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FDD Talk 2016: The Plato’s Closet Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on May 11, 2016

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

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Plato's Closet Greensburg PA

In this FDD Talk 2016 post, you’ll learn the following:

  • Section I – Background information on the Plato’s Closet franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Plato’s Closet franchise, based on Item 7 of the company’s 2016 FDD
  • Section III – Presentation and analysis of Plato’s Closet’s financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2015 average, high, and low gross sales and average gross profit for franchised Plato’s Closet stores that opened in 2014, 2013, 2012, 2011, 2010, and 2009 and prior, respectively, and had been in operation for the 12-month period ended December 26, 2015
  • 2015 average gross sales for the first, second, third, and fourth quartiles of the 410 franchised Plato’s Closet stores that had been in operation for the 12-month period ended December 26, 2015

Section I – Background Information

Plato’s Closet Drives Parent Company’s $1 Billion Milestone

Plato’s Closet, which surpassed 400 U.S. locations in 2015, was the largest force driving parent company Winmark Corporation to surpass $1 billion in systemwide franchised retail sales for the year.

Sales for the Minneapolis, Minnesota-based Plato’s Closet in 2015 averaged close to $1 million per location, while the top 25 percent of units reached average sales of nearly $1.5 million. That’s slightly greater than the average sales of Once Upon A Child, also franchised by Winmark, whose other brands include Style Encore, Play It Again Sports and Music Go Round.

Top Retail Franchise on Franchise 500 List

In Entrepreneur’s 2016 Franchise 500 list, Plato’s Closet was ranked 105th and was ranked as the top retail franchise. The resale franchise posted 7.1 percent unit growth for one year with 31 units added, and had 14.4 percent three-year growth with 63 units added. The brand, ranked in the Top 500 for the past 11 years in a row, jumped from No. 153 to No. 102 in 2011 and has been fairly steady since, with a slight drop in 2014 to No. 115. Plato’s Closet was ranked 108th in 2015.

Plato’s Closet also was No. 4 in the $150K-$500K category on Forbes’ list of Best Franchises to Buy in June 2015.

The chain continues to enjoy steady growth with increased units each year. Plato’s Closet finished 2015 with 439 units: 427 U.S. locations and 12 Canadian stores, up from 399 and nine respectively in 2014. A decade ago, the brand had 171 locations, all in the U.S. The first Canadian location debuted in 2007 as Plato’s Closet surpassed 200 locations.

Brand’s Name Sparked By Greek Philosopher’s Ideas

Plato’s Closet was founded in Columbus, Ohio, in 1998 by Lynn and Dennis Blum. Their teenage son, who had researched Plato, the Greek philosopher, for a school project, came up with the store’s name due to the respect he had for Plato, whose theories for reusing and preservation were in line with his parents’ creative recycling habits. The business prospered and began franchising the following year.

Stores Buy and Sell Name-Brand Clothing, Accessories, More

Plato’s Closet buys and sells quality, name-brand teen and young adult clothing items that are fashionable and in good condition. The stores also buy and sell used fashion accessories, CDs, books, games and other items enjoyed by teenagers.

Merchandise is priced at up to 70 percent less than new retail. Because the prices are low for these name-brand items, young shoppers can score a larger back-to-school wardrobe than they would at the full retail prices.

Used items accepted by the stores are paid for on the spot. Sellers may accept payment for their items, or they may choose to put the money toward purchases. Buyers who purchase clothing and other merchandise may end up being sellers as they bring their items back after a period of time, provided the items are still in style.

Section II – Estimated Costs

  • Please click here for detailed estimates of Plato’s Closet franchise costs, based on Item 7 of the company’s 2016 FDD.

Section III – Financial Performance Representations (Item 19, 2016 FDD) and Analysis

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