10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark one)

☒    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 30, 2023, or

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission File Number: 000-22012

WINMARK CORPORATION

(exact name of registrant as specified in its charter)

Minnesota	41-1622691
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

605 Highway 169 North, Suite 400, Minneapolis, Minnesota 55441

(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (763) 520-8500

Securities registered pursuant to Section 12 (b) of the Act:

Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Stock, no par value per share	WINA	Nasdaq Global Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☒ Non-accelerated filer   ☐ Accelerated filer ☐  Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.

Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was $759,915,375.

Shares of no par value Common Stock outstanding as of February 26, 2024: 3,497,430 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the Registrant’s Annual Meeting of Shareholders to be held on April 24, 2024 have been incorporated by reference into Items 10, 11, 12, 13 and 14 of Part III of this report.

WINMARK CORPORATION AND SUBSIDIARIES

INDEX TO ANNUAL REPORT ON FORM 10-K

PART I		PAGE
Item 1.	Business	1
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	11
Item 1C.	Cybersecurity	11
Item 2.	Properties	11
Item 3.	Legal Proceedings	11
Item 4.	Mine Safety Disclosures	11
PART II		PAGE
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	12
Item 6.	[Reserved]	13
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 8.	Financial Statements and Supplementary Data	18
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	41
Item 9A.	Controls and Procedures	41
Item 9B.	Other Information	41
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	41
PART III		PAGE
Item 10.	Directors, Executive Officers and Corporate Governance	42
Item 11.	Executive Compensation	42
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	42
Item 13.	Certain Relationships and Related Transactions, and Director Independence	42
Item 14.	Principal Accountant Fees and Services	42
PART IV		PAGE
Item 15.	Exhibits and Financial Statement Schedules	42
Item 16.	Form 10-K Summary	45
	SIGNATURES	46

FORWARD LOOKING STATEMENTS OR INFORMATION

The statements contained in this Form 10-K Item 1 “Business”, Item 1A “Risk Factors”, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in Item 8 “Financial Statements and Supplemental Data” that are not strictly historical fact, including without limitation, the Company’s statements relating to growth opportunities, its ability to open new franchises, its ability to manage costs in the future, the number of franchises it believes will open, performance of its lease portfolio, its future cash requirements, its future effective tax rate and its belief that it will have adequate capital and reserves to meet its current and contingent obligations and operating needs, as well as its disclosures regarding market rate risk, and other statements in which we use words or phrases such as “will,” “may,” “should,” “could,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “intends,” and similar words are all forward looking statements made under the safe harbor provision of the Private Securities Litigation Reform Act. Such statements are based on management’s current expectations as of the date of this report but involve risks, uncertainties and other factors which may cause actual results to differ materially from those contemplated by such forward looking statements. Investors are cautioned to consider these forward looking statements in light of important factors which may result in material variations between results contemplated by such forward looking statements and actual results and conditions including, but not limited to, the risk factors discussed in Section 1A of this report. You should not place undue reliance on these forward-looking statements, which speak only as of the date they were made. The Company undertakes no obligation to revise or update publicly any forward-looking statement for any reason.

Winmark qualifies as a “Smaller Reporting Company” under Item 10(f)(1) of Regulation S-K. Winmark has elected to voluntarily include certain disclosures not required by a Smaller Reporting Company.

PART I

ITEM 1:     BUSINESS

Background

Winmark – the Resale Company® (Winmark Corporation, Winmark or the Company), is a nationally recognized franchisor focused on sustainability and small business formation. We champion and guide entrepreneurs interested in operating one of our award winning resale franchises: Plato’s Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore® and Music Go Round®. At December 30, 2023, there were 1,319 franchises in operation in the United States and Canada and over 2,800 available territories. Our mission is to provide Resale for Everyone™.

Each of our resale brands emphasizes consumer value by offering high-quality used merchandise at substantial savings from the price of new merchandise and by purchasing customers’ used goods that have been outgrown or are no longer used. Our concepts also offer a limited amount of new merchandise to customers. For over 30 years, we have offered a sustainable solution for consumers to recycle their gently used clothing, toys, sporting goods and musical instruments. We estimate that, since 2010, stores in our resale brands have extended the lives of over 1.7 billion items. We continue to enhance our franchise model and provide our franchisees with the technology, tools and training to profitably expand their operations and evolve towards being a multi-channel retailer.

Our significant assets are located within the United States, and we generate the majority of revenues from United States operations. Revenues from Canadian franchisees in 2023, 2022 and 2021 were approximately $6.8 million, $6.4 million and $4.9 million, respectively. For additional financial information, please see Item 8 — Financial Statements and Supplementary Data. We were incorporated in Minnesota in 1988.

1

Operations

We currently franchise five brands:

Plato’s Closet

We began franchising the Plato’s Closet brand in 1999. Plato’s Closet franchisees buy and sell gently used clothing and accessories geared toward the teenage and young adult market. Customers have the opportunity to sell their used items to Plato’s Closet stores and to purchase quality used clothing and accessories at prices lower than new merchandise.

Once Upon A Child

We began franchising the Once Upon A Child brand in 1993. Once Upon A Child franchisees buy and sell gently used and, to a lesser extent, new children’s clothing, toys, furniture, equipment and accessories. This brand primarily targets parents of children ages infant to 12 years. These customers have the opportunity to sell their used children’s items to a Once Upon A Child store when outgrown and to purchase quality used children’s clothing, toys, furniture and equipment at prices lower than new merchandise.

Play It Again Sports

We began franchising the Play It Again Sports brand in 1988. Play It Again Sports franchisees buy, sell and trade gently used and new sporting goods, equipment and accessories for a variety of athletic activities including team sports (baseball/softball, hockey, football, lacrosse, soccer), fitness, ski/snowboard and golf among others. The stores offer a flexible mix of merchandise that is adjusted to adapt to seasonal and regional differences.

Style Encore

We began franchising the Style Encore brand in 2013. Style Encore franchisees buy and sell gently used women’s (and to a lesser extent, men’s) apparel, shoes and accessories. Customers have the opportunity to sell their used items to Style Encore stores and to purchase quality used clothing, shoes and accessories at prices lower than new merchandise.

Music Go Round

We began franchising the Music Go Round brand in 1994. Music Go Round franchisees buy, sell and trade gently used and, to a lesser extent, new musical instruments, speakers, amplifiers, music-related electronics and related accessories.

The following table presents system-wide sales, which we define as estimated revenues generated by all franchise locations through both in-store and e-commerce sales, for each of the past three years.

	System-Wide Sales
	(in millions)
	2021		2022		2023
Plato’s Closet	$	594.4	$	638.8	$	647.6
Once Upon A Child		420.3		466.2		504.8
Play It Again Sports		300.7		324.1		328.2
Style Encore		49.4		58.1		59.2
Music Go Round		41.8		47.1		49.2
	$	1,406.6	$	1,534.3	$	1,589.0

We have developed an e-commerce platform that allows franchisees of our Music Go Round, Play It Again Sports and Style Encore brands to market and sell in-store product inventory online. Consumers that visit musicgoround.com, playitagainsports.com or style-encore.com can find all product listed by participating stores in one convenient location. All product listings are available for in-store pickup, and certain products may be available for shipment. Our e-commerce platform assists our franchisees in marketing, increasing brand awareness, and driving consumers to local stores, which provides further opportunities for our stores to purchase product from consumers. Additionally, our franchisees use other vehicles to drive non-store sales including social media platforms (Facebook and Instagram) as well as third-party e-commerce platforms (Shopify) and marketplaces (eBay).

