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WINMARK CORP

WINA
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Business Summary

Winmark Corporation is a nationally recognized franchisor focused on sustainability and small business formation, operating in the resale industry. The company franchises five value-oriented retail brands: Plato's Closet, Once Upon A Child, Play It Again Sports, Style Encore, and Music Go Round. At December 27, 2025, there were 1,378 franchises in operation in the United States and Canada and over 2,800 available territories. The company estimates that, since 2010, stores in its resale brands have extended the lives of over 2.1 billion items. In 2025 alone, stores across the five brands extended the lives of over 195 million items of clothing, toys, books, musical instruments and sports equipment. The company has been at the forefront of the sustainability movement for over 35 years.

Retailing, including the sale of apparel, sporting goods and musical instruments, is highly competitive. Many retailers have substantially greater financial and other resources than Winmark. The company's franchisees compete with established, locally owned retail stores, discount chains, traditional retail stores, and online used and new goods marketplaces such as eBay, craigslist, Facebook Marketplace, Poshmark, thredUP, Amazon and many others. More recently, retail and consumer apparel brands themselves have been participating in developing platforms to sell previously used items. The company's Plato's Closet franchise stores primarily compete with specialty apparel stores such as American Eagle, Gap, Abercrombie & Fitch, Old Navy, and Hollister, as well as Target and Walmart. Once Upon A Child franchisees compete primarily with large retailers such as Walmart, Target and various specialty children's retail stores such as Carter's and Gap Kids. Play It Again Sports franchisees compete with large retailers such as Dick's Sporting Goods, Academy Sports & Outdoors as well as regional and local sporting goods stores. Style Encore franchise stores compete with a wide range of women's apparel stores. Music Go Round franchise stores compete with large musical instrument retailers such as Guitar Center as well as local independent musical instrument stores. The company also faces competition in connection with the sale of franchises, competing with other franchise companies based on factors including amount of initial investment, franchise fee, royalty rate, profitability, franchisor services and industry.

Winmark uses franchising as a business method of distributing goods and services through its retail brands to consumers. The company, as franchisor, owns a retail business brand, represented by a service mark or similar right, and an operating system for the franchised business. It enters into franchise agreements with franchisees and grants the franchisee the right to use its business brand, service marks and operating system to manage a retail business. The key elements of the franchise strategy include franchising the rights to operate retail stores offering value-oriented merchandise, attracting new, qualified franchisees, and providing initial and continuing support to franchisees. The company's most significant source of franchising revenue is royalties received from its franchisees. During 2025, royalties increased $4.2 million or 5.8% compared to 2024. The business is designed to generate consistent, recurring revenue and strong operating margins.

Winmark currently franchises five brands. Plato's Closet, first franchised in 1999, involves franchisees buying and selling gently used clothing and accessories geared toward the teenage and young adult market. Once Upon A Child, first franchised in 1993, involves franchisees buying and selling gently used and, to a lesser extent, new children's clothing, toys, furniture, equipment and accessories. Play It Again Sports, first franchised in 1988, involves franchisees buying, selling and trading gently used and new sporting goods, equipment and accessories. Style Encore, first franchised in 2013, involves franchisees buying and selling gently used women's (and to a lesser extent, men's) apparel, shoes and accessories. Music Go Round, first franchised in 1994, involves franchisees buying, selling and trading gently used and, to a lesser extent, new musical instruments, speakers, amplifiers, music-related electronics and related accessories. System-wide sales for fiscal 2025 were $1,682.0 million , compared to $1,610.2 million in 2024 and $1,589.0 million in 2023. Total royalties and franchise fees for fiscal 2025 were $77.9 million , representing 90.5% of consolidated revenue, compared to $73.7 million (90.7% ) in 2024 and $71.7 million (86.2% ) in 2023. The franchising segment's revenue for fiscal 2025 was $83,423,900 compared to $79,477,300 in 2024. The franchising segment's income from operations for fiscal 2025 was $52,057,400 compared to $51,593,300 in 2024.

The company has developed an e-commerce platform that allows franchisees of its Music Go Round, Play It Again Sports and Style Encore brands to market and sell in-store product inventory online. Consumers that visit musicgoround.com, playitagainsports.com or style-encore.com can find all product listed by participating stores in one convenient location. Additionally, franchisees use other vehicles to drive non-store sales including social media platforms (Facebook and Instagram) as well as third-party e-commerce platforms (Shopify) and marketplaces (eBay and Reverb). The company also provides centralized buying services, which on a limited basis include credit and billing for the Play It Again Sports franchisees. The Play It Again Sports franchise system uses several major vendors for new product including Adidas, Wilson Sporting Goods, Champro Sports, Rawlings/Easton, CCM Hockey and Bauer Hockey. The typical Once Upon A Child franchised store purchases approximately 30% of its new product from Wild Side Accessories, Melissa & Doug and Nuby. The typical Music Go Round franchised store purchases approximately 50% of its new product from KMC/Musicorp, RapcoHorizon Company, D'Addario, GHS Corporation and Ernie Ball. There are no significant vendors of new products to typical Plato's Closet and Style Encore franchised stores as new product is an extremely low percentage of sales for these brands.

