87 people support 1,389 stores?

Today, I'm digging into Winmark Corporation (WINA).

They franchise five resale store brands: Plato's Closet (teen clothing), Once Upon A Child (kids' stuff), Play It Again Sports (used gear), Style Encore (women's fashion), and Music Go Round (instruments). Franchisees run 1,389 stores across the US and Canada.

A few things that stood out to me:

• They are lean! 87 employees supporting 1,389 stores, with roughly $1 million of revenue and $470K of net income per employee. Franchisees carry the inventory, the leases, and the labor.

• Franchise agreements run 10 years, and all 50 that came up for renewal in the first half of 2026 renewed. 100% retention is very impressive.

• The vast majority of their franchise fees come from a 5% fee on gross revenue. They appear to be adding a 2% of gross revenue advertising fee as well, specifically for Plato's Closet, but I'm guessing it applies elsewhere. To me, this looks like pricing power on their end.

As I've talked about before, double-sided marketplaces are some of the most valuable business models that exist, and Winmark is an example of one.

The market recognizes that by pricing it at nearly a 25x EBITDA multiple today.

In nearly any business, you either have constraints on the supply side or the demand side. In Winmark's business model, the supply side is where they differentiate.

Getting quality used products to walk into your door every day and to be able to efficiently price and buy them is Windmark's competitive advantage. I find it compelling that they've taken this competitive advantage and have applied it across multiple industries.

In the businesses that I'm working on, Nerd Out and Fullstack Ag, there are a couple of constraints:

1. Building compelling enough content and training that people will pay for, and

2. Distributing those offerings to a cold audience at profitable advertising economics

These are where most of my efforts are going today. We are working on systems and processes for building our content and training, in addition to thinking outside the box on marketing/distribution.

An example of thinking outside the box on marketing and distribution is that we are planning to use free software as a way to build trust and grow our audience. We're going to be releasing a software product in September that combines AI and note-taking in a way that I think you'll find compelling. More to come on that.

Try to understand where the constraints lie in your business and whether the systems you've put in place to address them can be applied to other industries or markets, like Winmark has done.

With that, I'll see you in a couple of days!

Nick

TL;DR

• Winmark franchises five used-goods store brands (Plato's Closet, Once Upon A Child, Play It Again Sports, Style Encore, Music Go Round) with 1,389 stores across North America.

• Royalties are ~89% of revenue: franchisees pay roughly 5% of sales, which implies about $1.5 billion of systemwide resale volume flowing through the brands.

• Q2 2026 royalties grew 7.8%, and 87 additional franchises are awarded and waiting to open.

• The financial profile is about as clean as it gets: 96.7% TTM gross margin, 62.3% operating margin, near-zero CapEx, and $49M of dividends paid last year against $42M of net income.

• The stock returned 347% over 10 years (16.2% a year, dividend-adjusted) but is down 1.7% over the past year, while the resale field split: Savers Value Village +9.6%, ThredUp -67.9%.

• Operator lesson: franchise the hard part. Winmark solved used-goods supply acquisition and now collects a toll from everyone who uses the playbook.

The 30,000-Foot View

Winmark calls itself "the Resale Company," and the label fits. Five brands, each aimed at a category where used inventory is abundant and turnover is fast: teen apparel, kids' gear, sporting goods, women's fashion, musical instruments. The store playbook is the same everywhere. A customer walks in with a bin of outgrown clothes, a trained buyer appraises it on the spot using Winmark's pricing system, cash changes hands, and the goods go on the floor at a healthy markup. The seller usually turns around and shops.

The thing to understand about the model: Winmark's customer is the franchisee. Shoppers hunting for used hockey skates are the franchisee's problem. Winmark sells the brand license (10-year terms), training, the buying software, and field support, and collects an upfront fee plus a royalty of roughly 5% of sales, about $55K per store per year. Franchisees fund the build-outs, hire the staff, and own the inventory risk. That's how you get a $1.3 billion market cap with 87 employees and $192K of capital spending.

One leftover: the middle-market equipment leasing arm, unplugged in 2021 to make Winmark a pure resale franchisor, is down to a rounding error.

Revenue mix (FY2025):

• Royalties: ~89%

• Merchandise sales: ~4%

• Franchise fees: ~2%

• Leasing and other: ~5%

Key Stats

• Market cap: $1.3B

• TTM revenue: $86.5M

• TTM gross margin: 96.7%

• Employees: 87

• 1Y total return: -1.7%

• Industry: Franchising / specialty resale retail

Company History

• 1983: Martha Morris opens the first Play It Again Sports in Minneapolis. [VERIFY]

• 1988: Ron Olson and Jeff Dahlberg buy the franchising rights and build a company around the concept.

• 1992-1993: Acquires Once Upon A Child and Music Go Round, renames itself Grow Biz International, and IPOs on Nasdaq.

• 1998: Adds Plato's Closet, the teen-apparel concept that becomes the workhorse brand. [VERIFY]

• 2000-2001: Nearly broke after over-expanding into concepts like Computer Renaissance, the company brings in John Morgan, sheds the weak brands, and renames itself Winmark.

