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Rookie Year

A Plato's Closet franchisee reflects on the ups and downs of her first year in business.

Two years ago, Catherine Bracken was laid off from her job as a corporate attorney. She hoped to find a similar position with another company, but corporations in her immediate area were outsourcing and Bracken, 43, didn't want to make the hour-and-a-half commute from her home in Plano, Texas, to work in downtown Dallas. She figured the commute would stretch her workdays to 12 hours and limit her time with her then-8-year-old daughter.

Already the co-owner of two gift shops, Bracken decided full-time entrepreneurship was her best option. She saw an ad for Plato's Closet while flipping through the classifieds and sent off for materials.

Last October, Bracken and Kathy Egan, a former paralegal, opened the doors to Plato's Closet, a secondhand teen-clothing shop. "I thought it was a really good idea and the time was right," says Bracken. "[The franchisor] had sold only four territories, so at that point, I had my pick."

Though they realized the potential, Bracken and Egan also had to deal with start-up challenges from a less-than-receptive community and dishonest employees. Franchise Zone spoke with Bracken about her first year in business, the lessons she learned and how she remains optimistic.

Franchise Zone:Did you have any specific challenges in starting this up?

Catherine Bracken: A lot of the suburbs are continually trying to raise standards, so the franchise plan for the building didn't meet Plano's city code. That shot the budget. For example, we needed two ADA-compliant bathrooms, and only one was provided in the franchise standard-nobody thought to suggest that might be a requirement.

Did you have any other challenges besides the build out?

When opening it? No, pretty much everything went the way I expected. You're in your space four to six weeks [prior to opening the store], buying used product and not selling it, so you have to plan for a cash flow problem right from the beginning, as well as customer challenges. Customers asked, "Why can't you sell me this?" and I'd have to say, "Because if we sell this to you now, we'll never have enough inventory to open the doors." With other businesses, when you get ready to open, you order from your vendors, you time your shipments all to arrive within a week or two. You're not occupying space, challenging your customers before you even open.

One of the challenges we faced since opening is a huge amount of employee dishonesty. In the nine years I've been in retail, I've never experienced such pervasive theft of money and clothing. That also means my buy-and-sell ratio is not as far out of line as I thought it was, because part of the fraud was employees faking the purchase of clothing from customers.

What kind of response did you get from the people of Plano?

It's actually been sort of mixed. There are stores in other parts of the country that have been absolutely overwhelmed by a positive response. Plano is a sophisticated market with many shopping options. Shoppers have a lot of new, deeply discounted products to choose from. People's interest in selling us clothes has been very strong-everybody here is perfectly happy to sell their jeans so they can go to the mall and buy more jeans. But they've been less willing to buy the secondhand product than I expected. Our store is not performing at the level that other stores are, although we don't have trouble getting people to sell us clothes.

What have you done to change that?

We've readjusted our advertising. For example, we have cable advertising, which we were aiming at the primary market of teens and the secondary market of moms. We were reaching the moms but needed to focus harder on the teens to generate the demand, to make it look cool for the teens to come here and shop. We changed our cable advertising to all go to MTV, and we introduced some new spots. We had movie theater advertising on the west side of town, which is very affluent, but those people had no interest in buying used clothing. So we moved that [strategy] over to the east side of town to a theater that was much closer to the store to supplement our existing cable advertising and print.

What business goals did you set when you first started?

They were almost exclusively sales goals, because, based on my experience, I was fairly sure I could control costs. And we have managed the costs just fine-we just haven't hit the sales goals we set for ourselves. They were ambitious, because so many stores that had been open-and, admittedly, there were few-had done so well. But they weren't in markets like ours. The South is a little more of a challenge, because it's a whole year worth of tank tops, shorts and short sleeve shirts, which are the lower ticket items. So you have to move a ton of $3 tank tops. If you're in the Northeast, you're selling a lot of heavy sweaters, ski jackets and hiking boots, and those are much higher price points, so you don't have to sell as many of them.

How have your goals changed?

We've lowered them. Meanwhile, we've had to raise the amount of time each of us commits to the business. Every minute the store is open, an owner is here, to get a better sense of what the customers are seeing and doing. We want to watch with our own eyes. As far as expectations in terms of sales dollars, profits and time commitment go, we've made adjustments in all those.

Is there anything you wish somebody had told you or something you would tell the next franchisee?

One of our customers manages a store in a mall, and she says the teen stores there have a huge problem with [theft] as well. The franchise did mention these things, but they weren't adamant enough about how pervasive [employee theft] is. [They should have said,] "Six out of 10 of our stores have teens stealing" or "When teens steal, if they take $20 a day out of your store, that adds up to $10,000 over a year." They finally did pull this material together six months later.

Do you have any other advice for franchisees just starting out?

You have to enlist the franchise's support. Obviously, they're in the business of selling franchises, but they have a wealth of other knowledge they can provide if you make them. I waited a little too long to really get them invested in my particular problem. If anybody has any questions or issues or concerns when they're looking at the franchise, talk to other franchisees and to the franchisor.

What's your overall feeling at the end of your first year in business?

I'm still excited about the concept. It's a great idea, and I have lots of ideas about how I would do it differently if I had a second store or if I had this one to do over again. But I have to say I'm sort of worn down. This was a really grueling first year-it was physically demanding and mentally challenging.

What is your outlook for the next year?

I'm more positive about the next year, because it's hard to fix something when the problems aren't what you think they are. So we were doing a lot of wheel spinning.

I do feel it's a good concept and that we have the right product mix and a good-looking store and that we can hire good employees, given some time. But I'm trying to be realistic. I'm going to lower my sales goals, raise my time commitment and hunker down for the long term. Some of these franchises are actually making people very well off very fast, and this one isn't one of them. That's OK. I'm working with that.

Is there anything you wish you had done differently?

The only thing is the location. And we struggled very hard with the location, because Plano was rented up pretty tight at the time, and the rents are higher than they are in other parts of the country. So we made a calculated guess and took a risk in the placement of the store. I don't know whether that's playing a role or not in our inability to hit our ambitious goals in the beginning. People have put stores in absolute ratty dumps that are doing fine, and people have put stores in great locations that are only doing mediocre. If somebody said you could go back and change one thing, I might change the location. But I might not change a darn thing.

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