S01.E03: Pop Goes The Weasel

[Lola16]

 

Pop Goes The Weasel

Marcus Lemonis nixes his investment in Planet Popcorn. This commentator has a few questions. (About other stuff; the ixnay was a no-brainer.)

I do not have any questions about why Marcus Lemonis finally gave up on Planet Popcorn on last night's episode of The Profit. Lemonis gave Sharla enough time, expertise, and benefit of the doubt to pull it together, and didn't see too many red flags before bailing on it.

 

http://previously.tv/the-profit/pop-goes-the-weasel/

[Lola16]

Sharla is using the website Marcus bought for them back in 2013

 

http://www.planetpopcorn.com/about

 

The logo has changed.  They have tins now.   And according to the recap on the ASL episode, she kept the cameras in place.

 

Curious if Marcus let them buy the domain and logo?  

 

Sharla came across as shifty as ever.   On one website, a local claimed that the day after the episode originally aired, Disney severed their ties to Planet Popcorn.  Some assume it's because Sharla is so unsavory.  Probably more likely that Disney realized Sharla was hiding sales and not paying them the appropriate amount of commission.

 

http://tycoonplaybook.com/2013/08/18/the-profit-marcus-and-planet-popcorn/

 

Supposedly, Sharla has opened up her creperie in Newport like she wanted to when she contacted Marcus.  I don't think she's learned much from the episode.

[Amarsir]

When the revisit showed the floor with no money on it, I couldn't help but think "because you don't have any!"

Sharla's biggest problem was her delusion that she didn't need Marcus. Cash was coming in and this is Her Business and nothing else mattered. The most telling moment of the original show was when she did that little "I bought lottery tickets and you can't stop me" stunt. It was like a kid more interested in asserting their independence than proving worthy of it. And I'd like to think that seeing the show and immediately losing the Disney contract was a wake-up call.

She definitely seemed contrite, which was why Marcus was willing to make a deal. But wow did she get clobbered. The business was making $400,000 in profit and now he valued it at $100,000 total. I imagine that all 5 stages of grief happened before we got to see her at Acceptance.

Oh and I do remember wondering if there might have been some substance abuse going on there and if she's maybe past it now? If so, I certainly hope so.

Edited December 4, 2014 by Amarsir

[eddy]

I'm still scratching my head on this one.  Something changed to bring Marcus back, but I don't know what.  People don't change that much in a year.  Yeah - she tidied up the office, got some bar-code, and has the cameras - too little too late.  When the missing $400k was brought to her attention, she didn't even get mad.  I'd be pulling out all the stops to find out what happened.  Actually, I'd know the moment 1% of that money was unaccounted for.  Either she is extremely lax (don't trip over those bundles of bills on the floor), or she was hiding her true income from the IRS (and her commission to Disney).  Either way, those are not traits I want in a partner. 

 

Why would he risk his money when there are people out there who may need a little business education, but are otherwise honest and straight-forward?  I guess the answer is the people in the latter category don't make for exciting reality TV.

[Lola16]

Planet Popcorn still claims on their website to be 100% woman owned.  If Marcus has a 40% share, that's not true anymore.  They also claim to have contracts with some local stadiums.  Is that Sharla's doing or Marcus?  

 

Sharla tried to play things off as she didn't understand math and was too trusting but now she took Marcus' advice etc.  Except that the cameras & systems she points to, we saw Marcus install during his first visit.  Does her balance sheet show any profit?

 

Her assertion that she pays her mother back by paying her mortgage... yea... on the books now.  I'd be willing to bet that some of the missing 400K was cash to her mother to pay her mortgage before.  Her mother seemed blind to everything up until the point Marcus and the bookkeeper were reviewing the cash balance.  How did Sharla know that he discovered a problem?  Did her mom call her?  The bookkeeper and the mother had an 'oh shit' look when Marcus pointed out the variance.  Did they really think he wouldn't find it?

 

The fiance was shifty and had that shit eating grin.  Sharla was evasive and belligerent and seemingly uncaring about missing 400K$.  Mom and bookkeeper seemed nervous.  I think Sharla knew where all the money went and everyone else only knew where their portion went.  JMO.

[Amarsir]

Good point on the fiance.  He was certainly relevant enough the first time to warrant a mention on the revisit.

 

Somehow I've gotten the impression that the $400k wasn't missing so much as just unaccounted. Like they bought a building or something and didn't record it. There's just no incentive to take it out secretly. It wouldn't be tax fraud because the profit's still there on paper. If anything it's the opposite of cheating - looking more profitable than they actually are.

 

Of course it could have been taken by someone other than Sharla, but then her I-D-G-A-F attitude would make even less sense. Leaving me of the opinion that it's just sloppiness and nothing more.

[Lola16]

Back in the TWOP days, there was discussion of nose candy as being an expense for the missing cash.  That and a front for the fiance's money laundering.  Who knows.  What is apparent to me, is that Sharla wasn't concerned about the variance.  And the only way an owner wouldn't be concerned that 400K in profit doesn't exist in the bank is if that owner knew where it went.

[rehoboth]

Somehow I've gotten the impression that the $400k wasn't missing so much as just unaccounted. Like they bought a building or something and didn't record it. There's just no incentive to take it out secretly. It wouldn't be tax fraud because the profit's still there on paper. If anything it's the opposite of cheating - looking more profitable than they actually are.

 

 

This was a sticking point for me as well.  Since she didn't bat an eye at the report of missing money, she knew where it was or had gone.  She can't be scamming the IRS on the business end if the money is duly reported as income on her books.  BUT if she 'paid' herself the money for her own personal use and didn't report it as her income, would that be scamming the IRS?

