FDD Talk 2018: Once Upon A Child Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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

• Section I – Background information on the Once Upon A Child franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Once Upon A Child franchise, based on Item 7 of the company’s 2018 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Once Upon A Child franchise, based on Items 5 and 6 of the company’s 2018 FDD

• Section IV – Number of franchised and company-owned Once Upon A Child outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD

• Section V – Presentation and analysis of Once Upon A Child’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:

• 2017 average, high, and low gross sales and average gross profit of the 321 franchised Once Upon A Child stores in the United States and Canada that had been in operation by the same franchisee or owners for the 12-month period ended December 30, 2017, grouped by year opened (2016, 2015, 2014, 2013, 2012, and 2011 and prior)

• 2017 average gross sales for the first, second, third, and fourth quartiles of the 321 franchised Once Upon A Child stores in the United States and Canada that had been in operation by the same franchisee or owners for the 12-month period ended December 30, 2017

Section I – Background Information

11 Things You Need to Know About the Once Upon A Child Franchise

East Memphis Franchisee Expands Footprint

1.  Over the summer of 2017, Once Upon A Child franchisee Paul Fermi opened his fifth store in the East Memphis, Tennessee area. Fermi, whose background is in chemical engineering, had not owned a franchise before he opened his first Once Upon A Child in 2008 in Cordova. He said, “As I saw a decline in the real estate market in 2007, I decided that I would look to open a franchise. I saw that I had a bunch of kids’ stuff around the house, and I learned of places that did consignment, and then Once Upon A Child that resells kids’ stuff. So I looked into the franchise.”

2.  After the success of his first Once Upon A Child store, Fermi opened three more stores in Collierville, Southaven, and Jackson. His newest location is near St. Francis Hospital-Memphis. Fermi started buying merchandise for the new store in late March 2017 and he and his 10 employees celebrated their grand opening on June 15.

3.  According to Winmark’s director of franchise development Pete First, “The territories for Once Upon A Child and Plato’s Closet are now totally sold out for the Memphis market, and we expect our other brands to follow suit. So we’ve got growth opportunities with our newest brand Style Encore, which has about 50 locations nationwide. And with Play It Again Sports and Music Go Round we have open territories in the Memphis area.”

New Locations

4.  Once Upon A Child is one of Winmark Corporation’s more popular franchises and it opens new stores more frequently than other Winmark brands. The franchise has already opened a few locations in 2018, including one in Chattanooga, Tennessee and another in Kelowna, British Columbia, Canada. The Once Upon A Child in Kelowna opened its doors at the end of March. It is owned and operated by Ann Davis and Bob Henderson and is the first franchise of its kind in the area.

5.  At the beginning of the year, franchisee Colyn Shirley opened Once Upon A Child in Chattanooga. Shirley said, “Our store fills a distinct niche in the retail market. I understand how expensive it is to raise children today and want to offer an affordable option for local families. By purchasing merchandise directly from consumers, we’re able to offer them lower prices and a great opportunity to receive cash on the spot for items they may have otherwise simply given away.”

Ensuring Items Meet Current Safety Standards

6.  Children’s and babies’ products have to meet strict safety standards, but despite regulations, more than 240,000 toy-related injuries landed families in the emergency room in 2016. To help alleviate parents’ justified fears, all Once Upon A Child stores ensure that all products purchased and sold meet mandatory and voluntary safety standards.

7,  One of the main ways that Once Upon A Child employees make sure that products are safe, is by consistently checking products against safety standards and updated recall lists. Employees immediately pull all recalled products from shelves and make sure all items purchased are safety-checked to meet current standards.

8.  Stores also only purchase gently-used items that were in stores no longer than a year prior. This not only guarantees that the products sold are the latest styles, it ensures that products are compliant with the most recent safety standards. The safety section on the Once Upon A Child website provides direct links to the current toy safety standards and regulations in the United States and Canada.

Company History

9.  Once Upon A Child was founded in 1985 by Dennis and Lynn Blum in Perrysburg, Ohio. They were inspired to start their store after they noticed their local Goodwill buying and selling used baby attire. Before opening their first store, Lynn Blum had been selling her sons’, friends’, and neighbors’ clothing in a garage sale at her house every week.

10.  Lynn initially operated Once Upon A Child by herself until her husband quit his job and joined her in 1989. The Blums sold the business to Winmark Corporation in 1992. Today, there are over 350 Once Upon A Child stores across the United States and Canada.

Entrepreneur’s Franchise 500

11. Once Upon A Child ranked No. 58 on Entrepreneur’s 2018 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Once Upon A Child franchise costs, based on Item 7 of the company’s 2018 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Once Upon A Child’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2015

• Outlets at the Start of the Year:  308
• Outlets at the End of the Year:  326
• Net Change:  +18

2016

• Outlets at the Start of the Year:  326
• Outlets at the End of the Year:  348
• Net Change:  +22

2017

• Outlets at the Start of the Year:  348
• Outlets at the End of the Year:  360
• Net Change:  +12

Company-Owned

2015

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

2016

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

2017

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis

Part 1 – Statement of Average Gross Sales and Gross Profit of the 321 Franchised Once Upon A Child Stores for the Fiscal Year Ended December 30, 2017

• The following is a financial performance representation entitled “Unaudited Statement of Average Annual Sales and Gross Profit.” The gross profit figures do reflect the cost of sales but do not reflect the operating expenses that must be deducted from the gross profit figures to obtain your net income or profit.

• The following statement of average annual gross sales and gross profit includes average gross sales and gross profit during the 12-month period ended December 30, 2017 (Winmark’s fiscal year) as reported by the 321 franchised Once Upon A Child Stores located in the United States and Canada that commenced operations in each of the years 1988 through 2016.

• This statement includes information from only those Once Upon A Child Stores in the United States and Canada that had been in operation by the same franchisee or owners for the 12-month period ended December 30, 2017. No other Once Upon A Child Stores are included in this statement due to insufficient history of operations (not in operation for the 12-month period ended December 30, 2017 or transferred during this period).

• The financial statements Winmark receives from franchisees for these Stores are unaudited, and Winmark does not audit or independently verify, or express an opinion regarding, these statements.

• There were 321 franchised Once Upon A Child Stores that had been in operation by the same franchisee or owners for the 12-month period ended December 30, 2017. All 321 Stores are reflected in the average.

• This financial performance representation does not include information for the 39 Once Upon A Child Stores that opened or transferred in 2017. No Stores closed in 2017 after being opened less than 12 months.

Year Opened – 2016