Retail Retold Replay: The $500K Gamble with Paul Yousef
Guest: Paul Yousef
Topics: AT&T, CCIM Designations, Seller Financed Deals, Authorized Dealer Business Model
In today’s retail retold replay, Chris sits down with Paul Yousef, principal of Millennium Wireless Technology (MWT), who shares how he acquired four struggling AT&T authorized dealers and turned them into ten profitable locations with a $500K gamble.
What You’ll Learn
- What is a CCIM designation?
- How important is it to own the real estate where you operate a business?
- In what situation does a buyer receive cash in addition to real estate from a seller?
- How do you turn a struggling business profitable?
- How do authorized cell phone dealers make a profit?
About Retail Retold
The Retail Retold Podcast highlights community retailer stories from across the country and gives a behind-the-scenes perspective from business leaders in both retail and real estate industries. The show’s episodes contain valuable insights that help solve the needs of entrepreneurs and real estate pros. Join host Chris Ressa and guests weekly for amazing insights and thought-provoking stories.
Transcript:
Chris Ressa
Welcome to Retail Retold, everyone. I am joined today by Paul Yousef. Paul is a principal at MWT. They are an authorized AT &T dealer with 28 locations in the Midwest. I am excited for him to be on the show. Welcome, Paul.
Paul Yousef
Hi, Chris. Thanks for having me. Thank you.
Chris Ressa
Paul, why don’t you tell us a little bit more about who you are and what you do?
Paul Youseff
Yep. Paul Yousef, I’m the principal of Millennium Wireless Technology, MWT, and we have 28 locations in Michigan and Wisconsin. We’re headquartered out of Troy, Michigan.
Chris Ressa
Excellent. Paul, I’m fascinated to know because there are so many different franchises one can get into. How did you end up in the authorized retailer of a major cell phone brand?
Paul Yousef
Great question. So when I was in high school, I was working for my uncle. My uncle owned an Ameritech cellular store. That store sold pagers and a little bit of cell phones at the time. So we’re talking like 96. And so my job was to fix pagers in the back of the store. And so that’s what I did after school. I would leave school and you know, get to the store and they had like five or ten pagers that needed to be repaired from that morning, people come in that needed their pagers fixed or reprogrammed. So I’d come in, knock them out. And that’s what I did every day after school.
Chris Ressa
Excellent. How did that turn into you owning 28?
Paul Yousef
Okay, so good question. I continued to work for my uncle repairing pagers. Eventually, when I graduated high school, I was going to a local community college, but I was also running this Ameritech cellular store. I became the store manager, and I did that probably until I was about 19. So a couple of years after high school, a gentleman from AT&T, or at the time Ameritech, he was an account representative. He saw what I did. Once he saw what happened when I took over the store as a store manager and how the sales were doing, he approached me and just said, hey looks like you’re doing a really good job. How would you like to own your own store one day?
I really didn’t know what to say. I didn’t have money, but there was a gentleman. There was a gentleman named Al Johnson. He had one location. He was trying to exit the business. He was retiring, and I was introduced to Al. Al was a really good guy, and my dad actually refinanced our house and I think he pulled out like $50 ,000. I use those proceeds to buy the business and get working capital. So I think I was 19 years old. At the time it was pretty stressful, Chris, just because taking that kind of money and knowing, it would leverage the house. So, you know, that was a big deal.
Chris Ressa
Well, kudos to you. Before we get started, we have a segment in the show called Clear the Air. I’ve got three questions. They’re fun questions. Tell me when you’re ready.
Paul Yousef
Go ahead.
Chris Ressa
Okay. Question one. What is one skill you don’t possess but wish you did?
Paul Yousef
Speed reading.
Chris Ressa
Man, me too. That is a good one.
Paul Yousef
You get so much information put in front of you you have to evaluate. If you could get through it in half the time, man. With retention. Like I have to be able to retain it.
Chris Ressa
Obviously you have to be able to retain it. Good point. Okay. Question two, when is the last time you tried something for the first time?
Paul Yousef
A couple of years ago, I went out cause I wanted to learn more about commercial real estate. And I got my CCIM designation, took all the classes and got this designation.
