winmark corporation (wina)

by:Xprinter     2019-11-08
Securities and Exchange Commission of the United States (Washington, DC)C. 20549FORM10-K(Mark one)
☒Annual reports submitted under sections 13 or 15 (D)
The December 29, 2018 Securities Trading Act for the fiscal year ended 1934, or☐Transition reports submitted under sections 13 or 15 (D)
Document No. of the Securities Trading Act of 1934 on the transition period from Commission: 000-
22012 Mark Winmark company (
The exact name of the registrant specified in the articles of association)Minnesota41-1622691(
State or other jurisdiction of company or organization)(I. R. S.
Employee Identification Number)
605 Minnesota Minneapolis a polis 169, high-speed highway 55441 North (
Main executive office address)(Zip Code)
The registrant\'s telephone number, including the area code :(763)520-
8500 securities registered under article (b)
Title of the act: the name of the securities class of the registered common stock, the face value of each stock registered under section 12th (g)
Key points of the act: if the registrant is healthy, it is not indicated by a check mark
Well-known experienced issuers as defined in Rule 405 of the Securities Act.
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Yes. ☐No. ☒Indicate by check mark whether the registrant (1)
All reports requested in Section 13 or 15 have been submitted (d)
Securities Trading Act of 1934 within the first 12 months (
Or a short period of time required for the registrant to submit such reports), and (2)
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This Chapter 405)
Within the first 12 months (
Or within a shorter period of time when the registrant is required to submit such documents).
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This Chapter 405)
As the registrant is aware, it is not included here and will not be included in the final proxy or information statement referenced in the first part of this Form 10-
K or any amendments to this form 10K.
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A smaller reporting company, or an emerging growth company.
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2 of the Trading Act.
☐Yes. ☐No. ☒Total market value of voting and non-voting
Voting Ordinary Shares held by non-shareholders
The registrant\'s subsidiary, calculated by reference to the price of the last sale of common stock, or the average bid and asking price of such common stock, as of the last working day of the second fiscal quarter recently completed by the registrant, is $369,265,218.
Shares of ordinary shares with nominal value outstanding as of March 4, 2019: 3,909 shares and 186 shares.
The documents contained in the reference section of the final proxy statement of the registrant\'s annual general meeting to be held on April 24, 2019 have been incorporated into items 10, 11, 12 through reference, contentmark mark CORPORATION and SUBSIDIARIESINDEX 13 and 14 of the first part of this report form-
Report on the final accounts of KPARTIPAGEItem. Business 1A.
Risk factor 1B.
Unresolved employee reviews 2.
Property item month.
Legal action 4.
5. disclosure of mine safety.
Market for registrant common stock, related shareholder matters and issuer to purchase equity securities
Selected Financial Data Items 7.
Management Discussion and Analysis of operational financial status and results
Quantitative and qualitative disclosure of market risks
Financial statements and supplementary data items 9.
Changes and disagreements with accountants on accounting and financial disclosure project 9A.
Control and procedure 9B.
Other information partiipageitem 10.
Project 11. Director, executive officer and corporate governance.
Item 12 of administrative compensation.
Secured ownership of certain beneficial owners and management and related shareholders.
Relationship with directors and related transactions.
Main accounting fees and service fees
Annex and schedule 16 to the financial statements. Form 10-
Content 1: We are five franchisees of value in business background-
Concept for retail stores, buying, selling and trading of moderately used goods.
Each of our retail store brands emphasizes consumer value by offering high-value products
High-quality second-hand goods, saving a lot of money from the price of new goods, and buying second-hand goods for customers who are outdated or no longer used.
Our philosophy also provides customers with a limited number of new products.
As of December 29, 2018, we have 1,241 stores in the United States and Canada.
In addition, we offer franchise consulting and consulting services to new and emerging franchisees through our Winmark franchise partners launched in 2017.
We run one.
Market equipment leasing through Winmark Capital Corporation, our wholly owned subsidiary. Our middle-
Market leasing business for large and medium-sized enterprises
Large organizations focused on technology and business
Basic equipment.
The annual revenue of our target companies is generally between 30 million and billions of dollars.
We are in the middle.
Leasing Market equipment mainly through commercial alliances, equipment suppliers and directly from customers.
Besides, we run a small
Through the ticket financing business of our wholly owned subsidiary, Wirth business Credit, Inc. Our small-
The ticket financing business serves small businesses and focuses on assets that typically cost between $5,000 and $100,000.
Our important assets are located within the United States, and in addition to franchise income, we also receive about $4 in all revenue from US operations. 4 million, $3.
$8 million and $3.
3 million, 2016 and, respectively.
For more financial information, see Item 6-
Selected Financial Data and items 8-
Financial statements and supplementary information.
We registered in Minnesota in 1988.
Franchise retail brands and their fiscal year 2018 system-
We define extensive sales as estimated revenue generated by all franchise locations, summarized as follows: Plato\'s wardrobe®-$489 million.
We started franchising Plato\'s wardrobe brand in 1999.
Plato\'s wardrobe store sells used clothing and accessories for the youth and young adult markets.
Customers have the opportunity to sell their old items to Plato\'s Closet store and buy high quality old clothes and accessories for less than new items.
Children once®-$350 million.
We started franchising our former children\'s brand in 1993.
Once, a children\'s store bought and sold old children\'s clothing, toys, furniture, equipment and accessories, but to a lesser extent.
The brand is mainly aimed at parents of children between the ages of 12.
