Franchises are typically associated with fast-food chains not apparel brands. Most retailers own their own stores and very few open their organizations up to franchising. L Brands, one of the largest American retailers, had been franchising its China locations, but this past year, bought the stores back.
With new technology, that seems to be changing. Franchises such as Scout & Molly’s, Apricot Lane Boutiques, Plato’s Closet and Clothes Mentor are growing as improvements have been made with inventory systems.
“I think this category is interesting,” said George Knauf, a franchise expert and the founder of Myperfectfranchise.com. “I think it’s really just hitting its stride. If you watch over the next five to seven years, it will grow tremendously.”
Knauf said the challenge in the past for clothing franchises had been what items ended up in the store showroom. It was difficult for franchise owners to pick the right product for their location and challenging for the franchise owner to track the inventory. “Now you’re seeing a model that works as efficiently as the top franchise fast food brands,” he said.
Knauf said the buyers from the franchise present the fashion options they’ve purchased to the franchisees. The franchisees will pick out what they think works for their location. “I call it adult Garanimals. You give them a framework to work with,” Knauf said.
Apricot Lane has been franchising for 12 years and has 73 stores in the U.S., with plans for 15 to 20 store openings a year. The chain is described as celebrity-inspired branded apparel with accessories and gift items. It is franchised by Country Visions, a firm started by Ken Peterson, Tom Brady and Scott Jacobs.
The initial investment is $131,300 to $409,800 and there is a net worth requirement of $250,000. The initial franchise fee is $29,500 and the ongoing royalty fee is 5.5 percent. The company has appeared in Entrepreneurs top 500 hottest franchises for seven consecutive years.
Scout & Molly’s is described as vintage chic and was founded in Raleigh, N.C., in 2002 by Lisa Kornstein. The investment requires a $50,000 franchise fee and the unit investment ranges between $250,000 to $294,750. Franchisees pay a royalty fee of 5 to 6 percent. The franchise requires potential owners get a location that provides 1,200 square feet of space and has visibility in a Class A shopping center. The chain is now up to 21 stores.
Plato’s Closet and Clothes Mentor are both resale concept franchises. Plato’s Closet is one of the fastest-growing retail franchises with more than 450 stores in the U.S with the top stores doing $1.4 million in annual sales. In 2014, it was ranked the number-one franchise investment opportunity by Forbes in the $150,000 to $500,000 category. It requires a $250,000 investment, the owners must have cash or liquid assets of $75,000 and other assets of $175,000. The product assortment is 98 percent gently used and 2 percent new. The store size is generally 3,500 to 4,000 square feet and located generally in strip mall locations.
Chad Olson, chief operating officer at Clothes Mentor, said most of his franchisees break even in the first year or better, and are profitable in year two. He said an average store makes $74,000 a year, while some are making profits of more than $200,000 a year.
The stores buy garments from customers and then either gives them cash or store credit. The franchisees are provided with a list of valuations for particular garments, like an Ann Taylor sweater, removing the guesswork of pricing. If the clothing never sells, it gets donated to a local charitable organization. The initial investment ranges between $198,000 and $297,000 with a net worth requirement of $400,000. The initial franchise fee is $20,000 and the royalty fee is 4 percent.
Clothes Mentors was founded by Lynn and Dennis Blum, who had previously founded Plato’s Closet and Once Upon a Child. They sold those businesses to Grow Biz International and opened their first Clothes Mentor in 2001.
“We are riding the stream of popularity of franchises,” Olson said. “The owners have got the motivation and financial wherewithal. The common ground they share is they want to start a business, they have the energy level and personality conducive to entrepreneurship.”