Win-Win-Win Business Model
The company’s foundation rests on recycling and reusing millions of pieces of clothing a year, helping communities conserve and share fashion at affordable prices. Chelsea states, “Our business is a win for everyone: from the local business owner, to the customer who finds things at great prices, to the seller who is able to get money back from clothes they don’t wear anymore. When someone shops at Uptown Cheapskate, up to $.91 of their dollar stays local – unlike a Target where only maybe $.41 of that dollar stays local.” In addition to that, Uptown Cheapskate stores utilize clothing to raise money for causes on which they are passionate. Currently, they have collegially raised more than $600,000 to build schools with the company’s charity partner buildOn. The stores individually also partner with local charities to provide clothing to the people who are in need. Chelsea is proud of her franchisees’ efforts to give back to the community.
As a result of community focus and marketing efforts, Uptown Cheapskate franchise sales have growth – resulting in franchisee profitability. “My personal favorite thing is selling a new territory to an existing franchisee,” says Chelsea. “So many businesses in general fail, so when I see my franchisees find success in their stores and want to open additional locations, it’s a tribute to our business model and the trust our franchisees have in us.” This growth in locations has led to bourgeoning market recognition of Uptown Cheapskate as an upscale resale brand. Chelsea adds, “We don’t need to teach our customers that they can sell their clothes – they know it already and they just want details on how to make that happen.” This recognition as a successful franchise brand was not an overnight outcome but a result of a steady development with adapting to the changes in the past 12 years. She shares, “We’ve updated the store look and feel, and even replaced our dated logo with something more timeless.” The company’s ability to quickly adapt to changes has led to the success of its franchises. She adds, “We adapt with our local market’s preferences, buying in inventory one piece at a time.“
Riding the Resale Clothing Wave
“Resale is just an incredible industry to be in,” she highlights. As per Chelsea, the second-hand market is projected to double in the next five years, reaching $77bn. She believes that the resale sector is growing 11x faster than the retail clothing sector – “and we’ve just hit the tip of the iceberg,” she adds. Her stores are expanding in line with this trend, which is also beneficial to the franchisees. She says, “We’ve found that even as online resale grows, our customers like to touch and feel the clothing – and it’s extremely difficult for an online seller to photograph, inventory, and find a piece that’s selling for $12 (which is our average price point).”
An Uptown Cheapskate store costs somewhere between $280,000 and $420,000 to build out, including working capital. SBA loans are available for candidates that have approximately $75,000 in liquid capital. The company looks for franchisees with strong experience in leadership, retail, marketing, or teaching, and who are excited to work in a fashion resale business. The company expects franchise owners to work in a store full-time in the first year and become proficient in their local market.
The company provides a personalized online training program that polishes individuals’ skills, as well as an internship in the development of a successful store. “New franchisees get a lot of hand-holding in the first year,” says Chelsea. “We design the store layout, support the franchisee in building out their space, and provide the guidebook on how to get the store launched successfully in our local market. We visit you as you start buying to provide additional training and send people to your store to help with opening,”
She says, “We provide marketing, bookkeeping, and operational support – as much as you’d care to have.” If a franchisee is struggling or underperforming, the company provides a support representative who specializes in recalibrating the processes. They will connect with the franchisee to more marketing resources and help it to fabricate stable financial planning to turn the corner. “We’ve closed only a handful of stores – and seen most turn around and make it,” she mentions. The stores are generally located in areas where the population ranges from 100,000 to 250,000 in the five miles surrounding the store. The average American spends more than $600 on clothing each year, which creates tremendous local supply for each Uptown Cheapskate franchise. Chelsea says, “In our smallest markets, that’s 60 million dollars of new clothing per year in the market. We only need $400,000 of that $60 million to be a store that does more than $1mm in sales and returns 20%+ margins to their owner.“