Franchise Deep Dive: Plato’s Closet Franchise Costs, Fees, Profit and Data

Purchasing used clothing and selling it back to customers for a price 30% to 40% higher seems like a business model too good to be true, but is it? It's not with a Plato's Closet franchise.

By Luca Piacentini1851 Franchise Managing Editor

10:10AM • 03/08/23

LAST UPDATED: January 15, 2022

FRANCHISE WEBSITE: https://www.platoscloset.com/home/own-a-store

NUMBER OF LOCATIONS: 497

REPORTED COST TO GET IN: $275,000 to $350,000

REPORTED ROI (Item 19): $777,664 (2021 Average Gross Profit)

Plato's Closet is a resale clothing franchise that purchases and sells used brand-name children's and teenagers' clothes, shoes and paraphernalia. Unlike consignment shops, Plato's Closet pays sellers on the spot. The store's name was inspired by Dennis and Lynn Blum’s son's school work about the philosopher Plato, who had been an early proponent of recycling.

How Many Plato’s Closet Locations Are There?

Plato’s Closet currently boasts nearly 500 stores and its footprint is growing at a rate of around 4% on average a year.

The story started in 1993, when Winmark Corporation (parent company of Winmark Franchise Partners) purchased the franchising rights to Once Upon A Child. Dennis and Lynn Blum’s resale concept targeted parents of infants through preteens. In 1999, Winmark purchased the franchising rights to the Blum’s other resale brand, Plato’s Closet, and started to franchise the concept in March of that year with just four existing Ohio stores in operation.

A 2001 article in the Star Tribune brought the brand national attention by noting that Plato's Closet stocked up on brand-name items from retailers such as Abercrombie & Fitch, Gap and H&M, that they sold at a markdown of between 50% and 75%.

In 2001, there were 45 units. By 2008, there were 281. In a 2009 interview with Star Tribune, CEO John Morgan said Plato's Closet did the best during the Great Recession among Winmark's franchises because people were more likely to sell used clothing to make money and to buy used clothing to save money.

By 2011, Plato’s Closet featured over 280 franchises in North America. By 2018, the number nearly doubled, reaching 480 units. Plato’s Closet has received its share of accolades over the years, including top retail franchise by Entrepreneur magazine and the No. 1 franchise investment by Forbes magazine.

What Is the Plato’s Closet Business Model?

Plato’s Closet stores buy and sell gently used brand-name apparel and accessories for teens and young adults, filling a distinct missing niche in the retail marketplace. It is the only national resale business that specializes in the teen and 20-something market group. The wish list for trendy, brand-name apparel and the availability of it in virtually every teen’s closet presents fantastic opportunities for both franchise owners and customers alike. The used clothes are purchased at between 30% and 40% of Plato's Closet’s price, creating a profitable model for both franchisees and customers.

How Much Can Plato’s Closet Franchise Owners Make?

Sales and gross margins:

Average Gross Sales: $1,227,230(2021)*
Average Gross Profit: $777,664 (2021)*

*The Average Store numbers are the 2021 Average Gross Sales and Average Gross Profit amounts stated in Item 19 of the 2022 Plato’s Closet® Franchise Disclosure Document (as reported by the 457 stores that had been in operation at least one year as of December 25, 2021). Of the 457 stores, 195 (or 43% of the stores) attained or exceeded the Average Gross Sales and 199 (or 44% of the stores) attained or exceeded the Average Gross Profit. A new franchisee’s results will likely differ from these results.

How Much Does It Cost to Open a Plato’s Closet?

The total estimated Plato’s Closet franchise costs range from $275,000 to $350,000. However, this investment will vary depending on the market and other factors.

$75,000 to $105,000—Cash or liquid assets
$400,000—Net Worth

Name of Fee	Low	High
Initial Franchise Fee	$25,000	$25,000
Fixtures and Supplies	$35,000	$55,000
Signs	$8,000	$12,000
Security Cameras	$1,000	$5,000
Point-of-Sale (POS) System	$25,200	$32,400
Leasehold Improvements	$12,000	$20,000
Build-Out	$18,000	$50,000
Deposits and Business Licenses	$3,000	$15,000
Opening Inventory	$65,000	$80,000
Miscellaneous Pre-Opening Expenses	$35,000	$60,000
Rent—First 3 months	$12,500	$20,000
Additional Funds—First 3 months	$30,000	$33,000
ESTIMATED TOTAL	$269,700	$407,400

What Is the Franchise Fee for Plato’s Closet?

The initial Plato’s Closet Franchise Fee is $25,000.

Other Fees Include:

Type of Fee	Amount
Continuing Fee	5% of gross sales
Marketing Fee	$1,000 per year
Cooperative Advertising	Maximum amount is 5% of gross sales
Local Marketing Expenses	Minimum amount, when combined with cooperative advertising expenses, is 5% of gross sales
Advertising Fee	If Winmark imposes this fee, franchisees will pay up to 2% of gross sales
Transfer Fee	$10,000
Audit Expenses	Cost and expenses related to audit
Renewal Fee	$10,000
DRS Maintenance Fee	The fee for the term of this Franchise Agreement is $1,000. Upon renewal, the then-current rate for the fee will be applied.
Technology Fee	Currently $0
Remodeling Expenses	Will vary under the circumstances
Insurance	Will vary under certain circumstances
Interest Expenses	Lesser of 18% per year or maximum rate permitted by law
Lease Payment	Will vary under certain circumstances
Costs and Attorney's Fees	Will vary under certain circumstances

Who Is the Leadership of Plato’s Closet?

Brett D. Heffes—CEO of Winmark
Renae M. Gaudette—Executive Vice President and Chief Operating Officer of Winmark
Anthony D. Ishaug—Executive Vice President, Chief Financial Officer and Treasurer

What Helpful Articles Can I Read to Learn More About Plato’s Closet?

Disclaimer: This content is for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained on this site constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any franchises, securities, or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the franchise and/or securities laws of such jurisdiction. All content in this article is information of a general nature and does not address the detailed circumstances of any particular individual or entity. Nothing in the article constitutes professional and/or financial advice, nor does any information in the email constitute a comprehensive or complete statement of the matters discussed or the law relating thereto. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of any information or other content in this article before making any decisions based on such information or other content.