These customers have the opportunity to sell their used children\'s products to used children\'s stores when they grow up, and buy high-quality second-hand children\'s clothing, toys, furniture and equipment with low prices for new goods.
Sports play again®-$223 million.
We started franchising the Play It sports brand in 1988.
Play the sports store again to buy, sell, trade and deliver old and new sporting goods, equipment and accessories for various sports activities including team sports (
Baseball/softball, hockey, football, hockey, football)
Fitness, skiing/snowboarding, golf, etc.
The store offers a flexible portfolio of merchandise that is adjusted according to seasonal and regional differences.
Monthly Table ContentsStyle®-$44 million.
We started franchising the Style Encore brand in 2013.
Fashion Encore stores buy and sell used women\'s clothing, shoes and accessories.
Customers have the opportunity to sell their old items, design the style for the Encore store, and buy high quality old clothes, shoes and accessories for less than new items. Music sounds®-$34 million.
We began franchise music brands in 1994.
Music goes around the store to buy, sell, trade and deliver instruments, speakers, amps, music used --
Related electronic products and related accessories.
The table below lists the royalties and franchise fees that our franchise retail brands have contributed each year over the past three years, as well as the corresponding percentage of consolidated revenue each year: total royalties and franchise fees (inmillions)
% Ofounlidatedrevenue2062017-12-20182016-12-208plato\'s 19 wardrobe $. 5$20. 2$21. 829. 2%29. 0%30.
1% once a child 14. 214. 515. 221. 320. 820.
The sports match went on again. 29. 39. 413. 913. 313. 0Style Encore1. 72. 22. 42. 63. 13.
Moon Music. 01. 01. 01. 51. 41. 4$45. 6$47. 2$49. 868. 5%67. 6%68.
7% the following table lists the summary of our retail brand franchise activities for the fiscal year ended December 29, 2018: a total of 12/30/207 OPENEDCLOSED12/29/2018
United States and Canada (7)
4803030 charter for children
United States and Canada (5)
3791616 participate in the sports competition again
United States and Canada (6)
2811212 style franchise chain
United States and Canada3)67——
Music horse farm-US332(1)
3433 Total Franchise Stores 1 and 21152 (22)
Retail Brand Franchise overview we use franchising as a business approach to distributing goods and services to consumers through retail brands.
As a franchisee, we have a retail business brand represented by a service trademark or similar right, as well as an operating system for the franchise business.
We then enter into a franchise agreement with the franchisee and grant the franchisee the right to manage the retail business using our commercial brand, service logo and operating system.
Franchisees must operate their retail business in accordance with the systems, specifications, standards and formats we have developed for commercial brands.
We train franchisees on how to operate the franchise business.
We also provide continuous support and services to franchisees.
We created value.
Retail-oriented brands based on old goods and smaller new product portfolios.
We have a franchise for franchisees who have opened franchises with these brands.
Key elements of our franchise strategy include: the right of a franchise to provide value to a retail store
For goods;
Attract new and qualified franchisees;
And provide initial and continuous support for franchisees.
2 Content value table-
Commodity-oriented retail brands provide value to consumers by purchasing and reselling old goods that have exceeded or ceased to be used, thus greatly saving the price of new goods.
By providing high-
Quality and Value of use
We benefit from the value needs of consumers.
In addition, we believe that in the national retail business, our retail store brands provide consumers with unique sources of value by purchasing used goods.
We also believe that the strategy of buying used goods will increase consumers\' awareness of our retail brands.
Attracting franchisees for retail brands our franchise marketing program is designed to attract potential franchisees who have experience in management and operations and are interested in becoming their own business owners and operators.
We seek franchisees with sufficient net assets;
Business experience;
And intends to participate in the management of the business.
As of December 29, 2018, we have signed 47 retail franchise agreements, most of which are expected to open in 2019.
We started franchising in Canada in 1991 and as of December 29, 2018 we opened 113 licensed retail stores in Canada.
Canadian retail stores are operated by franchisees under agreements substantially similar to those used in the United States.
Our success as franchisees depends on our ability to develop and support competitive and successful franchise brands.
We highlight the following areas of franchise support and assistance.
Each franchisee must be trained on our training program, regardless of previous experience.
Soon after the signing of the franchise agreement, the franchisee is required to attend the new owner training.
This course covers basic management issues such as preparation of business plans, lease assessments, assessment of insurance needs, and access to finance.
Our trainers help each franchisee develop a business plan for their retail stores through financial and cash flow forecasts.
The second training is centered on store operation.
It covers point-among other things-of-
Sales computer training, inventory selection and acquisition, sales, marketing and other topics.
We provide the franchisees with a regularly updated operating manual.
On-site support us to provide operators to assist franchisees in their new business.
We also have an ongoing on-site support program designed to help franchisees run their retail stores.
Our franchise support personnel visit each retail store on a regular basis and in most cases conduct a business assessment to determine whether the franchisee operates according to our standards.
This visit is also to help franchisees solve operational problems.
During the training period, each franchisee was told how to evaluate, purchase and price used goods directly from the customer.
We developed a special computer point. of-
Our brand\'s sales system, which provides standardized price information to franchisees to help with the purchase of old items.
We offer a centralized purchase service that includes fees for credit and Sports franchisees on a limited basis.
Our Play It Sports franchise system uses several major suppliers of new products including Nautilus, Wilson Sporting Goods, Champro Sports, Easton Sports, Columbia hockey and Ball Hockey
The loss of any of the above suppliers will change the supplier\'s portfolio, but will not significantly change the products we provide.
