FDD Talk 2021: 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 2021 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 2021 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 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of Once Upon A Child’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• 2020 average, median, high, and low gross sales and average and median gross profit for the 369 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 26, 2020, grouped by year opened (2019, 2018, 2017, 2016, 2015, and 2014 and prior)

• 2020 average, median, high, and low gross sales and average and median gross profit for the first, second, third, and fourth quartiles of the 369 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 26, 2020

• number and percentage of 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 26, 2020, grouped by range of gross sales ($0 to $250,000; $250,001 to $500,000; $500,001 to $1,000,000; $1,000,001 to $2,000,000; $2,000,001 to $3,000,000; and greater than $3,000,000)

Section I – Background Information

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

Franchise Owners Get Creative with Delivery While Customers Are Quarantined

1.  In mid-April 2020, a month after many states went into some type of lockdown following the onset of the COVID-19 pandemic, Winmark, parent company of Once Upon A Child, highlighted in a blog post how Once Upon A Child franchisees were adapting to these new restrictions. According to Winmark, countless franchisees across all of its brands were doing their best to help their customers deal with the current situation and get access to the products they need to keep their families clothed, active, and entertained.

2.  The owners of the Once Upon A Child in Fairbanks, Alaska added a new level of convenience to their customers’ shopping experiences, getting creative while keeping customers safe with their version of curbside delivery. The owners took orders from customers online, shopped for the items, and then delivered them directly to customers on a snowmobile.

3.  In Longview, Texas, the owners of the Once Upon A Child took a unique approach to delivery as well. The franchisees developed themed spring clothing “boxes” on sale at different price points. At $20, $40, or $60, customers could sign up for whichever package they preferred and list out the items they needed, sizes, colors, themes, and the gender through the resale store’s Facebook page. The owners then sent them a video on Facebook to give their customer a chance to adjust their orders. Customers also provided payment information and chose their preferred delivery method, which could be porch drop-off (if the customer lives within a certain distance) or shipping directly to their home.

4.  Winmark said that it was proud to see the many examples of franchisees within the Winmark family of brands doing what they could to ensure their customers got the products they needed. On a final note, Winmark said, “Although the crisis with COVID-19 has created a lot of uncertainty, life still goes on in our communities; babies are being born, children continue to grow, we still want in style fashion, we still want to be fit and play sports, and musicians still want more gear. Our family of resale brands fit those needs, and we will be there for our community now and when this crisis is over.”

5.  Winmark concluded, “During times of economic uncertainty, customers increasingly turn to resale businesses to get high-quality products at a fraction of the retail cost. We’re proud that our franchisees across the U.S. and Canada are able to play a role in giving people the chance to maintain some sense of regularity. As a family of resale franchise brands, we are optimistic about the future. We recognize today is a challenging time for many, but there will come a time when social distancing and stay-at-home orders are lifted. Consumer confidence will return and businesses will grow once more.”

How the Brand Continues to Be an Industry Leader

6.  In January 2021, for the seventh year in a row, Once Upon A Child was named the top franchise in its category in Entrepreneur’s 2021 Franchise 500 list, as well as ranking No. 233 overall. Although Winmark focuses its attention more on its brands’ strength and growth than racking up accolades, recognition as a top business in the Franchise 500 validates Once Upon A Child as a consistently strong investment.

7.  The Franchise 500 list is one of the most comprehensive and prestigious rankings in the franchise industry. Recognition as a Top 500 brand is awarded to the best franchise opportunities across verticals, selected out of more than 3,000 different franchise brands. In order to evaluate the strength of franchise opportunities, Entrepreneur experts weigh each franchise’s key factors and performance metrics, including:

• Costs and fees
• Support
• Brand strength
• Financial strength and stability
• Size and growth

8.  While top-rated brands excel in each facet, the growth experienced by Once Upon A Child in the last year is cited as a primary factor in the impressive ranking. Once Upon A Child is the largest children’s retail/resale business in North America, outpacing its nearest competitors by 3 to 1 in total store count – and still growing. Last year, Once Upon A Child went from 385 to 392 franchises, with another 12 units in the development pipeline.

