Before & After
This story appears in the November 2000 issue of Entrepreneur. Subscribe »
Some franchise systems aren't worth a sack of beans. Tired ideas, evaporating markets and bad franchisor management can work at odds with even the hardest working franchisee. Fortunately, that isn't the case with Learning Express. In fact, Learning Express franchisees have created quite a bit of sales from little sacks of beans, or, as they're more commonly known, Beanie Babies.
At first blush it's hard to see how Beanie Babies fit into a chain of toy stores that began franchising in 1987 with the idea of featuring educational toys. Educating children is a laudable goal, but, frankly, I can think of little educational value relating to a little critter made of beans. I suppose our tots have used these toys to learn about greed and covetous consumerism, and this education will admittedly help children blend into adult society. But the bottom line is that Beanies were good for retailing irrespective of the rationale used for stocking them.
There's actually a point to this rant-it can be found in the astounding average Learning Express gross revenue figures disclosed in Item 19 of its UFOC: average per-store sales of $1,106,649 in 1997 for stores that had been open three or more years. Sure, Learning Express stores are typically located in strip centers with at least one big anchor in areas with high levels of discretionary income, a popular demographic for successful franchises, but that's still an exceptional number.
In 1998, that average dropped and then fell further in 1999 to $985,321. Why? According to company president and former Learning Express franchisee James R. Levy, it's all due to declining sales of Beanie Babies. Before the Beanie Babies craze, the 1996 per-store sales average was $751,485.
Most retail concepts follow a pretty typical business model, and if your cost of goods and labor are in line, the money you can make is a function of your sales. In 1999, the 39 Learning Express stores that had been open for their first full year posted average sales of $673,670. In my years of experience, that's a wonderful number compared to the cost of opening a store.
Learning Express also has a unique way of training and supporting franchisees: It uses regional business partners who are franchisees themselves. In essence, regional business partners have purchased territories and agreed to provide individual franchisees with support. In your research, arrange a meeting with the partner in your geographic area in addition to meeting franchisor management staff.
This is a hands-on franchise, and you're required to maintain a personal presence at the store. The company considers the ideal franchisee someone who enjoys being involved in the community, such as in the PTA or other organizations dealing with school-aged children. To qualify, you should have a net worth of $300,000 with approximately $150,000 in liquid assets. The company estimates a typical store costs from $231,000 to $393,000 to open, but that doesn't include your salary. Plan to work extended holiday hours, as you'll get about 40 percent of your sales in the fourth- quarter holiday season.
Learning Express now has 163 stores operating in 36 states. Although the opportunity to secure a large U.S. territory as a regional business partner has essentially evaporated, plenty of opportunities for individual units still exist. Should you buy this franchise, keep your eyes peeled for competitors Zany Brainy and Noodle Kidoodle, which have similar concepts on a larger scale.
Todd D. Maddocks is a franchise attorney and small-business consultant who is presently the CEO of The Worldlink Group. You can reach him at TMaddocks@aol.com.
Contact Source
- Learning Express, (888) 725-TOYS, www.learningexpress.com
