Planet Popcorn and the Case of the Missing $400,000
The Profit episode about the popcorn business brought back memories from my years in selling businesses. Let's just say that some business sellers are less than forthcoming with the facts.
Planet Popcorn sells a variety of popcorns at fairs and farmer's markets across southern California. However, its main cash cows are two stands at Downtown Disney. As you may have already guessed, this is a cash business and that means a challenge for anyone interested in getting a clear picture of just how well it's doing, as we will see.
Things get off to a shaky start for Marcus and the owner. Initially she wants to use Marcus's money to open a creperie. Marcus wants nothing to do with a new venture. When they later go to scout potential locations for a permanent popcorn store, she reveals that she is still fixated on opening a creperie. I don't know how Marcus could have made his feelings any clearer on the subject: No freaking creperie!
Towards the end of the show Marcus discovers that she and her boyfriend had attempted to go behind his back and steal away the registration for a domain he had grabbed for the business.
But let's get back to the missing cash. At first Marcus concluded that the entire profit for 2012, $319,000, was missing. The bank account was literally empty. The owner first reacted with a deer-in-the-headlights look, followed by denial of any knowledge of what happened to it, followed by an attempt to change the subject. Marcus then brings in a forensic accountant who points out that another $80,000 is missing pushing the total to $399,000!
Once again the owner quickly cycles through a look of shock, then denial of any knowledge that money was even missing, followed by an incongruous attempt to change the topic. "Yeah well, so it's gone. Water under the bridge. Let's move on." She didn't use those exact words, but she may as well have because they say the same thing.
How can any some business owner not care about the fact that an entire year's profit of $399,000 is missing?
Well, we all know the answer to that one. Nudge-nudge-wink-wink, say no more!
Based on the fact that clean and wholesome Disney is the company's landlord, I would not be surprised to hear that Planet Popcorn had lost its concession by now. Does anyone know? The site is "down for maintenance"as I write this. (http://www.planetpopcorninc.com/)
Now here's the takeaway for business buyers, if you were talking to this business owner about buying her operation, you can rest assured that her valuation would be based on a multiple of that $400k. Working as a broker I used to get calls from owner's whose books showed that they had only made, say for sake of the example, $100K in profit while arguing that the actual profit was $200k. In other words, they were admitting to theft and tax evasion. I always declined those businesses because it's next to impossible to verify the real numbers.
This was a fun episode to watch because Marcus caught on early about who he was really dealing with.
Find out more about how Marcus plays the game of business. Could you be the next Marcus Lemonis?
Click the image to jump to the video. CNBC doesn't allow embedding.