Music Go Round® started as a single consignment-only music store in South Minneapolis, but it has grown to be the largest used musical instrument and gear retailer in the world. Thanks to Winmark Corporation®, which used a franchise model to expand the brand’s presence in the competitive $17 billion musical instrument retail market, Music Go Round now has 33 locations throughout the United States.
The revenue at the original retail location was impressive, which caught the eye of Winmark Corporation. The franchisor had begun successfully franchising Play It Again Sports®, which sells quality new and used sports equipment, and Once Upon a Child®, which sells gently-used children’s apparel, toys, shoes and equipment. However, the music store needed changes to be profitable in the long run, and Winmark saw how it could help.
Winmark Backing Pays Off
Winmark Corporation purchased the franchising rights to the consignment shop in 1993. The first corporate store opened in Roseville, Minnesota, later that year. In 1995, Music Go Round opened its first franchise location in Alpharetta, Georgia.
“The partnership really helped both parties mutually,” said Tim Kletti, brand director for Music Go Round. “Winmark Corporation had a new and exciting brand in a very specific niche category, and Music Go Round had a financial partner that provided a great opportunity to grow the brand and evolve the business model.”
Winmark replaced the consignment model with the retail resale model it employed for Play It Again Sports and Once Upon A Child (and which it would later use for Plato’s Closet® and Style Encore®). The company opened four corporate-owned Music Go Round stores before franchising began. The stores did very well, averaging more than $1 million in revenue per store.
After franchising, the business model evolved even more. The portion of inventory consisting of used instruments and gear, such as guitars, drums, equipment and amplifiers, increased from 55 percent to 80 percent. Profit margins increased, too.
Average store sales have increased steadily in the last 15 years. In 2016, the average Music Go Round store had sales of $944,094 with an average gross profit of $458,213 (48.5 percent). The top quartile of Music Go Round stores had average sales of $1,567,730 with an average gross profit of $743,823 (47.4 percent).*
Set Up for Future Success
Music Go Round also adopted an e-commerce platform. E-commerce has become essential for retailers because consumers use all avenues to research and buy products, and smartphones are often the tool of choice for these tasks. While consumers still visit brick and mortar stores, 51 percent make purchases online as well, according to a UPS study.
The Music Go Round e-commerce site offers more inventory to shoppers looking for a specific instrument, as all locations participate and put their inventory online for all consumers to purchase. There are also customers who browse the site without searching for anything in particular and then show up at the store because they’re impressed with the inventory.
The e-commerce site is an important ingredient for future growth both online and offline for the stores and the brand.
“We are syncing our digital marketing with our e-commerce initiatives,” Tim said. “We are providing deeper inventory, financial analysis and management for our franchisees to focus on what really matters to help grow their businesses. Through that, we expect to continue growing our store count. We will always consider ourselves the provider of the best customer experience in our industry and experts at developing, marketing and growing small businesses.”
Now, Winmark Franchise Partners draws on Winmark’s 30 years of franchising experience to serve as a consultant –and potentially investment partner — for entrepreneurs and management teams looking into franchising as a business growth strategy.
The company also provides support and direction to emerging brands that have started to franchise but hit a wall in growth. Winmark Franchise Partners expands upon traditional consulting services to offer investment capital for select proven, sustainable business models.
If you are interested in franchising your business or are an existing franchisor looking for advice, contact us for more information.
*The Average Store numbers are the 2016 Average Gross Sales and Average Gross Profit amounts stated in Item 19 of the 2017 Music Go Round® Franchise Disclosure Document (as reported by the 32 stores that had been in operation at least one year as of December 31, 2016). Of the 32 reporting stores, 13 or 41% of the stores attained or exceeded the Average Gross Sales and 15 or 47% of the stores attained or exceeded the Average Gross Profit. The Top Quartile Average Gross Sales and Average Gross Profit only relates to 8 of the reporting Music Go Round® Stores who ranked in the top 25% of the gross sales range. Of the 8 reporting stores in the top quartile, 3 or 38% of the stores attained or exceeded the top quartile Average Gross Sales and 5 or 63% of the stores attained or exceeded the top quartile Average Gross Profit. A new franchisee’s results will likely differ from these results.