2

The following table presents the royalties and franchise fees contributed by each of our brands for the past three years and the corresponding percentage of consolidated revenues for each such year:

	Total Royalties and Franchise Fees
	(in millions)						% of Consolidated Revenue
	2021		2022		2023		2021		2022		2023
Plato’s Closet	$	26.8	$	29.4	$	30.2	34.3	%	36.2	%	36.3	%
Once Upon A Child		18.9		21.1		23.1	24.1		25.9		27.7
Play It Again Sports		12.6		13.6		13.8	16.1		16.7		16.6
Style Encore		2.7		3.1		3.1	3.4		3.8		3.8
Music Go Round		1.3		1.5		1.5	1.7		1.8		1.8
	$	62.3	$	68.7	$	71.7	79.6	%	84.4	%	86.2	%

The following table presents a summary of our net store growth and renewal activity for the fiscal year ended December 30, 2023:

					AVAILABLE
	TOTAL			TOTAL	FOR	COMPLETED
	12/31/2022	OPENED	CLOSED	12/30/2023	RENEWAL	RENEWALS	% RENEWED
Plato’s Closet	500	11	(5)	506	65	65	100	%
Once Upon A Child	406	11	(1)	416	54	54	100	%
Play It Again Sports	281	17	(4)	294	34	34	100	%
Style Encore	71	—	(5)	66	18	17	94	%
Music Go Round	37	—	—	37	6	6	100	%
Total Franchised Stores(1)	1,295	39	(15)	1,319	177	176	99	%

(1) All stores are owned and operated by franchisees. Winmark does not own or operate any corporate stores.

Of the 1,319 total franchised stores as of December 30, 2023, 149 were located in Canada.

Sustainability

As a leader in the circular economy, we have been at the forefront of the sustainability movement for over 30 years. Our franchise brands offer customers a better way to keep their clothes, sporting goods and music equipment out of landfills and in use for a fuller, longer product lifespan. In 2023 alone, stores across our five resale brands extended the lives of over 182 million items of clothing, toys, books, musical instruments and sports equipment. Our high-quality franchised stores give consumers an easier way to buy and sell used goods within their local communities without placing demands on wasteful production. In turn, this means less water and energy consumption, giving consumers a way to help cut down on pollution and greenhouse gas emissions.

Franchising Business Model

We use franchising as a business method of distributing goods and services through our retail brands to consumers. We, as franchisor, own a retail business brand, represented by a service mark or similar right, and an operating system for the franchised business. We then enter into franchise agreements with franchisees and grant the franchisee the right to use our business brand, service marks and operating system to manage a retail business. Franchisees are required to operate their retail businesses according to the systems, specifications, standards and formats we develop for the business brand. We train the franchisees how to operate the franchised business. We also provide continuing support and service to our franchisees.

We have developed value-oriented retail brands based on a mix of gently used and, to a lesser extent, new merchandise. We franchise rights to franchisees who open franchised locations under such brands. The key elements of our franchise strategy include:

● franchising the rights to operate retail stores offering value-oriented merchandise;

● attracting new, qualified franchisees; and

● providing initial and continuing support to franchisees.

3

Offering Value-Oriented Merchandise

Our retail brands provide value to consumers by purchasing and reselling gently used merchandise that consumers have outgrown or no longer use at substantial savings from the price of new merchandise. By offering a combination of high-quality used and value-priced new merchandise, we benefit from consumer demand for value-oriented retailing. In addition, we believe that among national retail operations our brands provide a unique source of value to consumers by purchasing used merchandise. We also believe that the strategy of buying used merchandise increases consumer awareness of our retail brands.

Franchisee Qualification

We seek to attract prospective franchisees with experience in management and operations and an interest in being the owner and operator of their own business. We seek franchisees who:

● have a sufficient net worth;

● have prior business experience; and

● intend to be integrally involved with the management of the business.

At December 30, 2023, we had 71 signed franchise agreements, of which the majority are expected to open in 2024.

Franchise Support

As a franchisor, our success depends upon our ability to develop and support competitive and successful franchise owners. We emphasize the following areas of franchise support and assistance.

Training

Each franchisee must attend our training program regardless of prior experience. Soon after signing a franchise agreement, the franchisee is required to attend new owner orientation training. This course covers basic management issues, such as preparing a business plan, lease evaluation, evaluating insurance needs and obtaining financing. Our training staff assists each franchisee in developing a business plan for their retail store with financial and cash flow projections. The second training session is centered on store operations. It covers, among other things, point-of-sale computer training, inventory selection and acquisition, sales, marketing and other topics. We provide the franchisee with operations manuals that we periodically update.

Operations Support

We provide operational support and guidance to assist the franchisee in the opening of a new business. We also have an ongoing support program designed to assist franchisees in operating their retail stores. Our franchise support personnel visit each store periodically (in person or virtually) and, in most cases, a business assessment is made to determine whether the franchisee is operating in accordance with our standards. The visit is also designed to assist franchisees with operational issues.

Purchasing

During training each franchisee is taught how to evaluate, purchase and price used goods directly from customers. We have developed specialized computer point-of-sale systems for our brands that provide the franchisee with standardized pricing information to assist in the purchasing of used items.

We provide centralized buying services, which on a limited basis include credit and billing for the Play It Again Sports franchisees. Our Play It Again Sports franchise system uses several major vendors for new product including Bowflex, Wilson Sporting Goods, Champro Sports, Rawlings/Easton, CCM Hockey and Bauer Hockey. The loss of any of the above vendors would change the vendor mix, but not significantly change our products offered.

To provide the franchisees of our Play It Again Sports, Once Upon A Child and Music Go Round systems a source of affordable new product, we have developed relationships with our significant vendors and negotiated prices for our franchisees to take advantage of the buying power a franchise system brings.

4

Our typical Once Upon A Child franchised store purchases approximately 30% of its new product from Rachel’s Ribbons, Wild Side Accessories, Melissa & Doug and Nuby. The loss of any of the above vendors would change the vendor mix, but not significantly change our products offered.

Our typical Music Go Round franchised store purchases approximately 50% of its new product from KMC/Musicorp, RapcoHorizon Company, D’Addario, GHS Corporation and Ernie Ball. The loss of any of the above vendors would change the vendor mix, but not significantly change our products offered.

There are no significant vendors of new products to our typical Plato’s Closet and Style Encore franchised stores as new product is an extremely low percentage of sales for these brands.

Retail Advertising and Marketing

We encourage our franchisees to implement a marketing program that includes the following: television, radio, point-of-purchase materials, in-store signage and local store marketing programs as well as email marketing promotions, website promotions and participation in social and digital media. Franchisees of the respective brands are required to spend a minimum of 5% of their gross sales on approved advertising and marketing. Franchisees may be required to participate in regional cooperative advertising groups.

