ACCT 525- The Profit Paper PDF

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Running Head: The “Profit” Paper Assignment - Corey’s NYC Bagel (Corey & Laurie) 1

The “Profit” Paper Assignment. "NYC Bagel Deli" (Season 6, Episode 1) Adeniyi Alese ACCT-525 Dr. Gordon Heslop 11/29/2019

Running Head: The “Profit” Paper Assignment - Corey’s NYC Bagel (Corey & Laurie) 2 Introduction Reality TV is changing the face of Television for good. There is a huge paradigm shift in the type of content viewers are craving for. Unfiltered real-life coverage of happenings and events in the life, business and undertakings of others (especially celebrities) is broadcasted 24hours on several TV stations today. This has helped to make the jobs of content directors a lot easier as long as they can get a celebrity who is ready to give viewers a peek into their personal lives and space. Reality TV is also helping to engage students in such a didactic and fun way that enriches the classroom experiences (Hall, 2009; Raines, 2002; Talyor, 2006). Hall (2009) discovered that students relate better to the celebrity characters in reality TV and their personal experiences. The abstract in classroom learning is brought to life. This paper explores how the reality TV show, The Profit, reinforces real-life application of managerial accounting topics, concepts and principles taught in the classroom. Management accounting tools like Ratio analysis, budgeting, Overhead Allocation, Cost-volume - profit analysis, Standard costing, Activity based costing, etc. can help small business owners like Corey and Laurie make more informed managerial accounting decisions as shown in season 6, episode 1 of the CNBC reality show “The Profit” make more informed decision especially with issues like cost and waste reduction. The Profit season 6, episode 1 ("NYC Bagel Deli”) was viewed and analyzed for this paper assignment. Background Marcus Lemonis’ “The Profit” show on CNBC The Profit is a television show on CNBC featuring Mr. Marcus Lemonis who is a selfmade millionaire and the CEO of the billion-dollar company called Camping World. On “The

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Running Head: The “Profit” Paper Assignment - Corey’s NYC Bagel (Corey & Laurie) 3 Profit,” Mr. Lemonis is an investor who specializes in helping struggling and failing businesses turn their fortunes around buying a stake of those businesses. The typical flow of the reality show is as follows start with Mr. Lemonis informally meeting the business owner(s) to gets a feel for the state of the business by reviewing important financial statements like cash flow and balance sheets. On satisfactory assessment of their books, Mr. Lemonis makes a financial offer for part of the business. It is usually followed by counter-offers and offers until a deal is reached. After the owners of the businesses have completed negotiation and agreed to the deal, Mr. Lemonis immediate hits the ground running by implementing perceived changes necessary for turning the company’s fortunes around. His strategies are hinged on the 3Ps - Products, Process and People. Corey’s Bagel ("NYC Bagel Deli”) NYC Bagel Deli is a local bagel shop owned by Corey and Laurie Kaplan. It offers bagels, sandwiches, salads and pizza. The two have owned the Chicago bagel chain for nearly two decades. The husband, Corey Kaplan, has a long history in the bagel industry since his father had run the same type of business. He was practically born into the business - he started out working at his father’s bagel shop in New Jersey over three decades before moving to New York to start the NYC Bagel Deli. Situational Analysis Corey’s Bagel ("NYC Bagel Deli”) was not a typical Marcus Lemonis interventionneeding business because it was not failing or struggling. It was already churning out profit. Its challenge was that; it was just not fulfilling its potential. For Mr. Lemonis, “cash is king’- the cash flow of the business says a lot about it viability and sustainability. The Kaplans wanted to

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Running Head: The “Profit” Paper Assignment - Corey’s NYC Bagel (Corey & Laurie) 4 expand- in fact, Corey Kaplan wanted to open ten more locations; This expansion dream may prove elusive and a mere pipe-dream if necessary reforms were not carried out. According to Marcus Lemonis, NYC Bagel Deli was experiencing a stunted growth due to its poorly executed business channel strategy and model, a drab and uninspiring branding, poorly streamlined array of product mix, and a lackluster business name that lacked originality and brand-worthiness. Mr. Lemonis also felt that Corey was getting in in the way of business growth because he was stubbornly opposed to any idea that did not originate from him. Marcus Lemonis was a first-hand witness to how Corey displayed close-mindedness and strong resistance to change. He has a big ego and was highly dismissive of his wife's (his business partner) ideas. His wife Laurie, wanted all the overcooked bagel turned into chips rather than trash as previously done. Corey came up with a million and one reasons why that was a bad idea. It took the intervention and persistence of Mr. Marcus Lemonis to eventually actualize Laurie’s ideas. Corey was also opposed to renaming the store from NYC Bagel Deli to The Famous Corey's NYC Bagel Deli. He was also opposed to creating new products like bagel chips at the store. Mr. Marcus Lemonis felt the business wasn’t maximizing its potential. He believes that, with the right tweaks, just one of the bagel store location could single-handedly generate an additional $1 million in annual sales. A bagel at the store was sold for $1.29 while it cost about $0.10 in materials and another $0.10 in labor. Mr. Marcus loved the high profit margins. Prior to Mr. lemonis’ intervention, the business operated in two primary locations and a pop-up location as a third site. The two primary locations were making about $100,000 per month and the pop-up site around $50,000 per month. With a percentage margin of 84% ($1.29 minus $0.10 material and $0.10 labor), Mr. Marcus Lemonis is sold by the huge profit potential. The Offer / Deal Alese (50088066)