3 Content sheets provide an affordable source of new products for our game sports franchisees, once with kids and music, we have established relationships with our key suppliers, and negotiate prices for our franchisees to take advantage of the purchasing power brought about by the franchise system.
Our typical kids store used to buy about 30% new products from Rachel\'s ribbons, wild accessories, Melissa and Doug, and Nuby.
The loss of any of the above suppliers will change the supplier\'s portfolio, but will not significantly change the products we provide.
Our music goes to stores to buy KMC/Musicorp, RapcoHorizon, d, GHS and Ernie balls for about 50% of new products.
The loss of any of the above suppliers will change the supplier\'s portfolio, but will not significantly change the products we provide.
Our typical Plato wardrobe and style encore franchise stores do not have an important supplier of new products because the proportion of new products in sales of these brands is extremely low.
Retail advertising and marketing we encourage our franchisees to implement marketing programs that include: TV, radio, point-of-
Purchase materials in store signage and local store marketing plans, as well as email marketing promotions, website promotions and engagement in social and digital media.
Franchisees of each retail brand must spend at least 5% of their total sales on approved advertising and marketing.
Franchisees can be required to participate in the regional cooperation advertising group.
Computerized pointOf-
Sales system we require our retail brand franchisees to use the retail information management computer system in each store, which is developed with the development of new technologies.
This computerized point. of-
The sales system is designed specifically for our licensed retail stores.
The current system includes our proprietary data recovery system software, dedicated servers, two or more workstation registers, receipt printers, report printers, and barcode scanners, software modules for inventory management, cash management and customer information management.
Our franchisees buy computer hardware from us.
The data recovery system software is designed to meet the purchase of second-hand goods.
The system provides franchisees with important management tools to reduce errors, improve efficiency and strengthen inventory control.
We offer points. of-
Provide sales system support through our computer support center located at the company\'s headquarters.
We have entered into a franchise agreement with the franchisee.
Here is a summary of some key terms of our current standard retail brand franchise agreement.
Apart from the above, the franchise agreements used by each of our retail brands are usually the same.
Each franchisee must execute our franchise agreement and pay the initial franchise fee.
As of December 29, 2018, the initial store franchise fee for all brands in the United States was $25,000S.
An initial store in Canada costs $31, $ 500CAD.
Once the franchisee has opened the original store, it can open an additional store for any brand by paying $15,000 for the franchise for stores in the United StatesS.
A shop in Canada is priced at $ 19000cad provided that there is an acceptable area and that the franchisee meets the brand\'s additional store standards.
Our initial retail and additional retail store franchise fees in Canada are based on the exchange rate applicable to us franchise fees for the last business day of the previous fiscal year.
The March2019 franchise fee for an initial retail store in Canada will be $34, $000, and another retail store in Canada will be $20, 500CAD.
Typically, the initial store of the franchisee opens within approximately 12 months from the date of signing the franchise agreement.
The initial term of the franchise agreement is 10 years, followed by 10-
The annual renewal period and Grant franchisees an exclusive geographical area that varies in size depending on population, population and other factors.
Under the current franchise agreement, franchisees of each brand are required to pay a weekly continuing fee to the United States (royalties)
Equivalent to the percentage of total sales as outlined in their franchise agreement, the total sales of all our brands typically range from 4% to 5%.
Each franchisee is required to pay an annual marketing fee of $1,000.
Each new or updated franchisee needs to spend 5% of its total sales to advertise and promote its franchise store.
At present, in addition to participating in sports again, all retail brands have the option to increase the minimum advertising spending requirements from 5% 4 catalogues to 6% of the total sales of franchisees, up to £ 2% will be paid to us as an advertising fee to be deposited into the advertising fund.
While we do not currently have the option to increase the advertising spending requirements for playing sports franchisees again, we may also require these franchisees to pay 2% of their total sales to the advertising fund.
If launched, the fund will be managed by us for advertising and promotion of the franchise system.
During the franchise agreement, the franchisee agrees not to operate any competitive business directly or indirectly.
In addition, the franchisee agrees that after the expiration or termination of the term of the franchise agreement, the franchisee will operate any competitive business within a reasonable geographical area for a period of two years.
While our franchise agreement contains provisions designed to ensure the quality of the franchisee\'s operations, we have less control over the franchisee\'s operations than when we own and operate retail stores.
Under the franchise agreement, we have the right to give priority to rejection when selling any franchise store, but we have no obligation to repurchase any franchise.
Renewal of franchise relationship at the end of 10-
The annual term of each franchise agreement, each franchisee can sign the new 10-
Annual franchise agreement.
If the franchisee chooses not to sign a new franchise agreement, the franchisee must comply with all post-termination obligations, including the non-competition provisions of the franchisee discussed above.
Only with the permission of the franchise agreement and applicable state law can we choose not to renew the franchise relationship.
We believe that updating these franchise relationships is critical to the success of the company.
Over the past three years, we have renewed the franchise agreement of 99%.
Retail franchises compete for retail, including the sale of clothing, sporting goods and musical instruments for teenagers, children and women, and the competition is fierce.
Many retailers have more money and other resources than we do.
Our franchisees compete with established local retail stores, discount chains and traditional retail stores for the sale of new goods.
Retailers across the board usually carry only items that are rare or unused.
Resale, thrift and consignment shop, garage and dump counter sales offer our franchisees a competition to sell used goods.
In addition, our franchisees are increasingly competing with online used and new goods markets such as eBay, craigslist.