During fiscal 2025, the company opened 55 new franchised stores and closed 27 , resulting in a net increase to 1,378 total franchised stores. Of the 1,378 total franchised stores as of December 27, 2025, 165 were located in Canada. The company renewed 114 of 116 franchise agreements up for renewal, a renewal rate of 98% . At December 27, 2025, the company had 82 signed franchise agreements, of which the majority are expected to open in 2026. In 2025, the company declared and paid quarterly cash dividends totaling $3.78 per share ($13.4 million ) and a $10.00 per share special cash dividend totaling $35.7 million . The company also purchased 7,944 shares of its common stock for an aggregate purchase price of $2.4 million . As of December 27, 2025, the company had the ability to repurchase an additional 70,656 shares under the Board of Directors' authorization. The company's Private Shelf Agreement with Prudential, which permitted the issuance of up to $100.0 million of privately negotiated senior notes, expired in April of 2025 and was not extended or replaced. The run-off of the equipment leasing portfolio was completed as of December 27, 2025, and the company no longer had any leasing customers or leased assets.

Total revenues for fiscal year 2025 were $86,055,700 compared to $81,289,100 in fiscal 2024, an increase of 5.9% . Net income for fiscal 2025 was $41,654,100 compared to $39,954,200 in fiscal 2024, an increase of 4.6% . Diluted earnings per share for fiscal 2025 were $11.30 compared to $10.89 in fiscal 2024. Income from operations for fiscal 2025 was $54,593,900 compared to $52,930,600 in fiscal 2024, an increase of 3.1% . Operating cash flow for fiscal 2025 was $44,896,800 compared to $42,157,900 in fiscal 2024. The company ended fiscal 2025 with $10,460,700 in cash, cash equivalents and restricted cash compared to $12,329,800 at the end of fiscal 2024.

Business Outlook

A key growth vector for Winmark is the continued expansion of its franchise network. As of December 27, 2025, the company had 82 signed franchise agreements, of which the majority are expected to open in 2026. The company also has over 2,800 available territories, providing a substantial runway for future franchise openings. The company's ability to generate increased revenue and achieve higher levels of profitability depends in part on increasing the number of franchises open. Management monitors franchise openings and closings as a key nonfinancial factor in evaluating current business operations and future prospects.

Another growth vector is the enhancement of the franchise model through technology, including the company's e-commerce platform. The company has developed an e-commerce platform that allows franchisees of its Music Go Round, Play It Again Sports and Style Encore brands to market and sell in-store product inventory online. The company continues to enhance its franchise model and provide its franchisees with the technology, tools and training to profitably expand their operations and evolve towards being a multi-channel retailer. The company is also pursuing a strategic initiative to modernize its point-of-sale (POS) platform to address legacy constraints and improve the franchisee and in-store experience. The replacement or significant modification of a mission-critical POS system is complex and involves operational and execution risk.

The filing does not provide specific margin or cost outlook targets. However, management notes that selling, general and administrative expenses increased 13.7% to $28.4 million in 2025 from $24.9 million in 2024, primarily due to an increase in compensation related expenses and a non-recurring expense related to third-party software licenses for franchisees. The company's business is described as not capital intensive and is designed to generate consistent, recurring revenue and strong operating margins.

The company's operational outlook includes a focus on franchise support and technology infrastructure. The company provides operational support and guidance to assist franchisees in the opening of a new business and has an ongoing support program designed to assist franchisees in operating their retail stores. The company is pursuing a strategic initiative to modernize its POS platform. As of December 27, 2025, the company employed 87 employees. The company provides learning and mentorship opportunities, leadership succession planning and encourages promoting from within.

The company's capital allocation strategy is evident from its fiscal 2025 activities. The company paid $49,112,700 in cash dividends, including a $10.00 per share special cash dividend. The company also repurchased 7,944 shares of its common stock for $2,418,700 . Proceeds from the exercise of stock options were $4,957,800 . The company's capital expenditures were $192,300 for fiscal 2025. The company has a Line of Credit with CIBC Bank USA that provides for a $20.0 million revolving loan facility and a $30.0 million delayed draw term facility. As of December 27, 2025, the company had no revolving loans outstanding and had delayed draw term loan borrowings totaling $30.0 million . The company also has a Note Agreement with Prudential with aggregate principal outstanding of $30.0 million as of December 27, 2025.