Computerized Point-Of-Sale Systems

We require our franchisees to use a retail information management computer system in each store, which has evolved with the development of new technology. This computerized point-of-sale system is designed specifically for use in our franchise retail stores. The current system includes our proprietary Data Recycling System software, a dedicated server, two or more work station registers with touch screen monitors, receipt printers, label printers and bar code scanners, together with software modules for inventory management, cash management and customer information management. Our franchisees purchase the computer hardware from us. The Data Recycling System software is designed to accommodate buying of used merchandise. This system provides franchisees with an important management tool that reduces errors, increases efficiencies and enhances inventory control. We provide point-of-sale system support through our Computer Support Center located at our Company headquarters.

The Franchise Agreement

We enter into franchise agreements with our franchisees. The following is a summary of certain key provisions of our current standard brand franchise agreement. Except as noted, the franchise agreements used for each of our brands, whether for locations in the United States or Canada, are generally the same.

Each franchisee must execute our franchise agreement and pay an initial franchise fee. At December 30, 2023, the franchise fee for all brands was $25,000 for an initial store in the U.S. and $34,000CAD for an initial store in Canada. Once a franchisee opens its initial store, it can open additional stores, in any brand, by paying a $15,000 franchise fee for a store in the U.S. and $20,500CAD for a store in Canada, provided an acceptable territory is available and the franchisee meets the brand’s additional store standards. The franchise fee for our initial store and additional store in Canada is based upon the exchange rate applied to the United States franchise fee on the last business day of the preceding fiscal year. The franchise fee in March 2024 for an initial store in Canada will be $33,200CAD, and an additional store in Canada will be $20,000CAD. Typically, the franchisee’s initial store is open for business approximately 10 to 14 months from the date the franchise agreement is signed. The franchise agreement has an initial term of 10 years, with subsequent 10-year renewal periods, and grants the franchisee an exclusive geographic area, which will vary in size depending upon population, demographics and other factors. Under current franchise agreements, franchisees of the respective brands are required to pay us weekly continuing fees (royalties) equal to the percentage of gross sales outlined in their Franchise Agreements, generally ranging from 4% to 5% for all of our brands.

Each Franchisee is currently required to pay us an annual marketing fee of $1,500, and is required to spend 5% of its gross sales for advertising and promoting its franchised store. We have the option to increase the minimum advertising expenditure requirement from 5% to 6% of the franchisee’s gross sales, of which up to 2% would be paid to us as an advertising fee for deposit into an advertising fund. This fund, if initiated, would be managed by us and would be used for advertising and promotion of the franchise system.

During the term of a franchise agreement, franchisees agree not to operate directly or indirectly any competitive business. In addition, franchisees agree that after the end of the term or termination of the franchise agreement, franchisees will not operate any competitive business for a period of two years and within a reasonable geographic area.

5

Although our franchise agreements contain provisions designed to assure the quality of a franchisee’s operations, we have less control over a franchisee’s operations than we would if we owned and operated a retail store. Under the franchise agreement, we have a right of first refusal on the sale of any franchised store, but we are not obligated to repurchase any franchised store.

Renewal of the Franchise Relationship

At the end of the 10-year term of each franchise agreement, each franchisee has the option to “renew” the franchise relationship by signing a new 10-year franchise agreement. If a franchisee chooses not to sign a new franchise agreement, a franchisee must comply with all post termination obligations including the franchisee’s noncompetition clause discussed above. We may choose not to renew the franchise relationship only when permitted by the franchise agreement and applicable state law.

We believe that renewing a significant number of these franchise relationships is important to the success of the Company. During the past three years, we renewed over 99% of franchise agreements up for renewal.

Competition

Retailing, including the sale of apparel, sporting goods and musical instruments, is highly competitive. Many retailers have substantially greater financial and other resources than we do. Our franchisees compete with established, locally owned retail stores, discount chains and traditional retail stores for sales of new merchandise. Full line retailers generally carry little or no used merchandise. Resale, thrift and consignment shops and garage and rummage sales offer competition to our franchisees for the sale of used merchandise. Also, our franchisees increasingly compete with online used and new goods marketplaces such as eBay, craigslist, facebook Marketplace, Poshmark, thredUP, Amazon and many others. More recently, retail and consumer apparel brands themselves have been participating (mostly through e-commerce) in developing platforms to sell previously used items. These have been done on their own or in connection with a technology partner.

Our Plato’s Closet franchise stores primarily compete with specialty apparel stores such as American Eagle, Gap, Abercrombie & Fitch, Old Navy, Hollister and Forever 21. We compete with other franchisors in the teenage resale clothing retail market.

Our Once Upon A Child franchisees compete primarily with large retailers such as Walmart, Target and various specialty children’s retail stores such as Carter’s and Gap Kids. We compete with other franchisors in the specialty children’s resale retail market.

Our Play It Again Sports franchisees compete with large retailers such as Dick’s Sporting Goods, Academy Sports & Outdoors as well as regional and local sporting goods stores. We also compete with Target and Walmart.

Our Style Encore franchise stores compete with a wide range of women’s apparel stores. We also compete with other franchisors in the women’s resale clothing retail market.

Our Music Go Round franchise stores compete with large musical instrument retailers such as Guitar Center as well as local independent musical instrument stores.

Our franchises may face additional competition in the future. This could include additional competitors that may enter the used merchandise market. We believe that our franchisees will continue to be able to compete with other retailers based on the strength of our value-oriented brands and the name recognition associated with our service marks.

We also face competition in connection with the sale of franchises. Our prospective franchisees frequently evaluate other franchise opportunities before purchasing a franchise from us. We compete with other franchise companies for franchisees based on the following factors, among others: amount of initial investment, franchise fee, royalty rate, profitability, franchisor services and industry. We believe that our franchise brands are competitive with other franchises based on the fees we charge, our franchise support services and the performance of our existing franchise brands.

6

Equipment Leasing Operations

Our leasing operations consist of a middle-market leasing business through Winmark Capital Corporation, which is a wholly-owned subsidiary.

Our middle-market leasing business began operations in 2004. In May 2021, we made the decision to no longer solicit new leasing customers and pursue an orderly run-off of this leasing portfolio. Given this decision, we anticipate that leasing revenues, expenses, contribution and cash flows will continue to decrease throughout the run-off period. For additional information on our leasing business, please see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8 “Financial Statements and Supplementary Data.”

Government Regulation

Fourteen states, the Federal Trade Commission and six Canadian Provinces impose pre-sale franchise registration and/or disclosure requirements on franchisors. In addition, a number of states have statutes which regulate substantive aspects of the franchisor-franchisee relationship such as termination, nonrenewal, transfer, discrimination among franchisees and competition with franchisees.

Additional legislation, both at the federal and state levels, could expand pre-sale disclosure requirements, further regulate substantive aspects of the franchise relationship and require us to file our Franchise Disclosure Documents with additional states. We cannot predict the effect of future franchise legislation, but do not believe there is any imminent legislation currently under consideration which would have a material adverse impact on our operations.

We believe that we are currently in compliance with all material statutes and regulations that are applicable to our business. We do not currently incur any material costs or effects of compliance with the environmental laws (federal, state and local).