Chris Ressa
Wow. That is a cool, cool one. Not many franchisees, authorized retailers would get a CCIM. Why don’t you explain what a CCIM is?
Paul Yousef
Yeah, so the CCIM is a certified commercial investment member. That’s the acronym that it stands for. And they basically teach you everything you want to know about commercial real estate investment. And what’s cool is it’s like four major modules. They cover how to look at the market, how to analyze the numbers, how to make decisions of which investment property to go after. Like if you have option A and option B, how do you make the decision of which one to buy? It was the best thing I ever did because we would like to own more of the buildings that we do business in. And so that’s kind of like the catalyst of what made me want to want to do it. But I would highly recommend it to anybody that wants to further their commercial real estate investment know how, and really understand it from the investor’s perspective. So there were a lot of brokers in that. Most of the people in the class were brokers and they wanted to understand how to present to their potential clients and stuff like that and what it’s like sitting on their side of the table. So I think it was a great class. I learned a lot.
Chris Ressa
Yeah, I’ve heard good things. I don’t have one, but I’ve heard good things. You mentioned to own some of your buildings. You have 28 stores. How many of those 28 stores do you own the underlying real estate?
Paul Yousef
We don’t own any of our current real estate right now. One of the major reasons is because we always select the best real estate in the trade area. So if it was between owning our building or being on main and main and paying 40 bucks a foot, we’re going to be on main and main because the way it works for us is we’ll just make so much more money than trying to just own the real estate. Who owns it is less relevant as long as you’re operating your business in what you consider the best real estate. And I will tell you Chris, through the CCIM class, when it came to studying markets, I learned a lot about how to study markets and some of the tools that were available and how to use those tools. And so I’ve been able to use those tools to help me make better real estate decisions for our AT&T business.
Chris Ressa
That’s a good one , cool. All right, question three. What is one thing most people agree with, but you do not?
Paul Yousef
Okay, so I hate mayonnaise and I think it should be banned.
Chris Ressa
Oh my goodness. Oh my goodness. Oh, we have to disagree on this one. However, I understand, but I do like mayonnaise. So no chicken salad and tuna salad for you?
Paul Yousef
No, man. The smell just, doesn’t do it for me.
Chris Ressa
Oh man. Can you do the ketchup mixed with mayonnaise? Can you do that?
Paul Yousef
No, man. Nope. You know, no special sauce. None of that stuff. Just anything that’s got mayonnaise in it. No spicy mayo, like sushi, no spicy mayo.
Chris Ressa
Yeah. Okay. That’s a great answer. I don’t agree with it, but it’s a great answer. Okay. Let’s move on to the story. Cause you have a fascinating story about how NWT ended up opening their stores in the state of Wisconsin. So it’s not a one-store thing, but it’s about how you entered Wisconsin and you ended up owning and opening multiple stores. Take us through the story because I find this one great.
Paul Yousef
Yeah. So in 2017, one of my friends, Rick, who was a national authorized retailer for AT &T was in more than five or six markets. He was all over. He had called me up in late 2017 and said, “hey, I’m exiting the Wisconsin market and I’d like to offer them to you.” And so I said, “fine, send me all the analytics and let me do a deep dive and review everything.” So he sends me all this stuff and I call him back and said “Rick, you’re losing money. I don’t know what you’re selling here. And he’s pretty much like, I’m not going to sell you the stores. I’m going to give you the stores.” And by the way, Rick is like the nicest guy in the world. Just one of the nicest human beings. So, I say “alright, I’ll get back to you.”
So my brother, Peter and I are in business. We’ve been in business this whole time for the last 24 years. So I brought it up to Peter, and Peter’s like “why do you want to do this? We’re in a really good situation with our 17 or 18 stores in Detroit. What’s the reason? Why do you want to do this?” And I convinced him to do it. I showed him the numbers. And he’s like, “the only way we’ll do this, is if we can get him to come to closing with $500,000.”
