$55

Business Description

Winmark was incorporated under the laws of the State of Minnesota on July 20, 1988 under the name “Play It Again Sports Franchise Corporation.” In July 1993, Winmark’s corporate name was changed from “Play It Again Sports Franchise Corporation” to “Grow Biz International, Inc.” In November 2001, our corporate name was changed from “Grow Biz International, Inc.” to “Winmark Corporation.” Winmark’s principal business address is 605 Highway 169 N, Suite 400, Minneapolis, Minnesota 55441; our telephone number is (763) 520- 8500. Winmark conducts business under the name Once Upon A Child®. Winmark also conducts business in 4 other separate lines of businesses under the names Play It Again Sports®, Music Go Round®, Plato’s Closet® and Style Encore® (see Item 1 below). Winmark has no parent. Winmark has no predecessors that must be disclosed in this Item 1. Winmark’s affiliates include two wholly owned subsidiaries, Wirth Business Credit, Inc. (formerly Winmark Business Solutions, Inc.) and Winmark Capital Corporation. Both subsidiaries were incorporated in Minnesota on April 2, 2004, for the purpose of equipment leasing to Winmark franchisees and other businesses. The principal business address of both corporations is 605 Highway 169 N, Suite 400, Minneapolis, Minnesota 55441. Neither Wirth Business Credit, Inc. nor Winmark Capital Corporation is involved in the offer or sale of franchises. In 2017, Winmark started Winmark Franchise Partners®, a division of Winmark Corporation. Winmark Franchise Partners utilizes Winmark’s 30 years of experience in the franchising industry to provide mentorship and consulting services in addition to marketing, sales and development assistance to new and emerging franchisors. Winmark Franchise Partners may also evaluate the development of new or emerging brands for the purpose of investing in or future acquisition of the companies or franchises.

Prior Experience

Winmark’s business includes the administration of its franchise system (see Item 11), the operation of 4 other franchise systems (described below). Winmark has offered Once Upon A Child® franchises since January 1993 and operated one or more Once Upon A Child® Store from February 1993 to December 2005. Winmark also offers franchises in 4 other lines of businesses. Winmark offers franchises for the operation of Play It Again Sports® retail stores which sell used and new sporting goods equipment and accessories. Winmark has offered Play It Again Sports® franchises since August 1988 and, as of December 29, 2018, 281 Play It Again Sports® franchised stores were in operation. In addition, Winmark offers franchises for the operation of Music Go Round® retail stores which sell quality used and new musical instruments, speakers, amplifiers, music related electronics and related accessories. Winmark has offered Music Go Round® franchises since March 1994 and, as of December 29, 2018, 34 Music Go Round® franchised stores were in operation. Winmark also offers franchises for the operation of Plato’s Closet® retail stores which sell used and new teen and young adult clothing and accessories. Winmark has offered Plato’s Closet® franchises since March 1999 and, as of December 29, 2018, 480 Plato’s Closet® franchised stores were in operation. Winmark offers franchises for the operation of Style Encore® retail stores which sell used and new women’s clothing and accessories. Winmark has offered Style Encore® franchises since April 2013 and, as of December 29, 2018, 67 Style Encore® franchised stores were in operation. Play It Again Sports®, Music Go Round®, Plato’s Closet® and Style Encore® franchises are offered, if at all, in this state through separate disclosure documents describing Winmark and its franchise programs. Winmark offered Disc Go Round® franchises (retail stores which sold used and new audio compact discs) from 1994 to 1998. Winmark offered It’s About Games franchises (retail stores which sold used and new video and computer games) from 1997 to 1999. Winmark offered Computer Renaissance® franchises (retail stores which sold used and new personal computer hardware equipment, software and related accessories) from 1993 to 2000. Winmark offered ReTool® franchises (retail stores which sold used and new tools and small engine machinery) from June 1998 to November 2001. Winmark also offered Wirth Business Credit® franchises (businesses that offered small-ticket equipment leasing and financing services) from October 2005 to February 2011. Winmark no longer offers Disc Go Round®, It’s About Games, Computer Renaissance®, ReTool®, or Wirth Business Credit® franchises.

