want any connection to anything like that. So, then ill up my offer to 125,000, and instead of 20 , well go to 25 . And im giving you about, like, maybe 10 seconds. Tamika you know what you having full control ends up being. So now see what sharing control ends up being. Tonnie and see, thats what scares me. Only because i dont have no control over that number. If we Start Building out and it costs me 50,000, then. Lemonis you have 75,000 left to pay all these people. Thats right. Which is, by the way, 25,000 more than you had 10 minutes ago. So. My final offers 125,000 for 25 of the business. We got a deal . Tonnie we got a deal, marcus. Lemonis you know that when you take my check, i am 100 in charge . Tonnie 100 in charge you said . Lemonis she knows that. Thats why she called me. She wants me to be 100 in charge. Is that right . Erenisse yes, absolutely. Thank you. Lemonis thank you. Tamika thank you. Lemonis thank you. So, let me tell everybody whats happening. Tonnie and i and erenisse made a deal for me to become a partner in the business, and im gonna put 125,000 in the business. A portion of that money is gonna be used to pay the bills that are not paid today. And whether thats the rent or people that have lent the company money, were gonna pay down the debt. The rest of that money is gonna be used to renovate this whole place. The store is gonna close. Tonnie we have people who are relying on me. If were closed, that means that theyre not working. Lemonis it means that ill take care of them. They get paid. Tonnie maybe im stuck on the fact that im being told. Perhaps its an ego thing, but tamika stop. Im gonna choke him in like five seconds. Just trust the process. Lemonis i see that you said if he trusts the process and you trust the process, its gonna be fine. Tonnie thats it. I get it. Im good. Lemonis the goal Going Forward is to not only fix the look of the store, but to fix the process. And so my goal is to do everything we can to generate more cash without adding more fixed expense. Were not gonna be doing any sort of expansion until we get this one right. Tonnie i would like to be in a position where i can grow the company at the speed that it can grow. But i think were just kind of cutting off our hands by letting go of these other opportunities like newark. So for me, its a struggle. Lemonis were not doing any expansion until this place is right. Before we do anything else, were gonna go back here, and were gonna find out how much it costs us to make a cupcake. Like, right now. Lets get everybody together. So, what i want to do is i want to understand the cost of one cupcake. I want the raw ingredients, i want the package, and i want the frosting and the sprinkles. I want it all. In order for tonnies minis to stop losing money, we have to know what it costs to make the products, and so were gonna take time to find out what it costs to make one cupcake. And so youre telling me that one batch makes 24, so when we add up all these costs, were gonna divide it by 24. You ready to go . Tonnie eggs are 15 dozen. I pay 24. Lemonis 180 eggs, about 14 cents an egg. Tonnie this needs three eggs. Lemonis so thats 42 cents. Tonnie the buttermilk is 1. 40 per quart, and we use 1 1 4 cups. Lemonis okay. 44 cents. Something you didnt like about that math . Tonnie no, it just seems higher than i thought. Lemonis tonnie has a history of guessing on everything, but the one thing he shouldnt be guessing on is what it costs to make his most important product, the cupcake. We have paper and packaging at 5 cents. We have toppings at 5 cents. 8. 33 for materials only. Well divide that by 24. 35 cents apiece. By the way, you havent factored in waste the mistakes that you make, the stuff that drips. So its actually costs you 38 cents a cupcake. Now we have 15 cents a cupcake in labor. Thats 53 cent