My initial reaction to Peter was like, “you’re doing this just to sabotage this deal, he’s giving us these stores for free.” And you know, we always got to agree on things. So I’m like, alright, I’m going to go back to Rick, and he’s the nicest guy in the world. And after he just told me he’ll give them to me I’m going to ask him for half a million bucks to take them. I call them. “What’s that?” “I’ll take your stores, but you have to give me $500,000 to do it. And I’m going to pay you zero.” Yeah.
So I call Rick and I told him, and then he got silent. I didn’t hear crickets. For, I think it was 10 seconds, but it felt like longer, you know? And then he says, “would you take 300,000?” And I couldn’t believe it when he responded. And I said, “um, I’ll call you back.”
And Peter says, “nope, don’t want it. It’s either half a million bucks or we’re not doing the deal.” Go back to Rick, Rick made it happen. You know, he was able to get us to $500,000. And that’s basically how we were able to get in.
Chris Ressa
So. Wow. For a lot of people who aren’t in business deals every day, that probably sounds so strange, but I’ve actually seen this before, in many transactions actually, and typically what happens is somebody has a large transaction. Maybe they’re selling a hundred stores or they have a hundred million dollar business and they need to sell off a part of the business that’s worth $400,000, but they have to get it all off. And sometimes the only way to make that sale happen is to transfer the interest. Was this one of those times? I have to imagine this was part of a larger scale.
Paul Yousef
You’re spot on Chris. So the seller did not reveal that to us. We found that out after the fact, but he had sold pretty much his entire portfolio except the Wisconsin stores. That’s because they were losing. Honestly, I did feel a little betrayed, but then I got over it pretty quick because we got half a million bucks. So yeah, you’re right. His stores, he sold all of them, just the ones up in Wisconsin were the ones that he sold to us.
Chris Ressa
And you were buying how many stores in this transaction?
Paul Yousef
So it was seven stores, but only four of them were open and operating. And there were three signed leases.
Chris Ressa
Wow. So this was going to be work. You weren’t just buying existing, operating, fun cash cash-flowing businesses. You were buying businesses that were failing and were about to double down and open up three more.
Paul Yousef
Yup. And you know, one other thing to add to that was, the leadership for these, there was no district manager. So the leadership was out of Chicago. We weren’t getting the district manager.
Chris Ressa
Oh, wow. So you’re going to have to go hire
Paul Yousef
We had to hire. And I think there was, by the time we took over, only seven employees running four stores. And I think not every store had a store manager. One of the stores was missing a store manager.
Chris Ressa
So, comes to closing with half a million dollars, you take the stores and half a million to get the stores to profitability. Well, first, are those four stores profitable today? You just bought it in 2017 and we just had a pandemic.
Paul Yousef
Yeah, they are.
Chris Ressa
Kudos to you.
Paul Yousef
But some of them have been relocated and then some of them have been reloaded, and we have better management now, but the short answer to your question is most of them are profitable. We might have one out there that’s not.
Chris Ressa
And are the other three open?
Paul Yousef
The other three opened up within six months of us going into the market, we went in on February 1st and they had opened up all within 2018. We had, by the end of 2018, seven open locations.
Chris Ressa
And now you have 10? You actually went and you opened three more, correct?
Paul Yousef
We opened three more locations and they’ve been much better located. We picked out some really good real estate. What ended up happening, Chris, is of the original seven, we ended up closing two. And then we opened up five new ones. That’s how it really happened.
Chris Ressa
Okay. Got it. So five of the seven stayed and then you opened up five new ones. So I think here’s the two questions that everyone’s probably wondering so they can analyze this deal. The first question, how much were the four stores losing every month?
Paul Youseff
The four stores, I think were losing anywhere between five to ten thousand bucks a month per location. We had a mall location, it was a kiosk, probably 100 square feet. The rent there, I think we were paying $17,000 a month in rent. We were paying like $1,700 bucks a foot for that kiosk. And in its heyday, before we owned it, it was a good store. You know, that was one of the reasons why we asked for it. Yeah. It’s losing twenty to forty thousand a month.
Chris Ressa
Wow. And the next question is, he gave you 500 grand. Did you have to invest more than that to actually get these stores profitable and rebrand it?