9.  Even more important than beating out competitors in size and growth is the strength of the business for franchisees. Once Upon A Child also outpaces competitors with 50 percent higher average sales. At the same time, the strength and growth experienced by the brand is mirrored by the broader franchise segment. Franchising as an industry continues to outpace the overall benchmark average growth in the U.S.

10.  In 2018, the industry grew by 6.2 percent to $757 billion. Franchise employment also grew by 3.7 percent the same year – nearly twice as much as the 1.8 percent economy-wide employment growth figure. With impressive growth in an equally fast-growing franchise industry, Once Upon A Child is a strong investment for savvy entrepreneurs.

11.  In addition to a strong business model and growth strategy, Once Upon A Child has also proven so successful because of unprecedented demand for children’s resale concepts. Demand for children’s resale goods has only continued to climb in recent years, alongside population growth and changing consumer preferences. In 2018, 3.79 million children were born in the U.S., creating additional demand and opportunities for businesses in the children’s resale industry. Not only that, but the millennial demographic starting families today overwhelmingly value and favor resale concepts more than their generational predecessors.

12.  Demand for resale and the shoppers supporting the industry continue to skew younger, with 27 percent of millennials and 37 percent of Generation Z members shopping resale. As younger demographics continue to have children and prioritize the sustainability and affordability inherent in the resale model, children’s resale concepts like Once Upon A Child are positioned for strong continued growth well into the future.

Company History

13.  Once Upon A Child was started in 1985 by Lynn Blum and her husband Dennis in Perrysburg, Ohio. Lynn Blum had been selling her sons’ gently used clothing and toys for years at a weekly garage sale. She also sold things from her friends’ and neighbors’ children. The Blums noticed that Goodwill sold a high volume of used baby attire and recognized the need for a store that specialized in selling only used children’s goods. Once Upon A Child was an instant success and after a few years, Dennis Blum left his job to help Lynn run the business full time.

14.  Over the next few years, the Blums opened additional Once Upon A Child locations, but around the time they hit 20 locations, they hit a roadblock in expanding into other markets. Around that time, in 1992, the Winmark Corporation acquired Once Upon A Child and launched a national franchise program. By 2001, the brand had reached 229 units with an average unit volume of $402,109. This growth continued over the next decade and by the late 2010s, there were over 348 Once Upon A Child stores across the U.S. and Canada. Today, Once Upon A Child is one of Winmark’s most successful brands.

Entrepreneur’s Franchise 500

15.  Once Upon A Child ranked No. 233 on Entrepreneur’s 2021 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 2021 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 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

• Outlets at the Start of the Year:  360
• Outlets at the End of the Year:  379
• Net Change:  +19

2019

• Outlets at the Start of the Year:  379
• Outlets at the End of the Year:  388
• Net Change:  +9

2020

• Outlets at the Start of the Year:  388
• Outlets at the End of the Year:  399
• Net Change:  +11

Company-Owned

2018

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

2019

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

2020

• 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, 2021 FDD) and Analysis

• This Item 19 contains financial performance representations based on information from franchised Once Upon A Child Stores under the headings “2020 Once Upon A Child Unaudited Statement of Average Annual Sales and Gross Profit.”

• The gross profit figures in this Item 19 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 sales and gross profits includes average gross sales and gross profits during the 12-month period ended December 26, 2020 (Winmark’s fiscal year) as reported by 369 of the 372 franchised Once Upon A Child Stores located in the United States and Canada that commenced operations in each of the years 1988 through 2019.

• 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 26, 2020, with the understanding that some of these Stores had temporary closures as a result of COVID-19, as further described below.

• There are no material financial and operational characteristics of the U.S. Stores that differ materially from the Canadian Stores included in this financial performance representation.

• 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 26, 2020 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 372 franchised Once Upon A Child Stores which had been in operation by the same franchisee owners for the 12-month period ended December 26, 2020. Only 369 of the 372 Stores are reflected in the average, however, because two Stores were closed for an extended period of time due to flooding/hurricane issues and one Store permanently closed in 2020 but was not recognized as terminated until 2021.

