A landlord decides to reopen a tenant’s defunct business
Michael Miller had a problem. One of the commercial buildings he owned had lost its biggest tenant, Spa Store of Plymouth, when it went out of business. Miller was complaining to his wife one evening about the phone ringing off the hook and customers pounding on the door at the hot tub store while he let in creditors and did other landlord duties.
“She says, ‘Well hey dummy, maybe that’s an opportunity,’” Miller says. “That was April of 2010, and in that real estate market, the prospect of replacing a tenant of that size was pretty dismal.” He made some phone calls, and a couple days later he was in the hot tub business.
Miller had zero hot tub knowledge. He thought the music he heard in the showroom was coming from overhead speakers — but it was coming from the spas. Right after they reopened the doors, they still hadn’t gotten in any product, so the large showroom was completely empty. “We had stocked chemicals, and had placed our order with the factory and were waiting for it to arrive,” Miller says. “I was there at the counter by myself, day two of the doors being open, and a gentleman walks in, looks around and says, ‘Oh my gosh, what happened?’” Miller explained the situation and the man wanted to know what kind of hot tubs they were planning on carrying. “I said, ‘Cal Spas.’ and he says, ‘Well yeah, but what kinds?’ I said, ‘Well, we’re going to have some small ones, and some medium-size ones and some great big ones,” Miller says. “That was all I could think to tell him.”
But what Miller lacked in hot tub knowledge, he made up for in business acumen. Miller had owned a software company, and after its sale in 2007 he used part of the funds to invest in commercial real estate.
“You have to support the staff so they can go out and do their duties,” Miller says. “Same at the customer or the client level — follow up, follow through, make the right decisions, be fair and ethical — those are all traits you take from one business to the next.”
To help with the hot tub part of the business, Miller immediately formed a partnership with another dealership, a subdealer who had broken away from its parent company. Its owner, Jason Karnes, saw the economy was contracting and knew he needed to make changes fast. “When I figured out that he was still thriving and still alive, I called him,” Miller says. “We joined forces and resurrected the store.”
Karnes gave Miller a roadmap to get the store back up and running. “I didn’t have to second guess — he knew exactly what needed to be done,” Miller says. Because of that partnership and the reputation he had built while being the store’s landlord, Miller was able to hire back some of the key employees from the old business.
With his software background, Miller set up a system to bring the paper-heavy business into the digital age.
- Sponsor -
“Designing that was a lot of fun,” Miller says, “but actually sitting down and doing the work was pretty mundane.” It took three interns six months to get 44 filing cabinets of customer information into the computer, but the drudgery had a silver lining: “Now we know what year the customers’ spas are, when they’re out of warranty, what pumps they have, what filters they have, what size filters they have…. With that data, we can do all kinds of things from service and marketing standpoints.”
What wasn’t a lot of fun was dealing with the backlog of calls from customers. There are thousands and thousands of Cal Spas customers in this market, Miller says, and roughly 600 customer service calls backlogged. And on top of that, it coincided with spring — a very busy time. “As you can imagine,” he says, “many of them were very unhappy.”
Miller and Karnes brought in Dave O’Donnell to help them create a service department. O’Donnell had lots of retail and customer service experience; he had actually worked at the spa store before, but had never run a service department. On his first day, O’Donnell says he had over 80 voicemails from customers for help. “I started with a mechanical pencil, which I still have to this day, and yellow pad,” he recalls. “I wrote down every single one of those voicemails. I really got thrown into the fire.”
O’Donnell moved the service department headquarters from the Karnes’ Woodbury store, southeast of Minneapolis/St. Paul, to Miller’s Plymouth location northwest of the Twin Cities, which had more space. Once he had the elbow room, the first order of business was hiring staff.
O’Donnell interviewed a few techs who were with the old company. “I didn’t know any of these guys,” he says, “so I had to prove myself because they wanted to make sure we weren’t going to fold either.” Today, the techs it hired back have been at Spa Store of Plymouth an average of 15 years, Miller says.
In 2012, after less than three years of owning the business, it was awarded as Cal Spas’ top dealer, selling more spas than any other dealership. They did it again in 2013.
“This is a great spa market,” Miller says. “Cal Spa is an awesome product to sell. The prior dealer had done a wonderful job building the Cal Spa brand in this market. We’ve got a pretty good combination of things that should, in theory, lead to success.”