Paul Yousef
Yeah, we did. We reinvested the profits. I mean, thank God Detroit was making money. But that half a million bucks was gone. And then I think we probably put in another million bucks from Detroit to to get it going.
Chris Ressa
Wow. Going back to when you were making the deal with Rick. What was it that you looked at and you said, you know what, I think we can turn these to profitability?
Paul Yousef
Um, good question. Rick was based out of Missouri, and his management was in Chicago like his district managers were running out of Chicago. And we also had analytics into how many customers were visiting his stores per month. We took that data and we said, if we can execute this business plan, we can convert a certain percentage of customers from just walk-ins into sales and generate revenue. We can break even and then eventually make a little bit of money. And we weren’t even looking to make a lot of money. What we were trying to do, Chris, was expand our footprint in the market. That was one of the things we were trying to do.
Chris Ressa
Got it. Okay. Well, it’s a fascinating story. You’re able to bring this interesting deal to the table. It wasn’t lollipops and rainbows under the hood of the deal. But you went in and you turned it around and it’s still working. And in 2016, you had zero stores in Wisconsin. Now you have 10. And a really, really cool story. And I think you bring something to the show that most people haven’t heard of, someone giving you the stores plus cash to try and get them to profitability. Times like that though, when you were pushing for it, your brother wanted it to be perfect. When you start rolling in 2018, and 2019, I imagine there was some tug and pull between you and your brother on this transaction. Not only was it the 500, but you also had to sink another million dollars in. How was navigating those waters?
Paul Yousef
You know, that is such a damn good question. I’ll put it this way. That was a really tough time for us knowing this thing is just bleeding money, right? And my brother was against it. He picked up his family and moved to Wisconsin. I can imagine that car ride to his wife. “Why are we moving to Wisconsin?” “Cause my brother had to buy this business and he’s taking all the money from Detroit and letting it implode and we’re losing everything. So I gotta go.”
So he set up shop there and built some really strong relationships with the local community, the talent that was there. I mean, he handpicked and recruited the best talent in the market. And he forged some really strong relationships with AT&T account managers. AT&T executives that were there. And what that did was, it built our brand awareness, like MWT’s local brand awareness out there, where we were known as one of the most respected employers in the market. And so people advocated for us and AT&T wanted to see us win. I mean, we took that risk and they really wanted to see us win. But I think that was probably the biggest thing was him going out there and the way he recruited. He recruited his butt off.
Paul Yousef
Wow. What a great story. In a transaction like that, how much is AT &T corporate involved?
Paul Yousef
Well, first of all, like you have to get their consent. And you know, and you’re not gonna, there’s gonna be no deal without their consent. And so they have to, you know, and I had a really good relationship with the VPGM in the market and she was out of Chicago. We had a really good relationship with her. So she advocated for us to do the deal. And so because of her approval, we’re able to get like the legal consent to move forward with the closing.
Chris Ressa
Got it. Okay. Well, listen, that’s a great story and I’m glad it’s working out today and truly fascinating. No one’s told one like that on the show before. So really appreciate you doing that. Sure. I want to move to the business for a second, just overall this dealer-authorized retailer world that you live in,I think a lot of people think of a cell phone store and the money comes from this. I’m holding up my iPhone right now, but what’s really critical are the subscribers and the people signing up for the service. So can you walk us through that for a second? I think that would be helpful to the audience.
Paul Yousef
Really good point that you bring up, Chris, and you’re absolutely correct. It’s somewhat of a backwards business model. And what I mean by that is, is the carrier is gonna front the cut, like you’re gonna get your thousand-dollar iPhone. And they’re usually free. Like if you sign up for new service, typically the iPhone is with AT &T for the last three or four years, they’ve just been given it for free as long as you sign up for the installment, the contract or whatever, right? And so they’re giving you the thousand dollar iPhone and then they’re gonna make their money up 50, 40 bucks a month, right? Over the next three or four, like three years, let’s just say. And so they call it monthly reoccurring fees. So the way the carrier makes money is from the monthly reoccurring fees. And as long as you’re a customer, that’s how they make money. And so they compensate you for that. So what they do for us is they say, all right, just ballpark, you’ll get four to six times the monthly reoccurring revenue that’s generated from that transaction. So if it states 50 bucks a month, you might get like, and if it’s safe, it’s worth five times of the MRC. I probably am not supposed to say exactly, but I’m just giving you an idea. The dealer is getting a multiplier of the monthly recurring charge of the customer’s bill. Now, depending on the carrier, each carrier is different and each brand is different. Like there’s brands that only pay one time MRC and there’s brands that pay six times MRC.