• This financial performance representation does not include information for the 27 Once Upon A Child Stores that opened or transferred in 2020.

• No Stores closed in 2020 after being opened less than 12 months.

• Due to governmental regulations and other restrictions related to COVID-19 in many jurisdictions during 2020, many Once Upon A Child Stores were forced to temporarily close for extended periods of time during the year. The temporary closures and COVID-19 regulations and restrictions negatively impacted the Stores’ sales, as reflected below.

• During the temporary in-store closures, some Stores continued to operate by offering curbside and/or online sales.

• Despite these temporary closures, as of the date of the 2021 Disclosure Document, Once Upon A Child does not anticipate that COVID-19 has or will significantly change its business model or the way its Business System operates.

• For purposes of clarification, the 369 Stores includes all Stores that were temporarily closed as a result of COVID-19.

Part 1 – Statement of Average Gross Sales and Gross Profit of 369 Franchised Once Upon A Child Stores for the Fiscal Year Ended December 26, 2020

Year Opened – 2019

• Number of Stores Reported:  22
• Number and Percentage of Stores Attaining or Exceeding Average Gross Sales:  4/18%
• Number and Percentage of Stores Attaining or Exceeding Average Gross Profit:  4/18%
• 2020 Average Gross Sales:  $644,570
• 2020 Median Gross Sales:  $613,703
• 2020 Average Gross Profit:  $424,974
• 2020 Median Gross Profit:  $416,762
• Average Gross Profit Percentage:  65.93%
• Sales Range:  $282,187 to $1,164,778

Year Opened – 2018

• Number of Stores Reported:  36
• Number and Percentage of Stores Attaining or Exceeding Average Gross Sales:  7/19%
• Number and Percentage of Stores Attaining or Exceeding Average Gross Profit:  7/19%
• 2020 Average Gross Sales:  $644,667
• 2020 Median Gross Sales:  $585,234
• 2020 Average Gross Profit:  $424,609
• 2020 Median Gross Profit:  $374,890
• Average Gross Profit Percentage:  65.86%
• Sales Range:  $302,571 to $1,633,758

Year Opened – 2017

• Number of Stores Reported:  37
• Number and Percentage of Stores Attaining or Exceeding Average Gross Sales:  9/24%
• Number and Percentage of Stores Attaining or Exceeding Average Gross Profit:  9/24%
• 2020 Average Gross Sales:  $711,842
• 2020 Median Gross Sales:  $602,798
• 2020 Average Gross Profit:  $470,850
• 2020 Median Gross Profit:  $402,389
• Average Gross Profit Percentage:  66.15%
• Sales Range:  $261,649 to $2,347,986

Year Opened – 2016

• Number of Stores Reported:  27
• Number and Percentage of Stores Attaining or Exceeding Average Gross Sales:  11/41%
• Number and Percentage of Stores Attaining or Exceeding Average Gross Profit:  10/37%
• 2020 Average Gross Sales:  $742,618
• 2020 Median Gross Sales:  $752,108
• 2020 Average Gross Profit:  $487,620
• 2020 Median Gross Profit:  $479,412
• Average Gross Profit Percentage:  65.66%
• Sales Range:  $306,702 to $1,318,595

Year Opened – 2015

• Number of Stores Reported:  22
• Number and Percentage of Stores Attaining or Exceeding Average Gross Sales:  10/45%
• Number and Percentage of Stores Attaining or Exceeding Average Gross Profit:  10/45%
• 2020 Average Gross Sales:  $838,377
• 2020 Median Gross Sales:  $724,818
• 2020 Average Gross Profit:  $552,683
• 2020 Median Gross Profit:  $490,125
• Average Gross Profit Percentage:  65.92%
• Sales Range:  $206,491 to $1,589,453

