Entrepreneurs

‘Pink slime’ convinced 2 millionaires to invest $500,000 in real chicken nuggets

"It's chef-driven, has a lot of flavor, and we take a lot of care in how it's made." -Serafina Palandech, co-founder of Hip Chick Farms

When you buy chicken nuggets at your local fast-food chain, you don't always get what you'd expect.

Instead of high-quality chicken, sometimes you get "pink slime," a blend of leftover meat, ground bones, and additives like starch, says entrepreneur and chef Jen Johnson.

That didn't sound too appetizing to Johnson, who's cooked for people like President Barack Obama and business mogul Gordon Getty.

She and her wife, Serafina Palandech, were so irked by modern chicken preparation processes that they decided to launch a frozen food company where they have full control of where ingredients come from.

Co-owners of Hip Chick Farms Serafina Palandech and Jen Johnson say they are “betting the farm” on their company and have taken out a second mortgage on their home to invest in their business.
CNBC
Co-owners of Hip Chick Farms Serafina Palandech and Jen Johnson say they are “betting the farm” on their company and have taken out a second mortgage on their home to invest in their business.

Enter Hip Chick Farms, the latest company featured on CNBC's reality pitch show "West Texas Investors Club."

The company focuses on using sustainable and locally sourced ingredients. Johnson crafts original recipes for their frozen food line, and Palandech manages the business side. They work with local farms to get their ingredients, and part of their profit goes to nonprofits in the community.

"It's chef-driven, has a lot of flavor, and we take a lot of care in how it's made," said Palandech.

The business duo approached millionaire investors Wayne "Butch" Gilliam and Mike "Rooster" McConaughey, seeking $500,000 for a 20% stake in their company.

While the clean ethics behind the chicken company was appealing to McConaughey, competition posed by larger companies and the fact that Hip Chick Farms took a $700,000 loss in one year made the investors nervous.

Palandech countered that since their down year, they'd raised prices by three percent and changed packers and suppliers to cut costs without cutting corners on the process.

Betting on their company, the entrepreneurs explained, was worth the investors' time and money since grocery stores had demand for this type of product — they just didn't have the money required to meet it.

While they couldn't promise success, they did make one guarantee: If they placed their chicken nuggets next to their competitors', consumers would definitely choose Hip Chick, they said.

The investors were sold, and Johnson and Palandech walked away with $500,000 for a 35% share of their company.

"I think it's a good product, and I think it really does matter how they process their chickens," Gilliam said. "If people know about it, they'll buy their product over the other ones."

CNBC's "West Texas Investors Club" airs Tuesday at 10 p.m. EDT.