FDD Talk 2021: Play It Again Sports 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 Play It Again Sports franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Play It Again Sports 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 Play It Again Sports franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned Play It Again Sports 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 Play It Again Sports’ 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 265 franchised Play It Again Sports 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 265 franchised Play It Again Sports 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 Play It Again Sports 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 Play It Again Sports Franchise

Helped People Stay Active at Home During Lockdown

1.  In late April 2020, about a month after many states implemented COVID-19 lockdown restrictions, Winmark, parent company of Play It Again Sports, reported that Play It Again Sports franchisees were thriving as they helped keep customers active at home. Winmark said that a number of Play It Again Sports franchisees saw their business increase as consumers brought exercise equipment into their own homes.

2.  Initially, Newport News-based franchisee Bob Harrell was concerned about the future of his Play It Again Sports location like so many of his fellow small business owners. While local sports teams canceled their events – cutting into a regular revenue stream – consumers seeking in-home fitness equipment helped pick up the slack.

3.  John Acheson, an owner in Bozeman, Montana, also saw demand for fitness equipment increase as stay-at-home orders and social distancing took effect. Acheson mentioned in an interview with MontanaSports.com that most of the customers that came into his store were looking for free weights and exercise machines.

4.  A silver lining around the health and economic crisis for Hal and Laura Gaston, franchisees of Play It Again Sports in Cary, North Carolina, and Matt Sawyer, their general manager, was the fact that their store was able to get their customers the items they wanted at a price they could afford. While other retailers used the crisis as an opportunity to increase their prices, Play It Again Sports franchisees held true to the brand promise of offering discounts of between 40 and 90 percent off the retail price for quality used sports and fitness gear.

5.  To accommodate social distancing standards, many owners offered both curbside pickup and delivery. For example, Oregon-based Play It Again Sports owner Jay DeKalb took phone orders and requests through social media. DeKalb sold nearly 90 percent of his free weights inventory by the end of March.

6.  As a franchise brand, Play It Again Sports is thankful that it had an opportunity to help people deal with the unprecedented situation with COVID-19. With a sporting goods resale franchise like Play It Again Sports, consumers are able to find a more convenient and economical way to make good on their fitness routines. Customers can purchase fitness equipment at substantial discounts compared to the retail cost, in addition to picking up inexpensive items like fit balls, dumbbells, and exercise bands. At a time when budgets are getting tighter and the need to stay active and healthy remains constant, Play It Again Sports considers it important that it remain a reliable resource for consumers across the country.

Franchisee Saw Increase in Sales as Sports Practices Resumed

7.  In late June 2020, Play It Again Sports in Duluth, Minnesota was mostly back to business as usual, a month after the store fully reopened to the public. Steven Holappa, general manager of the Play It Again Sports in Duluth, said, “We closed down on March 27th and then offered curbside delivery/outdoor service and then reopened fully to the public the week after.”

8.  Play It Again Sports said that when the pandemic first hit, dumbbells were popular and they’ve been low on them since. Now, outdoor sports are popular. “Two hobbies that anyone can get out and do, and you can space yourself out pretty well,” Holappa said.

9.  And it’s been a bit of a challenge to keep up with the demand for items like inlines and golf equipment. “The inline world is crazy right now. Those two companies are having a hard time keeping up, it’s probably their biggest demand since early 2000s, late 90s when it really started picking up. Golf stuff’s a different world. There’s so many different companies that finding stuff we’re able to do, but we’re opening up doors with different companies just to make sure we have product for everybody,” Holappa added.

10.  As the store welcomed customers back in, they implemented many of the normal cleaning procedures as other businesses. According to Holappa, “We’re asking people to try to maintain their six feet social distancing. We do ask that masks and gloves, they’re recommended, we’re not going to force people to do that. And our employees have masks and gloves to make sure that people are comfortable as well.”

11.  But they also allowed customers to sell their old gear, and initially asked for it to just be summer equipment and to clean it first. “As long as they’re looking at repurchasing something that they’re bringing in, we have no problem taking it in. We just have to make sure we’re going through the right disinfectant stages and keeping it off the floor for a couple of days,” Holappa added.

12.  As practices resumed and the weather got warmer, Play It Again Sports was happy to get their athletes out and active again. Holappa added, “The kids are so used to going to hockey or going to baseball, that sitting at home has been a struggle. So now that all of these places are opening up, we have the ability to offer the products that they might need or want and get the kids back out and enjoying the sports and some of the structure that they’re used to.”

Company History

13.  Play It Again Sports was founded in 1983 by Martha Morris in Uptown, Minneapolis. Morris recognized that there was a need to resell used sporting goods as most equipment lasts much longer than its participants, especially in youth sports. Over the next few years, Morris opened up a few more stores and in 1988, she sold Play It Again Sports to the Winmark Corporation – this was Winmark’s first resale brand.

14.  Winmark began franchising Play It Again Sports and it is now the brand’s third largest chain in North America, after Plato’s Closet and Once Upon A Child. Although Play It Again Sports does resell used sporting equipment, about 70% of its inventory is brand new.

Entrepreneur’s Franchise 500

15.  Play It Again Sports ranked No. 431 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Play It Again Sports 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 Play It Again Sports’ 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

2017

• Outlets at the Start of the Year:  281
• Outlets at the End of the Year:  281
• Net Change:  0

2018

• Outlets at the Start of the Year:  281
• Outlets at the End of the Year:  280
• Net Change:  -1

2019

• Outlets at the Start of the Year:  280
• Outlets at the End of the Year:  274
• Net Change:  -6

Company-Owned

2017

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

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

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

• 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 26, 2020 (Winmark’s fiscal year) as reported by 265 of the 266 franchised Play It Again Sports Stores in the United States and Canada that commenced operations during the years 1988 through 2019.

• This statement includes information from only those Play It Again Sports Stores located 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 the 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 Play It Again Sports 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 266 franchised Play It Again Sports Stores which had been in operation by the same franchisee or owners for the 12-month period ended December 26, 2020. Only 265 of the 266 Stores are reflected in the average, however, because one Store was temporarily closed for several months due to vandalism.

• This financial performance representation does not include information for the 8 Play It Again Sports 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 of the Play It Again Sports Stores were forced to temporarily close for extended periods of time during the year. The temporary closures and COVID-19 regulations and restrictions 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, Play It Again Sports 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 265 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 265 Franchised Play It Again Sports Stores for the Fiscal Year Ended December 26, 2020

Year Opened – 2019