Edited December 7, 2014 by rehoboth

[Lola16]

According to the forensic accountant, one 80K$ charge was miscoded as an expense and should have been added in as profit.

 

 

If anything it's the opposite of cheating - looking more profitable than they actually are.

No.  Misappropriation of funds doesn't make the business look more profitable than it actually is.  If a business has 400K in profits, it has 400K in profits whether or not it leaves that 400K in a cash account, disburses it or re-invests it into the business. 

[Amarsir]

This was a sticking point for me as well.  Since she didn't bat an eye at the report of missing money, she knew where it was or had gone.  She can't be scamming the IRS on the business end if the money is duly reported as income on her books.  BUT if she 'paid' herself the money for her own personal use and didn't report it as her income, would that be scamming the IRS?

Not for a sole proprietorship. Her income and the business income are treated as the same thing. Only with a partnership or corporation does it differ.

 

That's not to say there couldn't also be some skimming. It's a cash business so making $100 a day disappear before counting would be very easy.  But there's no benefit to making it go afterwards.

 

No.  Misappropriation of funds doesn't make the business look more profitable than it actually is.  If a business has 400K in profits, it has 400K in profits whether or not it leaves that 400K in a cash account, disburses it or re-invests it into the business. 

Unless the thing they left off is an expense. Or a depreciable asset.  Yeah, there are cases as you say where it doesn't matter. But my point is that once the income is marked, it's only to your benefit to track where it goes. Worst case it's a disbursement. Best case it's something you can deduct.

 

The exact opposite would be the owners who used the business credit card for personal expenses.  (Artistic Stitch?)  That let's them shrink the reported profit.

 

According to the forensic accountant, one 80K$ charge was miscoded as an expense and should have been added in as profit.

 

 

I'd forgotten about that, but yes that error would be to their favor it got carried through to taxes.  For some reason I think it was just a random error but more than one miscode like that would throw up fraud flags for me.

[Lola16]

 

Lola16, on 07 Dec 2014 - 10:41 AM, said:

    No.  Misappropriation of funds doesn't make the business look more profitable than it actually is.  If a business has 400K in profits, it has 400K in profits whether or not it leaves that 400K in a cash account, disburses it or re-invests it into the business.

 

Unless the thing they left off is an expense. Or a depreciable asset.  Yeah, there are cases as you say where it doesn't matter. But my point is that once the income is marked, it's only to your benefit to track where it goes. Worst case it's a disbursement. Best case it's something you can deduct.

Your point changes.  You stated "If anything it's the opposite of cheating - looking more profitable than they actually are"  in response to the missing 400K$.  Now you're coming up with 'cases' about where the money might have gone that was legit.  None of that was introduced or even implied on the show.  If there was a legit expense or asset, I'd think it would have come out by now.

 

FYI - Planet Popcorn has been registered as a corporation in California since 2005.

[Amarsir]

I first implied, then stated outright, that legitimate but undocumented expenses might be part of the discrepancy.  I don't think I can be much more clear. And if you want to go with a "we didn't see it so it couldn't have happened" line of reasoning, well then I have no response to that.

 

Now as being incorporated - good find!  I just checked that and you're right.  It's not even an LLC, which would have been my second guess.  I don't know why Sharla would have incorporated since the tax treatment is not favorable.  But I'll revise my statement now to say that there's no way this accounting was kosher and I wouldn't be surprised if she came up for audit.

 

Which would really be some dark humor. She goes on The Profit thinking she's doing well and will get free publicity and an investor.  Instead she gets trashed, loses her Disney contract, and then gets an audit and back tax penalty.  Pretty hard to spin that.

[eddy]

Yeah - as a Corp her accounting mess certainly has big implications.  Not much has been said about the guy who was introduced as her "accountant".  The guy who went over the books with Marcus before Marcus brought in the forensic accountant.  How come her "accountant" didn't know the books were a mess until Marcus pointed it out (unless of course he's in on the scam)?  With cash unaccounted for, all kinds of things could have happened.  People stealing?  People paid under the table?  Drugs?  Who knows?

 

I have no idea why Marcus went back a year later and made a deal.  Too many unanswered questions to understand what that's about.

[selhars]

Nevermind.

 

ETA: So much was unsaid.....Marcus' turn-around necessitated a WHOLE LOT more explanation to the audience. I say a lot more, but that would mean we got SOME explanation when we really didn't get ANY....so indeed SOME explanation was needed -- with details given what we saw last time around.

 

Again, NO mention of the boyfriend...who was sort of like a fiance, right?

 

First, we have Marcus' attitude in the ASL episode which was cut short, for an inexplicable update on Sharla.

Then, Marcus' attitude in the Greek Gyro episode, another one with SEVERAL relevant things NOT explained.

 

These two eps back to back have thrown me a bit....and not for the good when it comes to my views of the show.

Edited December 13, 2014 by selhars

[rehoboth]

Here's my theory:  In the original episode a big red flag was raised when Sharla was told that there was $400,000 'missing' and her response was akin to "Ummm,,,, ok.  I'll put that on my TO DO list to start looking around for it in the morning."  This in turn implied to many that she didn't need to look for it because she already knew where the money went.  In this episode, Marcus seemed like he had the same attitude as Sharla about the money.  "$400,000 was missing last year?  I guess it was found and aren't the desks much neater now?"  I think Marcus was nonplussed because he, too, now knows where that money went.  Maybe it was a problem that was taken care of (drugs/gambling/custody battle with rehab/legal issue settled) so he could be comfortable with her now.

 

This episode doesn't make me comfortable with either one of them.