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FDD Talk 2016: The Music Go Round Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on May 27, 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 2016 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 2016 FDD
  • Section III – Presentation and analysis of Music Go Round’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 Music Go Round Stores that opened in 2014, 2013, 2012, 2011, 2010, and 2005 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 franchised Music Go Round Stores that had been in operation for the 12-month period ended December 26, 2015

Section I – Background Information

Music Go Round Links Musically Inclined Buyers, Sellers, Franchisees

People with no retail experience but who can play a musical instrument or two might find their niche as a franchisee for Music Go Round, which buys and sells used and new music gear.

Music Go Round stores, which range in size from 2,800 to 3,200 square feet, can be found in busy uptown areas within U.S. cities as well as in suburban settings.

Most franchisees are familiar with gear and equipment for an instrument or two and learn about other music merchandise during training. Some are actually stage performers who enjoy playing instruments as well as buying and selling them.

They do not need to have retail experience, but the 75 hours of classroom and onsite training will help new franchisees master the necessary topics. Franchisees will learn how to run their businesses while also learning how to keep tabs on trends in musical instruments and accessories in order to be on top of what customers are looking for.

Brand Has Both Physical and Online Presence

The brand has more than 30 franchised locations in 20 U.S. states, with territories available across the United States. Music Go Round’s home state of Minnesota has the highest number of locations with six, while Colorado has four.

Sales are also driven by an international e-commerce operation. About 130,000 monthly user sessions take place on Musicgoround.com, where customers can find 20,000 unique items and about 35,000 total items in the inventory.

Used Merchandise is 78 Percent of Stock

In the stores, customers can buy and sell quality used and new music gear, such as drums and other percussion instruments, guitars, keyboards, band instruments, sound equipment, professional musical equipment, and a wide variety of accessories. Used merchandise represents 78 percent of products within the stores.

Core customers are men between the ages of 18 and 44 and professional musicians. Customers tend to be in middle-class to upper-middle-class households.

Company Founded in 1986 as Hi Tech Consignments

Music Go Round was founded in 1986 by Bill Shell, whose first store was originally named Hi Tech Consignments Inc. The Minneapolis, Minnesota-based business bought and sold new and used musical instruments, equipment and gear, similarly to what Music Go Round still does.

Hi Tech Consignments was purchased seven years later by Winmark Corporation, which changed the name to Music Go Round. Franchising began in 1994.

Parent Company Surpasses $1 Billion Mark

Minneapolis-based Winmark Corporation also franchises Once Upon a Child, Plato’s Closet, Style Encore and Play It Again Sports, all of which are resale businesses. Winmark surpassed $1 billion in systemwide franchised retail sales of more than 135 million items in 2015.

The company has more than 1,100 locations in North America.

Section II – Estimated Costs

  • Please click here for detailed estimates of Music Go Round franchise costs, based on Item 7 of the company’s 2016 FDD (updated).

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

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