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FDD Talk: The Music Go Round Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on February 4, 2016

in FDD Talk 2017: Retail Franchises, Franchise Earnings, Resale Franchise, Retail Franchise

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Music Go Round Burnsville MN

In this FDD Talk post, you’ll learn the following:

  • Section I – Background information on the Music Go Round franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Music Go Round franchise, based on Item 7 of the company’s 2015 FDD
  • Section III – Presentation and analysis of Music Go Round’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
  • 2014 average, high, and low gross sales and average gross profit for franchised Music Go Round Stores that opened in 2013, 2012, 2011, 2010, 2005, and 2004 and prior, respectively, and had been in operation for the 12-month period ended December 27, 2014
  • 2014 average gross sales for the first, second, third, and fourth quartiles of franchised Music Go Round Stores that had been in operation for the 12-month period ended December 27, 2014

Section I – Background Information

Back in the 1980s, Bill Shell could see that the Minneapolis area lacked good sources of quality used musical instruments, gear, and equipment. Most people were relying on pawnshops, which just didn’t feel right to him. In 1986, he opened Hi Tech Consignments to fill this niche segment.

Seven years later, Winmark (previously Grow Biz) acquired the store, changed its name to Music Go Round, and started franchising in 1994. The current number of locations is 33, which represents a slight decline in recent years.

Winmark also operates other consignment and used goods franchises such as Once Upon A Child, Plato’s Closet, Style Encore, and Play It Again Sports. Here’s how Music Go Round keeps the tunes playing in the used music equipment segment:

An Easy Process

The key to success in this segment is making it easy for people to sell their used equipment. The company describes its three-step process as follows: 1) Bring in your musical instruments and accessories (no appointment needed) including guitars, amps, drums, cymbals, keyboards, MIDI equipment, speakers, mixers, pro sound equipment, band instruments, and related accessories like stands, cases, and racks; 2) Staff will review and research each item and define a fair market value for the products; 3) Staff will make you an offer based on the fair market value. If you like the offer, you’ll be paid on the spot.

Used But in Great Shape

Offering great instruments and equipment at up to 70% off retail prices for new equipment works really well for people, but only if the used items are in good shape. That’s why Music Go Round is committed to reviewing and repairing everything they take in so that when it goes out on the floor, everyone knows it’s in great working condition.

Backed by Winmark

Music Go Round is owned by Winmark, a company that got its start through the successful Play It Again Sports franchise back in the 1980s and leverages the idea of “ultra-high-value” retailing through quality used products that are often sold alongside new products as well.

Martha Morris got the idea for Play It Again Sports after she had a devil of a time reselling a nearly new backpack for which she had originally paid $200. She got started with a $15,000 loan and sold around $120,000 worth of goods in her first year. The rest, as they say, is history.

After the turn of the millennium, Winmark made important changes to close concepts that weren’t working and focus on those that were. The result in those early years of the 21st century was 30% annual growth in return on equity for the company.

Section II – Estimated Costs

  • Please click here for detailed estimates of Music Go Round franchise costs, based on Item 7 of the company’s 2015 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2015 FDD) and Analysis

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