WINMARK CORP
For the period ended Dec 28, 2024. Filed Feb 26, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 26, 2025
WINA$265.23-1.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-30; filed 2024-02-28.
0000908315-24-000010
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-28; filed 2025-02-26.
0000908315-25-000010
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 59 previous paragraphs and 57 current paragraphs.
31 unchanged; 24 reworded; 2 added; 4 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 8 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (2)
Current report
Selling, general and administrative expenses decreased 0.7% to $24.9 million in 2024 from $25.1 million in 2023. The decrease was primarily due to a decrease in compensation related expenses.
Current report
Operating activities provided $42.2 million of cash during 2024 compared to $44.0 million provided during 2023. The decrease in cash provided by operating activities in 2024 was due to a decrease in accrued and other liabilities.
Removed paragraphs (4)
Previous report
Leasing Expense
Previous report
Leasing expense decreased to $0.4 million in 2023 compared to $1.0 million in 2022. The decrease was primarily due to a decrease in depreciation on operating leases and a decrease in the associated cost of equipment sales to customers noted above.
Previous report
Selling, general and administrative expenses increased 8.4% to $25.1 million in 2023 from $23.2 million in 2022. The increase was primarily due to an increase in conference expenses, as we returned to holding an in-person conference for our apparel brands for the first time since the Covid-19 outbreak, advertising related expenses, outside services and amortization expense.
Previous report
Operating activities provided $44.0 million of cash during 2023 compared to $43.8 million provided during 2022.
Reworded paragraphs (24)
Previous wording
Winmark – the Resale Company is focused on sustainability and small business formation. As of December 30, 2023, we had 1,319 franchises operating under the Plato’s Closet, Once Upon A Child, Play It Again Sports, Style Encore and Music Go Round brands. Our business is not capital intensive and is designed to generate consistent, recurring revenue and strong operating margins.
Current wording
Winmark – the Resale Company is focused on sustainability and small business formation. As of December 28, 2024, we had 1,350 franchises operating under the Plato’s Closet, Once Upon A Child, Play It Again Sports, Style Encore and Music Go Round brands. Our business is not capital intensive and is designed to generate consistent, recurring revenue and strong operating margins.
Previous wording
Our most significant source of franchising revenue is royalties received from our franchisees. During 2023, our royalties increased $3.1 million or 4.6% compared to 2022.
Current wording
Our most significant source of franchising revenue is royalties received from our franchisees. During 2024, our royalties increased $2.0 million or 2.8% compared to 2023.
Previous wording
Management continually monitors the level and timing of selling, general and administrative expenses. The major components of selling, general and administrative expenses include salaries, wages and benefits, advertising, travel, occupancy, legal and professional fees. During 2023, selling, general and administrative expense increased $2.0 million, or 8.4%, compared to the same period last year.
Current wording
Management continually monitors the level and timing of selling, general and administrative expenses. The major components of selling, general and administrative expenses include compensation & benefits, marketing & advertising, professional services, and occupancy. During 2024, selling, general and administrative expense decreased $0.2 million, or 0.7%, compared to the same period last year.
Previous wording
Renewal activity is a key focus area for management. Our franchisees sign 10-year agreements with us. The renewal of existing franchise agreements as they approach their expiration is an indicator that management monitors to determine the health of our business and the preservation of future royalties. In 2023, we renewed 99% of franchise agreements up for renewal. This percentage of renewal has ranged between 99% and 100% during the last three years.
Current wording
Renewal activity is a key focus area for management. Our franchisees sign 10-year agreements with us. The renewal of existing franchise agreements as they approach their expiration is an indicator that management monitors to determine the health of our business and the preservation of future royalties. In 2024, we renewed 98% of franchise agreements up for renewal. This percentage of renewal has ranged between 98% and 100% during the last three years.
Previous wording
In May 2021, we made the decision to no longer solicit new leasing customers and will pursue an orderly run-off of our middle-market leasing portfolio. Leasing income net of leasing expense for the fiscal year of 2023 was $4.4 million compared to $6.0 million in 2022. Our leasing portfolio (net investment in leases – current and long-term), was $0.1 million at December 30, 2023 compared to $0.3 million at December 31, 2022. Given the decision to run-off the portfolio, we anticipate that leasing income net of leasing expense and the size of the leasing portfolio will continue to decrease through the run-off period. See Note 3 – “Investment in Leasing Operations” for information regarding the lease portfolio, including future minimum lease payments receivable under lease contracts and the amortization of unearned lease income.
Current wording
In May 2021, we made the decision to no longer solicit new leasing customers and will pursue an orderly run-off of our middle-market leasing portfolio. Leasing income net of leasing expense for the fiscal year of 2024 was $1.8 million compared to $4.4 million in 2023. Our leasing portfolio (net investment in leases), was $0.0 million at December 28, 2024 compared to $0.1 million at December 30, 2023. Given the decision to run-off the portfolio, we anticipate that leasing income net of leasing expense will continue to decrease through the remainder of the run-off period. See Note 3 – “Investment in Leasing Operations” for information regarding the lease portfolio.
