Build-A-Bear Workshop 2012 Annual Report Download - page 27

BUILD-A-BEAR WORKSHOP, INC. 2012 FORM 10-K
These provisions may:
• discourage, delay or prevent a change in the control of
our company or a change in our management, even if
such change may be in the best interests of our
stockholders;
• adversely affect the voting power of holders of common
stock; and
• limit the price that investors might be willing to pay in the
future for shares of our common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
STORES
As of December 29, 2012, we operated 291 retail stores
located primarily in major malls throughout the United States,
Canada and Puerto Rico, 58 stores located in the
United Kingdom and two stores in Ireland in our Retail
segment. Our North American stores generally range in size
from approximately 2,000 to 4,000 gross square feet and
average approximately 2,800 square feet, while our tourist
location stores currently range up to 7,000 square feet and
our flagship store in New York City is approximately 20,000
square feet. Our UK stores range in size from approximately
800 to 2,300 selling square feet and average approximately
1,400 selling square feet. Our stores are highly visual and
colorful featuring a teddy bear theme and larger than life
details including a “sentry bear” at the front entry,
custom-designed fixtures as well as a customized Build-A-Bear
Workshop tile logo in our entryway. Our stores are designed
to be open and inviting so that guests can fully immerse in the
shopping experience and actively participate in the creation
and customization of their purchase. Our typical store features
one or two stuffing machines, three to five Name Me
computer stations and numerous displays of fully-dressed
stuffed animals throughout the store. We select malls and
make site selections within the mall based upon demographic
analysis, market research, site visits and mall dynamics as
well as actual past history and mall performance metrics. We
have identified additional target sites that meet our criteria for
new stores in new and existing markets. We seek to locate
our mall-based stores in areas with maximum customer traffic,
often near to or in the center of the mall, as well as offering
adjacencies to other children, teen and family retailers.
We lease all of our store locations. Due to our attraction
as a family-oriented entertainment destination concept, we
continue to have high interest from mall owners and
developers to locate a Build-A-Bear Workshop store in their
malls. We believe that we generally have negotiated favorable
lease terms including provisions providing for exclusivity of
operation of our concept in the mall. Our stores are located in
a variety of shopping center types. As of December 29, 2012,
the distribution of our stores is as follows:
Super regional center 210
Regional center 89
Open air lifestyle center 17
Outlet center(1) 11
Other (theme, NYC, concession) 16
Total traditional stores 343
Temporary locations 4
Other (ballparks, zoo) 4
Total company-owned retail locations 351
(1) Build-A-Bear Workshop stores in outlet centers are not merchandised with
outlet merchandise.
Most of our leases have an initial term of ten years and
do not have renewal options or clauses although our leases in
the United Kingdom are typically covered by laws and
regulations that give us priority rights of renewal. A number of
our leases, primarily in North America, provide a lease
termination or “kick out” option, which may be mutual,
allowing either party to exercise the option in a
pre-determined year or years, typically the third or fourth year
and sixth or seventh year of the lease, if we do not meet
certain agreed upon minimum sales levels. In addition, our
leases typically require us to pay personal property taxes, our
pro rata share of real property taxes of the shopping mall, our
own utilities, repairs and maintenance in our store, a pro rata
share of the malls’ common area maintenance and, in some
instances, merchant association fees and media fund
contributions. Most of our leases in North America also
require the payment of a fixed minimum rent as well as
percentage rent based on sales in excess of agreed upon
minimum annual sales levels. Our leases in the United
Kingdom and Ireland typically have rent reviews every five
years in which the base rental rate is adjusted to current
market rates if they are higher than the original rent agreed.
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