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Shark Tank Season 4 Episode 16, which aired on February 15, 2013, saw brothers Yeun and Peter Yung pitch their custom sushi franchise, How Do You Roll, to the Sharks. The Yungs sought $1 million for a 12% stake in their business. Kevin O'Leary matched their ask but wanted a 22% share with a percentage of the franchise royalties distributed to the partners, including himself.
He then tried to persuade the brothers into accepting his offer by saying:
"If I were you, I'd take me on."
While the other Shark Tank panelists expressed concern over Kevin's offer, Kevin, also known as Mr. Wonderful, backed himself, saying he brought "value to the table" by becoming a partner. He added that although he did not know much about sushi, he was an expert at franchise and the economics of investment. He assured the brothers they would not regret collaborating with him.
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After much deliberation, the Yung brothers requested Kevin to lower his equity ask. When the Shark Tank panelist agreed at a 20% stake, they finalized the deal. Despite the negotiations, the contract with Mr. Wonderful fell through due to disagreements. The company ultimately closed its doors in 2021.
"I don't wanna be in the sushi business" — Shark Tank expert Mark Cuban refused to invest in How Do You Roll
How Do You Roll was a fast casual restaurant that served customized sushi rolls. After handing some samples to the Sharks and receiving positive feedback, the Yung brothers started talking about the economics of their company. The pair began with one restaurant in Austin, Texas. However, during the show's filming, they had 15 stores open and 40 franchises sold.
They added that the franchises were profitable and mentioned that each restaurant's average bill came up to $10-$12. When Kevin asked about their cash flow, Yeun revealed they made $250,000 yearly just on royalties, whereas the corporate store generated $1 million in yearly sales.
Shark Tank expert Barbara Corcoran then asked Yeun what she had to pay to buy a franchise. The entrepreneur explained she had to pay $270,000-$300,000 to purchase one. He also mentioned that their royalty rate was 7%.
Shark Tank alum Mark Cuban was the first to bow out of making an offer, unwilling to step into a highly competitive market space.
"I like the idea. I like the concept. But it's a brutally competitive area. I don't wanna be in the sushi business so, I'm out," he said.
When Kevin noted their valuation was too high, Yeun explained that they had already received an offer to buy 75% of How Do You Roll for $6.6 million.
Although appreciative of the concept, Shark Tank panelist Daymond John feared the margins for a fresh fish business in the culinary market space would be "too low." Consequently, he refused to offer an investment.
Robert Herjavec was equally complimentary, but confessed that he could not help with their operation since he did not understand the food model. Barbara followed suit, saying their presentation was "too buttoned up" for her liking. However, she applauded the business owners for opening at 15 locations within a couple of years.
With four Shark Tank panelists out of discussion, Kevin was the sole investor left to reveal his verdict. He offered to invest $1 million but sought 22% of the company. Moreover, he wanted a certain percentage of the franchise royalties. However, he left the percentage up for debate.
"Listen to what he just said. Now he's gonna undervalue your valuation... on top of that he's taking cash out of the business upfront," Mark reacted.
The Yeun brothers countered with a 15% equity offer, which Kevin dismissed but agreed to come down to 20%. Before announcing their decision, they asked the Shark Tank panelist how he would help manage real estate. Kevin explained it would not be easy and added that Yeun would have to continue managing it until they crossed 50 locations and were able to hire someone to manage it instead.
After a brief back and forth, the How Do We Roll entrepreneurs accepted Kevin's offer, while Barbara remarked:
"You made a deal with the devil."
Shark Tank Season 16 airs every Friday exclusively on ABC.