Business Offered

Winmark franchises Once Upon A Child® retail stores (sometimes referred to as a “Store”) under the terms of the Franchise Agreement in the form included in this disclosure document as Exhibit D (the “Franchise Agreement”). A Once Upon A Child® Store is a retail store from which you will sell quality used and new children’s apparel, toys, furniture and accessories. A Once Upon A Child® franchise emphasizes consumer value by offering quality used merchandise at substantial savings from the price of new merchandise and by purchasing customers’ used goods that have been outgrown or are no longer used. A Store also offers new merchandise to supplement the selection of used goods. The market for the goods and services which you will offer includes families with children and, to some extent, grandparents, relatives and friends purchasing children’s apparel, toys and furniture. The market for used children’s apparel, toys, equipment and furniture is expanding as consumers recognize the value associated with these used items. The market for new children’s apparel, toys, equipment and furniture is well-developed and competitive. Winmark has developed a marketing system which creates a certain product image in the minds of customers, a business strategy for getting and keeping customers, and a distribution method for products and services. Winmark has developed all of these as part of the business system (the “Business System”) which you will receive the right to use. Winmark uses and licenses certain service marks and trademarks, logos, trade dress and other commercial symbols, including the service mark Once Upon A Child® (collectively, the “Trademarks”). Winmark may, in the future, modify the Trademarks as well as add new trademarks, service marks, logos, trade dress and other commercial symbols. The purchase of a Once Upon A Child® franchise permits you: (i) to use Winmark’s nationally recognized Trademarks; (ii) to obtain access to the distinctive operational and management attributes of the Once Upon A Child® Business System, including confidential manuals describing complete guidelines for the operation of a Store (the “Manuals”); (iii) the right, under certain conditions, to participate in Winmark’s preferred vendor program (see Item 8); and (iv) to receive the benefits of association with a nationally recognized franchise system, including various forms of opening and operational assistance from Winmark (see Item 11). You must comply with all of Winmark’s requirements described in the Franchise Agreement and the Manuals. This compliance assures uniform and consistent application of the Business System which is essential to the successful operation of your Store. If you are an existing Once Upon A Child® franchisee or an existing franchisee of one of Winmark’s other brands in good standing, have been a franchisee of Winmark for at least 12 months and are opening an additional store, you must sign the Additional Store Addendum attached to the Franchise Agreement. Under special circumstances, Winmark may, at our sole discretion, waive the 12 month requirement.

Initial Fees

You must pay to Winmark “Initial Fees” to cover the cost of goods and services that Winmark provides to you before your Store opens. The Initial Fees include the Initial Franchise Fee and the initial cost of Winmark’s point-of-sale system and proprietary software. Each component of the Initial Fees is described below: Initial Franchise Fee. If you are opening a single Store, you must pay an “Initial Franchise Fee” of $25,000 to Winmark. The Franchise Fee is $15,000 if you are currently opening a second or subsequent Store or if you are an existing franchisee of one of Winmark’s other franchised concepts. You must sign a separate Franchise Agreement for each Store, and you must pay the Initial Franchise Fee for each Store in a lump sum to us when you sign the Franchise Agreement for that Store. The Initial Franchise Fee is non-refundable. Point-of-Sale (POS) System. You must use in your Store the point-of-sale system (“POS System”) which Winmark has selected for your Business System, and you must enter into a Computer Software License Agreement with Winmark for use of Winmark’s proprietary software program (the “Proprietary Software”). The initial cost of the POS System and Proprietary Software will range from $21,700 to $27,700 for each Store, which includes a DRS Maintenance Fee. This amount is not refundable. You will generally purchase the POS System and Proprietary Software immediately before you attend Winmark’s second week of training. See Item 11 for additional information regarding the POS System and Proprietary Software. Winmark, through its subsidiary, Wirth Business Credit, Inc., may lease to you the POS System or other equipment necessary to operate your Business (see Item 10). The monthly payment and finance charges will vary based on the value of the leased equipment, type of leased equipment, your financial health, your credit history, the type of lease and other factors. The total amount for your Initial Fees will depend on the goods and services that Winmark provides to you.