Our Plato wardrobe franchise mainly competes with professional clothing stores such as American Eagle, Gap, Abercrombie & Fitch, Old Navy, Hollister and Forever 21.
We compete with other franchisees in the youth clothing retail market.
Our former children\'s franchisees mainly compete with large retailers such as Wal-Mart.
Various specialty retail stores such as Gap Kids.
We compete with other franchisees in the specialty child resale retail market.
We are again competing with large retailers such as Dick\'s Sporting Goods, college sports and outdoor as well as regional and local sporting goods stores.
We also compete with Target and Wal. Mart.
Our Encore franchise stores compete with a variety of women\'s clothing stores.
We also compete with other franchisees in the women\'s clothing retail market.
Our music franchise stores compete with large instrument retailers such as Guitar Center and local indie instrument stores.
In the future, we may face more competition in our retail business.
This may include other competitors who may enter the second-hand goods market.
We believe that our franchisees will continue to compete with other retailers based on our value
Brand-oriented and name recognition related to our Service logo.
We also face competition related to franchising.
Before purchasing franchise from us, our potential franchisees often assess other franchise opportunities.
We compete with other franchisees for 5 content franchisees based on the following factors: initial investment, franchise fees, royalties, profitability, franchisee services and industries.
We believe that our franchise brands compete with other franchises based on the fees we charge, franchise support services and performance of existing franchise brands.
Winmark franchise partners®During 2017, we announced the launch of an initiative to provide advisory services, support and capital to emerging franchisees.
Under the leadership of Winmark franchise partner mark, we use our experience in franchising to develop their brand by partnering with specific company strategies that are interested in franchising.
We expect this concept to create additional revenue streams while collaborating with our existing businesses.
We run one equipment rental business.
Market leasing through Winmark Capital Corporation, a wholly owned subsidiary.
We run a small-
Air ticket financing through Wirth business Credit, Inc.
Wholly owned subsidiary.
We have incorporated both subsidiaries into april04.
To stand out in the leasing industry, we offer innovative leasing and financing products and focus on building long-term
Establish long-term relationships with our customers and business alliances.
Wilmark capital is engaged in providing non-
High rent that can be canceled
Technology and Business
Basic assets of large organizations and small growth companies.
Our goal is for businesses with annual revenues ranging from 30 million to billions of dollars.
We focus on trading for two to three years.
Such transactions typically exceed $250,000, including high
Basic equipment for technical equipment and/or business, including computers, telecom equipment, storage systems, network equipment and other services
Basic equipment.
Leases are retained in our portfolio to meet the changing needs of our customers.
High industry
The technical equipment industry is characterized by rapid and continuous progress that allows for the expansion of user applications and the reduction of processing costs.
The introduction of new equipment usually does not lead to outdated existing equipment, but usually leads to a decline in the market value of existing equipment, reflecting the performance improvement of new equipment cost per dollar.
Users often change their equipment because their existing equipment is not able to meet their needs, or they need to increase their processing capacity, thus creating a secondary market in used equipment. Generally high-
Technical equipment, such as information technology equipment, will not undergo physical deterioration if properly maintained.
According to the requirements of our rental, the equipment we lease must be maintained continuously according to the manufacturer\'s specifications (usually provided by the manufacturer.
The economic life and residual value of information technology equipment depends, among other things, on the development of technological improvements and changes in the terms of sales and maintenance initiated by the manufacturer.
Business strategy your business strategy enables us to stand out in the leasing industry.
Key elements of this strategy include: relationship focus.
We stay focused, long termterm, customer-
Serve our business. ·Full Service.
We can meet the equipment rental needs of mainframe institutions and smaller growth companies.
Ownership of assets.
We are different by commitment to retain lease ownership throughout the lease term.
6 Content and sales activity table our middle-
Market rental products are sold nationwide through our offices in Minneapolis, Minnesota and Santa Barbara, California.
We bring rental services directly to the market.
Through the Business Alliance, through equipment, software, value suppliers, indirectly to provide services to users
Services and advisory services have been added.
We build relationships with local business alliances through telephone canvassing and direct marketing to customers and prospects.
We usually rent high
Technology and other businesses
Basic equipment.
In addition, we can Lease operating systems and application software to our customers, but usually only hardware.
Our standard lease agreement with each client is a non-Cancelled \"net\" lease with \"Hell\"or-
The \"High Water\" clause stipulates that after accepting the equipment, the customer must pay all the rental fees, regardless of any defects or performance of the equipment, and require the customer to maintain and serve the equipment, ensure that the equipment is protected from casualties and that all property, sales and other taxes related to the equipment are paid.
We retain ownership of the equipment we lease, and if the customer defaults, we or the financial institution that transfers the lease payment can declare the customer defaults and expedite all lease payments due to the lease, other available remedies, including equipment recovery, are also sought.
According to the structure of the lease, when the initial term or extension of the lease term expires, the customer can: return the equipment to us;
Extension of the lease for a period of time;
Or buy equipment.
If the device is returned to us, it is usually sold to Level 2
User market.
Wirth Commercial Credit LimitedOur small-
Ticket financing operations serve the needs of small businesses. Small-
Ticket financing transactions usually range from $5,000 to $100,000 for a period of two to four years, covering commercial basic assets such as computers, printing equipment, security systems, telecom equipment, and production equipment.
Our financing transaction is usually a full payment transaction, which means that the customer has the assets after paying all the necessary payments as stipulated in the financing agreement.
