tv The Profit CNBC August 11, 2016 12:00am-1:01am EDT
they could get a discount on the value of my company. i won't be back. -you're steven, also? to-steven: yes. profit"... lemonis: three generations right here. steven: right here. lemonis: a multigenerational custom-furniture business... do you and your dad have blowups here? steven: all the time. lemonis: ...struggles to stay up with the times... [ screeching noise ] steve: some of the machinery here are 50 years old. lemonis: ...and a father who won't give up control... steve: do you have a packing list? steven: are you really gonna micro me again right now? steve: please. lemonis: ...leaves a son struggling to make his mark. steven: oh, my god. lemonis: if i can't bring these two together... steven: when it's done, it has a sticker. if this doesn't have a sticker, is it done? -steve: no, it's not done. -steven: okay. lemonis: if he can't do the job, you fire him. ...there may not be a next generation of grafton furniture. your grandfather was here. now your father is here.
and if you don't get the quality right, this business won't be here for you. miami is my hometown, and it's also home to over a million cuban-americans. 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 manufacturing company makes everything from sofas, chairs, to tables. steve: this one's 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 company's 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 today, with limited funds, they work in an outdated facility that's strangling production. third-generation 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: i'm great. -lemonis: are you steven? -steve: i'm 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 i've 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 can't buy. they're a custom manufacturer, so this warehouse is not a showroom. it's 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: he's 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, i've been here since 1953, and i'm an american. lemonis: you're an american. i'm american. -we're both americans. -esteban: [ laughs ] lemonis: and so you're 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: i'm 82. -lemonis: 82. -steve: and this is steven. -steven: hey lemonis: how are you? i'm marcus. steven: nice to meet you, marcus. lemonis: you're a steven, also? steven: yeah. it's a terrible story, really. steve: i'm steve, he's steven, he's 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 it's a three-generational business. that tells me that there's a lot of love and a lot of passion here. what worries me is that generational businesses often struggle. we know that second-generational businesses fail at about a 60% rate, and we know that it's even worse for third-generational businesses that fail at almost 90%. how is it working for your dad? steven: it's 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? i'm 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. i'm 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 doesn't that machine do it all in one? louis: 'cause it's 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, it's obvious to me now that the company isn't the only thing that's three generations old. and if this equipment doesn't work and it's not up to date with the right technology, well, you're wasting a lot of time. what does it cost to get a brand-new 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 don't know until you make it. lemonis: you don't 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 doesn't know how much time it takes to make something, maybe that's one of the reasons that they're 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 in-house. lemonis: but why are all the wips zero? steve: 'cause they haven't --
they don't put the wips into here. lemonis: why wouldn't you update this? this is nothing now. why wouldn't 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 work-in-process 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 don't have anything filled out. they're all zeroes, so i don't know what the hell's 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, i'd send it back. george: how are you doing, sir? -lemonis: i'm 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 ] it's very common. -steve: he doesn't do payroll. -steven: yeah, he does. lemonis: you say no, he says yes, he says yes. you said he doesn't 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 that's 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. there's no logic to their work flow. it's totally inefficient. the facility feels really hot, and it's messy. that's not a good thing for the people that do the work. and it's also not good for the furniture. dust and heat -- that's not something you want around fine furniture. steve: all of these products -- these are orders to be done. lemonis: it's not very clear what the process is.
it's not easy to follow. louis: it is for me, 'cause i've been doing it for so long. and that's 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 isn't he at that point yet? steven: i'm not comfortable, because i'm not sure that this is the actual order, because something changes, and it's 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 what's going on. the problem is nobody else does, including stevie, who's 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: there's not a change-order process. -steve: yes, there is. -steven: no official. steve: there is. esteban: sometimes it doesn't happen. lemonis: sometimes it doesn't happen. steve: right, because he's being jumped over all the time. lemonis: well, 'cause he doesn't have a clear role, and you're making changes, and you're not bringing him into the loop. would his role exist if he wasn't your son? steve: yes. assistant production manager. lemonis: if he's out, is he in charge?
