Kevin O’Leary called the presentation “chaotic” and initially rejected the offer as the co-founders struggled to explain in detail how the company would ultimately make money. did.
“How do we make money? All the rest doesn’t matter,” O’Leary said.
However, by the end of the episode, O’Leary teamed up with guest judge Michael Rubin, CEO of Fanatics, to offer RoboBurger’s founder $1.5 million. Here’s how they came up with the idea and, in Rubin’s words, “did a 180-degree effort.”
The three founders brought in a vending machine for the judges to try. The company mass-produced “reheated” burger patties with cheese and seasonings on a toasted bun in about four minutes. The burgers sell for $5.99 to $6.99 each, the founders said.
“‘Reheating’ is a fancy word for ‘reheating,'” Mark Cuban points out, but Blade, the company’s chief technology officer, says the machine uses the machine to process cooked patties. He said the meat is seared to form a skin, leaving the meat in a “straight-fried state.” juice. ”
A RoboBurger vending machine on display on the set of ABC’s “Shark Tank.”
Source: Disney/Christopher Willard
The sample burgers were delicious, the Sharks agreed. The founders asked for a $1.5 million investment in exchange for a 5% stake in the company. This meant that the business, which was not yet profitable, was valued at $30 million.
“Wow!” several investors said in unison.
RoboBurger makes money by leasing the machines for $3,000 a month or selling them outright, said Siegel, the company’s chief marketing officer. Buyers and lessees are responsible for keeping the machines stocked with materials. (Roboburger did not immediately respond to CNBC’s request for clarification on the selling price.)
At the time of the photo shoot, RoboBurger had been in “beta testing” for 18 months and had sold more than 12,000 burgers, its founders said. They predicted annual revenue would be $1.4 million by the end of the calendar year, but added that the overall loss for the year would be $700,000.
Roboburger CEO Wilson said the company needed the money to expand its production process “so we can bring these machines out at a faster pace and continue to grow.”
Cuban noted that robotics is a competitive industry and the technology can quickly become obsolete. He called vending machines “hard capital assets that cost a lot of money” to manufacture and maintain, and suggested RoboBurger would be better off pursuing a “licensing strategy.”
“I think that’s a big mistake because it’s driven by the physical location and the physical lease,” Cuban explained, rejecting the offer.
Rubin also expressed doubts about the business model, specifically whether tens of thousands of people would be willing to pay $3,000 a month plus food.
“This is a great idea, and I applaud you for that, but I don’t think your business model is right,” Rubin said. “But I think this has the potential to be very successful… If it actually works out, it could be massive. It could be a multi-billion dollar business.”
Instead of investing in equity, Mr. Rubin proposed another method of financing: a loan. He offered $1.5 million with “market rate” interest payments and 10% equity in the company.
“I think this is a very high-risk project. [with] The chances of it working are very low. “What we heard here was a lot of skepticism,” he noted.
Barbara Corcoran criticized Rubin’s offer as “greedy.” But Mr. O’Leary, angered by what he called “the very Mr. Wonderful structure,” offered to split the $1.5 million loan cost with Mr. Rubin.
Rubin agreed. RoboBurger’s founders gave O’Leary and Rubin their nod by negotiating up to a 9% stake and expressed excitement about partnering with “two Sharks we’d love to work with.” .
Rubin explained his decision to return to negotiations after previously withdrawing: “In business, sometimes you have to do a 180.” [degree turn]. I just did a 180 on myself. ”
Disclosure: CNBC owns the exclusive off-network cable rights to “Shark Tank.”
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