Key elements of our small
The ticketing business strategy involves focusing on the relationship between business owners and equipment suppliers and providing fast credit decisions, flexible terms and easy-to-understand processes.
The small ticket finance industry is highly fragmented and highly competitive.
Small business owners usually finance their business through one of many possible sources including banks, supplier-specific financing companies, leasing brokers, credit card companies and independent leasing companies.
These funding sources typically limit their focus to certain types of transactions and may be determined based on credit quality, geographical location, transaction size, asset type or other criteria.
Financing so far, we have used our existing cash or debt to fund most of our leases internally.
Winmark Capital Corporation may pass from time to time
At a fixed rate, the rental rent is discounted to financial institutions.
The proceeds from the transfer of rental rent are generally equal to the present value of the remaining rental payments due under the lease, discounted at the rate charged by the financial institution.
The interest rate obtained under such financing is negotiated in the transaction. by-
The basis of the transaction and reflects the financial strength of the customer, the lease term and the current interest rate.
In the default case of the customer, in
Recourse financing, financial institutions have the first lien on basic rental equipment, and no longer pursue us.
However, if the customer fails to pay the lease or some other breach of contract occurs by the customer in accordance with the terms of the lease, the agency may obtain ownership of the collateral.
Our use of rental discounting depends on having leases that are attractive to financial institutions and the cash balance we have available.
7 Content sequence lease competition table we compete with various sources of equipment financing available to enterprises, including: national, regional and local financial companies that provide leasing and loan products;
Through exclusive financing and leasing companies attached to major equipment manufacturers;
Credit card company;
Commercial banks, savings loans and credit unions.
Many of these companies are much larger than us, and have far greater financial, technical and marketing resources than we do.
Some of our competitors are less expensive and we can\'t get a source of money.
The lower cost of funds may enable competitors to provide leases with a yield much lower than the rate of return we provide, which may cause us to lose the original amount of the lease.
In addition, some of our competitors may have higher risk tolerance or different risk assessments, which may enable them to establish more original sources and end-user customer relationships and improve their
We have and will continue to face significant competition.
Pre-implementation by 14 states, the Federal Trade Commission and 6 Canadian provinces
Sales franchise registration and/or disclosure requirements for franchisees.
In addition, some countries have formulated regulations to regulate the substantive aspects of franchisees --
Termination, non-renewal, transfer, discrimination between franchisees and competition with franchisees.
Additional legislation at the federal and state levels could be expanded
Sales disclosure requirements further regulate the substantive aspects of the franchise relationship and require us to submit charter disclosure documents to other states.
We cannot predict the effect of future franchise legislation, but we do not believe that there is currently any legislative council to be considered that has a significant adverse effect on our operations.
While most states do not directly regulate the commercial equipment leasing financing business, certain states require lenders and financial companies to obtain permission and impose restrictions on interest rates and other charges, and disclose certain contract terms and restrictions on collection practices.
We believe that we are currently in compliance with all the important regulations and regulations that apply to our business.
Wardrobe for trademarks and services MarksPlato®There used to be a child®Sports play again®Style Encore®Music sounds®Mark Wen®, Wirth commercial credit®Winmark Capital®Winmark franchise partners®This includes our registration service logo.
These marks are of considerable value to our business.
We intend to take appropriate legal action when necessary to protect our service marks.
Service logo registration must be updated every 10 years.
We have and intend to continue to take all necessary steps to update the registration of all our important service logos.
Plato alityour Plato\'s wardrobe and former children\'s franchise brands sold above average in spring and fallto-school season.
Our Play It Sports franchise brand is selling above average in winter.
In general, the different seasonal trends of our brand offset each other and will not lead to significant seasonal trends in the company. wide basis.
Our equipment rental business is not seasonal,
However, quarterly and quarterly results are often very different.
We hired 107 employees in December 29, 2018.
We maintain a website on www.
Winmark company
Com, whose contents do not belong to or are incorporated into this annual report on form 10 by referenceK.
We do the annual report on Form10.
Quarterly Report on Form10
Q and Current Report on Form8K (
And changes to these reports)
Available on our website via a link to the USS.
Securities and Exchange Commission (SEC)
After submitting or providing such reports to the SEC, provide the website free of charge as soon as possible.
ContentsITEM 1A table: risk factors we rely on franchise renewals.
Each of our franchise agreements has a history of 10 years.
At the end of the term of each franchise agreement, if certain conditions are met, each franchisee may, by signing a new 10-
Annual franchise agreement.
As of December 29, 2018, each of our five franchise retail brands has the following number of franchise agreements to expire in the next three years: 201920202021 plato\'s closet454——
91102118 we believe that updating these franchise relationships is critical to our continued success.
If a large number of franchise relationships are not updated, our financial performance will be significantly and adversely affected.
We rely on new franchisees.
Our ability to generate more revenue and achieve a higher level of profitability depends to a certain extent on the increase in the number of open franchises.
Unfavorable macro
Economic conditions may affect the ability of potential franchisees to obtain external financing and/or affect their net assets, both of which may result in lower levels of openness than we have experienced historically.
There is no guarantee that we will maintain the current franchise level.
We are in the early stages of the new franchise program.
We are currently investing in a new initiative to provide advisory services, support and capital to emerging franchisees.
There is no guarantee that we will succeed in this area, nor that it will have a negative impact on our financial performance.
We may make additional investments outside of our core business.
Sometimes we have and may continue to invest both internally and externally in our current business.