steve: he's in charge if he's out. -lemonis: everybody knows that? -steve: i would hope so. lemonis: louis, is that true? louis: it will be steven to a point, but they're gonna go to steve. lemonis: and so it's the worst position you can put him in is when you give somebody a title, but you don't actually give them the stick. who's 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 don't want to do that, and i think if we're not gonna get a check 'cause we're 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, here's how you should think about this. this is -- your grandfather was here. -now your father is here. -steven: yeah. lemonis: and if you don't get the quality right, this business won't be here for you. steven: exactly. that's my -- lemonis: it's 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 custom-furniture 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 third-party 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 it's about $1 million. -steve: correct. lemonis: it's 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 build-out of $100,000, how did you fund that -- cash? steve: yeah. lemonis: ooh. that's a lot of cash. steve: i don't have credit. you know, we lost a condo in the keys. we've 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 it's with three or four different lenders. the problem is, when they have a downturn, they're not just in trouble with one bank. they're 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 it's good, but it's scary when it's bad. and so a business like this should have no debt, 'cause you can't handle the recession. steve: correct. lemonis: today, grafton operating only with custom furniture is a very dangerous proposition. you're dealing with high-end clients and high-end 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. semi-custom, where there's a couple of styles, and you can pick your wood finish and your fabrics, and then custom. mary: that's what we are. lemonis: you're not any of the first two.
mary: i just feel like we're custom and high-end, and i kind of want to stay there. lemonis: all right, i'm gonna take some time to just kind of look at this. steve: okay. lemonis: i'll see you in a little bit. -okay. thank you. -steve: thanks, marcus. lemonis: today, i'm meeting the graftons at one of my favorite restaurants in miami, joe's stone crab. i have a lot of good memories here, and hopefully, after today, i'll have one more. do you feel like your business is run right today? esteban: no. [ laughs ] lemonis: your dad said no pretty quick, didn't he? steve: well, no. there's always room for improvement. lemonis: you know, generational businesses sometimes don't succeed. second generation has a failure rate of 60% or 70%. third generation has a failure rate of 90%. mary: wow. lemonis: and so it's 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 doesn't have the smoothest of transition plans today. i get the sense based on a few things yesterday you feel like you're the only one with good ideas. steve: you have to convince me of what your asking or doing or saying. and if i think it's totally wrong, i'll 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: there's $1 million in debt, not enough working capital to sustain any sort of downturn.
fixing up the machinery in the buildings -- -that's $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 i'm adamant that there's clarity for steven. and so my offer is very simple. i'm willing to put up $1.5 million. that's 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.
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mary: that's what he needs. lemonis: i want to pay off the mortgage. i want to ensure that the facility is acceptable and make sure that there's plenty in the bank so that you guys feel like you can take care of your family and your bills so that you don't ever have to feel like 2009 and '10 again. mary: i think i'm 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 -- you're taking him under your wing. i'm ecstatic. -lemonis: we have a deal? -steve: we have a deal. mary: i'm supposed to do a round of applause now? -lemonis: thank you. -steven: thank you. steve: i'm looking forward to you helping us. mary: i feel like i'm in a dream. i don't even know that any of this is real. esteban: we have what he needs. lemonis: you all right?
you got pit stains 'cause you're so nervous? steven: yeah. a little warm in here. lemonis: it's not that warm in here. i think you were just...your pants. steven: yeah. [ laughter ] lemonis: ibuenos días! -all: ibuenos días! -lemonis: see? you thought i was gonna break out "good morning," didn't you? [ laughter ] yesterday, i made a deal to invest $1.5 million into this company. the reason that i'm 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 i'm hoping to be able to share those mistakes so that we don't make those same mistakes. today, we make custom furniture, but that's 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 don't want to be average, and i don't 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 -- i'm 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, you've 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: let's go to work. grafton's primary business is the custom-furniture business -- a great foundation. and they sell mostly to designers. but i think the real opportunity here is to find a way to sell directly to customers. i told you that i wanted to figure out a way to build a line. steve: mm-hmm. lemonis: and so what i'd like to do is i'd like to start with creating a quick-ship product designed solely by you. steve: okay. lemonis: my goal in driving grafton's revenue is to create a quick-ship line. these are ready-to-buy lines with multiple designs, and they're offered up with a few wood choices and a few fabric selections. and unlike custom furniture, these pieces can be in your home within 10 to 14 days.
