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S03.E05: Fuelfood


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OMG! What a  jerk! I'm glad Diana is out - hope she is doing well with a new company. I'm amazed that company made any money at all. I checked the the website during the show, and saw they were still using the old name and logo and figured either (a) they couldn't change until the show aired, or (b) Marcus bailed.  Smart man. I'd be interested to know how the SEC investigation played out. Skakey business all around.

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Am I the only one who got a steroid vibe from the bully business owner?

Not at all. I thought the same thing.

 

What a hot mess. I feel so bad for the employees - they seemed like good people. (Glad Diana got out!) And if Erik was this much of a jerk to his employees on camera, I shudder to think how much worse it must be off camera. Marcus really did dodge a bullet, though. 

 

I am curious to know where all the money is going. Am I the only one who thinks that some of it may have been invested with Ponzi scheme shareholder?

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I was waiting for somebody in the focus group to comment about the 'petrol pump nozzle into a bicep' logo. For me, seeing such a logo would subconsciously prompt me to expect the taste of gasoline instead of pesto.

 

Since Roidguy was so un-hesitant to fork over controlling interest in the company for 300K, I'm thinking he was just looking for cash to burn from yet another investor. In fact, I wonder how many other investors think they have 46% of the company?

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Good catch by Ketzel From the document Paragraph 8. 

 

"For example, Schumack’s wife signed a check for $500,000 made out to the IRS.  T.B.T.I. also has transferred approximately $4 million from its investor account to an unrelated account from which Schumack and others executed more than 100 cash withdrawals totaling around $4.8 million, which was 91 percent of the account balance.  Another $23,000 of investor money was used by Schumack for personal expenses including restaurants, merchandising stores, and a nutrient therapy center."

 

I enjoy watching a few business screw-ups.  Bunting's summery was a bit hard to read but did cover the main points.  Bunting mentions she wants to know more about Marcus's eating disorder...WHY??  And covering sweet item businesses is popular because most people can follow and understand it.  Does anyone think Marcus investing in a Tesla  theory inventor would hold an audience?

 

I really was expecting a few roaches to scurry across the floor - place looked really dirty.  Enter Kitchen Nightmares.

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I learned about Marcus's eating disorder from a magazine profile (Inc) I read last season. I don't think he's mentioned it on the show before, but I could be wrong.

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(edited)

I should have been more clear in my comment about Marcus's eating disorder.  Why do we want to know more about his eating disorder?  I don't and disagree with the inquiry by Bunting.

 

Let the show roll on as it is going.   At least this time we didn't have any tears.  Plus once again we  are reminded that when considering an investment, check out all lends, restrictions, shareholders - good lesson in this episode.

Edited by Curious5
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In the abstract, I don't need to know more about Lemonis's ED (or really any other personal aspects of his biography). I mention it because HE mentioned it, but didn't elaborate -- and he's not obliged to, but there are different types of disorders, and a type whose sufferers compulsively count and restrict is maybe contraindicated by a pre-ordered food regime, which might tend to feed into it in a less-than-healthy way.

I'm not a doctor; I don't have an ED; I don't know. But I didn't bring it up, and when it was brought up and then left there, versus either explained or cut out entirely in post, I found that peculiar. It's not keeping me up at night or anything.

And I disagree on the Tesla point, for the record. :)

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Interesting episode.  Obviously the show's staff is doing research and due diligence behind the scenes to shape the direction of each episode.  Thirty minutes into the show and no sign of the typical "Let's gut this place and install a new process" was a clue that Marcus knew the outcome from day three.  Buying some pots and pans was as far as he got.

 

Erik's brain is obviously damaged by steroids.  His tactics, bravado, and persona that may have worked in the gym won't work in business as clearly shown.  There is a fine line between showmanship and bullying.  You can't bully your way to success and maintain it for long.

 

But where Erik really blew it was allowing his "books" to be exposed in detail on TV.  Any company, any entrepreneur with half a brain can see the revenue and margins and growth that this nitwit achieved in spite of himself.

 
Imagine what a competent team could accomplish.  Look for a start-up to enter the market and quickly wipe this guy out.  Erik probably thought being on the show would be a huge publicity win. Instead it blew up in his face.

