Build-A-Bear Workshop 2009 Annual Report Download - page 15

BUILD-A-BEAR WORKSHOP, INC. 2009 FORM 10-K
GROWTH STRATEGY
Our growth strategy is to develop and expand the reach of
the Build-A-Bear Workshop brand. Product innovation is key
to our growth, as well as the full integration of our product,
marketing and operations teams. We believe this will create
a sense of urgency to drive traffic to our stores, increase
conversion and improve sales. Additional toy products outside
of our core plush animals, yet consistent with our interactive
and hands-on experience, will be added to our assortment.
We will continue to grow our virtual world engagement, as
well as improve our online and e-commerce business. In
addition, we are exploring new opportunities for our products
to be sold outside of our current store base. We expect to
grow our business by opening additional stores in the United
States, Canada, the United Kingdom and Ireland, by the
addition of new international stores opened through existing
and new franchise agreements, and through the development
of third party licensed products that promote Build-A-Bear
Workshop as a lifestyle brand and build overall brand
awareness.
We have increased our company-owned store locations
throughout the United States, Canada and Puerto Rico from
271 at the end of fiscal 2006 to 291 as of January 2, 2010.
In April 2006, we acquired Amsbra Limited, our former
franchisee in the United Kingdom, as well as The Bear Factory
Limited (collectively, the UK Acquisition), a stuffed animal
retailer in the United Kingdom whose store locations we
subsequently rebranded to the Build-A-Bear Workshop brand.
In 2007, we discontinued our franchise agreement in France
and opened our first company-owned stores there. As of
January 2, 2010, we operated 51 stores in the United
Kingdom and Ireland and three stores in France all under the
Build-A-Bear Workshop brand. Due primarily to challenging
economic conditions in North America and Europe, in fiscal
2010, we expect to open one new store in North America,
the same as in 2009, and two new stores in Europe,
compared to opening no new stores in 2009. We believe
there is a market potential for at least 350 Build-A-Bear
Workshop stores in North America and approximately
70 in the United Kingdom and Ireland. In addition, we also
currently operate Build-A-Bear Workshop stores in
non-traditional retail locations including four Major League
Baseball®ballparks, one store located in the Saint Louis Zoo
and one store in a museum at the St. Louis Science Center.
Build-A-Bear Workshop stores are also operated within select
Rain Forest Café®and T-Rex Café locations under licensing
agreements with Landry’s®Restaurants.
We believe that there is continued opportunity to grow
our Build-A-Bear Workshop concept and brand outside of
North America, the United Kingdom, Ireland and France
primarily through franchise agreements. Our goal is to have
franchisees that are well capitalized and bring extensive retail
and/or real estate experience. Our franchisees currently
operate 65 Build-A-Bear Workshop stores in several foreign
countries under master franchise agreements on a
country-by-country basis. We expect our franchisees to open
approximately three new stores in fiscal 2010, net of closures,
under existing and anticipated franchise agreements. We
believe there is a market potential for approximately 300
franchised stores outside North America, the United Kingdom,
Ireland and France. Although we expect to continue to open
international stores primarily through franchise agreements,
we may open additional company-owned stores outside of
the United States, Canada, Puerto Rico, the United Kingdom,
Ireland and France, as our international plans adjust as our
expansion continues.
We believe there are also growth opportunities to sell
Build-A-Bear Workshop products in other retail stores. Over
the past 13 years, we have established our store as a place
where children can have a hands-on experience, express their
creativity and use their imagination. We believe our brand is
one that parents value and trust and kids love. We believe
that our expertise in product development and the reputation
and quality of our brand will drive sales of plush and other
branded products in locations other than our own stores. We
expect to be able to leverage our extensive guest database to
market these new products and build demand for them.
We hold a minority interest in Ridemakerz, LLC
(previously Retail Entertainment Concepts, LLC). Ridemakerz®
is an early-stage company that has developed an interactive
retail concept that allows guests, or customizers, to build and
personalize their own model cars. The concept capitalizes on
the universal love of cars and a widely popular car culture
that crosses ages and demographics, although the primary
targets are children and their families. In 2009, Ridemakerz
undertook a major restructuring of its operations that included
significant store closings. As of January 2, 2010, Ridemakerz
operated six stores, including one temporary location in
Downtown Disney®District at the Disneyland®Resort in
Anaheim, California and one store that closed in January
2010. We are currently providing advisory and support
services to Ridemakerz in exchange for additional equity. In
2009, we wrote off our entire equity method investment and
receivable balance while Ridemakerz continues to develop
their repositioning strategies.
In fiscal 2003, we began testing in certain markets a
proprietary collection of Friends 2B Made®make-your-own
dolls and related products. In the fiscal 2008 third quarter,
we announced plans to close the Friends 2B Made concept.
The closure plan affected our nine Friends 2B Made locations,
separate Friends 2B Made fixtures in approximately 50
Build-A-Bear Workshop stores, and the concept’s website.
As of January 2, 2010, all Friends 2B Made locations were
closed. Eight of these locations were in or adjacent to a
Build-A-Bear Workshop store and were not considered a
separate store.
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