• 2004: Launches a middle-market equipment leasing business alongside franchising. [VERIFY]

• 2013: Launches Style Encore, its women's apparel concept.

• 2016: Brett Heffes takes over as CEO.

• 2021: Announces the leasing run-off to go all-in on resale, after a decade in which roughly $360M went back to shareholders.

• 2025: Royalties reach $76.4M; pays a $10.00 per share special dividend.

• 2026: Store count hits 1,389 at midyear, with 87 more franchises awarded and waiting to open.

Show Me the Money

Standout financial features:

• Slow and steady growth. $70.2M in FY2023, $72.2M in FY2024, $76.4M in FY2025, and up 7.8% in the most recent quarter. Total revenue below looks flatter than that because the leasing book has been running off.

• FY2025 dividends totaled $49.1M against $41.7M of net income, and book equity sits at negative $37.6M after years of this.

• Net debt dropped from $54.3M at year-end to $36.2M at midyear as cash builds. History says a chunk of that pile goes out the door as a special dividend before year-end.

• Operating cash flow was $44.9M last year against $0.2M of CapEx.

Financial Data

Stock Performance

Returns are dividend-adjusted, which matters here because of the specials.

One-year head-to-head against the public resale field:

The past year shows which resale model carries which risk: the thrift operator ground out a gain, the online marketplace lost two-thirds of its value, and the royalty collector sat flat while its coupons kept paying. Ten years of sitting there has compounded at 16.2% annually.

The N.O.O.B. Nine — Competitive Powers

The Nerd Out on Business Nine is made up of Hamliton Helmer's famous "7 Powers" of competitive advantage (Scale Economies, Network Economies, Counter-Positioning, Switching Costs, Branding, Cornered Resource, and Process Power) combined with two of my own (Data Flywheel and Distribution Advantage).

Average Score: 3.4/5 - A franchise-system moat: niche-dominant brands and an encoded supply playbook, monetized as royalty.

Memorable Marketing

Winmark markets to two audiences. Corporate courts prospective franchisees (the actual customer), while consumer marketing is delegated to franchisees with local incentive. And the buy counter itself does acquisition work: handing a teenager $40 cash for a bin of hoodies creates a seller, a shopper, and a story she tells at school.

Notable campaigns and tactics:

• "Find the Fit that Fits You" (2026): Plato's Closet back-to-school campaign built around first-day-of-school confidence, complete with an in-store "fit simulator." Selling a feeling in a category where price is already the hook.

• "Winmark - the Resale Company" repositioning (2020s): A corporate rebrand aimed at franchise development and investors, wrapping the model in sustainability and small-business ownership.

• Organic TikTok haul content (ongoing): Customers film what they sold and scored at Plato's Closet and Once Upon A Child. Free, credible, and aimed at exactly the right demographic.

• Cash-for-goods as advertising (always on): Every buy transaction is paid customer acquisition that also stocks the shelves.

Tactical takeaways:

1. Figure out who your real customer is and point corporate marketing there; delegate the rest to people with skin in the game.

2. In a discount category, campaigns about identity and confidence beat campaigns about price.

3. If your business pays consumers, treat that payout as a marketing line and design the experience around it.

4. User-generated content works best when the store experience is inherently filmable.

AI Uses & Opportunities

Current exposure:

• The buy-counter pricing guidance, running on decades of transaction data across 1,389 stores, is the closest thing to an AI asset in the building.

• Corporate is 87 people and proudly low-tech; with no e-commerce operation to disrupt, AI-driven shifts in online shopping mostly pass them by.

Future opportunities:

• Computer vision at the buy counter: photograph an item, get brand, condition, and price in seconds. Lower training burden and more consistent buys across the system.

• Dynamic local pricing tuned to neighborhood demand and seasonal cycles (ski gear, back-to-school).

• A franchisee copilot for scheduling, buy calibration, and inventory decisions, which would deepen switching costs.

• Authentication and fraud detection as counterfeit streetwear leaks into teen resale.

Bumps in the Road

• The growth engine is slow by design: royalties compound mid-single digits, the flagship brands are mature in North America, and the stock trades north of 30x earnings anyway.

• Franchisee execution risk: the model depends on small operators nailing a labor-intensive buy process; a weak cohort would show up in royalties years later.

• The teen closet has other exits now: Depop, Poshmark, and Facebook Marketplace compete for the same supply of used clothing, on the phone the seller is already holding.

• Debt-funded special dividends plus negative book equity leave thin cover if royalties ever decline for real.

• 87 employees means the institutional knowledge sits in very few heads.

Your Swipe File

• I've seen many businesses use a growing team size as a sign of success. I view it as the opposite. Stay lean.

• Collect royalties on activity you don't have to operate. Franchisees own the inventory, the leases, and the payroll; Winmark owns the playbook and takes roughly 5% off the top.

• In resale, supply acquisition is where you build a moat.

• Skipping a channel can be a strategy. Winmark watched everyone rush into online resale, stayed physical, and let others try to figure out the economics of it (see ThredUp, down 67.9% in a year).

• It's okay to kill non-core efforts. The leasing book made money, and they killed it anyway to be a pure-play.