And that’s on a new line. If it’s a renewal, one, two times, three times MRC on renewal. So that’s the model. And what you’re doing is what you’re trying to do is you get so many customers walking in, right? And then if you can convert those walk-ins into renewals or up or new lines or renewals, then that’s how you’re, that’s how you’re generating revenue to the business.
Chris Ressa
So you bring up something interesting. You’re really in the service business almost more than the retail service business, more than the actual product business. It’s a retail service. You’re selling a retail product, but you’re also selling a retail service where the bread and butter is made. And so I’m curious how e-commerce has impacted this. How has online impacted your world?
Paul Yousef
You bring up a really good point. You know, you think about like when Apple does the announcement, hey, we, you know, we’re doing the iPhone 13 Net to Sounds, right? There’s a segment of customers that will, there’s a segment of customers that will watch that recording of the Apple recording when, you know, when it comes out. And as soon as it’s, you know, pre like the pre -launch where you could pre -order,
They’re ordering the phone without even like having seen it like live. They don’t even care. They’re just like new iPhone. I’m getting it. And some people don’t even watch the, like the live Apple like thing, right? Some people just say, Oh, it’s the new one. I don’t even need to, I don’t even have seen it, but I’m just going to order it. Cause I know I want the newest one. You have a pretty big chunk of customers that do that. And when that happens, that doesn’t obviously it doesn’t come to us. It’s going to Apple or it’s going to go into like AT&T direct.
There’s another segment of customers that are, they want to do business in the store. The biggest driver for that is they don’t know how to, they still come in like, hey, I want to see the new iPhone. And it looks like the last one that they had, because it’s just a black screen when you look at it, right? They want to know a little bit about the benefits, but they still, they still really don’t care. They’re more interested that it’s the newest iPhone and they want to get it. But the biggest like,thing for them is the dilemma is how do I get my contact, like all my content from my old phone to my new phone? And they’re afraid to like mess it up. They don’t wanna do anything. They don’t wanna lose anything. That’s the biggest thing. And our retail sales associates do it every day. They do it seven days a week. So they can do it with their eyes closed. So they come in knowing that all of their content, all of their pictures and their photos and everything they have is all gonna be moved over and that, you know. I think the other piece of that is, those are all great points. Isn’t the other piece like the plans? Like even for sophisticated customers, like getting your arms around like the different plans and deals to me, it’s like really hard to navigate online. I don’t know if you see that a lot, but I think it’s easier to navigate in a store when you’re talking to someone. Good question.
Like what I just mentioned, if it’s like a renewal, like you already have AT &T and you’re going to stick to everything, hey, I don’t want to change my plan. But like say you’re coming from like a different carrier, right? Like I’m coming from Verizon. You come in, you know, you might not be sure about all the plans. You’re just browsing. If I can qualify you and find out what you’re looking for, what you have and learn more about you and where you work, maybe on your own business.
Who do you have for your home internet? Cause we sell home internet. And if I can create a package for you and get you every discount that we have, that’s typically not something that you’re going to be able to do online. That’s going to be a lot more difficult to do online than what we would be able to do in the store. I mean, that is a major, major advantage. And so having for us having like,
retail sales associates that like know their stuff and know their promotions and know how to like bundle and cross sell and create like a really good solution for the customer. That’s the value they can bring to a customer. I think that. And where the customer wouldn’t need to go on the internet, they could just come in and get that.