Edited by eddy
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You probably are right about Tesla.  I've only watched it for about one season so the small store front businesses seem to be the majority.  You  brought up a good point about Marcus's knowledge about different food diets and health food.

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(edited)

What I would like to know is whether Marcus did his own research into the other shareholders. Because if not, he's guilty of the same mistake he blamed Erik for. Ultimately I don't think it matters: the SEC wouldn't agree to a dilution without a ton of other meetings and investigations, so the rest of this was just noise.

 

And what noise it was.  When the guy said "Women, as you know, are more emotional and less rational in their decisions" then you already know what you need.So sticking around after that is on you. I think this was an interesting episode because of all the issues going on, but at no point did it seem like a viable investment.

 

Maybe Fuel Foods can get together with Pro-Fit Gym. I think the owners would get along.

Edited by Amarsir
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http://www.ponzitracker.com/main/2014/4/14/company-with-shark-tank-link-added-to-receivership-in-suspec.html

Company With 'Shark Tank' Link Added To Receivership In Suspected $70 Million Ponzi Scheme

JORDAN D. MAGLICH MONDAY, APRIL 14, 2014 AT 8:59PM

A Florida federal judge approved an emergency request by the court-appointed Receiver of a suspected $70.9 million Ponzi scheme to expand the receivership to include a company whose mobile app was endorsed by prominent 'Shark Tank' personality Barbara Corcoran. In a hearing this morning, U.S. District Judge Donald Middlebrooks granted an emergency motion filed by court-appointed receiver James Sallah to include My Gee Bo, Inc. ("Gee Bo") in the recently-instituted receivership over JCS Enterprises, Inc. and T.B.T.I., Inc. (collectively, the "Receivership Entities"), which stand accused along with principals Joseph Signore and Paul Schumack of operating a massive Ponzi scheme using ATM-like "Virtual Concierge" machines. Notably, Gee Bo reportedly paid $400,000 to secure the endorsement of Corcoran, one of the personalities of CNBC's hit show 'Shark Tank.' Following news of the alleged fraud, Corcoran has announced she will be withdrawing her endorsement.

(Emphasis mine)

Yeah, I don't think it's a case of "getting past" vetting" or why would it make it to air DESPITE this shit; I think it was vetted BECAUSE of this situation, specifically TO make it to air.

As Marcus himself said in one of his Talking Eyeliners, even a hint of being attached to a [poorly frankenbited "alleged"] Ponzi scheme can ruin one's reputation: Barbara fucking endorsed one!

What better way to make it clear that Ponzies Are Bad, M'kay?, (and, poor, poor, 400,000-dollars-for-doing-nothing-no-wonder-these-Sharks-don't-like-to-PAY-for-businesses-anymore, poor Barbara, she couldn't have known about the Bad Bad Ponzi Man, either!), without risk of slander, without drawing any more explicit connection between Barbara The Business Woman and Barbara the Shark Tank Shark Metonym, etc. (they pretty much gave instructions on how to Google for more info: I don't think they've ever been so explicit with names, states, etc.), than to have Marcus, whom I think many viewers see as The Ethical, Trustworthy One among these Business Reality Tv personalities, put down his gavel on it while presenting his judgment on national broadcast (AND syndication?) for the courtroom of public opinion?

The question is, WHY draw more attention something that never made it past the small pubs like this one, and fell out of the collective consciousness of those subcultures for whom it was ever on the radar to begin with: this seems more likely to just BRING more scrutiny, through more awareness, UNLESS, unless, unless something else is about to happen-- Babs called in to testify? Or even just the expectation that, when a larger ruling comes in, the media is likely to run with this shit?-- and this is just a preemptive strike. OR, maybe she IS guilty of something more.... (Nah, don't think that: just showing that's why it's maybe a bad idea!)

But a coincidence, a slip-through, just an odd ep, despite the record number of viewers lest with concussions after all of the Anvils of Heavy-handed Foreshadowing got thrown at and dropped on us for an hour? No. No way.

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Simply said, Profit crew must have known about this fraud before going in UNLESS  it was only at the time FuelFood disclosed who his shareholders were.  The documents show April 2014.  I doubt the filming took place before the civil action took place.

