Build-A-Bear Workshop 2012 Annual Report Download - page 16

BUILD-A-BEAR WORKSHOP, INC. 2012 FORM 10-K
As of December 29, 2012, we employed approximately
1,000 full-time and 3,400 part-time employees. We divide
our store base into three geographic regions, with the
United Kingdom and Ireland representing one of those
regions. The regions are led by our Chief Operations and
Financial Bear; our North American operations are led by our
Chief Workshop Bear – North America and there are three
Regional Workshop Managing Directors. Bearitory Leaders
are responsible for each of our 31 store districts, or
bearitories, consisting of on average, 11 stores. Historically,
our stores generally have had a full-time Chief Workshop
Manager, and three additional managers who are full-time or
part-time, depending upon the volume at the specific location,
in addition to part-time hourly Bear Builder®associates. In
2011 and 2012, as part of our cost savings initiatives, we
adjusted our store staffing model to reduce fixed costs and
provide flexibility to better match staffing levels to peak sales
times. This resulted in significant savings in store payroll,
while still maintaining our high levels of overall guest
satisfaction. In addition to the approximately 4,000
employees at our store locations, we employ approximately
230 associates in general administrative functions at our
World Bearquarters in St. Louis, Missouri, approximately
70 associates at our Bearhouse distribution center in
Groveport, Ohio, and approximately 20 associates in our
European Bearquarters in Windsor, England. The number of
part-time employees at all locations fluctuates depending on
our seasonal needs. We are committed to innovation and
invention and generally have confidentiality agreements with
our employees and consultants. Store managers and
Bearquarters associates pass specific profile assessments.
None of our employees are represented by a labor union,
and we believe our relationship with our employees is good.
INTERNATIONAL FRANCHISES
In 2003, we began to expand Build-A-Bear Workshop
stores outside of the United States, opening company-owned
stores in Canada and our first franchised location in the
United Kingdom. As of December 29, 2012, there were
91 Build-A-Bear Workshop franchised stores located in
14 countries. All stores outside of the U.S., Canada, the
United Kingdom and Ireland are currently operated by third
party franchisees under separate master franchise agreements
covering each territory. Master franchise rights are typically
granted to a franchisee for an entire country or group of
countries for a specified term. The terms of these master
franchise agreements vary by country but typically provide
that we receive an initial, one-time development fee and
continuing royalties based on a percentage of the franchisees’
stores sales. The terms of these agreements range up to
25 years with a franchisee option to renew for an additional
term if certain conditions are met. All franchised stores have
similar signage, store layout and merchandise characteristics
to our company-owned stores.
Our goal is to have well-capitalized franchisees with
expertise in retail operations or franchising and real estate in
their respective country. We collaborate with our franchisees
in the development of their business, marketing and store
growth plans. We review all franchisees’ orders for
merchandise which are made in the same factories that
produce products for our company-owned stores and advise
our franchisees concerning their operational and business
practices in an effort to ensure they are in compliance with
our standards. We expect our current franchisees to open
approximately eight to twelve new stores in fiscal 2013.
SOURCING AND INVENTORY MANAGEMENT
We do not own or operate any manufacturing facilities. Our
animal skins, stuffing, clothing and accessories are produced
by factories located primarily in China. We purchased
approximately 80% of our inventory in fiscal 2012,
approximately 81% in fiscal 2011 and approximately 73% in
fiscal 2010 from three long standing vendors. After specifying
the details and requirements for our products, our vendors
contract orders with multiple manufacturing facilities in China
that are approved by us in accordance with our quality
control and labor standards. We believe that our supplier
factories are compliant with the International Council of Toy
Industries (ICTI) CARE certification.
The CARE (Caring, Awareness, Responsible, Ethical)
Process is the ICTI program to promote ethical manufacturing,
in the form of fair labor treatment, as well as employee health
and safety, in the toy industry supply chain worldwide. The
program’s initial focus is in China, where 70 percent of the
world’s toy volume is manufactured. In order to obtain this
certification, each factory completed a rigorous evaluation
performed by an accredited ICTI agent. Our vendors can
be used interchangeably as each has a sourcing network
for multiple product categories and can expand its factory
network as needed. Our relationships with our vendors
generally are on a purchase order basis and do not provide
a contractual obligation to provide adequate supply or
acceptable pricing on a long-term basis.
The average time from the beginning of production to
arrival of the products into our stores is approximately 90 to
120 days. Our weekly tracking and reporting tools give us
the capability to adjust to shifts in demand. Through an
ongoing analysis of selling trends, we regularly update our
product assortment by increasing quantities of productive
styles and eliminating less productive items. Our distribution
centers provide further logistical efficiencies for delivering
merchandise to our stores.
DISTRIBUTION AND LOGISTICS
We own our 350,000 square-foot distribution center near
Columbus, Ohio which serves the majority of our stores in
the United States and Canada. We also engage a third-party
warehouse in southern California to service our West Coast
stores. The contract has a one year term and is renewable.
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