i'd like to start with four accent chairs, because that accent chair is easily marketed. it can have cool looks to it. they're easy to make. they have a great price point. my goal is $1 million with the quick-ship line, and i'm gonna do that by creating four chairs to start the program. each one of those chairs is gonna have to do $250,000 a year at a 50% margin. on $1 million of revenue with a 50% cost, that's $500,000 in gross profit. i want you to design all four chairs with a different look in mind. i want to see a california look, i want to see a midwest look, i want to see a southwest look, and an east coast look. now, there's one more twist to it -- you have to be able to retail it for under $500 and make a 50% margin. steve: that's doable. lemonis: although the margins are a little lower at 50%, the volume is where you make it up,
because you're gonna pre-make furniture and have it in inventory. that allows you to make 10 or 20 at a time instead of 1. i think the real question is, can steve adapt and change? i want to look at them later, but have some fun sketching some stuff. steve: all right, cool. thanks, marcus. lemonis: steven! so going forward, we want to be able to understand better how we represent our quality. steven: yeah, no. back when i started doing deliveries and i would see unhappy clients and see mistakes maybe they wouldn't notice, but i would notice. lemonis: so, is this an example of something that would get delivered? steve: mm-hmm. lemonis: what would this chair retail for brand-new? steve: brand-new, that's a $1,700 chair. mary: oh. what do you see that's interesting about that cushion? steve: this shouldn't be seamed here. lemonis: why is the seam there?
steven: it was seamed 'cause sometimes we make things work. lemonis: so this customer that paid $1,700 just happened to get "hey, sorry. we wanted to make it work, so we're gonna give you a half -- literally a half-assed cushion that covers half your ass. steve: right. this is not our best foot forward. lemonis: it's in your showroom. why is it in here? find a piece that you think is good. steve: this one, we reupholstered recently. lemonis: how much would this chair retail for? steve: $1,000 or even a little bit more. lemonis: and what is it worth with this nick? steve: nothing. lemonis: what else do you want to show me? 'cause i'm really excited to buy furniture here. find something in this $100,000 showroom.
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that arm is on straight. -this arm is on crooked. -steve: right. lemonis: you're rushing it. steven, is there anything in this showroom that you would deliver to a customer? steven: no, there's nothing in here that i would give 100%. lemonis: what about that chair right there? steven: it has the nicks on the paint. lemonis: how about this one? steven: the upholstery is all right, but the finish could be better. there's scratches. it's not good. lemonis: who is really pushing the furniture out before it's ready? steve: it's a good customer, and they call, and they say, "can you have it in less time?" steven: he'll say yes, but then we have to do a rush. it messes up production. lemonis: does that frustrate you? steven: everyone gets frustrated, because they're expected to do perfect in less than, you know, perfect amount of time. lemonis: the problem with the furniture and the quality isn't the people that are making it. it's the process that they're given to make it or the lack of process. going forward, effective today, steven is 100% in charge of the quality. steve: okay.
lemonis: and i'm gonna get him yellow stickers, like a little dot. and if it doesn't have the dot, it doesn't go out. and so if something goes out of here and it's a mistake or a customer complains, it's coming back on you. steve: the pressure's from the client, the pressure is gonna be from louis, the pressure is gonna be from me, and he's gonna be under a lot of pressure. lemonis: you are now the yellow-dot man. how much stuff in here is just not needed, dust all over it, not efficient? the other major problem at grafton -- well, it's production. there is no flow. fabric and upholstery is everywhere, and equipment is very outdated. the space -- too confining. we have a finite amount of space, and we want to make more money. what we need to do is figure out how we're gonna lay this whole thing out. i've got a great way to expand the production capacity without acquiring more land or more buildings. you have this space that makes no money,
and so we're gonna clear it all out. steve: they're gonna take my showroom away from me. mary: i told you. when you were doing it, i told you. lemonis: we're gonna improve the process by putting the flow in place, improving the number of mistakes that are made, and making sure that when it goes out, it goes out right. but if we want our product to be the best, we have to upgrade our equipment. we bought over $50,000 of new equipment... steven: a sander. that's a dust collector. so it's two planers. lemonis: come on. ...including a new sander, a new wood planer, two new table saws, and a dust-collection system. efficiency is labor. labor is money. money is margin. that's what's gonna take this company's margins from 50% to 70%. steve: what happened with that silverleaf mirror? steven: the paint came off.