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Simply said, Profit crew must have known about this fraud before going in UNLESS  it was only at the time FuelFood disclosed who his shareholders were.  The documents show April 2014.  I doubt the filming took place before the civil action took place.

If the Profit crew hadn't found out that one of the investors of Fuelfood was a crook. A company can have dozens to hundreds to thousands or even tens of thousands of investors.

 

Doing background checks on each investor to see what their investments in would be next to impossible. Even if one of the investors was funneling money into the company from a ponzi scheme it wouldn't really wouldn't affect matters of to invest or not. Those that have run ponzi schemes have put money into legitimate businesses or into other ponzi schemes. 

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Even if one of the investors was funneling money into the company from a ponzi scheme it wouldn't really wouldn't affect matters of to invest or not.

 

I agree with all of this.  And it is hard to say if this was producer manipulations, coincidence, etc.  However, I think the fact that the owner couldn't really account for over one million dollars that had been "invested" was a huge issue. Giant truck? And still no money for payroll? Add in a Ponzi scheme, and it suddenly made me wary.  I'm guessing that the money was also part of the scheme in some way. I think Marcus did a public service by showing that he didn't allow the check to be cashed until all the T's were crossed and I's dotted. Creepy vibe all around. What a bizarre work environment.

 

Regarding the Ponzi scheme - looks like Youtube videos were part of the sales approach.  Didn't Erik rip his "sales manager" a new one for not having reviewed their Youtube channel ads? (and criminy - he built a business on that ad?!)  Youtube marketing in both cases sounds a little too cozy for me. But then, I'm old, so maybe that's the new way to build a business.

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I am also old, but doubt it's a way to build a business -- BUT I can imagine someone taking the word of a Ponzi schemer that it is. "That's what he does, and he's getting 50% returns!" or whatever. 

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If the Profit crew hadn't found out that one of the investors of Fuelfood was a crook. A company can have dozens to hundreds to thousands or even tens of thousands of investors.

 

Doing background checks on each investor to see what their investments in would be next to impossible. Even if one of the investors was funneling money into the company from a ponzi scheme it wouldn't really wouldn't affect matters of to invest or not. Those that have run ponzi schemes have put money into legitimate businesses or into other ponzi schemes. 

I partially agree and partially don't. Yes, off the hundreds of business applicants they get it would probably be prohibitive to ask for a list of investors on each and then run backgrounds on each of them. However, once you're down to a short list it could probably be done. (As would vetting some of the finances.) But I just don't think they want to. Letting Marcus discover all of it in front of the camera is good TV.

 

The other thing you're saying is that you can't necessarily blame a business for its investors, and for that I 100% agree.  If FuelFood was running well then all the SEC would say is "great, I'm glad there's a good investment here, how soon can you buy our shares out?"  But now that the funding is suspect it's natural to wonder how high it goes.

 

Ultimately though I don't even think that matters. Marcus simply can't invest without dilution approval, which he wouldn't possibly get on any kind of a decent timeline. Jesus himself could come down, bless the books, say "Yeah I never pitch the bitch either", then fist-bump roid-head and ascend out of there. It wouldn't make a difference.

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why did Marcus say he needed approval of all the shareholders this time?    maybe because he didn't want hassles, like he had with sweet pete's.

 

the last argument might have gone a little better if he had told the guy that he was not going to get approval from the feds to do the deal.......and shareholder agreement was one of the requirements........that's why the deal is off.

 

I guess since the check wasn't cashed, then Marcus was not 100% in charge - so he could not stop the employee pay cuts.

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It depends upon the business contract. Some businesses have anti-dilution measures. So dilution of shares cannot take place without the holder shareholders approving. It's just considered convenient to get the other shareholders to approve the dilution then go forward with it.

 

Marcus could get that 46% from the feds. It would take time and money. The feds in ponzi scheme recovery efforts rarely get 20 cents on the dollar back to the victims. Often it is way lower. If Marcus was to buy the shares even at 50% of their purchased value the gov't would be happy. It would just take a year or two minimum. 