Year Opened – 2014 and Prior

• Number of Stores Reported:  225
• Number and Percentage of Stores Attaining or Exceeding Average Gross Sales:  116/52%
• Number and Percentage of Stores Attaining or Exceeding Average Gross Profit:  113/50%
• 2020 Average Gross Sales:  $869,420
• 2020 Median Gross Sales:  $816,862
• 2020 Average Gross Profit:  $568,312
• 2020 Median Gross Profit:  $531,770
• Average Gross Profit Percentage:  65.37%
• Sales Range:  $219,152 to $2,214,838

Total

• Number of Stores Reported:  369
• Number and Percentage of Stores Attaining or Exceeding Average Gross Sales:  157/43%
• Number and Percentage of Stores Attaining or Exceeding Average Gross Profit:  153/41%
• 2020 Average Gross Sales:  $807,158
• 2020 Median Gross Sales:  $759,340
• 2020 Average Gross Profit:  $529,138
• 2020 Median Gross Profit:  $496,679
• Average Gross Profit Percentage:  65.56%

• “Gross Sales” means all revenues the franchisee receives from the sale of goods and services, whether by cash or by check, credit card or trade, in connection with the Store, less sales tax and customer refunds and returns.

• Average Gross Profit equals Gross Sales less Cost of Goods Sold. Average Gross Profit does not reflect any expenses related to the operation of a Once Upon A Child Store other than Cost of Goods Sold.

Part 2 – Statement of Sales Ranges by Quartile for 369 of the 372 Franchised Once Upon A Child Stores Open on December 26, 2020 That Had Been in Operation for at Least 12 Months by the Same Franchisee or Owners for the 12-Month Period Ended December 26, 2020

• Quartile refers to that portion of the total number of Stores open that represents 25%. For example, the first Quartile identifies those Stores that were in the top 25% of all Stores in Gross Sales.

• These results relate to specific Once Upon A Child Stores located in the United States and Canada. Your individual results will likely differ from these results.

1st Quartile

• Number of Stores:  92
• 2020 Gross Sales Range by Quartile:  $1,003,119 to $2,347,986
• 2020 Quartile Average Gross Sales:  $1,289,546
• 2020 Quartile Median Gross Sales:  $1,204,765
• Number and Percentage of Stores Attaining or Exceeding Quartile Average Gross Sales:  37/40%
• 2020 Quartile Average Gross Profit:  $844,278
• 2020 Quartile Median Gross Profit:  $780,252
• Number and Percentage of Stores Attaining or Exceeding Quartile Average Gross Profit:  26/39%
• Quartile Average Gross Profit Percentage:  65.47%

2nd Quartile

• Number of Stores:  92
• 2020 Gross Sales Range by Quartile:  $760,819 to $999,578
• 2020 Quartile Average Gross Sales:  $864,112
• 2020 Quartile Median Gross Sales:  $858,927
• Number and Percentage of Stores Attaining or Exceeding Quartile Average Gross Sales:  44/48%
• 2020 Quartile Average Gross Profit:  $564,653
• 2020 Quartile Median Gross Profit:  $564,905
• Number and Percentage of Stores Attaining or Exceeding Quartile Average Gross Profit:  46/50%
• Quartile Average Gross Profit Percentage:  65.34%

3rd Quartile

• Number of Stores:  92
• 2020 Gross Sales Range by Quartile:  $545,578 to $759,340
• 2020 Quartile Average Gross Sales:  $649,658
• 2020 Quartile Median Gross Sales:  $642,605
• Number and Percentage of Stores Attaining or Exceeding Quartile Average Gross Sales:  41/45%
• 2020 Quartile Average Gross Profit:  $428,051
• 2020 Quartile Median Gross Profit:  $424,114
• Number and Percentage of Stores Attaining or Exceeding Quartile Average Gross Profit:  44/48%
• Quartile Average Gross Profit Percentage:  65.89%

4th Quartile

• Number of Stores:  93
• 2020 Gross Sales Range by Quartile:  $206,491 to $544,747
• 2020 Quartile Average Gross Sales:  $429,420
• 2020 Quartile Median Gross Sales:  $434,833
• Number and Percentage of Stores Attaining or Exceeding Quartile Average Gross Sales:  48/52%
• 2020 Quartile Average Gross Profit:  $282,252
• 2020 Quartile Median Gross Profit:  $285,114
• Number and Percentage of Stores Attaining or Exceeding Quartile Average Gross Profit:  48/52%
• Quartile Average Gross Profit Percentage:  65.73%