Previous wording
Revenues for the year ended December 30, 2023 totaled $83.2 million compared to $81.4 million in 2022.
Current wording
Revenues for the year ended December 28, 2024 totaled $81.3 million compared to $83.2 million in 2023.
Previous wording
Royalties increased to $70.2 million for 2023 from $67.1 million for the same period in 2022, a 4.6% increase. The increase is primarily due to higher franchisee retail sales and from having additional franchise stores in 2023 compared to 2022. Fiscal 2023 was a 52-week year compared to a 53-week year in fiscal 2022, which also impacted the comparability of royalty revenue.
Current wording
Royalties increased to $72.2 million for 2024 from $70.2 million for the same period in 2023, a 2.8% increase. The increase is primarily due to having additional franchise stores in 2024 compared to 2023.
Previous wording
Franchise fees of $1.5 million for 2023 were comparable to $1.6 million for 2022. Franchise fees include initial franchise fees from the sale of new franchises and transfer fees related to the transfer of existing franchises. Franchise fee revenue is recognized over the estimated life of the franchise, beginning when the franchise opens. An overview of retail brand franchise fees is presented in the Operations subsection of the Business section (Item 1).
Current wording
Franchise fees of $1.5 million for 2024 were comparable to $1.5 million for 2023. Franchise fees include initial franchise fees from the sale of new franchises and transfer fees related to the transfer of existing franchises. Franchise fee revenue is recognized over the estimated life of the franchise, beginning when the franchise opens. An overview of retail brand franchise fees is presented in the Operations subsection of the Business section (Item 1).
Previous wording
Leasing income decreased to $4.8 million in 2023 compared to $6.9 million for the same period in 2022. The decrease is primarily due to a decrease in selling profit on the commencement of sales type leases and lower levels of equipment sales to customers, partially offset by an increase in operating lease income when compared to last year.
Current wording
Leasing income decreased to $1.8 million in 2024 compared to $4.8 million for the same period in 2023. The decrease is primarily due to a decrease in operating lease income and income on sales of equipment under lease resulting from the run off of the portfolio.
Previous wording
Merchandise sales include the sale of product to franchisees either through our Computer Support Center or through the Play It Again Sports buying group (together, “Direct Franchisee Sales”). Direct Franchisee Sales increased to $4.8 million in 2023 from $3.9 million in 2022. Theincrease is due to an increase in technology and buying group purchases by our franchisees.
Current wording
Merchandise sales include the sale of product to franchisees either through our Computer Support Center or through the Play It Again Sports buying group (together, “Direct Franchisee Sales”). Direct Franchisee Sales decreased to $3.6 million in 2024 from $4.8 million in 2023. Thedecrease is due to a decrease in buying group and technology purchases by our franchisees.
Previous wording
Cost of merchandise sold includes in-bound freight and the cost of merchandise associated with Direct Franchisee Sales. Cost of merchandise sold increased to $4.5 million in 2023 from $3.7 million in 2022. The increase was due to an increase in Direct Franchisee Sales discussed above. Cost of merchandise sold as a percentage of Direct Franchisee Sales for 2023 and 2022 was 93.7% and 94.7%, respectively.
Current wording
Cost of merchandise sold includes in-bound freight and the cost of merchandise associated with Direct Franchisee Sales. Cost of merchandise sold decreased to $3.4 million in 2024 from $4.5 million in 2023. The decrease was due to a decrease in Direct Franchisee Sales discussed above. Cost of merchandise sold as a percentage of Direct Franchisee Sales for 2024 and 2023 was 93.8% and 93.7%, respectively.
Previous wording
Interest expense was $3.1 million in 2023 compared to $2.9 million in 2022. The increase is primarily due to higher average corporate borrowings when compared to last year.
Current wording
Interest expense was $2.9 million in 2024 compared to $3.1 million in 2023. The decrease is primarily due to lower average corporate borrowings when compared to last year.
Previous wording
The provision for income taxes was calculated at an effective rate of 21.8% and 22.4% for 2023 and 2022, respectively. The decrease is primarily due to higher tax benefits on the exercise of non-qualified stock options.
Current wording
The provision for income taxes was calculated at an effective rate of 22.0% and 21.8% for 2024 and 2023, respectively. The increase is primarily due to an increase in the valuation allowance related to foreign tax credits.
Previous wording
Revenues are all generated from United States operations other than franchising revenue from Canadian operations of $6.8 million and $6.4 million in each of fiscal 2023 and 2022, respectively.
Current wording
Revenues are all generated from United States operations other than franchising revenue from Canadian operations of $7.3 million and $6.8 million in each of fiscal 2024 and 2023, respectively.
Previous wording
The franchising segment’s 2023 operating income increased by $0.4 million, or 0.8%, to $49.4 million from $49.0 million for 2022. The increase in segment contribution was primarily due to increased royalty revenues, partially offset by an increase in selling, general and administrative expenses.
Current wording
The franchising segment’s 2024 operating income increased by $2.2 million, or 4.5%, to $51.6 million from $49.4 million for 2023. The increase in segment contribution was primarily due to increased royalty revenues.
