- Company: Just the Cheese
- Owner: David Scharfman
- Product: Baked cheddar cheese snacks (with no carbs, gluten, or sugar)
- Asking Price: $500,000 for 5%
- Final Deal: No Deal
- Sharks Who Took the Bait: Lori, Kevin, Mark
- Season/Episode: Season 11, Episode 19
Just the Cheese, Please
David Scharfman grew up in a family of cheesemakers. As you can imagine, his childhood and adolescence were full of formative experiences involving cheese and cheese-related psychology. He understands the insatiable American appetite for cheese, and he aims to fill that appetite with a simple, wholesome, and delicious baked product, helped along by some great marketing and, as you’ll see in this episode, some really excellent cheese-themed apparel.
He’s here on Shark Tank, at top of Season 11, Episode 19, to pitch his family’s new product. With over a million dollars of his family already invested and hundreds of jobs on the line, David has the world to gain on this pitch – and everything to lose.
Just the Cheese on Shark Tank: A Quick Recap
David Scharfman makes one of the most memorable entrances in shark tank history by strolling casually on stage wearing a red suit, a yellow cheese-tie (replete with Swiss holes), and a yellow top hat made out of what appears to be – you guessed it – cheese.
But more astounding than the cheese-themed costume is David’s asking price: he’s seeking $500,000 for just 5% equity.
That’s a lot of cheddar, but surely there’s a reason for such a steep price tag. David goes on to pitch his product in all its brilliant, delicious-sounding detail. Essentially, his product is a snack bar made out of baked cheddar cheese. For those of you who’ve ever longed to eat the cheese out of a pan after making a grilled cheese sandwich, this product is for you.
“No rice, no fillers,” David says while demonstrating the pure Wisconsin milk and golden cheddar cheese that gets baked into each cheesy snack. Three bright and colorful bags of snacks decorate his display table: one for grilled cheese, one for spicy Jalapeno cheese, and one for aged cheddar, their top-seller. It’s the perfect grab-and-go snack, and a huge hit with fans of Keto and low-carb diets.
Lori admits she’s had the product before, a great sign which impresses the sharks. She bought her boxes of the delicious low-carb snack off Amazon. “We sell between 400 and 700 boxes a day on Amazon,” says David, confirming a promising online sales business. At just 75 calories per bar, 4 grams of protein, and a veritable smorgasbord of gluten-free, sugar-free health perks, this snack has market potential galore.
Running The Numbers
While the sharks munch away on the tasty cheesy snacks, David answers questions about retail sales, cost of production, and profit margins.
- Annual sales, prior year: $3.5 million
- Annual sales, year-to-date: $3.7 million, with four months left
- Retail stores: 700, plus 1,300 convenience stores
- Production cost: $0.95 per unit
- Retail: $1.99
- Profit margin: 17-20%, depending on SKU (stock-keeping-unit or barcode price)
Just the Cheese has two main competitors on the market – one of them puts quinoa, brown rice, and oat bran in their product, which makes their product cheaper to make, and more reminiscent of a traditional cracker.
The company is entirely self-funded and has raised no previous investment capital. So far, David estimates they’ve invested a total of $1 million of their own money.
The product is suffering from terrible margins, and Robert is eager to know what the long-term plan is for making more profit. David explains that if he sells 40,000 boxes a month, his production cost drops from 95 cents to 76 cents, substantially increasing his profit margin.
In essence, the more he grows, the more he profits.
Just the Cheese will go down in history as one of the most fascinating bidding wars that ever transpired on Shark Tank. it involves multiple offers, counter-offers, a notepad for doing basic math, and plenty of merciless truth bombs from Mark Cuban.
Kevin is first out of the gate to express genuine interest. He doesn’t have a cheese maker in his portfolio, and he’s intrigued by the product’s potential with Keto dieters and low-carb conscious markets.
This is Kevin we’re talking about there, so you know he’s going to try to work royalties into the deal somehow, and Mark Cuban is going to emasculate him for trying to bilk this poor, unsuspecting cheesemaker out of every last penny he makes.
Kevin’s offer: $500,000 for a 20 cent royalty. In exchange, David gets the full range of Kevin’s formidable marketing and distribution skills.
Robert, meanwhile, congratulates David for being one of the fastest 0-to-1 million in sales companies they’ve ever seen on the show but confesses he just doesn’t like the taste of the product. It’s nothing to do with the business, just a matter of personal preference. Robert is first to drop out.
Guest shark Daniel Lubetzky (founder of Kind bars) is next to drop, saying that he thinks David has a superior brand but that the market is still emerging and there will be more and more competitive entrants to the field as time passes.
Lori has similar concerns and expresses her uncertainty about who will ultimately be the leader in the low-carb, Keto-friendly snack market. At half a million dollars for just 5%, Lori doesn’t feel solid enough to invest – and she’s the third to drop. (Or so it seems…for now.)
Mark Cuban, as usual, comes to the table with the smartest and most perceptive argument against investing. He’s obviously been doing math and running numbers of his own while Kevin was making his predatory pitch.
“At a $10 million evaluation, even if you sell the company for $50 million, and I get five times my money back, my total upside is still only $2.5 million over $500,000. That’s not enough for the risk that’s involved.”
Damn, Cuban. That’s some cold hard truth right there.
Surprisingly, Lori jumps back in at this point. She wants to undercut Kevin’s ridiculous royalty offer. She says she’ll give $500,000 for just 15 cents a bar, as opposed to Kevin’s 20 cent royalty fee.
David asks for a pen and paper so he can work out a reasonable deal, and puts Kevin squarely in his place. If he gave Kevin 20 cents a bar just based on his previous year’s sales, Kevin would make $360,000. “That seems, for lack of a better word, nuts.”
“I really like David,” says Mark.
David comes back with a revised offer of his own – he thinks a nickel is reasonable for each bar, but not in perpetuity as Kevin and Lori have proposed. Strictly for ten years. A nickel a bar, for ten years. That’s it.
Mark Cuban now jumps back into the mix, cutting out royalties entirely. “I’ll give you $500,000 for 15% equity.”
After a rollercoaster of bidding, and a moment to consider each deal with intelligence and clarity, David politely – and respectfully – declines all offers.
Final Deal: No Deal.
Where Are They Now?
It’s only been a few months since Shark Tank aired, but the business seems to be doing well, with a lively website and multiple online retail options, a thriving Instagram page, and tons of great press from The New York Times, Buzzfeed, and Greatist.
All businesses receive a significant boost in sales after appearing on Shark Tank – it’s called the Shark Tank Bump – whether they make a deal or not.
The brand visibility and national notoriety that comes from appearing on NBC during primetime hours can’t really be overhyped or overemphasized. Just the Cheese did themselves a huge favor by appearing on the show, even though David Scharfman was shrewd and savvy enough to reject all three deals the sharks offered.
Disclaimer: The information provided in this article is strictly informational; INSIGNIA SEO is not affiliated with Just the Cheese, SharkTank, or any of its subsidiaries.