A structural headwind explicitly flagged by management is the company's dependence on franchise renewals. Each franchise agreement is 10 years long, and as of December 27, 2025, the company has 110 franchise agreements expiring in 2026, 103 in 2027, and 92 in 2028. The company believes that renewing a significant number of these franchise relationships is important to its continued success, and if a significant number are not renewed, financial performance would be materially and adversely impacted. Another headwind is the dependence on new franchisees; unfavorable macro-economic conditions may affect the ability of potential franchisees to obtain external financing and/or impact their net worth, which could lead to a lower level of openings.

A key execution risk management identified is the strategic initiative to modernize the POS platform. The replacement or significant modification of a mission-critical POS system is complex and involves operational and execution risk. If the company does not successfully design, implement, test, integrate, or deploy enhancements or a new POS system in a manner that minimizes disruption, franchisee operations could be adversely affected. Implementation challenges could result in system instability, workflow interruptions, data or reporting inconsistencies, or other operational disruptions during development, rollout, or post-deployment stabilization. Disruptions associated with the required POS system could strain franchisee relationships, negatively affect the customer experience at franchised stores, harm the reputation of the company's brands, and adversely affect its financial results.

Risk Factors

The company is highly dependent on franchise renewals, with 110 franchise agreements expiring in 2026, 103 in 2027, and 92 in 2028; a significant number of non-renewals would materially and adversely impact financial performance. The company is also dependent on new franchisees, and unfavorable macro-economic conditions may affect their ability to obtain external financing, leading to a lower level of openings. The strategic initiative to modernize the point-of-sale system involves significant operational and execution risk; a failed or poorly executed modernization effort could disrupt franchisee operations, strain franchisee relationships, and adversely affect financial results. The company operates in an extremely competitive industry, facing competition from retailers with significantly greater financial resources, as well as online marketplaces like eBay, craigslist, Facebook Marketplace, Poshmark, thredUP, and Amazon. The company's debt facilities impose financial covenants, including minimum levels of debt service coverage and maximum levels of leverage; as of December 27, 2025, the company was in compliance, but failure to comply in the future could result in acceleration of indebtedness.

Management Priorities

Management's message in the filing emphasizes Winmark's position as a nationally recognized franchisor focused on sustainability and small business formation. The tone is forward-looking, with management stating that the company continues to enhance its franchise model and provide franchisees with the technology, tools and training to profitably expand their operations and evolve towards being a multi-channel retailer. Key strategic priorities emphasized include effectively supporting franchisees so that they produce higher revenues, opening new franchises, and controlling selling, general and administrative expenses. Management also highlights the importance of franchise renewals, noting that the renewal of existing franchise agreements as they approach their expiration is an indicator that management monitors to determine the health of the business and the preservation of future royalties. The company's mission is to provide 'Resale for Everyone.'

