How Do You Roll Before Shark Tank
How do You Roll founders, Yuen and Peter Yung, from Austin, Texas, had plenty of early experience in the running of a business. They both grew up, and worked in, their parents restaurant business from an early age. Yuen had graduated from the University of Texas with a degree in finance while Peter followed his ambition to become a top chef, and it was while Yuen was beginning a corporate nine to five career that he realised there were no lunchtime options for sushi that were both quick and good quality.
The entrepreneurial brothers decided to take the traditional sushi experience and make it an entirely new experience for customers. They had a tag-line of ‘The Customer is the Chef’, and offered a totally customized menu, based on a similar principle to the successful Subway franchise model. Customers could choose their own roll and select from a wide range of fillings to create their own personally designed sushi snack. They launched the How Do You Roll business in 2008 with one location in Austin, Texas.
Yuen and Peter’s original take on Sushi, with their focus on a fast-food style experience for hungry lunchtime customers was an early success, and in 2011, just three years after opening their first location, the Yung brothers had two corporate locations, more than a $1 million annually in revenue, and 15 franchise locations in five different states. But the brothers knew the pace of the businesses growth would be greatly accelerated if they could gain not only additional investment from a shark, but also the benefits of a Sharks business expertise.
How Do You Roll On Shark Tank
Yuen and Peter came into the tank hoping to gain a $1 million investment in exchange for 12% equity in the How Do You Roll business. Yuen began the pitch by explaining to the sharks the traditional problems that faced customers hoping to pick up a quick sushi meal. Option one was a sit-down meal in a restaurant, but it wasn’t a quick experience for those who had limited time to eat, the alternative was a sushi roll picked up at a local grocery store, but that option usually involved food that was not of the highest quality and freshness.
Yuen revealed that the How Do You Roll model was fully customizable, and provided the sushi fan with a third option, unpretentious good quality food, that was provided quickly and without all the usual fuss of a restaurant. Yuen’s business experience shone through during the professional presentation, but it was time for younger brother Peter to show the sharks exactly what skills he was bringing to the table. Barbara Corcoran was invited up to try the How Do You Roll experience for herself, which she enthusiastically agreed to.
Barbara selected a wrap, some fillings, and sauces, and Peter provided her with her own customized snack in a matter of seconds. The other sharks were impressed with the speed of the process, and they looked a little hungrier by now too, but Yuen was quick to reassure them that there were samples of the companies featured rolls for them to try too. The Sharks got to grips with their tasty samples right away, and it was clear immediately that the quality of food provided was top-notch.
After the samples were happily devoured, and the compliments had ended, Robert Herjavec asked the brothers about their background and experience. Yuen revealed he and Peter’s upbringing in their parents restaurant, and the early experience they had gained in the trade. He explained that he concentrated on the business side of things, while Peter dealt with the food preparation and menu selection.
Mark Cuban wanted to talk about the growth of the business so far. Yuen explained that the business had been launched just two and a half years previously, yet already operated two corporate locations, and a further fifteen franchise operations, with another 25 franchises due to be opened in the next twelve months.
Kevin O’Leary inquired if the corporate locations and the franchises were all profitable. Yuen was quick to inform him that the franchises were bringing in $250,000 a year in total royalties. Robert asked what sales had been achieved from the two corporate businesses in the previous year. Yuan revealed that they had achieved $1 million in revenue between them.
Barbara Corcoran was interested in the set-up costs for new locations, and asked what costs a new franchisee would incur. Yuen explained that the initial franchise fee was a modest $20,000, but the additional costs involved, setting up the restaurant, fitting out the premises and other costs would take the total investment required up to approximately $300,000.
Mark Cuban inquired what the royalty rate for the satellite businesses was. Yuen told him it was 7%, which was a reasonable amount compared to many other franchise opportunities. Kevin O’Leary asked how the business ensured they received the full amount owed from the franchises. Yuen explained that franchise operators were obliged to open a corporate bank account to ensure that all royalties could be correctly calculated.
‘Wise Move’ commented Kevin, pleased that the business minded Yuen appeared to have thought of everything.
Mark Cuban liked the entrepreneurial brothers, he liked the concept of the How Do You Roll business, and he had loved the food, but he had other objections. Mark asserted that the food sector was ‘brutally’ competitive, and due to his own complete lack of experience in the area, he had no ambition to be in the sushi business. With that Mark dropped out of the negotiations.