If we make an unsuccessful additional investment, this investment may have a significant adverse effect on our financial results.
We may sell the franchise for a certain area, but the franchisee may not be open.
We believe that most granted but not open franchises will be open within the time allowed by the applicable franchise agreement, or that we will be able to resell the territory franchise for most terminated or expired franchises.
However, there is no guarantee that almost all of the franchises currently sold but not yet open will be open and will start paying us royalties.
Our retail franchisees rely on the supply of used goods.
Our retail brand is based on a combination of old and new items for our customers.
Therefore, the ability of our franchisees to obtain a continuous supply of high-quality second-hand goods is crucial to the success of our brand.
The supply of second-hand goods comes from the public, irregular and unreliable.
In addition, compliance with federal and state product safety and other requirements may limit the number of used goods available to our franchisees.
In addition to the laws and regulations applicable to general businesses, our licensed retail stores may also be subject to state or local regulations or regulations governing used dealers.
There is no guarantee that our Chamber of Commerce will avoid the supply of old goods.
We may not be able to collect accounts receivable from franchisees.
If our ability to charge accounts receivable from the current interest rate has dropped significantly, we may incur additional charges that affect our income.
If we are unable to collect due payments from franchisees, this will have a significant adverse effect on our operating results and financial position.
We do business in a highly competitive industry.
Competition in the retail sector, including sales of youth, children and women\'s clothing, sporting goods and musical instruments, is fierce.
Many retailers have more money and other resources than us and our franchisees.
Individual franchisees face competition in their markets from new commodity retailers, and in some cases competition from other stores that resell, thrift and sell old goods.
With the expansion of our franchise system, we may face additional competition if more competitors enter the second-hand goods market.
Our equipment leasing business competes with various sources of equipment financing available to the enterprise, including: national, regional and local financial companies that provide rental and loan products;
Through exclusive financing and leasing companies attached to major equipment manufacturers;
And commercial banks, savings and loans, credit unions and credit cards.
Many of these companies are much larger than us, and have far greater financial, technical and marketing resources than we do.
There is no guarantee that we can successfully compete with these larger competitors.
There is a credit risk in our rental portfolio and our credit loss allowance may not be sufficient to absorb the loss.
In our leasing business, if we do not accurately assess the credibility of our customers, we may encounter more lease defaults than expected, which will reduce our income. For our middle-
Market customers, we serve a wide range of businesses, from small companies that may be financed by venture capital investors to large organizations that may be financed by private equity companies and large independent public or private companies.
In many cases, our credit analysis relies on the current or projected financial position of the client.
If we fail to fully assess the risk of a client\'s business plan, we may suffer a loss of credit. For our small-
Ticket customers usually have only limited public finance and other information about their business.
Therefore, in making credit decisions, we rely on the accuracy of the information provided by small business owners and/or third-party sources such as credit reporting agencies.
If we get incorrect information from small business owners and/or third-party sources, our ability to make appropriate credit decisions will be compromised.
We may generate a concentration of credit risk in our rental portfolio.
As of December 29, 2018, rental assets with one client accounted for about 26% of our total net rental investment.
If the loss caused by the lease exceeds our credit loss limit, our operating income will be reduced.
In relation to our lease, we recorded the allowance for the loss of credit to provide the estimated loss.
Determining the appropriate level of the allowance is an inherent uncertainty process, so our determination of the allowance may not be sufficient to cover the loss of our rental portfolio.
Losses exceeding our credit loss allowance will result in us increasing our reserve for credit loss, reducing or eliminating our operating income.
Any substantial increase in such losses could have a significant adverse effect on our financial performance.
The deterioration of the economic or commercial situation may have a negative impact on our leasing business.
In the event of a slowdown or recession, our equipment rental business may face increased default payments, lease defaults and credit losses.
The rental business volume of our new and existing customers may decline, and the credit quality of customers may also decline.
Because we provide credit to many new and leveraged companies through our subsidiary Winmark Capital Corporation, mainly through our subsidiary, Wirth Business credit, Inc. , to small businesses
Our customers may be particularly vulnerable to a slowdown or recession.
Any long-term economic slowdown or recession can make it difficult for us to maintain the number of leases for new and existing customers and may deteriorate the quality of credit for new leases.
Any of these events can slow down the growth of our rental portfolio and affect the profitability of our rental business.
Our credit line and Bill facilities are limited.
In addition, our credit line will be affected by counter-party risks.
Our $50 terms.
A credit line of 0 million and $37.
5 million note financing imposes certain operational and financial restrictions on US and requires us to meet certain financial tests, including tests related to minimum debt service levels, tangible net assets and maximum leverage levels.
As of December 29, 2018, we have complied with all financial covenants under these facilities;
However, failure to comply with these covenants in the future may result in a default of one or two of the capital sources and may result in an acceleration of the relevant liabilities.
Any such debt acceleration will adversely affect our business activities and our financial position.
Continued deterioration of the credit market may jeopardize the counterparty obligations of one or two banks involved in our credit line, if we cannot replace this credit instrument or find other sources of liquidity on acceptable terms, this may adversely affect our business.
We have debt.
We have liabilities for the 2017 offer to acquire shares (see Note 5 —
Equity of shareholders (Deficit)” and Note 6 —“Debt”)
, We expect to generate additional liabilities for the purchase of shares in the 2019 bid offer (See Note 13 —
\"Follow-up events \").
We would like to generate the cash needed to pay our fees, finance our leasing business and pay the principal and interest of all our outstanding debts from the cash flow provided by our business activities.