Financing

If you meet our credit standards, we may, through our Wirth Business Credit, Inc. subsidiary, lease you equipment related to your Once Upon A Child® store operations. If you choose this option, your monthly payment and APR will depend on the value of the leased equipment, the type of leased equipment, your financial health, your credit history, the type of lease and other factors. Generally, the rate of interest on your lease will be between 15% and 25% on an annual basis. In addition, there is a document fee of up to $250 (currently $175 as of the issuance date of this disclosure document) for each lease. On March 1, 2019, the rate of interest for a franchisee leasing equipment from Wirth Business Credit, Inc. for a 36 month term was 18.1%. Generally, our leases are structured as $1 purchase option leases. This lease type allows you to buy the leased equipment for $1 at the end of your lease (see Exhibit G for a copy of the Equipment Lease). We may design a leasing program for certain assets where the structure of the lease is set by us. Each Lease will have a term of between 24 and 48 months. There will be monthly payments in an amount which will depend on the equipment leased and the term of the Lease. Payment shall be made through the use of automatic payment deducted from a checking or savings account. We may require an advance payment and/or a security deposit prior to the commencement of the Lease (Equipment Lease, Section 12). We require a personal guaranty from you and from all the shareholders of your corporation owning more than 10% of the ownership interests in the corporation, and we retain ownership of the equipment (Equipment Lease, Section 5). We may file a financing statement to protect our interest in the equipment. The Lease may not be cancelled or prepaid at any time (Equipment Lease, Section 6). If you do not make a payment on time, we may do one or more of the following: (i) we may directly debit your bank account and/or sue you for all past due payments and other charges and all payments due in the future to the end of the Lease term, plus our legal and collection costs, and if you are in default and/or do not meet your end of term obligations, we may also directly debit your account and/or sue for the “residual” (end of term) equipment value; (ii) cancel or terminate all of your rights, but not your obligations under the Lease; (iii) we may take possession of the Equipment; and/or we may exercise any remedy at law or equity (Equipment Lease, Section 10). Winmark also has a right to terminate your franchise if you are in default under your Equipment Lease (Franchise Agreement, Section 15.A.) You waive your rights of notice of a collection action and to assert any defenses to collection against Winmark (Equipment Lease, Section 10). You must also submit to Minnesota jurisdiction and venue (Equipment Lease, Section 14). Winmark may sell, assign or discount to any third party any lease, note or other instrument executed by its franchisees, which third parties may be immune under law to any defenses to payment you may have against us. Winmark does not finance any part of the Initial Franchise Fee due under the Franchise Agreement nor guaranty your retail lease.

Franchisee Revenue and Profit

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 best source of cost and expenses data may be from franchisees and former franchisees, some of whom may be listed in Exhibit A. ONCE UPON A CHILD® UNAUDITED STATEMENT OF AVERAGE ANNUAL SALES AND GROSS 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 29, 2018 (Winmark’s fiscal year) as reported by the 341 of the 342 franchised Once Upon A Child® Stores located in the United States and Canada that commenced operations in each of the years 1988 through 2017. 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 29, 2018. 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 29, 2018 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 342 franchised Once Upon A Child® Stores which had been in operation by the same franchisee owners for the 12 month period ended December 29, 2018. Only 341 of the 342 Stores are reflected in the average, however, because one Store was temporarily closed for several months. This financial performance representation does not include information for the 37 Once Upon A Child® Stores that opened or transferred in 2018. No Stores closed in 2018 after being opened less than 12 months. Some Stores have sold or earned these amounts. Your individual results may differ. There is no assurance that you will sell or earn as much. Winmark has written substantiation in our possession to support the information appearing in this Item 19, and will make the written substantiation available to prospective franchisees upon reasonable request. Other than the preceding financial performance representation, Winmark does not make any financial performance representations. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to the franchisor’s management by contacting Renae Gaudette, Vice President of Franchising at Winmark Corporation, 605 Highway 169 N, Suite 400, Minneapolis, MN 55441, 763/520-8500, the Federal Trade Commission, and the appropriate state regulatory agencies.