Custard Stand Hot Dog Chili
NO DEAL
EPISODE SUMMARY
🕓 Air Date: February 21, 2016
Asking For:
$400,000 for 10%
Investor:
No Deal
Deal:
No Deal
PRODUCT SUMMARY
Custard Stand Food Products offers an all-beef hot dog chili, based on a family recipe from the 1920s, that has become their top-selling item for 24 years.
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Background Story
Dee Cowger and his wife, Angie, started Custard Stand Food Products 24 years ago with a small dairy bar in Webster Springs, West Virginia. Their mainstay has been their hot dogs with chili, featuring a rich and meaty chili recipe passed down from Dee’s grandfather since the 1920s. Responding to customer demand, they brought their famous hot dog chili to the retail market. With a successful restaurant and chili business, they aimed to become a national brand, seeking $400,000 for 10% of their company on Shark Tank.
The Product
Custard Stand Hot Dog Chili distinguishes itself by being an all-beef chili with no fillers, soy, textured vegetable protein, or additional additives. It contains no gluten, trans fat, or preservatives, and every ingredient on the label is pronounceable.
The product is currently available in regional stores like Walmart, Kroger, and Sam’s Club. While their hot dog chili does not include beans, they also offer a chili soup variant with beans and diced tomatoes. The founders showcased the product’s taste to the Sharks, emphasizing its regional appeal.
How It Went
The company’s position before Shark Tank
Custard Stand Food Products generated $1.6 million in sales the previous year, with a notable profit of $217,000. They operate one restaurant and have five franchise locations, each contributing around $20,000 in revenue. Despite their success, the company carries a substantial debt of $700,000, including $320,000 from the brick-and-mortar store and $400,000 for a new freezer. The founders, lacking a business or marketing background, emphasized their role in living the American dream and raising the next generation of entrepreneurs.
The Negotiations:
The negotiations started positively with the Sharks expressing admiration for the founders’ success. However, concerns arose about the $400,000 investment for 10% equity, valuing the company at $4 million. The Sharks questioned the scalability of a regional product to a national level. While the founders outlined a plan that included estimated profits of $400,000 from the current year, the revelation of a $700,000 debt raised eyebrows.
Ultimately, all Sharks bowed out, expressing concerns about the ambitious valuation, the challenges of scaling a regional product nationally, and the complexities associated with the $400,000 investment. Despite not securing a deal, the founders received praise for their hard work and resilience, with Mark Cuban commending them for embodying the American dream. The couple left the Tank disappointed but determined to overcome the setback and continue building their business.