Our ability to pay, finance the leasing business and meet our debt-servicing obligations depends on our performance in the future, which may be affected by financial, commercial, economic and other factors.
If we do not have enough money to pay off our debt, we may be required to refinance, sell assets, borrow more money or raise equity for all or part of our existing debt.
In this case, we may not be able to refinance, sell assets, borrow more funds or raise equity on conditions that we can accept or at all.
In addition, we have the ability to carry out these activities on favourable terms and, if any, may be further affected by any financial or credit crisis that may limit access to the credit market, and increase the cost of our capital.
We are under government supervision.
As franchisees, we must comply with various federal and state franchise laws and regulations.
14 states, the Federal Trade Commission and 6 Canadian provinces
Sales franchise registration and/or disclosure requirements for franchisees.
In addition, some countries have formulated regulations to regulate the substantive aspects of franchisees --
Termination, non-renewal, transfer, discrimination between franchisees and competition with franchisees.
Additional legislation at the federal and state levels could be expanded
The sales disclosure requirements further regulate the substantive aspects of the franchise relationship and require us to submit franchise notices to other states.
Future franchise legislation may impose costs or other burdens on us, thus having a significant adverse impact on our operations.
In addition, changing labor and employment laws, rules and regulations may lead us as franchisees to make potential claims for labor and employment-related liability that has historically been borne by franchisees.
Although most states do not directly regulate the commercial equipment leasing financing business, some states require lenders and financial companies to obtain permission to limit interest rates and other charges and limit collection behavior, and require disclosure of certain terms of the contract.
For our equipment rental or equipment rental industry as well as the collection process, laws or regulations can be passed.
Any new legislation or regulations affecting the equipment rental industry, or changes to existing legal interpretation, may increase our compliance costs.
We may not be able to guard against data security risks.
We have implemented a security system to maintain the physical safety of our facilities, protect our employees, franchisees, lessees, customers, customers and suppliers of confidential information and information related to identifiable individuals, prevent theft or loss of physical media through our information system or other electronic transmission or unauthorized access in the wrong direction.
These include, for example, proper information encryption.
Despite these efforts, we may still be potentially compromised by the security system, which may result in unauthorized access to our facilities or information that we are trying to protect.
Because the technologies used to obtain unauthorized access are constantly changing, becoming more and more complex, and are usually not recognized until the target is launched, we may not be able to predict these technologies, adequate precautions cannot be implemented.
If an unauthorized party is able to actually access one of our facilities or electronic access to our information system, or if this information is misled, lost or stolen during transmission or transportation, any theft or abuse of this information, among other things, may result in adverse publicity, government investigation and supervision, and difficulty in marketing our services, client and client charges that we have not fulfilled our contractual obligations, litigation by the affected parties and possible financial obligations for damages related to theft or abuse of such information, any of these could have a significant adverse impact on our business.
Item 1B: Staff comments that have not been resolved.
Project 2: We rented 41,016 square feet of property at our headquarters facility in Minneapolis, Minnesota.
Under the lease, we are obliged to pay the rent on a monthly basis, and for the remaining period due on 2029, we will pay an average of $765,600 per year.
We are also obliged to pay the projected taxes and operating expenses described in the lease, which change every year.
If we exercise any right to obtain the additional space described in the lease, the total amount of rent, taxes and operating expenses paid may increase.
Our facilities are sufficient to meet our current and future needs.
Item 3: Legal action we are not a party to any major action nor are we aware of any threat action that would have a significant adverse effect on our business.
Item 4: mine safety disclosure does not apply.
Part V: registrant common stock market, related shareholder matters and issuer\'s purchase of equity securities market information, holders, common shares of dividendmark Corporation are traded in the NASDAQ Global Market with the symbol \"WINA.
See Note 5 for dividend information-\"shareholder equity (Deficit).
\"On March 4, 2019, our common stock had a record of about 65 shareholders.
The issuer and associated the company purchasing equity securities 2014 2015 financial information not for adjustment to reflect new standard.
Item 7: Management\'s Discussion and Analysis of the financial situation and results of operations in December 29, 2018, we operated 1,241 franchises under Plato\'s Closet, once with children, we started sports style Encore and Music around the brand again, with a rental portfolio of $39. 0 million.
Management closely tracks the following financial criteria to assess current business operations and future prospects: Royalties, rental activities, sales, general and administrative costs.
The most important source of franchise income is the royalties obtained from franchisees.
Our royalties increased by $2 during the 2018 period. 6 million or 5.
Compared with 2017, it was 7%.
14 The content income table for the deduction of rental expenses in 2018 is $16.
Compared with $15, 2 million.
2017 2 million.
Periodic Fluctuations-to-
The period rental income and rental expenses are mainly derived from the manner and time in which the rental income and rental expenses are confirmed within each specific lease term in accordance with the accounting guidelines applicable to the lease.
Therefore, we believe that more meaningful rental activities are to purchase equipment for the leasing customers andto long-
Long-term trends in the size of the rental portfolio.
We purchased $23 during 2018.
The rental customer\'s equipment costs $1 million, compared to $25.
It was $4 million and $26 in 2017.
2016 2 million.
Our rental portfolio (
Net investment in leasing-
Current and long termterm)was $39.
December 29, 2018 was $0 m, compared to $41.
£ 3 million for Dec and $41.
December 31, 2016 for 4 million.
Management continuously monitors the level and timing of sales, general and administrative expenses.