Running Head: The “Profit” Paper Assignment - Corey’s NYC Bagel (Corey & Laurie) 5 Mr. Marcus Lemonis offered the Kaplans $200,000 for a 25% share of NYC Bagel Deli. He felt that he could drive higher traffic to the Dearborn location and help grow NYC Bagel Deli from a $1.3 million business to $2.5 million. Corey declined the offer from Mr. Lemonis because he felt the offer was not commensurate with the financial state of the business which was not struggling but only trying to grow. The both walked away. Armed with ample research into Mr. Lemonis’ past successful intervention into other businesses and with pressure from Laurie, his wife, Corey called Marcus for a meeting and to propose $250,000 for a 25% share of the company. He reiterated that that Corey’s bagel would be stronger with Mr. Lemonis than without. A deal was made. SWOT Analysis This Strength-Weakness-Opportunities-Threats analysis of the Corey’s Bagel ("NYC Bagel Deli”) according to Mr. Marcus Lemonis are as follows: Strength: 1.

Very impressive profit margins. (Unit cost of raw material is $0.10, unit cost of labor is $0.10 and unit selling price for a bagel is $1.29)

2.

Corey’s long experience in the bagel industry (comes from a generation of bagel makers). Marcus Lemonis is a strong believer in gaining industry experience.

3.

The popularity of store and the huge following.

4.

The customers love the bagel

5.

Happy and motivated workforce. One of the workers had worked at the store for 16 years (this checks the people part of Mr. Lemonis’ Product-Process-People focused business strategy).

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Running Head: The “Profit” Paper Assignment - Corey’s NYC Bagel (Corey & Laurie) 6 Weakness: 1.

Poorly planned and poorly presented product mix. The store has bananas and other fruits stacked so high on the shelves that it overshadowed the main product. Need to introduce traditional New York food like cheesecake into the product mix.

2.

Lack of openness to new ideas and change.

3.

Lack of consistency in product quality.

4.

Poor brand awareness and quality

5.

Store design was uninviting to customers. Items and products seemed to clogged up the free flow of customer traffic.

Opportunities: 1.

Ancillary product line could provide drive traffic and further improve the bottom-line

2.

Commissary product channel model will help improve product quality consistency.

Threats: 1.

Customers could be lost to improper branding and online misrepresentations.

2.

Bagel wastage could impact bottom-line.

3.

Resistance to change could give completion an edge. Marcus Lemonis’ Strategy for Corey’s Bagel

1.

He hit the ground running as soon as the deal was made. His first step was to review all the product line including the 13 different types of bagels sold in the store. He got rid of products that added little to nothing to the bottom-line and added the traditional New York bagel chips, coffee and cheesecake to the product mix. Mr. Lemonis

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Running Head: The “Profit” Paper Assignment - Corey’s NYC Bagel (Corey & Laurie) 7 believed that the ancillary grab-and-go items are what customers build onto their order thereby increasing the dollar value per order, as long as the products in stock are things that customers are interested in buying. 2.

H rebranded the store from NYC Bagel Deli to Corey’s NYC Bagel Deli and redesigned the store façade from the old dull look to a modern catchy feel. He believed that a recognizable branding is key to growing the business.

3.

He developed a concept store at the Dearborn location to better create a customercentric process for company.

4.

He developed a commissary model and product channel strategy that make it easier to open more locations and sell wholesale product. He also believed that people should be on the top of his 3Ps (People, Product, Process) business strategic pyramid. Mr. Lemonis 3Ps Methodology Mr. Marcus Lemonis pointed out that for any business to thrive, it must adapt the 3Ps

(People, Product, Process) business management methodology. He invests only in business that have checked at least two of the three P’s. In fact, he strongly believes the 3Ps concept can revive any dead or struggling business. The lies the secret of his successful interventions. The people are the workers that produce the products and the customers that help drive the bottom-line. Hiring and training the right people as well as ensuring that your customers are satisfied, is key to the success of the business. Performance evaluation helps to motivate the people. The right process is the right strategy, the right planning and execution. In the case, Mr. Lemonis figured that a commissary product channel is the right process for Corey’s Bagel. A process audit is necessary to continuously align the process to business goals.

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Running Head: The “Profit” Paper Assignment - Corey’s NYC Bagel (Corey & Laurie) 8 Finding the right product that people are willing and able to buy is very crucial. Then how create and continuously improve it will determine the survival of the business. This is the first step but not the most important. Both the product and the process should be centered towards people having a good experience. Conclusion According to the Kaplans, the introduction of ancillary products like bagel chips are helping to drive sales. In fact, the bagel waste from overcooking was initially converted into chips but the huge demand for bagel chip is making them intentionally overcook the bagel to make chips. This has a huge positive impact on the profit margin and overall bottom-line. The customers’ feedback to the changes made by the team (Mr. Lemonis and the Kaplans) have been positive. They are seeing a great surge in add-on sales as well as in the sales revenue which grew by an impressive 10-15%. The also landed some large and strategic wholesale accounts for their bagel chips. Mr Lemonis infused more capital to the tune of $2 million to kick start the commissary business model.

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Running Head: The “Profit” Paper Assignment - Corey’s NYC Bagel (Corey & Laurie) 9 REFERENCES Berliner, C. and J. A. Brimson. 1988. Cost Management.for Today's Advanced Manufacturing: The CAM-I Conceptual Design. Boston, Mass: Harvard Business School Press. Brimson, J. A. 1986. "How Advanced Manufacturing Technologies are Reshaping Cost Management." Management Accounting, (March): 25-29.

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