Previous wording
The other segment operating income for 2023 decreased by $0.7 million, or 15.2%, to $3.9 million from $4.6 million for 2022. The decrease in segment contribution was due to a decrease in leasing income net of leasing expense, partially offset by a decrease in selling, general and administrative expenses.
Current wording
The other segment operating income for 2024 decreased by $2.6 million, or 65.8%, to $1.3 million from $3.9 million for 2023. The decrease in segment contribution was due to a decrease in leasing income net of leasing expense.
Previous wording
We ended 2023 with $13.4 million in cash, cash equivalents and restricted cash compared to $13.7 million in cash, cash equivalents and restricted cash at the end of 2022.
Current wording
We ended 2024 with $12.3 million in cash, cash equivalents and restricted cash compared to $13.4 million in cash, cash equivalents and restricted cash at the end of 2023.
Previous wording
Investing activities used $0.4 million of cash during 2023 compared to $3.7 million used during 2022.
Current wording
Investing activities used $0.2 million of cash during 2024 compared to $0.4 million used during 2023.
Previous wording
Financing activities used $43.9 million of cash during 2023 compared to $37.9 million used during 2022. Our most significant financing activities over the past two years have consisted of net borrowings/payments on our debt facilities, the payment of dividends, repurchase of common stock, and net proceeds received from the exercise of stock options. During 2023, we paid $43.7 million in cash dividends (including a $9.40 per share special cash dividend; the “2023 Special Dividend”), and paid $4.3 million on notes payable; partially offset by $4.0 million of proceeds from the exercise of stock options. (See Note 6 — “Shareholders’ Equity (Deficit)” and Note 7 — “Debt”).
Current wording
Financing activities used $43.0 million of cash during 2024 compared to $43.9 million used during 2023. Our most significant financing activities over the past two years have consisted of payments on our notes payable, the payment of dividends, and net proceeds received from the exercise of stock options. During 2024, we paid $38.9 million in cash dividends (including a $7.50 per share special cash dividend), and paid $9.2 million on notes payable (including $4.9 million in prepayment of notes that had scheduled amortization payments due in 2025-2027); partially offset by $5.0 million of proceeds from the exercise of stock options. (See Note 6 — “Shareholders’ Equity (Deficit)” and Note 7 — “Debt”).
Previous wording
The Shelf Agreement allows us to offer privately negotiated senior notes to Prudential in an aggregate principal amount up to (i) $100.0 million, less (ii) the aggregate principal amount of notes outstanding at such point (including notes outstanding under the Note Agreement, which at December 30, 2023 was $39.2 million). As of December 30, 2023, we had not issued any notes under the Shelf Agreement. Of the $39.2 million of principal outstanding under the Note Agreement, $9.2 million amortizes over 2024 through 2027, and $30.0 million matures in 2028.
Current wording
The Shelf Agreement allows us to offer privately negotiated senior notes to Prudential in an aggregate principal amount up to (i) $100.0 million, less (ii) the aggregate principal amount of notes outstanding at such point (including notes outstanding under the Note Agreement, which at December 28, 2024 was $30.0 million). As of December 28, 2024, we had not issued any notes under the Shelf Agreement. All of the of principal outstanding under the Note Agreement matures in 2028.
Previous wording
As of the date of this report we believe that the combination of our cash on hand, the cash generated from our franchising and leasing businesses, our Line of Credit and our Shelf Agreement will be adequate to fund our planned operations through 2024.
Current wording
As of the date of this report we believe that the combination of our cash on hand, the cash generated from our business, our Line of Credit and our Shelf Agreement will be adequate to fund our planned operations through 2025.
Previous wording
The Company collects royalties from each retail franchise based on a percentage of retail store gross sales. The Company recognizes royalties as revenue when earned. At the end of each accounting period, royalty amounts due are based on franchisee sales information. As of December 30, 2023, the Company’s royalty receivable was $1,110,500.
Current wording
The Company collects royalties from each retail franchise based on a percentage of retail store gross sales. The Company recognizes royalties as revenue when earned. At the end of each accounting period, royalty amounts due are based on franchisee sales information. As of December 28, 2024, the Company’s royalty receivable was $1,219,800.
Previous wording
The Company collects initial franchise fees when franchise agreements are signed and recognizes the initial franchise fees as revenue over the estimated life of the franchise, beginning when the franchise is opened. Franchise fees collected from franchisees but not yet recognized as income are recorded as deferred revenue in the liability section of the consolidated balance sheet. As of December 30, 2023, deferred franchise fee revenue was $7,088,700.
Current wording
The Company collects initial franchise fees when franchise agreements are signed and recognizes the initial franchise fees as revenue over the estimated life of the franchise, beginning when the franchise is opened. Franchise fees collected from franchisees but not yet recognized as income are recorded as deferred revenue in the liability section of the consolidated balance sheet. As of December 28, 2024, deferred franchise fee revenue was $7,483,300.
Previous wording
See Note 2, “Significant Accounting Policies — Recently Issued Accounting Pronouncements”.
Current wording
See Note 2, “Significant Accounting Policies — Recently Issued Accounting Pronouncements and Recently Adopted Accounting Pronouncements”.