Chris Ressa
This has been fascinating. I do have one recommendation that I think could get dealer stores, corporate stores, sales to skyrocket. Ready for this? I need the in-store process to be much quicker. It’s not that it’s any faster online, but I wanna be able to walk into a store, get anything I want in and out in 10, 15 minutes. And if I’m getting a new cell phone plan, it’s really hard. It’s really hard for that to happen. I’ve been into cell phone store for hours before. And I think a lot of people have had that. And I say that It’s no different online or if I’m calling Verizon or AT&T, it’s gonna be a long time on that phone. But the carrier who gets the in-store experience, lightning speed, that’s going to be really interesting to see.
Paul Yousef
I couldn’t agree with you more. I know that AT &T, they’re more transparent than they should be with dealers. They show us like they talk to us and say, look, like here’s what we’re investing in our systems and IT and improving. And they’re always trying to, you know, they’re always trying to improve that process. That’s one of the biggest, that’s the part of the retail experience I think we can improve on. So I would agree with you on that. And as you know, like it’s, we’re selling a service and we’re also selling, even though, the revenue generated doesn’t come from the product, but you still have a piece of equipment. And so trying to move that stuff over, like trying to transfer that equipment over. Like zap, like what needs to happen? I wish that there was like maybe Apple, somebody comes up with it that just literally like just zap, like flashes it. Like it’s just a flash, like two minute flash, one-minute flash, and then everything just moves up. That process is not, that technology isn’t there yet, but if.
If somebody can crack that code, that would be an absolute game changer for our industry. Yeah, I think so too.
Chris Ressa
Well, Paul, you’ve been a wealth of knowledge. This has been so fascinating. I want to bring us to the last part of the show. You ready? We call it retail wisdom. I got three questions for you. Question one. What extinct retailer do you wish would come back from the dead?
Paul Yousef
Probably Blockbuster Video.
Chris Ressa
Good one, popular one. Okay, question two. What’s the last item over $20 you bought in the store?
Paul Yousef
I bought some bourbon, walked into like a liquor store and bought some bourbon. Kind of bourbon. I don’t remember the guy, it was the guy recommended. It was a total, it was that total wine. It was like this really huge badass retailer in Milwaukee. And he told, he recommended some really good bourbons, but I don’t remember the names. See everybody. That’s the power of the retail associate. He recommended it and you ended up buying it. That’s what you need. I bought, I walked into buy one bottle. I ended up buying three. And there were more than 20 associates in your stores. Okay.
Chris Ressa
Last question. If you and I were in target and I lost you, what aisle would I find you in?
Paul Yousef
I have two small daughters and I’m always getting them toys. So, I’d probably be in the toy aisle. I was in target yesterday. I know all too much. I’m getting to the point where I’m like, I think she has that Barbie. She has that Barbie. She has that one. She has that one. I don’t know what to do.
Chris Ressa
So, well, Paul, listen, this was fantastic. Thank you so much for coming on and really appreciate it, man.
Paul Yousef
Thanks Chris, thanks for having me. Take care. Do you have anything going on and do you have anything in like Wisconsin, Illinois?
Chris Ressa
So Wisconsin, Illinois, yes. I don’t own anything in Michigan. So we’re an owner. We don’t third-party anything. We’re an owner. I got a bunch in Illinois. In Wisconsin, I have one in Milwaukee.
Paul Yousef
Which one do you own?
Chris Ressa
I own Midtown Center. It’s in Milwaukee. It’s in the heart of Milwaukee. It’s in an urban ethnic environment. I have a US cellular. We just did them last year, but I don’t have a restriction. I can do another cell phone provider, but we did a, we had a, we have a US cellular. We put them in about a year ago, right before the pandemic. So we would definitely, we would definitely be interested. I’ll send it to you.
Paul Yousef
Yeah, can you do me if you ever, can you send them to me? And then do you have any Sprint or T-Mobile’s that are closing in any of your centers?
Chris Resa
I do. I need to check with my team on which sites they are, but yes.
Paul Yousef
Okay. If you have, if you have stuff in those markets,
Chris Ressa
I’ll let you know.
Paul Yousef
Please let me know.
Chris Ressa
Will do, Paul. Thank you. It was good talking to you. Good interview. This is great. Thank you so much. Bye.
Paul Yousef
Bye.