Trademarks and Service Marks

We have various trademark registrations and pending trademark applications for registration, including Plato’s Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore®, Music Go Round®, Winmark®, Winmark – the Resale Company®, and Resale for Everyone®, among others. These marks are of considerable value to our business. We intend to protect our service marks by appropriate legal action where and when necessary. Each service mark registration must be renewed every 10 years. We have taken, and intend to continue to take, all steps necessary to renew the registration of all our material service marks.

Seasonality

Our Plato’s Closet and Once Upon A Child franchise brands have experienced higher than average sales volumes during the spring months and during the back-to-school season. Our Play It Again Sports franchise brand has experienced higher than average sales volumes during the winter season. Overall, the different seasonal trends of our brands partially offset each other and do not result in significant seasonality trends on a Company-wide basis.

Human Capital Resources

Human capital resources are an integral and essential component of our business.  As of December 30, 2023, we employed 83 employees. None of these employees are covered by a collective bargaining agreement. Our franchisees are independent business owners, therefore, they and their employees are not included in our employee count and are not employees of Winmark Corporation.

Our employees are our most valuable resource. We recognize that employee development is a critical element of maintaining an engaged and inclusive work environment. Investing in our employees supports employee retention, morale and enhances the quality of work. We provide mentorship opportunities, leadership succession planning and encourage promoting from within to further strengthen our commitment to each employee. Our compensation programs are designed to support not only the financial, but the physical and mental well-being of our employees.  In addition to our competitive salaries, our programs include, among other things, robust health and welfare benefits, a 401(k) plan with matching contribution, profit-sharing, generous paid leave policies, and an employee assistance program. We have in the past and will continue to place a strong emphasis on our employee’s welfare, health, and safety.

We recognize the benefits of and are committed to a culture of diversity and inclusion, where each individual is valued for their own unique perspective and experiences.  As of December 30, 2023, 55% of our overall employee count and 53% of our management team identify as female. Additionally, we provide training to our management team and

7

employees regarding diversity and inclusion and we continue to actively work to increase representation among underrepresented demographic groups within our employee base.

Available Information

We maintain a Web site at www.winmarkcorporation.com, the contents of which are not part of or incorporated by reference into this Annual Report on Form 10-K. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K (and amendments to those reports) available on our Web site via a link to the U.S. Securities and Exchange Commission (SEC) Web site, free of charge, as soon as reasonably practicable after such reports have been filed with or furnished to the SEC.

ITEM 1A:    RISK FACTORS

Our business, results of operations, financial condition, cash flows and the market value of our common stock can be adversely affected by pandemics, epidemics or other public health emergencies, such as the outbreak of COVID-19.

Our business, results of operations, financial condition, cash flows and the market value of our common stock can be adversely affected by pandemics, epidemics or other public health emergencies, such as the outbreak of COVID-19.

The extent to which pandemics, epidemics or other public health emergencies may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, depending upon the severity and duration of any such outbreak and the effectiveness of actions taken globally, nationally and locally to contain or mitigate its effects. Any resulting financial impact cannot be estimated reasonably at this time, but may materially adversely affect our business, results of operations, financial condition and cash flows. Even after any pandemic, epidemic or other public health emergency has subsided, we may experience materially adverse effects to our business due to any resulting economic recession or depression. Additionally, concerns over the economic affect of any pandemic, epidemic or other public health emergency may cause extreme volatility in financial and other capital markets which may adversely impact the market value of our common stock and our ability to access capital markets and debt capital. To the extent any pandemic, epidemic or other public health emergency adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this Annual Report.

We are dependent on franchise renewals.

Each of our franchise agreements is 10 years long. At the end of the term of each franchise agreement, each franchisee may, if certain conditions are met, “renew” the franchise relationship by signing a new 10-year franchise agreement. As of December 30, 2023 each of our five brands have the following number of franchise agreements that will expire over the next three years:

	2024	2025	2026
Plato’s Closet	56	44	40
Once Upon A Child	51	44	50
Play It Again Sports	22	20	14
Music Go Round	2	4	6
Style Encore	15	8	6
	146	120	116

We believe that renewing a significant number of these franchise relationships is important to our continued success. If a significant number of franchise relationships are not renewed, our financial performance would be materially and adversely impacted.

We are dependent on new franchisees.

Our ability to generate increased revenue and achieve higher levels of profitability depends in part on increasing the number of franchises open.  Unfavorable macro-economic conditions may affect the ability of potential franchisees to obtain external financing and/or impact their net worth, both of which could lead to a lower level of openings than we have historically experienced. There can be no assurance that we will sustain our current level of franchise openings.

We may make additional investments outside of our core businesses.

From time to time, we have and may continue to make investments both inside and outside of our current businesses. To the extent that we make additional investments that are not successful, such investments could have a material adverse impact on our financial results.

8

We may sell franchises for a territory, but the franchisee may not open.

We believe that a substantial majority of franchises awarded but not opened will open within the time period permitted by the applicable franchise agreement or we will be able to resell the territories for most of the terminated or expired franchises.  However, there can be no assurance that substantially all of the currently sold but unopened franchises will open and commence paying royalties to us.

Our franchisees are dependent on supply of used merchandise.

Our retail brands are based on offering customers a mix of used and new merchandise.  As a result, the ability of our franchisees to obtain continuing supplies of high quality used merchandise is important to the success of our brands.  Supply of used merchandise comes from the general public and may not be regular or highly reliable. In addition, adherence to federal and state product safety and other requirements may limit the amount of used merchandise available to our franchisees. In addition to laws and regulations that apply to businesses generally, our franchised retail stores may be subject to state or local statutes or ordinances that govern secondhand dealers. There can be no assurance that our franchisees will avoid supply problems with respect to used merchandise.

We may be unable to collect accounts receivable from franchisees.

In the event that our ability to collect accounts receivable significantly declines from current rates, we may incur additional charges that would affect earnings. If we are unable to collect payments due from our franchisees, it would materially adversely impact our results of operations and financial condition.

We operate in an extremely competitive industry.

Retailing, including the sale of apparel, sporting goods and musical instruments, is highly competitive.  Many retailers and online marketplaces have significantly greater financial and other resources than us and our franchisees.  Individual franchisees face competition in their markets from retailers of new merchandise and, in certain instances, resale, thrift and other stores that sell used merchandise.  We may face additional competition as our franchise systems expand and if additional competitors enter the used merchandise market.

We currently, and may in the future, have assets held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation, the loss of such assets would have a severe negative affect on our operations and liquidity.

We may maintain our cash assets at certain financial institutions in the U.S. in amounts that may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit of $250,000. In the event of a failure of any financial institutions where we maintain our deposits or other assets, we may incur a loss to the extent such loss exceeds the FDIC insurance limitation, which could have a material adverse effect upon our liquidity, financial condition and our results of operations.

We are subject to restrictions in our line of credit/term loan and note facilities. Additionally, we are subject to counter party risk in our line of credit facility.

The terms of our line of credit/term loan and note facilities impose certain operating and financial restrictions on us and require us to meet certain financial tests including tests related to minimum levels of debt service coverage and maximum levels of leverage. As of December 30, 2023, we were in compliance with all of our financial covenants under these facilities; however, failure to comply with these covenants in the future may result in default under one or both of these sources of capital and could result in acceleration of the related indebtedness. Any such acceleration of indebtedness would have an adverse impact on our business activities and financial condition.

