When Honest Foods Catering owner Tad Devlin approached business guru Marcus Lemonis for help boosting his catering business, Devlin could not understand why his company was suffering a 30 percent shortfall in revenue from the previous year.
As Lemonis sat in the company's storefront kitchen of Chicago's Forest Glen neighborhood to review the company's finances, he noticed two things standing out: The company was being underutilized and it wasn't diversifying its client base.
Eighty percent of the food the company produced was feeding Chicago's small entertainment industry, a seasonal one that boomed during certain periods and suffered during others. The unpredictability led the business to frequently be underutilized.
Lemonis, host of CNBC's "The Profit," encouraged the business to focus on meeting its capacity, or the maximum level of output the company could sustain. "That's a way to all of the sudden take the same amount of labor and the same amount of rent and the same amount of lights and have more revenue attached to it," Lemonis explained.
To reach capacity, the business would need to operate 90 hours per week, 30 hours more than it had been working with its staff of 12, Lemonis said. Working those additional hours would generate Honest Foods Catering another $648,960 in revenue per year.
That revenue, however, would not be generated in a vacuum. "Bottomline, they need more business," Lemonis said.
Lemonis encouraged Devlin and his team to go into food trucks, an industry valued at $1.2 billion in the United States in 2016 and which has increased over 12 percent over the past five years, according to Statistic Brain Research Institute.
"You have all the dry goods, all the machinery, all the storage, all the folks from prep, you have all the assets that are needed," Lemonis said.
With two food trucks, Lemonis forecast, Honest Foods Catering could generate an additional $600,000 in sales per year. Factoring in gross margin and operating expenses, the two trucks would net Honest Foods $180,000 per year.
"That's almost double what Tad did last year," Lemonis pointed out.
Ultimately, the company followed Lemonis' advice and purchased two additional food trucks, debuting them at the 50th anniversary of Camping World and Good Sam Club's. Lemonis is chairman and CEO of those companies.