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(edited)

since the show indicated he did not know there were any other owners/shareholders/investors,  it seems unlikely he knew what the corporation rules were during the scene where he made the conditional deal.

 

 

edit:    I don't recall if he found out about the other investors during the "deal scene", or if it was earlier.     if it was earlier, he (his staff) might have had time to find and review the corporation paperwork.

Edited by clod
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Marcus had asked for a list of shareholders and musclehead didn't have it handy. Musclehead said there were multiple shareholders and it was six.

 

Musclehead seemed to not have certain pieces of paper he should have had. I think that made Marcus put that provision in about cashing the check. 

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I think we only got that scene with the missing page because it fit the narrative, and that in actuality it was resolved 5 minutes later. I just can't picture a scenario where the guy says "you're missing a page" and Marcus lets that slide.

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I think we only got that scene with the missing page because it fit the narrative, and that in actuality it was resolved 5 minutes later. I just can't picture a scenario where the guy says "you're missing a page" and Marcus lets that slide.

The guy was a muscle head. odds are it took a day for Marcus to get those pages and the pages didn't tell the whole truth. Hence Marcus didn't know that one shareholder held 46% of the company and the 54% was divided between Musclehead and the other 5 shareholders. 

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(edited)

Mr. Ponzi  had  46  or 47%  of the company.  Those shares would be frozen by the gov't - I would believe - and thus could not be deluted.  I would think the shares would be forced to be sold immediately in the process of clawing back any available assets.

 

Innocent  investors of ponzi schemes who were thrilled with their "returns" in this type company have been forced to returned any profits they had received.  The 46% investment in this case was from illegal funds and thus clawed back.

 

The real question is where is all the money this muscle head had from other investors.  Notice how he casually said "it's gone" when referring to additional investment during the current year.  Marcus was clear when he stated "all I see is the truck."  Some of the initial money was used to upgrade the kitchen and that was all.

Edited by Curious5
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(edited)

Marcus is no dummy.  He's got a big enough staff to investigate a company before he shakes the owner's hand the first time.  You could see from the start Marcus had no interest in Musclehead Inc.  The company has no competitive advantage - anyone could easily start up a competing company.  All they have is a local customer base, and no realistic opportunity or resources to take it national.  The crappy kitchen, the lousy food recipes, the demoralized staff are worth zero.

So, for the cost of some new pots and pans, Marcus gets another show under his belt, and dodges a bullet.

Final score:  Marcus 10, Musclehead 0

Edited by eddy
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(edited)

Ok, here's something I'm curious about. Ponzi scheme guy invested a million two-ish, right? And when Meathead and Marcus were going over the numbers, Marcus asked where the money had gone and Meathead accounted for it under what seemed like oddly general categories or entries. The only thing he could actually show was the truck, which definitely looked more like a cargo van and not a monster truck. Some Googling tells me that a $150K cost for a monster truck isn't crazy, but a cargo van should land more in the $40K range. From the numbers that Meathead gave, I'm not sure the math adds up. Meathead seemed shady as hell and he danced around the Ponzi scheme problem enough that I wouldn't be surprised if he knew more than he was letting on. I think Marcus mentioned that the company was making money in spite of ownership, so I'm kind of wondering if the investor was using his stake to launder money through the business.

 

I kind of like seeing Marcus get into a shady business and I wish he'd do more on the kind of due diligence that goes into investing in a business. I thought it was fascinating when he started unraveling all the SEC mess and explaining that. This episode made me really wish for an episode that would take the place of one of the follow-up eps and would get more into depth into the kind of research Marcus does into a business and how he decides whether to do a deal.

Edited by BabyVegas
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"... it turns out $779,000 of stolen investor money may have gone through fuelfood"

 

I hope The Profit does an update on this doomed company before the season ends.  Maybe with Marcus holding a microphone with a penitentiary in the background.

 

 

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(edited)

There is a lot more going on with this "business" than was disclosed in the episode. Where is all the cash flow going? Where did the $1.2M plus proceeds from loans by Huntley, Kalaydjian, and Snap Advances go? Why couldn't they make payroll?

 

The food looked like garbage, the owner was a lunatic, there were loads of unexplained cash flowing through the books, the Yelp reviews are abysmal, the business model is incoherent (they appear to auto-bill cancelling clients mercilessly)...In what did Marcus think he was investing?