The main components of sales, general and administrative expenses include wages, wages and benefits, advertising, travel, check-in, legal and professional fees.
Sales, general and administrative expenses increased by $0 in 2018. 8 million, or 3.
2%, compared with the same period last year.
Management also monitors several non-financial factors that assess current business operations and future prospects, including franchise opening, closure and franchise renewal.
The following is a summary of our franchise activities for the fiscal year ended December 29, 2018: a total of 12/30/2016 OPENEDCLOSED12/29/2018 franchise is available
United States and Canada (7)
4803030100% charter for children
United States and Canada (5)
3791616100% participate in the sports competition again
United States and Canada (6)
2811212100% style franchise chain
United States and Canada3)67——
N/AMusic go to lundfranches-US332(1)
3433100% Total Franchise Stores 1 and 21152 (22)
1,2416161100% Renewal activity is a key focus area of management.
Our franchisees sign 10-
An annual agreement with us.
When existing franchise agreements are about to expire, updating these agreements is an indicator of management monitoring to determine the health of our business and the preservation of future royalties.
In 2018, we updated the 100% franchise agreement.
In the past three years, this ratio has been between 97% and 100%.
Our ability to increase our operating income depends on our ability :(i)
Effectively support our franchise partners to generate higher revenue ,(ii)
New franchise stores ,(iii)
Increase rental sources and write as little as possible
Off in our rental portfolio, and (iv)
Control our sales, general and administrative expenses.
The risks of our business and other risk factors are described in detail in project 1A \"risk factors.
15 operation results table we use ASU 2014-
09, the income from signing contracts with customers, using the full traceability method, will take effect from December 31, 2017.
To reflect this adoption, our financial results for the previous period have been restated. (
See Note 2-\"major accounting policy: accounting announcement recently adopted \").
The following table lists the information selected from our consolidated operating statements, which are represented by a percentage change in total income and a percentage change in the amount of US dollars in the previous period: 2018,2016, December 29, December 30 fiscal year December 31 fiscal yearunder)over (under)
Income: 20182017201620172016. 5%65. 4%66. 1%5. 7%3.
7% rental income 25. 126. 526. 0(1. 6)6.
9 Sales of goods 4. 03. 73. 312. 916.
0 franchise fees2. 22. 22. 42. 5(1. 5)Other2. 22. 22. 26. 34.
Total revenue is 100. 0100. 0100. 03. 94.
9 Cost of goods sales (3. 8)(3. 5)(3. 2)12. 715.
8 rental fees (2. 7)(4. 7)(3. 5)(41. 0)40.
7 reserve for credit losses-——328. 9(51. 4)
Sales, general and administrative expenses (35. 9)(36. 2)(35. 9)3. 25.
Operating income 57. 655. 657. 47. 61.
Interest expenditure (3. 4)(3. 4)(3. 5)3. 41.
Interest and other income (expense)———(357. 4)205.
Income before tax252. 253. 97. 81.
Income tax provision (12. 6)(17. 0)(20. 6)(22. 9)(13. 4)Net income41. 6%35. 2%33. 3%22. 6%11.
For the year ended December 29, 2018, 0% of total income was $72.
Compared with $69, 5 million.
$8 million and $66.
The comparable period in 2017 was 5 million per cent and 2016 per cent, respectively.
Royalties and royalties increased to $48.
2 million from $45 to $2018.
The same period in 2017 was 6 million and a was 5. 7% increase.
The increase is due to the higher wardrobe of Plato, which used to have a child and style of encore royalty of $1. 4 million, $0.
$8 million and $0.
3 million respectively.
The increase in royalties for these brands is mainly due to the increase in retail sales of franchisees for these brands and the increase in franchise stores for these brands in 2018 compared to 2017.
In 2017, royalties increased by $1.
Compared with 2016, it was 6 million.
This increase was mainly due to the addition of 25 franchise stores in 2017 compared to 2016.
Fiscal 2018 and 2017
Fiscal 2016 is 53-
This also affects the comparability of royalties.
$1 franchise fee.
$6 million in 2018 is equivalent to $1.
2017 of 5 million and $1.
6 million for 2016
Franchise fees include the initial franchise fee for the sale of the new franchise and the transfer fee related to the transfer of the existing franchise.
The franchise fee income starts from the franchise and is confirmed within the estimated life of the franchise.
An overview of retail brand franchise fees see the franchise section of the business section (Item 1).
Rental revenue decreased to $18.
In 2018, it was $2 million, compared to $18.
2017 the same period for 5 million.
The main reason for the reduction is the low level of equipment sold to customers.
Rental income increased by $1 in 2017.
Compared with 2016, 2 million is mainly due to the high level of equipment sales to customers.
16 ContentsMerchandise sales merchandise sales table includes the sale of products to franchisees through our computer support center or through the Play It Sports purchase group (
\"Direct sales\" together \").
Sales of direct franchisees rose to $2.
It was $9 million in 2018.
2017 6 million.
This increase is mainly due to the increase in technology procurement by our franchisees.
Sales of direct franchisees increased by $0 in 2017.
Compared to 2016, 4 million was due to the increased purchase of technology by our franchisees.
The cost of goods sales is included in-
Binding freight and cost of goods related to direct franchisee sales.
The cost of selling goods has increased to $2.
It was $7 million in 2018.
2017 4 million.
The increase is due to the increase in direct sales in 2018 discussed above.
The cost of goods sold in 2017 increased by $0.
3 million compared to 2016, this is due to an increase in direct sales in 2017 as discussed above.
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