Kevin O’Leary told Yuen his pitch had been excellent, he liked the concept of the business and thought the combination of Yuen’s business acumen, with Peter’s culinary experience, was a superb partnership of skills, but Kevin still believed the valuation was ‘rich’.
No-one seemed particularly surprised at that declaration, and Yuen took it in his stride as he calmly disclosed that he and Peter had received an offer for 75% equity in the business for $6.6 million, which was in fact a slightly higher valuation, and that was how the valuation for Shark Tank had been calculated. Kevin inquired if the brothers were considering accepting the offer. Yuen admitted that they were not, as they had no intention of losing the controlling stake in the company.
Daymond John had been the most impressed with the quality of the food amongst all the sharks, but he was nowhere near as enthusiastic about joining the Yung family firm. He believed that the highest profit margins in catering came from beverages and desserts, but the profit margin on fish itself was very low. And for that reason Daymond was out.
Robert Herjavec was very impressed with Yuen’s knowledge of the business and well-prepared pitch. He thought the food had been excellent and believed the business could be a great success, but he admitted that he had no knowledge, or real interest, in catering businesses. He assured Yuen and Peter that he would happily sample the How Do You Roll experience as a customer, but he had no intention of investing in the company, and with that Robert was out too.
Barbara Corcoran thought the growth of the company in under three years had been ‘amazing’. She praised both brothers for their achievements so far, but admitted that she had previous experience with food franchise operations, and knew they could be very complicated to run. She implied that Yuen’s presentation may have glossed over some of the less attractive elements of the business and confirmed that she was not going to invest in the business.
Kevin had come to a decision, and it was good news for the brothers. He offered the requested $1 million, but in exchange for 22% equity in the business, and he had an additional caveat too. Kevin wanted to take a percentage of the royalties earned from the franchises every month, with the percentage to be determined at a later stage. He stressed his experience in setting up franchises, and in particular his knowledge of the real estate business.
Yuen looked interested, but not entirely happy with Kevin’s own valuation of less than $5 million, he made a counter offer to Mr Wonderful, $1 million for 15% equity. Kevin considered it briefly, and suggested they ‘meet in the middle’, at 20%.
At this stage the brothers took a quick time-out to discuss things outside the tank. When they returned Yuen asked Kevin how he would help them with future franchising opportunities.
Kevin admitted that there was no easy answer to that, he asserted that each franchise was an individual negotiation, and until the business had at least 50 franchise locations it was counter productive to appoint a franchise manager to ease the process, and that should be the first aim for the company.
After another brief consultation between the brothers Yuen told Kevin ‘We’ll accept the offer’, and the new partners shook on the deal.
As Yuen and Peter left the tank, Barbara Corcoran called after them ‘You’ve made a deal with the devil’. Kevin O’Leary smiled at the comment with a look of triumph.
How Do You Roll Now in 2018 – The After Shark Tank Update
The odds of an entrepreneur being fortunate enough to appear on Shark Tank are fairly low. Of the estimated 35,000 who apply each season, less than 0.5% of them ever actually get the chance to pitch their business to the sharks, so to be offered a deal from a shark would be the ultimate dream for many applicants, but that is just the beginner of another, far less public, set of negotiations.
Although Shark Tank executives always refuse to comment about post-show talks between entrepreneurs and their prospective Shark partners, it has been estimated that around a quarter of the deals made on the show eventually fall through, and How Do You Roll was one of the businesses that fell on that final hurdle.
Within three months of filming the negotiations had fallen through. At one stage of talks Kevin O’Leary had expressed a wish to create a five member board of directors for the business, taking three of the seats for his own hand-picked members, including company chairman. Yuen refused point-blank to entertain that, and other suggestions, and eventually Kevin O’Leary withdrew from the proceedings, and that was the end in terms of a Shark Partner for Yuen and Peter.
Of course, a shark partner is only one of the benefits a business can expect from an appearance on the show. In the three years since the segment was first shown, the number of franchises operated by the brothers has grown to more than 100 locations, not only across the United States, but with franchises now operating in Canada and the Middle East. As Yuen admitted in an interview in 2015, the negotiations with Kevin may have ended in deadlock, but you can’t buy the kind of exposure an appearance on Shark Tank brings, not even for a million dollars.