steve: well, what happened? they told me it was more like handling on the delivery. steven: we did it too fast. no. the glue of the leaf needs time to sit, and we're just not taking that time. steve: well, this is the second time that mirror comes back. steven: and it will come back again if we give them another quick date. we need to spend time on it. we can't give them quick-turnaround days, because these things will just keep happening. lemonis: are you frustrated a little? steven: yeah. yeah. they were just rushing a piece out that they had made a "promise" to, and i was telling them i don't care what you promised. it can't go. and we sent it. it came back. i was very frustrated. at times, i'm still like, "come on, guys. come on. we're still doing the old-fashioned way." and i feel like sometimes, they may think i'm just complaining to complain, 'cause i don't always have the answer. i could only sometimes see the problem. and i need some support or -- you know? lemonis: well, let's go talk to them. steve continues to promise unrealistic delivery dates, and it's affecting the business.
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steve: i am starting to change. yes, i am. it's not gonna happen overnight. i think we have improved. lemonis: let's come back to the kind of overarching issue. the fact that he wants more time is because he's a perfectionist. he's got so much passion and so much energy and so much love for his family's business. steve: you're right. lemonis: the biggest goal that i had was creating a succession plan, and having him feel like he doesn't have your support, it's not gonna help. steve: you're right. i promise i'll try. lemonis: we've started work on the warehouse. so, this is the new floor plan? man: this is the very newest as of this morning. lemonis: my goal isn't just to improve productivity, but to make it a better, more comfortable place to work in. the lunch room -- is it built?
steve: yeah. lemonis: i'm building a new break room so all the employees can eat together. this was a good investment right here. steve: this is awesome. what it does for the morale is way worth it. lemonis: i spent $75,000 putting air-conditioning, because it didn't have it before. so as the humidity goes up and down, the furniture doesn't -- steve: right. very important. lemonis: and i spent $110,000 building out a design center so that designers and customers can come in and pick from woods, fabrics, stain, and design exactly what they're looking for. i've already spent over $500,000, and i'm not even close to being done, but improving efficiency, quality, and margins, as well as production capacity is worth it. steve: this is the prototype, and it's getting ready to go into paint for tomorrow. lemonis: steve's been working on the quick-ship furniture line, and he's ready to show me the first of four chairs, the great lakes chair.
steve: this is what i didn't like about it. -the arm is too low. -lemonis: yeah. it feels like i'm struggling. steve: struggling to get down. lemonis: it also doesn't have the same pitch. it feels flat. it needs a little bit... the problem is is that this isn't this. what looks different to you? steve: we're rounding off the back here, and then i added this detail here. lemonis: why? steve: because i felt it gave it a little bit more of a relief. you don't like that? lemonis: i would have liked this, 'cause this is what i thought you were making. it's not exactly the way i want it. there are certain things, like the rounded edges, the cut-ins, and the height of the arms that have to change. i worry that if we agree on a whole line of furniture, and you show me images, and i'm like, "that looks amazing." and then i show up, and the furniture's in, i'm like, "this looks different." the number-one message that i want steve to understand is once we lock and load this design, i don't want him going back into the warehouse in the middle of the process and changing it. it costs us time and money, and we end up having to redo it again.
are you increasing the gap or increasing this? guillermo: increasing this. lemonis: this seems off-center to me now. guillermo: know how to change the pitch of this. lemonis: when you do these drawings and you back up all this information, where does it sit -- on your laptop? steve: in the computer. lemonis: what if you lose a computer? steve: we're done. lemonis: i want to put a system in here, like they have this at&t backup and go system, where basically everything you do -- the drawings, the accounting records, the payroll, the customer files -- everything basically sits in the cloud. you can access it remotely, and it's secure, and so you don't have to worry about it. so can we print this on a blueprint? -guillermo: absolutely. -lemonis: okay. and then we'll take it out in the shop and start the process. now that i'm comfortable with the revisions of the great lakes chair, i'm gonna send it into production. i want to see some stuff get cut. we'll start the process by creating a template chair. the wood will get planed, then measured and cut to size. so we build a whole template for the whole chair. -steve: correct. -lemonis: okay. -one time. -steve: yes.
lemonis: next, the parts and pieces will be assembled. once i give my final stamp of approval, this will be the master template for all great lakes chairs. then the process will be completed for the other three chairs, and we'll have a full line and be ready to sell them. -target price point? -steve: $495. -lemonis: cost? -steve: $250. steve: well, i don't see yellow stickers. i see them on this, but i don't see them on these pieces. steven: when it's done, it has a sticker. this doesn't have a sticker. is it done? steve: no, it's not done. steven: okay, so let me do my thing, man. lemonis: steve has been making a lot of progress by putting new process in place and designing new products. but some of those old, bad habits -- they continue to come back. -how are you? -steven: i'm good.
