When the co-founders of RoboBurger, Andy Seagull, Dan Brdo, and Odley Wilson, stepped into the Shark Tank, they brought an idea that could change the fast-food industry forever. RoboBurger is a fully automated burger vending machine.
It can cook a fresh burger in less than four minutes. The trio believed this machine could offer hot, tasty food on demand, even in places where traditional food service isn’t available.
However, they faced a big challenge. Convincing the Sharks to invest $1.5 million for a 5% equity stake in their company was no easy.
During their pitch, they faced strong skepticism and tough criticism. But in a surprising twist, they turned that criticism into a major opportunity. Here’s how they did it.
They could revolutionize the fast-food industry but they need money to do that
The RoboBurger team believed their product could revolutionize the fast-food industry. Their machine only needs electricity to operate and doesn’t require special plumbing or venting.
Roboburger could be placed in busy locations like airports, college campuses, and office buildings. Despite their passion and dedication, Andy, Dan, and Odley had one major weakness.
They didn’t have enough money to produce and distribute their machines on a large scale. They knew they needed to grow quickly to make a big impact.
“What are we going to use these machines for? To scale, to get these machines out there on a larger scale, and continue to grow,” they explained during their pitch.
The founders sought a $1.5 million investment to mass-produce their machines and expand their market presence, but they needed to prove that their concept was more than just a cool idea.
Burger tastes good
Knowing they needed to make a strong impression, the RoboBurger team started their pitch by demonstrating the taste of their product. They invited the Sharks to sample burgers freshly made by their machine. They showed that the quality and flavor were comparable to those of a restaurant.
This strategy aimed to prove that RoboBurger could deliver a high-quality, delicious meal, even from a vending machine. The tactic worked, the Sharks were pleasantly surprised by the flavor, with one even admitting, “It tastes really good.”
Sharks not buying vending machine for $1.5 million
Despite the successful taste test, the Sharks were still skeptical about the overall business model. Mark Cuban was the first to question the idea, wondering if a burger vending machine was really necessary in a world already filled with fast food.
“You know the field of robotics; it’s a leapfrog industry where you hit one plateau, and then somebody comes along and optimizes—then there’s a new chip that comes along, there’s new software that comes along,” Cuban said, highlighting how quickly technology changes and suggesting that RoboBurger might not keep up.
He also criticized the company’s reliance on physical locations and high leasing costs. “You’re driven by the physical location and the physical leasing. I think that’s a huge mistake, so for those reasons, I’m out,” he added.
Kevin O’Leary, known for his bluntness, was equally critical. He thought the business model was “confusing and economically unsound,” especially considering the high lease cost of $3,000 per machine each month.
“I just want to say the presentation was chaotic, and I was not going to go there,” O’Leary remarked, pointing out his concerns about the financial side of the business.
Lori Greiner and Barbara Corcoran also had concerns, mainly about maintenance and the risk of mechanical problems. They drew on past experiences with similar ventures that struggled with reliability.
Michael Rubin summed up their feelings by saying, “This is a big idea, and for that, I commend you guys, but I just don’t think you have the business model right. But I think this could be very successful, so for me, I’m out.”
Good taste is not enough
Even though the Sharks liked the taste of the burgers, they still had concerns about the financial side of the business. Kevin O’Leary, one of the harshest critics, asked directly, “How do I make money?”
The RoboBurger team explained their revenue model and growth plans in detail. They expected $1.4 million in revenue for the current year with a loss of $700,000, but projected a significant increase to $7 million in the following year as they expanded and placed more machines.
Mark Cuban was still not convinced about the business’s long-term viability. He points out how fast technology evolves and the costs involved in keeping up.
It became clear to the RoboBurger team that they needed to explain their financial strategy better and show how they would use the investment wisely. They clarified their goal: “Like the use of capital—what are we going to use these machines for? To scale, to get these machines out there on a larger scale, and continue to grow.”
This helped the Sharks see the bigger picture and the potential of the business beyond just one machine.
To get a bigger shark they had to put Bigger Baite
The turning point came when Michael Rubin saw a new way to structure the deal. He suggested, “Wait a second, would you take a $1.5 million loan to finance the machines you have on order and give 10% of the company to me? Because if you said to me, ‘I need $1.5 million to finance hard orders for these machines,’ I’d consider it.”
This proposal caught Kevin O’Leary’s interest, and he suggested teaming up with Rubin, saying, “This structure is a very Mr. Wonderful structure; there’s no question going. So why don’t we partner together?”
After a quick negotiation, the RoboBurger team proposed 8% equity instead. Kevin O’Leary, was not ready to negotiate but Rubin wanted. “Split the difference—call it 9%.” Kevin agreed saying, “Mike is a nice guy, man—9% in the middle. This guy’s too generous.”
With this deal, RoboBurger secured the $1.5 million investment for a 9% equity stake, shared between Rubin and O’Leary. They left the Tank with not only the money they needed but also two strategic partners who could help them grow and expand their business.
Featured image credit @ CNBC