 

The Youtube marketing coincidence between Signore and Schumack's scheme and Fuelfood's marketing is interesting.

Edited by tehach
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I agree, a nice technical followup would be awesome.

 

On the one hand, just because a dishonest fund invests in you doesn't mean you're bad. On the other, Ponzi schemes need to look like they're profiting when they aren't, so a compliant asset is very handy for faking that. And then on yet a third hand, surely no one's stupid enough to call CNBC if their books are crooked, right? Not even this guy - it's the 3rd season for crying out loud.

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Delivery of healthy food or   companies with healthy food options is a huge market nowadays. Used to be it was only nutrisystem or jenny craig but now there are many starting up. Several delivery raw ingredients with a recipe. There is money to be had and using an existing company with a small local customer base then expanding it could be a hugely profitable venture. Hence why Marcus was interested. 

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I agree, a nice technical followup would be awesome.

 

On the one hand, just because a dishonest fund invests in you doesn't mean you're bad. On the other, Ponzi schemes need to look like they're profiting when they aren't, so a compliant asset is very handy for faking that. And then on yet a third hand, surely no one's stupid enough to call CNBC if their books are crooked, right? Not even this guy - it's the 3rd season for crying out loud.

You would think no one would be that dumb and yet one thing I've come to learn is that con men/women always seem to think they are one step ahead and won't get caught. The more they get away with it, the more they think they will always get away with it. I wouldn't be surprised if the owner thought that "hey, it's a TV show, they'll come in and give me some money for my time, they get a great episode, we all walk away and they don't look at anything too closely." Based on how informal his reports looked I would be wholly unsurprised to see some fuzzy Arthur Andersen math.

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Before pointing fingers, your attention is directed to this SEC filing for the offering of securities:

 

http://www.secinfo.com/d1FCU9.n17.htm#1stPage

 

Erik can claim what he wants to, but he signed the form which includes Schumack's name.   Note that the offering is for $3.0 million - fortunately (at least up to that time), nobody was suckered into buying them.  

 

The bottom line is, Erik was required to get releases from ALL shareholders.  Despite repeatedly being asked by Marcus for those releases, either because of lack of motivation or the knowledge that he could never deliver them, he failed to do so and, therefore, forfeited any right to cash that $300K check.  He couldn't even stand there as Marcus kept trying to explain why, choosing to walk away like he was the victim.  Boo hoo.  Sorry folks, but in this case you can count me on Team Marcus.

 

Having worked in TV video editing in the past, it's easy for viewers to ask why something was included or omitted after days of work are compressed to fit into a 22 minute work (the remaining 8 minutes are, naturally, commercials).  When you have an hour to tell a story, it doesn't get any easier.

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(edited)

The Yelp reviews are interesting.  The only positive ones are obvious marketing plants whose primary focus is the AMAZING Erik and the wonder that is his company.  Somehow I doubt actual customers would make Erik himself the primary focus of a review. The actual customer reviews are scathing. Most concern being ripped off by credit card billing, receiving expired or near expired food, no customer service of any kind, and complete lack of response from company once they have your credit card info. And most of the reviews were from before the episode aired. 

 

My favorite part of the episode was when Erik dismissed women as 'emotional and irrational'.  Wow. Because if anyone is emotional, completely ruled by emotion, it is Erik. The emotion is anger and it fuels everything he does. He is so insecure in himself that he surrounds himself with all the alpha male trappings, he's a walking cliche.  Huge muscles (steroids, natch). Check. Monster truck. Check. Fitness models in skin tight clothes. Check  Pitbull on leash and pitbull head painted on wall over desk. Check. (Of course he has a pitbull. Of course he does.) Threatening and intimidating verbally and physically at the slightest provocation.  Check check check.  He's a walking talking cartoon of a man, completely guided by his insecurity and pure anger.  Hey ladies!  I think he's single!  

 

Oh, and the street marketing campaign?  Wow. What I totally want in a healthy food delivery service is a huge muslceman walking toward me with a large pitbull on a leash by his side,  next to a monster truck and sexy women in skin tight clothes.  What a perfect way to get me to cross the street and be depressed and buy an ice cream cone because I am so totally demoralized by the arrogance of the thing.  I'm saying this poorly, but I think at least some of you know what I mean.  