Sustained credit market deterioration could jeopardize the counterparty obligations of the bank participating in our line of credit facility, which could have an adverse impact on our business if we are not able to replace such credit facility or find other sources of liquidity on acceptable terms.

9

We have indebtedness.

We have existing indebtedness in the form of notes payable and term loans (see Note 7 — “Debt”). We expect to generate the cash necessary to pay our expenses and to pay the principal and interest on all of our outstanding debt from cash flows provided by operating activities and by opportunistically using other means to repay or refinance our obligations as we determine appropriate. Our ability to pay our expenses and meet our debt service obligations depends on our future performance, which may be affected by financial, business, economic, and other factors. If we do not have enough money to pay our debt service obligations, we may be required to refinance all or part of our existing debt, sell assets, borrow more money or raise equity. In such an event, we may not be able to refinance our debt, sell assets, borrow more money or raise equity on terms acceptable to us or at all. Also, our ability to carry out any of these activities on favorable terms, if at all, may be further impacted by any financial or credit crisis which may limit access to the credit markets and increase our cost of capital.

We are subject to government regulation.

As a franchisor, we are subject to various federal and state franchise laws and regulations.  Fourteen states, the Federal Trade Commission and six Canadian Provinces impose pre-sale franchise registration and/or disclosure requirements on franchisors. In addition, a number of states have statutes which regulate substantive aspects of the franchisor-franchisee relationship such as termination, nonrenewal, transfer, discrimination among franchisees and competition with franchisees.

Additional legislation, both at the federal and state levels, could expand pre-sale disclosure requirements, further regulate substantive aspects of the franchise relationship and require us to file our franchise offering circulars with additional states. Future franchise legislation could impose costs or other burdens on us that could have a material adverse impact on our operations. In addition, evolving labor and employment laws, rules and regulations could result in potential claims against us as a franchisor for labor and employment related liabilities that have historically been borne by franchisees.

We may be unable to protect against data security risks.

We have implemented security systems with the intent of maintaining the physical security of our facilities and protecting our employees, franchisees, lessees, customers’, clients’ and suppliers’ confidential information and information related to identifiable individuals against unauthorized access through our information systems or by other electronic transmission or through the misdirection, theft or loss of physical media. These include, for example, the appropriate encryption of information. Despite such efforts, we are subject to potential breach of security systems which may result in unauthorized access to our facilities or the information we are trying to protect. Because the techniques used to obtain unauthorized access are constantly changing and becoming increasingly more sophisticated and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement sufficient preventative measures. If unauthorized parties gain physical access to one of our facilities or electronic access to our information systems or such information is misdirected, lost or stolen during transmission or transport, any theft or misuse of such information could result in, among other things, unfavorable publicity, governmental inquiry and oversight, difficulty in marketing our services, allegations by our customers and clients that we have not performed our contractual obligations, litigation by affected parties and possible financial obligations for damages related to the theft or misuse of such information, any of which could have a material adverse effect on our business.

Our stock price will fluctuate, and at times these fluctuations may be volatile.

The prices of markets and individual equities tend to fluctuate. These fluctuations commonly reflect events, many of which may be fully or partially outside of our control, that may change investor's perception of our future earnings growth prospects, including changes in economic conditions, ability to execute business strategy, the impacts of public policy, investor sentiment, competitive dynamics, and many other factors. While the sources of stock price fluctuation can be common across companies, the magnitude of these fluctuations can vary for different companies.

10

ITEM 1B:  UNRESOLVED STAFF COMMENTS

None.

ITEM 1C: CYBERSECURITY

We deploy several processes for assessing, identifying and managing material risks from cybersecurity threats. These processes include, but are not limited to, security assessments, physical access restrictions, internal and external penetration testing, endpoint detection and response, and employee security awareness programs and training.

Our cybersecurity processes have been integrated into our overall risk management processes, and we engage assistance from third parties as we deem necessary or appropriate. We believe that we have processes in place to oversee and identify risks from cybersecurity threats associated with our use of third-party services providers to our business. See Item 1A: Risk Factors for further discussion regarding data security risks.

Our Information Technology team, under the direction of the Chief Financial Officer and with the assistance of industry-leading third parties with over 20 years of expertise, is tasked with monitoring cybersecurity and operational risks related to information security and system disruption. They have many years of experience in various technology-related functions including security, auditing, compliance and systems. Our Executive Leadership team is briefed regularly on information security, including discussion of processes such as those listed above to monitor the prevention, detection, mitigation and remediation of cybersecurity incidents.

Our Board of Directors is charged with providing oversight of our risk management process. Specifically, the Audit Committee is primarily responsible for overseeing the risk management function, including risks from cybersecurity threats. Periodically, the Audit Committee reviews risk assessments, including cybersecurity risks, prepared by management and/or third-party providers.

There have been no previous cybersecurity incidents which have materially affected us to date, including our business strategy, results of operations or financial condition. However, any future potential risks from cybersecurity threats, including but not limited to exploitation of vulnerabilities, ransomware, denial of service, or other similar threats may materially affect us, including our execution of business strategy, reputation, results of operations and/or financial condition.

ITEM 2:     PROPERTIES

We lease 41,016 square feet at our headquarters facility in Minneapolis, Minnesota. We are obligated to pay rent monthly under the lease, and will pay an average of $840,500 annually over the remaining term that expires in 2029. We are also obligated to pay estimated taxes and operating expenses as described in the lease, which change annually. The total rentals, taxes and operating expenses paid may increase if we exercise any of our rights to acquire additional space described in the lease. Our facilities are sufficient to meet our current and immediate future needs.

ITEM 3:     LEGAL PROCEEDINGS

We are not a party to any material litigation and are not aware of any threatened litigation that would have a material adverse effect on our business.

ITEM 4:     MINE SAFETY DISCLOSURES

Not applicable.

11

PART II

ITEM 5:     MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information, Holders, Dividends

Winmark Corporation’s common stock trades on the NASDAQ Global Market under the symbol “WINA”. For dividend information see Note 6 – “Shareholders’ Equity (Deficit).”

At February 26, 2024, there were approximately 52 shareholders of record of our common stock.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

				Total Number of	Maximum Number
				Shares Purchased as	of Shares that may
	Total Number of	Average Price		Part of a Publicly	yet be Purchased
Period	Shares Purchased	Paid Per Share		Announced Plan(1)	Under the Plan
October 1, 2023 to November 4, 2023	—	$	—	—	78,600
November 5, 2023 to December 2, 2023	—	$	—	—	78,600
December 3, 2023 to December 30, 2023	—	$	—	—	78,600

(1) The Board of Directors’ authorization for the repurchase of shares of the Company’s common stock was originally approved in 1995 with no expiration date. The total shares approved for repurchase has been increased by additional Board of Directors’ approvals and as of December 30, 2023 was limited to 5,400,000 shares, of which 78,600 may still be repurchased.

The table set forth in Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matter” of this Annual Report is also incorporated herein by reference.