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Operations
  2. [2] Item 1, Business — Background
  3. [3] Item 1, Business — Background
  4. [4] Item 1, Business — Sustainability
  5. [5] Item 1, Business — Background
  6. [6] Item 7, MD&A — Overview
  7. [7] Item 7, MD&A — Overview
  8. [8] Item 1, Business — Operations
  9. [9] Item 1, Business — Operations
  10. [10] Item 1, Business — Operations
  11. [11] Item 1, Business — Operations
  12. [12] Item 1, Business — Operations
  13. [13] Item 1, Business — Operations
  14. [14] Item 1, Business — Operations
  15. [15] Item 1, Business — Operations
  16. [16] Item 1, Business — Operations
  17. [17] Item 8, Note 13 — Segment Reporting
  18. [18] Item 8, Note 13 — Segment Reporting
  19. [19] Item 8, Note 13 — Segment Reporting
  20. [20] Item 8, Note 13 — Segment Reporting
  21. [21] Item 1, Business — Franchising Business Model, Purchasing
  22. [22] Item 1, Business — Franchising Business Model, Purchasing
  23. [23] Item 1, Business — Operations
  24. [24] Item 1, Business — Operations
  25. [25] Item 1, Business — Operations
  26. [26] Item 1, Business — Operations
  27. [27] Item 1, Business — Operations
  28. [28] Item 1, Business — Operations
  29. [29] Item 1, Business — Operations
  30. [30] Item 1, Business — Operations
  31. [31] Item 1, Business — Franchising Business Model, Franchisee Qualification
  32. [32] Item 8, Note 6 — Shareholders' Equity (Deficit), Dividends
  33. [33] Item 8, Note 6 — Shareholders' Equity (Deficit), Dividends
  34. [34] Item 8, Note 6 — Shareholders' Equity (Deficit), Dividends
  35. [35] Item 8, Note 6 — Shareholders' Equity (Deficit), Dividends
  36. [36] Item 8, Note 6 — Shareholders' Equity (Deficit), Repurchase of Common Stock
  37. [37] Item 8, Note 6 — Shareholders' Equity (Deficit), Repurchase of Common Stock
  38. [38] Item 5, Market for Registrant's Common Equity, Purchases of Equity Securities
  39. [39] Item 8, Note 7 — Debt, Notes Payable
  40. [40] Item 8, Consolidated Statements of Operations
  41. [41] Item 8, Consolidated Statements of Operations
  42. [42] Item 7, MD&A — Results of Operations
  43. [43] Item 8, Consolidated Statements of Operations
  44. [44] Item 8, Consolidated Statements of Operations
  45. [45] Item 7, MD&A — Results of Operations
  46. [46] Item 8, Consolidated Statements of Operations
  47. [47] Item 8, Consolidated Statements of Operations
  48. [48] Item 8, Consolidated Statements of Operations
  49. [49] Item 8, Consolidated Statements of Operations
  50. [50] Item 7, MD&A — Results of Operations
  51. [51] Item 8, Consolidated Statements of Cash Flows
  52. [52] Item 8, Consolidated Statements of Cash Flows
  53. [53] Item 8, Consolidated Balance Sheets
  54. [54] Item 8, Consolidated Balance Sheets
  55. [55] Item 1, Business — Franchising Business Model, Franchisee Qualification
  56. [56] Item 1, Business — Background
  57. [57] Item 7, MD&A — Results of Operations
  58. [58] Item 7, MD&A — Results of Operations
  59. [59] Item 7, MD&A — Results of Operations
  60. [60] Item 1, Business — Human Capital Resources
  61. [61] Item 8, Consolidated Statements of Cash Flows
  62. [62] Item 8, Note 6 — Shareholders' Equity (Deficit), Dividends
  63. [63] Item 8, Note 6 — Shareholders' Equity (Deficit), Repurchase of Common Stock
  64. [64] Item 8, Note 6 — Shareholders' Equity (Deficit), Repurchase of Common Stock
  65. [65] Item 8, Consolidated Statements of Cash Flows
  66. [66] Item 8, Consolidated Statements of Cash Flows
  67. [67] Item 8, Note 7 — Debt, Line of Credit/Term Loan
  68. [68] Item 8, Note 7 — Debt, Line of Credit/Term Loan
  69. [69] Item 8, Note 7 — Debt, Line of Credit/Term Loan
  70. [70] Item 8, Note 7 — Debt, Notes Payable
  71. [71] Item 1A, Risk Factors — We are dependent on franchise renewals
  72. [72] Item 1A, Risk Factors — We are dependent on franchise renewals
  73. [73] Item 1A, Risk Factors — We are dependent on franchise renewals
  74. [74] Item 1A, Risk Factors — We are dependent on franchise renewals
  75. [75] Item 1A, Risk Factors — We are dependent on franchise renewals
  76. [76] Item 1A, Risk Factors — We are dependent on franchise renewals
  77. [77] Item 8, Consolidated Statements of Operations
  78. [78] Item 8, Consolidated Statements of Operations
  79. [79] Item 8, Consolidated Statements of Operations
  80. [80] Item 8, Consolidated Statements of Operations
  81. [81] Item 8, Consolidated Statements of Operations
  82. [82] Item 8, Consolidated Statements of Operations
  83. [83] Item 8, Consolidated Statements of Operations
  84. [84] Item 8, Consolidated Statements of Operations
  85. [85] Item 7, MD&A — Results of Operations
  86. [86] Item 7, MD&A — Results of Operations
  87. [87] Item 8, Consolidated Statements of Cash Flows
  88. [88] Item 8, Consolidated Statements of Cash Flows
  89. [89] Derived from Item 8, Consolidated Statements of Cash Flows
  90. [90] Item 8, Consolidated Balance Sheets
  91. [91] Item 8, Consolidated Balance Sheets
  92. [92] Item 8, Consolidated Balance Sheets
  93. [93] Item 8, Consolidated Balance Sheets
  94. [94] Item 8, Note 13 — Segment Reporting
  95. [95] Item 8, Note 13 — Segment Reporting
  96. [96] Item 8, Note 13 — Segment Reporting
  97. [97] Item 8, Note 13 — Segment Reporting
  98. [98] Item 7, MD&A — Results of Operations, Income Taxes
  99. [99] Item 7, MD&A — Results of Operations, Income Taxes

Analysis on 6/8/2026