Music Go Round Franchise Costs: Estimated Initial Investment (Item 7, 2022 FDD)

• The typical size of a Music Go Round Store ranges from 3,000 to 4,000 square feet. For several items discussed below, your cost will increase as the number of square feet increases.

• Except where otherwise noted, all fees you pay to Winmark (the franchisor) are non-refundable. Third-party lessors, contractors, and suppliers will decide if payments to them are refundable.

1.  Initial Franchise Fee:  $25,000

• The Initial Franchise Fee for new Music Go Round franchisees is $25,000. The Initial Franchise Fee is $15,000 for a second and subsequent Store or for an existing franchisee of one of Winmark’s other franchised concepts.

2.  Fixtures and Supplies:  $20,000 to $27,000

• Your investment in fixtures and supplies necessary to operate the Store is highly variable. The cost will increase as the number of square feet increases.

3.  Signs:  $8,000 to $14,000

• This item is for interior and exterior signs for the Store.

• All signs must meet Winmark’s standards and comply with your landlord’s requirements as well as any local government regulations. You must purchase all interior and exterior signs through Winmark’s approved, preferred third-party suppliers.

4.  Security System and/or Cameras:  $1,000 to $4,000

• Winmark requires that you purchase a security system that includes security cameras, motion detectors, entrance security, and glass breakage detectors. You must purchase a minimum of 3 to 4 cameras depending on the size of your Store.

5.  Point-of-Sale (POS) System:  $20,000 to $23,300

• You must use in your Store the POS System which Winmark has selected for the Business System. You must obtain a license for the Proprietary Software from Winmark.

• The estimated amount includes the $6,000 software license fee you pay Winmark for the Proprietary Software. It also includes the $1,000 DRS Maintenance Fee. It does not include sales tax and shipping costs.

• You must obtain the computer hardware components from Winmark.

6.  Leasehold Improvements:  $9,000 to $11,000

• You must lease the premises for your Store. Typical locations for your Store are strip shopping malls and smaller free standing locations.

• You will need to make certain leasehold improvements to the leased premises for your Store to comply with Winmark’s approved plans and standards. The estimated cost of leasehold improvements could include:  carpeting, slat wall, lighting, and decor.

7.  Build-Out:  $25,000 to $40,000

• The build-out cost refers to the physical labor expense of building the Store location to Winmark’s approved brand standards. This may include installation of slat wall, wall standards, counter configuration, building store fixturization, installing flooring, painting, etc.

8.  Deposits and Business Licenses:  $5,000 to $9,000

• This amount includes utility and security deposits and business licenses. Deposits are generally refundable, but license fees are not.

9.  Opening Inventory:  $110,000 to $120,000

• This amount assumes your opening inventory will include both new and used musical instruments, speakers, amplifiers, music-related electronics, and related accessories.

• The maximum amount assumes that you will open your Store in the fall and will have an additional supply of inventory to meet customer demands during this period.

• Winmark strongly recommends that you have a minimum of $80,000 in used inventory when you open your Store and encourages you to have a much larger amount of used inventory.

• This amount does not reflect amounts needed to replenish inventory during the initial stage of operation.

• Winmark will refuse to allow you to open your Store if you have less than $70,000 in used inventory. In addition, Winmark recommends that you have a minimum of $30,000 in new inventory when you open your Store.

10.  Miscellaneous Pre-Opening Expenses:  $30,000 to $50,000

• This amount includes lodging, meals, and travel expenses for one person attending the initial training program and the cost of participation in an online financial management course (currently $395) during the initial training program; telephone and high-speed Internet hook-up; legal expenses; initial financing costs; freight costs; building permits; pre-opening and buy day labor expenses; pre-opening and buy day advertising expenses; and website development costs.

11.  Rent – First 3 Months:  $12,500 to $20,000

• This amount estimates the rent expense you will incur during the first 3 months of Store operations.

• Rent is estimated to be approximately $50,000 to $100,000 per year depending on factors such as size, condition, and location of the leased premises. At times, franchisees are able to negotiate 2-4 months free rent with the landlord upon commencement of the lease.

• What you pay in rent will depend on local rental rates.

12.  Additional Funds – 3 Months:  $30,000 to $35,000

• This amount estimates the expenses you will incur during the first 3 months of Store operations, including initial wages and fringe benefits; insurance premiums; advertising; taxes; office, paper, and cleaning supplies; and interest payments on any business loans.

• It does not include inventory costs beyond the opening inventory costs identified in the table, and does not include your compensation during this 3-month period.

13.  Total:  $295,500 to $378,300

• This total is an estimate of your pre-opening initial investment and the expenses you will incur during the first 3 months of Store operations. This total is based on Winmark’s estimate of nationwide average costs and prevailing market conditions, and Winmark’s 32 years of experience in the franchise retail business and its 27 years of experience in this specific business.