Authored by: Ian Gyan
Still, finding a balance between food that’s good for you and food that tastes good has always been difficult. Fortunately, Guy Vaknin’s company, Beyond Sushi, presents a solution tastier than you can imagine.
On Episode 3 of Season 10, Guy calmly requested $1.5 million to help grow his New York-based company in Los Angeles, offering 25% of his west coast profits and 5% of his already established east coast profits.
His hefty ask drew a few odd looks from the Sharks, so Guy kept his puns to a minimum and delivered his pitch without much flair. A smart choice, as the Sharks grew less apprehensive as he went through his talking points.
Beyond Sushi is a multi-unit vegan restaurant chain. It makes use of veggies, fruits, and whole grains to create unique flavors, all without the use of artificial meat. The “extensive” menu includes salads, wraps, dumplings, and (sushi) rolls.
This modern approach to traditional food manages to maintain that delicate balance between flavor and nutrition. It’s what distinguishes Beyond Sushi as one of the “pioneers” of the vegan movement and shows its commitment to creating more sustainable ways of eating.
Thanks to Guy’s best-selling “Mighty Mushroom” and “Sunny-Side Up” rolls, the Sharks could clearly see that… or taste it, rather. His “amazing” sample platter included sushi made with robust ingredients like braised fennel, micro arugula, truffle shiitake sauce, 4-grain rice, and sun-dried tomatoes.
Despite the good food, these Sharks would only be satisfied with profitable numbers, and in that regard, Guy did not disappoint. It only costs Guy $1.50 to make one 280 calorie roll (8 pieces), which he then sells for $7.50. Guest Shark, Matt Higgins, absolutely loved the sound of an 80% margin but that wasn’t Guy’s only advantage, there was also his scale of operations.
Guy opened his first restaurant using the last $70K from his life savings in July 2012. Back then he only had 12 seats and 1 employee. Since then, he opened 6 locations throughout New York City.
So, how does one man handle so many restaurants?
It’s because Beyond Sushi is a commissary-based business, meaning all the food is cooked by a single distributor. This is a perfect example of working smart instead of working hard. Having one entity produce the food keeps his margin stable, cuts the hassle of keeping ingredients in stock, and allows him to focus on the macro aspects of expanding a business.
Guy owned restaurants ranging from as small as 180 sq. ft. to as large as 2,500 sq. ft., but regardless of size, each location pulled its weight. He confidently reported that last year, his east coast operations grossed $4 million in sales!
“Mr. Wonderful” leered suspiciously, as the other Sharks nodded in approval, he sensed the devil hiding in the details
Before Guy announced his sales, he revealed his resourceful partnership with Sandy Beall, the founder of Ruby Tuesday. Together, they planned to change Beyond Sushi’s grab-n-go structure to a more open-seated arrangement using Guy’s largest restaurant. When Kevin asked how much he netted out of last year’s $4 million gross, he sadly revealed that he was down $272K. Evidently, his expansion placed a lot of pressure on the entrepreneur to keep his business afloat. He assured the Sharks that this was not the norm and mentioned that the year before his deficit, he pocketed $600K out of his $2.4 million gross.
At Guy’s current pace, Beyond Sushi’s projected sales rested comfortably at $5.6 million, but to Mr. O’ Leary’s disappointment, he only expected to net $300K next year. Although, this letdown didn’t weigh too heavily on the other Sharks.
Being the food aficionado of the tank, Matt began asking about his unit economics, specifically Guy’s QSR (Quick Service Restaurant) percentage. He answered questions as quickly as Matt asked them but this eventually wore down the interest of some of the other Sharks.
Daymond cut into their conversation simply because he couldn’t understand any of the food industry-specific jargon. Since he also wasn’t familiar with the back-end of the restaurant industry, he decided that it was best for him to back out. Daymond’s loss of appetite was echoed by a few others. Kevin also took the chance to expand on his issues with the business. Since Guy only expected to net $300K out of his projected $5.6 million in sales next year, fronting the requested $1.5 million for 25% of an expansion that hadn’t begun yet would be akin to him paying twenty times Guy’s pre-tax earnings. A valuation like that was “insane” according to Kevin, so he backed out as well.
Things didn’t get better from there, Mark correctly pointed out the already immense workload that Guy’s east coast operations placed on him. Given that Beyond Sushi wasn’t the only restaurant selling plant-based foods, Mark decided to go with his “gut” on the matter and pulled his hand away from the table. Perhaps Mark thought Guy wouldn’t be able to handle the financial burden of expanding again so soon.
This was more than likely a reaction to the entrepreneur's last year of sales. His expenses sank him so low into the red that he had to invest $160K in personal funds just to stay in business. For a seasoned money maker like Mark Cuban, a fluctuation like that raises a big red flag.
With 3 Sharks now out of the water, Guy’s eyes were left wide and nervous. At the same time, Matt and the ever-patient Lori Greiner settled in for a deal, but not before making Guy sweat a little...
“Here’s what I don’t like,” Matt said, explaining that he didn’t like that Guy’s offer would have him paying $1.5 million for 25% of operations that hadn’t begun yet, but only gave him 5% of his east coast operations, which were already profitable. Considering his losses, Guy’s initial offer now looked more like an investment to be made on faith alone.
However, these Sharks don’t deal in faith, they deal in fact. And the fact was that between east and west coast operations, the potential for a “misalignment of interests” between them was too great to ignore. With how hard he worked to counteract his deficit, it was very possible for Guy to end up too focused on east coast maintenance instead of west coast expansion like Matt wanted.
So, Matt requested more east coast equity as an incentive to ensure that guaranteed profits would come his way. Even though Guy looked terrified at the thought of giving up equity, he still offered to raise the east coast stake up to 10%. Clearly, it wasn’t enough because during the time it took Guy to respond, Lori had whispered what seemed like a fruitful agreement into Matt’s ear. They both turned their mischievous eyes back onto the now silent entrepreneur.
Matt announced that he and Lori were coming into the deal together, as Beyond Sushi was also right up her alley. Lori believed that the company would do better on the west coast, as the health-conscious movement over there was very strong. Their plan was to cross-market, get Guy into major airports and stadiums and change his life. And at first, the entrepreneur smiled, only to stop once he heard their new offer of $1.5 million for 30% of west coast operations & 15% of east coast operations.
At this point, Guy could only say “yes”, “no”, or make a counteroffer.
He chose to counter with a similar offer of $1.5 million for 30% of the west and 12% of the east. But that wasn’t enough, Lori and Matt’s offer was final. So, Guy looked to the ceiling as he pondered the deal, as though saying a prayer, and finally said, “ok, let’s do it.”
Lori and Matt sprang from their seats, rushing to congratulate him. The other Sharks congratulated him too, although Kevin didn’t hide his disapproval. He just scowled and shook his head. Maybe he saw the signs of a bad deal, but based on the way both he and Daymond started clearing out the rest of the sushi samples, Beyond Sushi would be just fine.
Ultimately, giving up equity was the best move, as it would translate to faster growth. With two Sharks worth of resources behind it, Beyond Sushi would start growing practically at "lightspeed."
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