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    Motley Fool Money

    The Business of Resale

    Sun Jul 09 2023
    resalesustainabilityfranchisecapital allocation

    Description

    The episode covers the company overview, success and sustainability, convenience and culture, franchisee support and capital allocation, and the capital allocation strategy and stakeholder communication. Windmark is a resale company that includes brands like Plato's Closet, Once Upon a Child, and Play It Against Sports. They have experienced growth in franchises and focus on adding qualified franchisees. The company is committed to sustainability and has extended the lives of billions of items. They differentiate themselves through their market leadership and convenient option for selling used items. Windmark provides strong support for franchisees and has a clear capital allocation strategy based on their worth. They communicate frequently with stakeholders and have happy long-term shareholders.

    Insights

    Focus on Sustainability

    Windmark has been a leader in the circular economy for over 35 years, extending the lives of billions of items.

    Convenient Resale Option

    Windmark aims to be the first stop for selling used items, offering cash payments and accepting items that other stores may not.

    Strong Franchisee Support

    Windmark provides strong support for franchisees, focusing on continuity and renewal rates.

    Capital Allocation Strategy

    The company focuses on running a good company and avoiding excess cash, with primary uses of excess capital being dividends, buybacks, and debt management.

    Stakeholder Communication

    Windmark communicates frequently with all stakeholders involved in making decisions and has happy long-term shareholders.

    Chapters

    1. Company Overview
    2. Success and Sustainability
    3. Convenience and Culture
    4. Franchisee Support and Capital Allocation
    5. Capital Allocation Strategy and Stakeholder Communication
    Summary
    Transcript

    Company Overview

    00:01 - 07:32

    • Windmark is a resale company that includes brands like Plato's Closet, Once Upon a Child, and Play It Against Sports.
    • The most recent quarterly earnings press release highlighted the growth of franchises with 1,297 operating, 70 awarded but not yet open, and over 2,800 available territories.
    • When selecting franchisees, Windmark looks for candidates who are both operationally qualified and financially qualified.
    • They want individuals who can follow their established operating model while also being entrepreneurial within that framework.
    • Candidates come from various backgrounds such as retail professionals, teachers, and engineers.
    • Windmark aims to continue adding more than one or two franchises per quarter to their network of stores.

    Success and Sustainability

    07:10 - 14:34

    • The company wants to add more qualified franchisees and has signed more agreements in 2022 than any year since 2016.
    • They have repositioned the company, refocused marketing, and redefined their mission, leading to success.
    • The company is focused on sustainability and has been a leader in the circular economy for over 35 years.
    • They have extended the lives of almost 1.6 billion items since 2010, with last year alone extending the life of 169 million items.
    • Their focus is on value-oriented items with average retail prices of $10 for Play It Again Sports and $5 for Once Upon A Child.
    • Windmark believes their biggest competitor is throwing items away and putting them in landfills.
    • Windmark differentiates itself from other retail concepts through its market leadership in store count and average unit volume.

    Convenience and Culture

    14:18 - 21:42

    • The company aims to be the first stop for selling used items, offering cash payments and accepting items that other stores may not.
    • The independent thrift store market is large and growing rapidly, with millions of people becoming interested in resale.
    • The company believes it has a convenient and sustainable option compared to online competitors that require shipping and returns.
    • The company is the only pure play resale company at scale that pays customers for their clothes or sporting goods.
    • The CEO emphasizes the clarity of purpose and mission within the company, which has positively impacted its culture, performance, and accountability.
    • The company has strong executive depth and talented employees with an average tenure of nearly 10 years.
    • Training focuses on clear communication, shared pursuit, promoting from within, and reducing risk for shareholders and franchisees.

    Franchisee Support and Capital Allocation

    21:12 - 28:22

    • Franchisees are trained on a document called Windmark, which outlines communication and treatment guidelines.
    • The company promotes from within and focuses on continuity and renewal rates.
    • The goal is to build a company that is not reliant on any individual.
    • The company is confident in providing strong franchisee support for the long term.
    • Capital allocation philosophy includes focusing on running a good company and avoiding excess cash.
    • The primary uses of excess capital are dividends, buybacks, and debt management.
    • The company has repurchased a significant amount of shares in recent years.
    • Special dividends have been issued in the past as well.

    Capital Allocation Strategy and Stakeholder Communication

    28:02 - 31:17

    • We had a million dollars of cash on hand during the pandemic, but going forward, we don't know the exact amount.
    • Our capital allocation strategy is not complicated and is based on our strong view of our worth.
    • We communicate frequently with all stakeholders involved in making decisions.
    • We have happy long-term shareholders who support us through ups and downs.
    • If interested, visit www.winmarkfranchises.com to learn about our concepts and apply for a franchise opportunity in your community.
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