Performance Graph

In accordance with the rules of the SEC, the following graph compares the performance of our common stock on the NASDAQ stock market to the NASDAQ US Benchmark TR composite index and to the NASDAQ US Benchmark Retail TR industry index, of which we are a component. The graph compares on an annual basis the cumulative total shareholder return on $100 invested on December 29, 2018 though our fiscal year ended December 30, 2023 and assumes reinvestment of all dividends. The performance graph is not necessarily indicative of future investment performance.

12

ITEM 6:     [RESERVED]

None.

ITEM 7:     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management’s discussion and analysis of certain significant factors which have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements and should be read in conjunction with those consolidated financial statements. This section of this 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-date comparisons between 2022 and 2021 that are not included in this Form 10-K, can be found in ‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’ in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Overview

Winmark – the Resale Company is focused on sustainability and small business formation. As of December 30, 2023, we had 1,319 franchises operating under the Plato’s Closet, Once Upon A Child, Play It Again Sports, Style Encore and Music Go Round brands. Our business is not capital intensive and is designed to generate consistent, recurring revenue and strong operating margins.

The financial criteria that management closely tracks to evaluate current business operations and future prospects include royalties and selling, general and administrative expenses.

Our most significant source of franchising revenue is royalties received from our franchisees. During 2023, our royalties increased $3.1 million or 4.6% compared to 2022.

Management continually monitors the level and timing of selling, general and administrative expenses. The major components of selling, general and administrative expenses include salaries, wages and benefits, advertising, travel, occupancy, legal and professional fees. During 2023, selling, general and administrative expense increased $2.0 million, or 8.4%, compared to the same period last year.

Management also monitors several nonfinancial factors in evaluating the current business operations and future prospects including franchise openings and closings and franchise renewals. The following is a summary of our net store growth and renewal activity for the fiscal year ended December 30, 2023:

					AVAILABLE
	TOTAL			TOTAL	FOR	COMPLETED
	12/31/2022	OPENED	CLOSED	12/30/2023	RENEWAL	RENEWALS	% RENEWED
Plato’s Closet	500	11	(5)	506	65	65	100	%
Once Upon A Child	406	11	(1)	416	54	54	100	%
Play It Again Sports	281	17	(4)	294	34	34	100	%
Style Encore	71	—	(5)	66	18	17	94	%
Music Go Round	37	—	—	37	6	6	100	%
Total Franchised Stores(1)	1,295	39	(15)	1,319	177	176	99	%

(1) All stores are owned and operated by franchisees. Winmark does not own or operate any corporate stores.

Renewal activity is a key focus area for management. Our franchisees sign 10-year agreements with us. The renewal of existing franchise agreements as they approach their expiration is an indicator that management monitors to determine the health of our business and the preservation of future royalties. In 2023, we renewed 99% of franchise agreements up for renewal. This percentage of renewal has ranged between 99% and 100% during the last three years.

Our ability to grow our operating income is dependent on our ability to: (i) effectively support our franchise partners so that they produce higher revenues, (ii) open new franchises, and (iii) control our selling, general and administrative expenses. A detailed description of the risks to our business along with other risk factors can be found in Item 1A “Risk Factors”.

13

In May 2021, we made the decision to no longer solicit new leasing customers and will pursue an orderly run-off of our middle-market leasing portfolio. Leasing income net of leasing expense for the fiscal year of 2023 was $4.4 million compared to $6.0 million in 2022. Our leasing portfolio (net investment in leases – current and long-term), was $0.1 million at December 30, 2023 compared to $0.3 million at December 31, 2022. Given the decision to run-off the portfolio, we anticipate that leasing income net of leasing expense and the size of the leasing portfolio will continue to decrease through the run-off period. See Note 3 – “Investment in Leasing Operations” for information regarding the lease portfolio, including future minimum lease payments receivable under lease contracts and the amortization of unearned lease income.

Results of Operations

The following table sets forth selected information from our Consolidated Statements of Operations expressed as a percentage of total revenue and the percentage change in the dollar amounts from the prior period:

	Fiscal Year Ended				Fiscal 2023
	December 30,		December 31,		over (under)
	2023		2022		2022
Revenue:
Royalties	84.4	%	82.5	%	4.6	%
Leasing income	5.7		8.5		(31.3)
Merchandise sales	5.7		4.8		21.4
Franchise fees	1.8		1.9		(4.0)
Other	2.4		2.3		8.0
Total revenue	100.0		100.0		2.3
Cost of merchandise sold	(5.3)		(4.6)		20.2
Leasing expense	(0.5)		(1.2)		(59.5)
Provision for credit losses	-		0.1		(90.3)
Selling, general and administrative expenses	(30.2)		(28.4)		8.4
Income from operations	64.0		65.9		(0.6)
Interest expense	(3.7)		(3.6)		6.0
Interest and other income	1.4		0.1		1,269.3
Income before income taxes	61.7		62.4		1.1
Provision for income taxes	(13.4)		(14.0)		(1.5)
Net income	48.3	%	48.4	%	1.9	%

Revenue

Revenues for the year ended December 30, 2023 totaled $83.2 million compared to $81.4 million in 2022.

Royalties and Franchise Fees

Royalties increased to $70.2 million for 2023 from $67.1 million for the same period in 2022, a 4.6% increase. The increase is primarily due to higher franchisee retail sales and from having additional franchise stores in 2023 compared to 2022. Fiscal 2023 was a 52-week year compared to a 53-week year in fiscal 2022, which also impacted the comparability of royalty revenue.

Franchise fees of $1.5 million for 2023 were comparable to $1.6 million for 2022. Franchise fees include initial franchise fees from the sale of new franchises and transfer fees related to the transfer of existing franchises. Franchise fee revenue is recognized over the estimated life of the franchise, beginning when the franchise opens. An overview of retail brand franchise fees is presented in the Operations subsection of the Business section (Item 1).

Leasing Income

Leasing income decreased to $4.8 million in 2023 compared to $6.9 million for the same period in 2022. The decrease is primarily due to a decrease in selling profit on the commencement of sales type leases and lower levels of equipment sales to customers, partially offset by an increase in operating lease income when compared to last year.

14

Merchandise Sales

Merchandise sales include the sale of product to franchisees either through our Computer Support Center or through the Play It Again Sports buying group (together, “Direct Franchisee Sales”). Direct Franchisee Sales increased to $4.8 million in 2023 from $3.9 million in 2022. The increase is due to an increase in technology and buying group purchases by our franchisees.

Cost of Merchandise Sold

Cost of merchandise sold includes in-bound freight and the cost of merchandise associated with Direct Franchisee Sales. Cost of merchandise sold increased to $4.5 million in 2023 from $3.7 million in 2022. The increase was due to an increase in Direct Franchisee Sales discussed above. Cost of merchandise sold as a percentage of Direct Franchisee Sales for 2023 and 2022 was 93.7% and 94.7%, respectively.

Leasing Expense

Leasing expense decreased to $0.4 million in 2023 compared to $1.0 million in 2022. The decrease was primarily due to a decrease in depreciation on operating leases and a decrease in the associated cost of equipment sales to customers noted above.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 8.4% to $25.1 million in 2023 from $23.2 million in 2022. The increase was primarily due to an increase in conference expenses, as we returned to holding an in-person conference for our apparel brands for the first time since the Covid-19 outbreak, advertising related expenses, outside services and amortization expense.