Edited by Andyourlittledog2
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There is no deep "due diligence" for the show, because Marcus doesn't want to know anything about the owners/business in order to portray the  reality of his experience to viewers. He's absolutely the most real honest person you'll ever meet.  I believe some basic due diligence should be done (financial/legal) ahead by the producers.  They don't have to tell Marcus  unless it's bad. That way real problems like tax dodgers/Ponzi schemes,/ ins. fraud won't happen. But as in Fuel Foods or Swansons, it's almost impossible to go through everything, everywhere .  44 mins of show, 5- 10 days of filming over 1-3 mos.  Have to edit, but as Marcus has said, the good and the bad are shown. He truly wants to educate & has great integrity. Hands down, he tells it like it is and does NOT lie.  They spent 3 intense days at Fuel Foods and were completely exhausted and very disappointed when he found out about the SEC/Ponzi thing. Have no idea if Eric had any part in the thing, but he's not a sane dude.

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What I would like to know is whether Marcus did his own research into the other shareholders. 

 

Of course he did.  This episode was a new low in reality TV garbage. When he's going over the financials at the beginning of the episode, you can tell right away that the numbers don't add up, and the expressions on Marcus's face betray that he knows something's wrong here.  None of Meathead's answers add up, but Marcus goes along with it anyway, because it'll make for "good" TV, and you need episodes to have a show.  Right then, the viewer knows this deal will go south because of finances.  Then he makes a big deal about the shareholders at the investment meeting, which he's never done before, so now we know the deal will fall apart because of the shareholders.  Some of this is editing, but the way it transpires, it's clear that the producers knew from the jump that this deal was a dead-end, and it's likely Marcus knew as well.  He's no idiot, and it doesn't take detailed SEC research to know that Meathead was full of shit and hiding important financial data.  I don't mind deals falling apart, but it's irritating when it's all a dog-and-pony show, and everyone knows there's no chance of success.

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The one guy who looked like he had no awareness up front was the accountant brought in towards the end.  He looked like he was sweating bullets as if to say, "Don't try to associate me with these books!".

 

The company should be named FoolFood

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I think Marcus is an inspirational person and does the show for the business owners and himself.  Not for fame or notoriety.  If you don't like Marcus and feel like you cannot trust him, why watch the show?

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I just watched this episode.  I feel so bad for the employees.  I can not imagine having that horrible lunk of a man breathing down my neck and threatening to hulk out at any second.  The misogyny the guy was displaying was amazing.  It is obvious he does not want his business to be patronized by women, because that might make his probably raisin size balls shrink even more.  No it not a diet company, but a "gas in the monster machine that is your body" company.  Everything is ultra manly.  The inside of the company looked like a prison and lunkhead probably thinks that is "manly" decor.

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22 hours ago, Thrifty said:

This episode prompted me to try Nutrisystem for a while.  Bad idea.  Nutrisystem will leave you starving because the portions are tiny and the food unpalatable.

That's the problem with one-size-fits-all meals.

Try to get into the habit of logging food using a site like fitbit.com or myfitnesspal.com. Using the targets they give you, you'll have the flexibility of choosing your own meals so long as they fit within calorie limits. That way you can pick foods you like and set portions to your needs by adding low-calorie volume like vegetables.

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2 hours ago, Amarsir said:

That's the problem with one-size-fits-all meals.

Try to get into the habit of logging food using a site like fitbit.com or myfitnesspal.com. Using the targets they give you, you'll have the flexibility of choosing your own meals so long as they fit within calorie limits. That way you can pick foods you like and set portions to your needs by adding low-calorie volume like vegetables.

I can't do food logging.  This isn't like balancing a checkbook where you can go days without spending money that you have to log.  Trying to log food 4 or 5 times a day just makes me cranky and destroys my will to diet.

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I just rewatched this episode.  Then looked up the site.  Looks like www.fuelfood.com is offline, and the company's Facebook page hasn't been updated in years.  Seems it's officially gone bellyup.

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