-how you doing? -lemonis: what's going on? steve: i was just making sure he had, you know, his eye on the ball and everything that needs to go out is checked. lemonis: i think he knows that, though, right? steven: yeah. lemonis: are you now the yellow-dot guy, as well? steve: no, no, no, no. lemonis: okay. [ laughing ] look how stressed he looks. you all right? steven: yeah. lemonis: okay. i'm sorry. steven: no, it's all right. -lemonis: okay. -steve: i'm sorry, too. lemonis: steve tells me that he's trying to adapt and change, but honestly, i'm not seeing it. if he can't get out of the way and let stevie do his thing, there's gonna be terrible consequences for all of us. i think you got to remember to stick to your thing. steve: right. lemonis: and you're bumping into other people. he's your son, too. steve: oh, i know. i know. lemonis: and if we say we're gonna give him authority, we say we're gonna let him do his job...
-no? -steve: yeah. lemonis: i mean, was it that way when you were growing up? was it the same? is your dad here? steve: yeah. my dad's over there. lemonis: let's go talk to him about it, 'cause i'm trying to understand where your habit comes from. -how you doing, my man? -esteban: i'm in my office. lemonis: you're in your office? esteban: yes. [ laughs ] lemonis: you know, i'm watching how him and stevie interact, and it seems like steven is always...on stevie. esteban: yes. lemonis: were you the same way with him? esteban: no. when he was that age, i stepped aside, and i let him to learn the business. lemonis: and what about stevie? esteban: well, i don't think he still has grown to his potential. -lemonis: he's a young man. -esteban: he's a young man. that's why he's got to let steven learn to take charge for the next generation. lemonis: and in the business you built. esteban: uh-huh. lemonis: remember that steven is learning from both of you. steve: right. lemonis: different lessons from you, different lessons from you. that's the beauty of this business is that there's three generations here.
the importance to me is that everybody can be on the same page going forward. you just got a fresh start. steve: yes. esteban: that's progress. lemonis: it's progress. esteban: yeah. it's progress. steve: stevie? steven: huh? steve: i know that there's a lot of pressure, and i know that i've been hard on you and i've been, you know, always riding you, and i want you to know that i am proud of you. steven: no, no, i know. i know. it's cool. steve: you beat me here every morning. you're hustling from one department, you know? so i want you to know that. steven: yeah, yeah. i'm glad you're...here.
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lemonis: hey, buddy. how are you? it's been three weeks since we started overhauling the warehouse, and i'm excited to see what it looks like. we're getting a little cleaned up out here. steve: oh, my god, yeah. lemonis: show me what's going on inside. steve: oh, gosh. let me show you. lemonis: the old showroom. steve: yeah. lemonis: the warehouse came out exactly like i wanted to. steve: we got eduardo's setup back here. lemonis: you like your new space. eduardo: oh, yeah. absolutely. lemonis: it's good?
in three weeks, it went from a disorganized maze with broken-down machinery to a very clean operation. oh, my god, this is totally different. steve: totally. lemonis: how much lighter does the place feel? steve: oh, my god. no, the place? the shoulders. lemonis: this total renovation cost me about $700,000. i spent $150,000 putting on a new roof that will last us for 15 years. i spent $75,000 putting air-conditioning. i built out the employee lunch room. and i spent $110,000 building out a design center. the build-out will allow us to entirely change the process, and new heavy machinery to cut and shape are now all in one room, and fine-tuning, like sanding, is in another, which is right next to the paint and stain room. the warehouse is gonna run like clockwork. and all of our designs will be backed up in the cloud. grafton had leakage of 20% of their profit margin
because of inefficiencies. with the new equipment, that will eliminate mistakes and do-overs, and that will save 10%. the new, efficient work flow will cut down on manpower hours, and that will save another 10%. put those savings against $1 million of revenue, and we've just added $200,000 in gross profit. this is really about creating efficiency. it's about having a starting point and having the product go through the system one time the right way. today, i'm just outside of chicago at the directbuy headquarters. directbuy is a consumer retail-buying group, and it's the largest retail network in the country. in furniture alone, they sell over $200 million of product a year. -steve: marcus. -lemonis: my man. -steve: we're on. -lemonis: how are you? steve and steven are gonna pitch the first phase of our quick-ship line. if we get this deal, it's a true game changer.
we go in there today, sell. this is a national retailer, and so this gives us a chance to do business all over the country. steve: right. -lemonis: are you guys ready? -steve: i'm ready. lemonis: all right. this just got interesting. why pause to take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure.