Interest Expense

Interest expense was $3.1 million in 2023 compared to $2.9 million in 2022. The increase is primarily due to higher average corporate borrowings when compared to last year.

Income Taxes

The provision for income taxes was calculated at an effective rate of 21.8% and 22.4% for 2023 and 2022, respectively. The decrease is primarily due to higher tax benefits on the exercise of non-qualified stock options.

Segment Comparison of Fiscal Years 2023 and 2022

As of December 30, 2023, we have one reportable operating segment, franchising, and one non-reportable operating segment. The franchising segment franchises value-oriented retail store concepts that buy, sell and trade merchandise. The non-reportable operating segment includes our equipment leasing business. Segment reporting is intended to give financial statement users a better view of how we manage and evaluate our businesses. Our internal management reporting is the basis for the information disclosed for our operating segments. The following tables summarize financial information by segment and provide a reconciliation of segment contribution to income from operations:

	Year Ended
	December 30, 2023		December 31, 2022
Revenue:
Franchising	$	78,477,300	$	74,473,100
Other		4,766,200		6,937,700
Total revenue	$	83,243,500	$	81,410,800
Reconciliation to income from operations:
Franchising segment contribution	$	49,375,900	$	49,007,900
Other operating segment contribution		3,904,700		4,604,900
Total income from operations	$	53,280,600	$	53,612,800

Revenues are all generated from United States operations other than franchising revenue from Canadian operations of $6.8 million and $6.4 million in each of fiscal 2023 and 2022, respectively.

15

Franchising Segment Operating Income

The franchising segment’s 2023 operating income increased by $0.4 million, or 0.8%, to $49.4 million from $49.0 million for 2022. The increase in segment contribution was primarily due to increased royalty revenues, partially offset by an increase in selling, general and administrative expenses.

Other Segment Operating Income

The other segment operating income for 2023 decreased by $0.7 million, or 15.2%, to $3.9 million from $4.6 million for 2022. The decrease in segment contribution was due to a decrease in leasing income net of leasing expense, partially offset by a decrease in selling, general and administrative expenses.

Liquidity and Capital Resources

Our primary sources of liquidity have historically been cash flow from operations and borrowings. The components of the Consolidated Statements of Operations that reduce our net income but do not affect our liquidity include non-cash items for depreciation and amortization and compensation expense related to stock options.

We ended 2023 with $13.4 million in cash, cash equivalents and restricted cash compared to $13.7 million in cash, cash equivalents and restricted cash at the end of 2022.

Operating activities provided $44.0 million of cash during 2023 compared to $43.8 million provided during 2022.

Investing activities used $0.4 million of cash during 2023 compared to $3.7 million used during 2022.

Financing activities used $43.9 million of cash during 2023 compared to $37.9 million used during 2022. Our most significant financing activities over the past two years have consisted of net borrowings/payments on our debt facilities, the payment of dividends, repurchase of common stock, and net proceeds received from the exercise of stock options. During 2023, we paid $43.7 million in cash dividends (including a $9.40 per share special cash dividend; the “2023 Special Dividend”), and paid $4.3 million on notes payable; partially offset by $4.0 million of proceeds from the exercise of stock options. (See Note 6 — “Shareholders’ Equity (Deficit)” and Note 7 — “Debt”).

We have debt obligations and future operating lease commitments for our corporate headquarters. As of December 30, 2023, we had no other material outstanding commitments. (See Note 12 — “Commitments and Contingencies”). The following table summarizes our significant future contractual obligations at December 30, 2023:

	Payments due by period
			Less than 1						More than 5
	Total		year		1-3 years		3-5 years		years
Contractual Obligations
Line of Credit/Term loan(1)(3)	$	37,372,900	$	1,395,500	$	2,791,000	$	2,791,000	$	30,395,400
Notes Payable(2)(3)		44,413,700		5,604,800		6,178,000		32,630,900		—
Operating Lease Obligations		5,042,900		784,400		1,634,200		1,725,700		898,600
Total Contractual Obligations	$	86,829,500	$	7,784,700	$	10,603,200	$	37,147,600	$	31,294,000

(1) Includes interest payable monthly at rates ranging from 4.60% to 4.75%.

(2) Includes interest payable quarterly at rates ranging from 3.18% to 5.50% assuming principal payments in accordance with amortizing schedules.

(3) Refer to Part II, Item 8 in this report under Note 7 — “Debt” for additional information regarding long-term debt.

Our debt facilities include a Line of Credit with CIBC Bank USA and a Note Agreement and Shelf Agreement with Prudential. These facilities have been and will continue to be used for general corporate purposes, are secured by a lien against substantially all of our assets, contain customary financial conditions and covenants, and require maintenance of minimum levels of debt service coverage and maximum levels of leverage (all as defined within the agreements governing the facilities). As of December 30, 2023, we were in compliance with all of the financial covenants under the Line of Credit, the Note Agreement and the Shelf Agreement.

16

The Line of Credit provides for up to $20.0 million in revolving loans and $30.0 million in delayed draw term loans. As of December 30, 2023, we had no revolving loans outstanding, and had delayed draw term loan borrowings totaling $30.0 million that mature in 2029.

The Shelf Agreement allows us to offer privately negotiated senior notes to Prudential in an aggregate principal amount up to (i) $100.0 million, less (ii) the aggregate principal amount of notes outstanding at such point (including notes outstanding under the Note Agreement, which at December 30, 2023 was $39.2 million). As of December 30, 2023, we had not issued any notes under the Shelf Agreement. Of the $39.2 million of principal outstanding under the Note Agreement, $9.2 million amortizes over 2024 through 2027, and $30.0 million matures in 2028.

See Part II, Item 8, Note 7 – “Debt” for more information regarding the Line of Credit, Note Agreement and Shelf Agreement.

We expect to generate the cash necessary to pay our expenses and to pay the principal and interest on our outstanding debt from cash flows provided by operating activities and by opportunistically using other means to repay or refinance our obligations as we determine appropriate. Our ability to pay our expenses and meet our debt service obligations depends on our future performance, which may be affected by financial, business, economic, and other factors including the risk factors described under Item 1A of this report. If we do not have enough money to pay our debt service obligations, we may be required to refinance all or part of our existing debt, sell assets, borrow more money or raise equity. In such an event, we may not be able to refinance our debt, sell assets, borrow more money or raise equity on terms acceptable to us or at all. Also, our ability to carry out any of these activities on favorable terms, if at all, may be further impacted by any financial or credit crisis which may limit access to the credit markets and increase our cost of capital.

As of the date of this report we believe that the combination of our cash on hand, the cash generated from our franchising and leasing businesses, our Line of Credit and our Shelf Agreement will be adequate to fund our planned operations through 2024.

Critical Accounting Policies

The Company prepares the consolidated financial statements of Winmark Corporation and Subsidiaries in conformity with accounting principles generally accepted in the United States of America. As such, the Company is required to make certain estimates, judgments and assumptions that it believes are reasonable based on information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. There can be no assurance that actual results will not differ from these estimates. The critical accounting policies that the Company believes are most important to aid in fully understanding and evaluating the reported financial results include the following:

Revenue Recognition — Royalty Revenue and Franchise Fees

The Company collects royalties from each retail franchise based on a percentage of retail store gross sales. The Company recognizes royalties as revenue when earned. At the end of each accounting period, royalty amounts due are based on franchisee sales information. As of December 30, 2023, the Company’s royalty receivable was $1,110,500.

