Every week, three business owners stand up in front of a panel of judges and plead their case in hopes of winning $50,000. The biggest difference between Crowd Rules and Shark Tank, is that the audience decides who wins, and only one business owner walks away with the money.
In this week's premiere episode the theme was the specialty food market. According to the show's host, entrepreneur Kendra Scott, specialty foods make up 14% of the retail food industry. And, as co-host Pat Kiernan points out, the main demographic for these products are the 25 to 35 year olds, so if you can gain a customer's loyalty, they're in for the long haul.
Competing for the $50,000 were three small companies with very different stories.
Mr. Green Tea
This family-run, high-end ice cream company specializes in exotic flavors. The company was founded back in the sixties by granddad Emanuele. He thought the business would flourish if they concentrated on selling to restaurants, but Emanuele's partner, Reuben Mattus, wanted to sell to the public via the local grocery store. The two men couldn't agree, so they went their separate ways. Emanuele founded Mr. Green Tea and Mattus founded Häagen-Dazs. Ouch!
After granddad's passing, dad Richard took over the business and brought in wife Lori and son Michael. The company grossed $1.3 million last year and cleared a profit of $280,000. Nice, but the old squabble is still stalling the company's growth. Richard depends on the restaurant biz while young Michael insists on a commitment to the retail market.
Robin is the owner of this vintage inspired store that specializes in old fashioned barrel pickles. Sure, it's like a trip back in time, but is there really a big market for pickle stores? The company grossed $688,000 last year but only made $32,000 profit. Robin's daughter Alex helps her run the biz and they want to open a second location. The downside right off the bat is that these two just don't sound passionate about their business.
On the opposite side of that coin, is Johnny from Heartbreaking Dawns. He's beyond enthusiastic about his line of hot sauces and other fiery products. After success at a local festival, Johnny began selling his products through a distributor. He brags about being in 14 countries but sales of $230,000 only brought in $5,000 profit and he dumped that back into the biz. Right now, he's running the company from his kitchen and his wife is seven months pregnant, so of all the contestants, he needs the money the most.
After introductions, the audience delivers their first impression vote. Keep in mind, the audience members are all people with business backgrounds of some kind, so they're bringing knowledge to the table.
First Impression Vote:
Heartbreaking Dawns gets 65%, Mr. Green Tea gets 24% and Pickle Licious comes in last with only 12%.
The Truth Comes Out
In the second half of the show, Elizabeth Chambers of Bird Bakery joins the panel to reveal what she found out when she visited each of the three businesses. It's an eye-opener for the panel and the audience judges.
While visiting the "headquarters" of Heartbreaking Dawns, Elizabeth discovered that Johnny spent over $100,000 on NEW product development. He now stocks 25 products, which is insane when you're working from a home kitchen without a full-time staff. This lack of focus worries Pat and some members of the audience, too.
Mr. Green Tea says they want to build their brand but when Elizabeth checked a Manhattan market she found out that the product was routinely sold out because the company only delivers once a week! Son Michael made things worse by burning through the ad budget in 3 weeks. Father and son fight constantly and that's a problem. Part of the fight comes from the fact that even though Michael has worked his way up from delivery boy to brand manager, dad won't give him a share of the business.
That's nothing though, compared to the problems at Pickle Licious. Robin owns one store but she couldn't tell Elizabeth how much money the store made, which pickles sell better than others (they don't itemize sales), and they don't have any idea what's in stock and what they need. Daughter Alex says she spends ten hours a week building up the social media - 500 twitter followers with posts every day. The truth? They have 69 Twitter followers and she barely posts once a week. Sloppy, sloppy.
This leads to the first elimination vote and it's no surprise that Pickle Licious is out.
And the Winner Is. . . ?
In the final round, the businesses talk about how they'd spend the $50,000. Heartbreaking Dawns comes out ahead because that money would get Johnny out of his house and into a warehouse. He also has concrete plans for trade shows and a commission sales team.
Mr. Green Tea says they'll use the money for the retail push but considering they've been in business for 50 years and they're profitable, $50,000 isn't the game changer it would be for Johnny.
In the end, Heartbreaking Dawns wins it with 67% of the vote.
I think the audience made the right decision.
Want to learn more about how to and how not to grow your small business? Watch Crowd Rules every Tuesday night at 9p.m. on CNBC.
Tell Us What You Think
We want to hear from you! If you had $50,000 to invest would you give it to a 50 year-old company with a track record or a passionate start-up? Share your thoughts on Twitter or in the comments!
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(Photo Credit: By Ali Goldstein/CNBC) Pictured: (l-r) Kendra Scott, Pat Kiernan