Compared to other types of retail locations, opening a cap store is relatively simple and inexpensive. Because the store only carries caps and cap-related items such as cleaning kits, the size of the inventory (and the capital outlay it requires) can be held down. And because the caps and their displays don't take up a lot of floor space, there's a significant savings on rent. For example, the first store opened by The Hat Zone Inc., a Lee's Summit, Missouri-based cap retailer with 18 stores, cost less than $60,000 for a 300-square-foot mall space.
If you go the custom-embroidered route, a good portion of your start-up capital will be devoted to the automatic embroidering machine. Bridgewater, New Jersey-based Brother International Corp. offers a line of multihead, multineedle machines that each cost between $18,000 and $60,000, not including the computer and software necessary for creating graphic designs.
As with any business, there is a certain element of risk involved in opening a cap store. According to Stewart, while a narrow niche may be a cap store's advantage over full-scale sporting goods stores and other retail outlets, it may also be a store's Achilles' heel. Although it's unlikely people will stop buying baseball-style caps in the near future, there are some ways to protect yourself should the cap market suddenly go sour. "[You could] broaden the appeal by carrying different kinds of hats," says Stewart. "It's certainly a way to hedge the risk, but it requires a larger investment."
Another way to reduce your risk is to start small. As Lids' experience has shown, a kiosk in a mall is a good place to start a cap empire. "You don't have the rent you would have with a [standard retail] store, and you're not going to carry a big inventory," says Stewart. "For someone who doesn't have a lot of business experience, it would be a good way to get a sense of what the business is about while not incurring too much risk."