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Marcus Lemonis visited Ideal Cheese Shop, a specialty store in the upper East side of New York City, to help owners and father-son duo, Julius and Michael Binetti uncover why their once-thriving shop is now struggling to make ends meet. This family-run cheese shop has been in business since 1954 but has been under the ownership of the Binetti family for the last 16 years. Marcus resolved to help them renew their passion in their business, revamp their attitude and solve their family issues.

When Marcus arrived at Ideal Cheese shop, he immediately noticed the aging and run-down storefront. This first impression is problematic because it does not invite prospective customers into the shop. The physical appearance of the store is indicative of management who has lost their passion for their product and their market. This is further evidenced by the light inventory throughout the shop. The Binetti’s explained that due to cash flow issues, they were not able to increase or expand their inventory in the store.

Ideal Cheese Shop found itself buried in approximately $400,000 of debt. Although in the last year the company generated $1.4 million in revenue, after their debts were paid, the business only made $28,000. The company was essentially bankrupt. It was very clear to Marcus Lemonis and to Michael and Julius, that if they did not get an infusion of capital, they would need to close. If that happened, Julius would personally need to file for bankruptcy.

Another issue that Marcus identified for the Ideal Cheese Shop is that the grocery area in their store takes 50% of their retail space even though packaged goods only accounts for 20% of their sales. They needed to reevaluate their floor space allocation to be sure that they are utilizing as much space as possible for their cheeses. Although the shop is failing in many ways, Marcus is impressed by the variety of cheeses that they have from other countries. While they focus heavily on European cheeses, Marcus challenges them to bring in some domestic cheeses as well so that they have all ends of the market covered.

Perhaps one of the largest and trickiest problems that Ideal Cheese Shop faced was the family dynamic between Michael and his father Julius. Although Julius owned 70% of the company, he now lives in Florida and was not present to handle the day-to-day business of the cheese shop. Michael owned 30% but is there 7 days a week, working 12 hour days, putting in all the work but still not getting a paycheck. He was burnt out and frustrated with the status quo of the business.

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Marcus is concerned about the past sins of the organization but does see the value of investing in Ideal Cheese Shop. He didn’t think the valuation was correct and also didn’t want to fund the previous issues and past debt of the company. Marcus offered to invest $100,000 and be a third partner at 33% equity. He is valuing the company at $700,000 and taking the $400,000 of debt off of the total valuation to base his offer. His money can be used to clean-up the past few payables, add inventory and refresh the store. Marcus does not want any of his money to service their debt. After countering and negotiating, they agree to an investment of $125,000, for 33% equity. His investment into Ideal Cheese Shop will be a preferred investment which means that he is a shareholder with a guaranteed return on his capital.

To kick off the changes to the store, Marcus challenged Julius to make upgrades to the storefront. This included new signage, new awnings, and a lot of cleaning and rearranging. During their cleaning process, they found evidence of mice which was concerning to Marcus. In order to feel comfortable food products and selling premium cheeses, Julius and his team must get the store cleaned up. Marcus is frustrated with how hard it was to get Julius to commit to fixing up the property when he learned that they are afraid to put money into the property because there were lease issues. Michael and Julius committed to fixing the lease issue so that they could move forward with the facility improvement projects.

In an effort to increase sales through cross-sell opportunities, Marcus empowered Michael and his longtime employee Miguel to find new products that they can introduce to their customers that are complementary to their line of cheeses. Examples of these products are cheese knives, boards, etc. Because Miguel is so confident with his knowledge of what the customer wants, Marcus put him in charge of procuring accessories for the store. Michael worked with Mars Cheese Castle to taste other cheeses and identify new domestic cheeses that they can begin to sell in their store to round out their product line.

Although the store was making some great progress, including landing some great strategic partnerships, better inventory, and a cleaner and bright store space, Marcus still had concerns about the family dynamic in the business. He didn’t think that Julius and Michael should work together anymore. There was a lot of resentment between them and if they continued on the path that they were on, they will likely end up with an irreparably damaged relationship. Because the business had enough cash flow to buy Julius out, the business offered to pay him $400,000 over 7 years. This equates to $57,000 per year. Julius and Michael agreed to disband their partnership, but they are both agree that Michael will need a partner to help him with the business moving forward.

They extended an offer to Miguel to become a partner in Ideal Cheese Shop. Michael will own 85% of the business and Miguel will own 15%. Marcus will no longer have an equity share in the company but will rather act as a lender to them. After seeing the progress that they have made, Marcus is confident that Ideal Cheese shop can reclaim its spot in NYC as being a top cheese shop and Michael and Julius can get back to just being a father and son.

What do you think about the improvements that Ideal Cheese Shop has made? Which do you feel has the largest impact on the business? Do you agree with Marcus’ decision to give full equity back to Michael and Miguel? Start the conversation in the comments below!