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and so this gives us a chance to do business all over the country. -are you guys ready? -steve: i'm ready. lemonis: all right. -steven: hi. -jim: hi there. steven: how are you doing? steven. jim: hey, steven. jim o'keefe. nice to meet you. steve: steve. lemonis: you guys, thanks for allowing us to come in and talk to you today. getting this meeting was a great opportunity for us.
while we're very niche today, the goal is really to change the way we manufacture, and so i want to see if there's a way to do some business. steve: great. thank you, marcus. i have designed four chairs, one for every region of the country. i'll start with the one that we shipped you. this is our great lakes chair. man: what's the retail on that? -steve: $495. -man: okay. lemonis: i had him make these four chairs with four very specific regional feels. the line that this will all be branded under will be the american dream. man: are you guys gonna carry inventory, or what type of lead times would you expect? steve: this is our quick-ship program, so we are going to stock and be able to ship in a 24-hour period. lemonis: can we look at the chairs? have you seen them? let's look at them. man: okay. steven: it's a clean, modern look, available with a cushion or with just the wood. man: mm-hmm. lemonis: there's a story behind the manufacturer. it really, i think, resonates with people. man: oh, it's a wonderful story to be promoted. we're constantly getting requests from our members,
saying what products are american-made. if we can have the american dream story behind it, that really takes it over the top. lemonis: look, the feedback on the furniture's fantastic, but a deal isn't done until we have a handshake. man: love your story, and you got a great product. i think it's a wonderful partnership for the future. steve: awesome. man: we have a conference in a couple of weeks where almost every club's gonna be there. if you could be there, it's in dallas. if you could be there, displaying your product, it would be a great opportunity. -lemonis: this is a big deal. -steve: absolutely. lemonis: oftentimes, you're begging to go to companies' conferences. but when they're inviting you, it's kind of a big deal. guys, thank you very much. appreciate it. we're gonna give you great-quality service and do a great job for you. man: great. thank you. it's a pleasure. lemonis: the four chairs of our american dream line are going to directbuy's conference. this is the start of something really big for grafton. we're also in the final stages of looking for space
for a new showroom in the miami design district. but the improvement i'm most excited about has nothing to do with the product or prices. it has to do with pride. this, to me, is your business, your town, your family, because it started with you, and it's gonna go long after you. so go ahead and turn around and take a look. steven: oh, my god. oh, my god. lemonis: there's your design center. steve: [ laughs ] look at that. mary: oh, wow. look at that eagle. oh, my god! man: oh, look at these three guys. steve: [ laughs ] mary: oh! steven: they gave you a little more hair, huh? mary: wow. -steve: papa... -esteban: yes? steve: ...congratulations.
lemonis: i really feel like the moment in front of the mural was kind of a culmination of years and years of joy and frustration and sadness and fear. and in that moment, i think the grafton family realized that they were finally heading in the right direction. when i first came to miami, i told the employees that there was no way that i was going to invest in a business in my hometown and not have it be the best, so i focused on improving the people, the process, and the product. but when it came to the people, we forced the change. i required that steve understand the relationship with his son from a business standpoint and that if this business was gonna succeed for generations to come, he was gonna have to let him fly. and he's doing a really good job.
courage. bis: is a family-run clothing company with seven stores across the country, but they have stumbled badly over the past two years. lousy decisions... noemi: i never approved this design. -nicolas: you approved this. -stephanie: are you kidding? lemonis: ...and poor execution... i just see cash. ...have put the company in a deep financial hole. that's created a ton of family drama. nicolas: you want all of the accolade without doing any of the work. lemonis: if they can't figure out a way to iron out their differences, there won't be a business to fight over. stephanie: nicolas, i don't want him to walk out that door because of this. lemonis: my name is marcus lemonis, and i fix failing businesses. i make the tough decisions.