Part 3 – Number of Stores, Average and Median Gross Sales, Lowest and Highest Gross Sales Amount in Each Range, and Percentage of Total Number of Stores That Fell Within Certain Ranges of Gross Sales for 2020

• Based on information reported by the 369 Once Upon A Child Stores which had been in operation by the same franchisee or owner for the 12-month period ended December 26, 2020, the following chart sets forth the number of Stores, average and median Gross Sales, the lowest and highest Gross Sales amount in each range, and the percentage of total number of Stores that fell within certain ranges of Gross Sales for 2020:

2020 Range of Gross Sales:  $0 to $250,000

• Number of Stores Falling Within Range:  2
• Average Gross Sales for Stores Within Range:  $212,821
• Number and Percent of Stores Attaining or Exceeding Average Gross Sales for Stores Within Range:  1/50%
• Gross Sales for Lowest Store Within Range:  $206,491
• Gross Sales for Highest Store Within Range:  $219,152
• Median Gross Sales for Stores Within Range:  $212,821
• Percent of Total Number of Stores (369) Within Range:  0.54%

2020 Range of Gross Sales:  $250,001 to $500,000

• Number of Stores Falling Within Range:  63
• Average Gross Sales for Stores Within Range:  $393,136
• Number and Percent of Stores Attaining or Exceeding Average Gross Sales for Stores Within Range:  30/48%
• Gross Sales for Lowest Store Within Range:  $261,649
• Gross Sales for Highest Store Within Range:  $497,466
• Median Gross Sales for Stores Within Range:  $388,596
• Percent of Total Number of Stores (369) Within Range:  17.07%

2020 Range of Gross Sales:  $500,001 to $1,000,000

• Number of Stores Falling Within Range:  212
• Average Gross Sales for Stores Within Range:  $726,461
• Number and Percent of Stores Attaining or Exceeding Average Gross Sales for Stores Within Range:  108/51%
• Gross Sales for Lowest Store Within Range:  $501,540
• Gross Sales for Highest Store Within Range:  $999,578
• Median Gross Sales for Stores Within Range:  $733,099
• Percent of Total Number of Stores (369) Within Range:  57.45%

2020 Range of Gross Sales:  $1,000,001 to $2,000,000

• Number of Stores Falling Within Range:  89
• Average Gross Sales for Stores Within Range:  $1,256,902
• Number and Percent of Stores Attaining or Exceeding Average Gross Sales for Stores Within Range:  36/40%
• Gross Sales for Lowest Store Within Range:  $1,003,119
• Gross Sales for Highest Store Within Range:  $1,942,455
• Median Gross Sales for Stores Within Range:  $1,192,352
• Percent of Total Number of Stores (369) Within Range:  24.12%

2020 Range of Gross Sales:  $2,000,001 to $3,000,000

• Number of Stores Falling Within Range:  3
• Average Gross Sales for Stores Within Range:  $2,257,984
• Number and Percent of Stores Attaining or Exceeding Average Gross Sales for Stores Within Range:  1/33%
• Gross Sales for Lowest Store Within Range:  $2,211,128
• Gross Sales for Highest Store Within Range:  $2,347,986
• Median Gross Sales for Stores Within Range:  $2,214,838
• Percent of Total Number of Stores (369) Within Range:  0.81%

2020 Range of Gross Sales:  Greater Than $3,000,000

• Number of Stores Falling Within Range:  0
• Average Gross Sales for Stores Within Range:  $0
• Number and Percent of Stores Attaining or Exceeding Average Gross Sales for Stores Within Range:  0/0%
• Gross Sales for Lowest Store Within Range:  $0
• Gross Sales for Highest Store Within Range:  $0
• Median Gross Sales for Stores Within Range:  $0
• Percent of Total Number of Stores (369) Within Range:  0%

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