The Company collects initial franchise fees when franchise agreements are signed and recognizes the initial franchise fees as revenue over the estimated life of the franchise, beginning when the franchise is opened. Franchise fees collected from franchisees but not yet recognized as income are recorded as deferred revenue in the liability section of the consolidated balance sheet. As of December 30, 2023, deferred franchise fee revenue was $7,088,700.

Recent Accounting Pronouncements

See Note 2, “Significant Accounting Policies — Recently Issued Accounting Pronouncements”.

17

ITEM 7A:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company incurs financial markets risk in the form of interest rate risk. Risk can be quantified by measuring the financial impact of a near-term adverse increase in short-term interest rates. At December 30, 2023, the Company’s line of credit with CIBC Bank USA included a commitment for revolving loans of $20.0 million. The interest rates applicable to revolving loans are based on either the bank’s base rate or SOFR for short-term borrowings (twelve months or less). The Company had no revolving loans outstanding at December 30, 2023 under this line of credit. The Company’s earnings would be affected by changes in short-term interest rates only in the event that it were to borrow amounts under this facility. With the Company’s borrowings at December 30, 2023, a one percent increase in short-term rates would have no impact on annual pretax earnings. The Company had no interest rate derivatives in place at December 30, 2023.

None of the Company’s cash and cash equivalents at December 30, 2023 was invested in money market mutual funds, which are subject to the effects of market fluctuations in interest rates.

Foreign currency transaction gains and losses were not material to the Company’s results of operations for the year ended December 30, 2023, as approximately 8% of the Company’s total revenues and less than 1% of expenses were denominated in a foreign currency. Based upon these revenues and expenses, a 10% increase or decrease in the foreign currency exchange rates would impact annual pretax earnings by approximately $670,000. To date, the Company has not entered into any foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.

ITEM 8:     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Winmark Corporation and Subsidiaries

Index to Consolidated Financial Statements

Consolidated Balance Sheets	Page 19
Consolidated Statements of Operations	Page 20
Consolidated Statements of Shareholders’ Equity (Deficit)	Page 21
Consolidated Statements of Cash Flows	Page 22
Notes to the Consolidated Financial Statements	Page 23
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 248)	Page 39

18

WINMARK CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

	December 30, 2023		December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	13,361,500	$	13,615,600
Restricted cash		25,000		65,000
Receivables, less allowance for credit losses of $600 and $800		1,475,300		1,438,600
Net investment in leases - current		75,100		344,900
Income tax receivable		31,400		558,700
Inventories		386,100		770,600
Prepaid expenses		1,392,100		1,310,400
Total current assets		16,746,500		18,103,800
Net investment in leases — long-term		—		5,400
Property and equipment:
Furniture and equipment		3,602,900		3,484,200
Building and building improvements		2,952,100		2,952,100
Less - accumulated depreciation and amortization		(4,885,200)		(4,731,700)
Property and equipment, net		1,669,800		1,704,600
Operating lease right of use asset		2,425,900		2,716,000
Intangible assets, net		2,994,300		3,348,300
Goodwill		607,500		607,500
Other assets		471,300		429,700
Deferred income taxes		4,052,400		3,540,400
	$	28,967,700	$	30,455,700
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net of unamortized debt issuance costs of $32,100 and $32,100	$	4,217,900	$	4,217,900
Accounts payable		1,719,400		2,122,000
Accrued liabilities		2,858,200		2,611,700
Deferred revenue		1,666,100		1,643,900
Total current liabilities		10,461,600		10,595,500
Long-term Liabilities:
Line of credit/Term loan		30,000,000		30,000,000
Notes payable, net of unamortized debt issuance costs of $88,700 and $120,800		34,848,800		39,066,700
Deferred revenue		7,657,500		6,974,200
Operating lease liabilities		3,715,800		4,287,000
Other liabilities		1,440,100		1,164,400
Total long-term liabilities		77,662,200		81,492,300
Commitments and Contingencies (Note 12)		—		—
Shareholders’ Equity (Deficit):
Common stock, no par value, 10,000,000 shares authorized, 3,496,977 and 3,459,673 shares issued and outstanding		7,768,800		1,806,700
Retained earnings (accumulated deficit)		(66,924,900)		(63,438,800)
Total shareholders' equity (deficit)		(59,156,100)		(61,632,100)
	$	28,967,700	$	30,455,700

The accompanying notes are an integral part of these consolidated financial statements.

19

WINMARK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

	Fiscal Year Ended
	December 30, 2023		December 31, 2022		December 25, 2021
Revenue:
Royalties	$	70,230,700	$	67,148,100	$	60,779,300
Leasing income		4,766,200		6,937,700		11,148,300
Merchandise sales		4,761,100		3,921,600		3,100,100
Franchise fees		1,512,000		1,575,400		1,496,900
Other		1,973,500		1,828,000		1,691,600
Total revenue		83,243,500		81,410,800		78,216,200
Cost of merchandise sold		4,461,500		3,712,800		2,940,500
Leasing expense		398,300		984,700		1,850,300
Provision for credit losses		(5,600)		(57,900)		(206,600)
Selling, general and administrative expenses		25,108,700		23,158,400		22,295,800
Income from operations		53,280,600		53,612,800		51,336,200
Interest expense		(3,091,000)		(2,914,900)		(1,453,900)
Interest and other income (expense)		1,171,700		85,600		(15,000)
Income before income taxes		51,361,300		50,783,500		49,867,300
Provision for income taxes		(11,183,200)		(11,358,600)		(9,947,400)
Net income	$	40,178,100	$	39,424,900	$	39,919,900
Earnings per share - basic	$	11.55	$	11.30	$	10.87
Earnings per share - diluted	$	11.04	$	10.97	$	10.48
Weighted average shares outstanding - basic		3,479,936		3,487,732		3,671,980
Weighted average shares outstanding - diluted		3,640,524		3,592,456		3,810,480

The accompanying notes are an integral part of these consolidated financial statements.

20

WINMARK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity (Deficit)

Fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021

					Retained
					Earnings
	Common Stock			(Accumulated
	Shares	Amount		Deficit)		Total
BALANCE, December 26, 2020	3,756,028	$	9,281,800	$	(20,660,500)	$	(11,378,700)
Repurchase of common stock	(225,839)		(19,037,300)		(25,180,200)		(44,217,500)
Stock options exercised	105,617		8,320,000		—		8,320,000
Compensation expense relating to stock options	—		1,435,500		—		1,435,500
Cash dividends	—		—		(33,162,600)		(33,162,600)
Comprehensive income (Net income)	—		—		39,919,900		39,919,900
BALANCE, December 25, 2021	3,635,806		—		(39,083,400)		(39,083,400)
Repurchase of common stock	(226,165)		(4,597,400)		(44,522,400)		(49,119,800)
Stock options exercised	50,032		4,751,700		—		4,751,700
Compensation expense relating to stock options	—		1,652,400		—		1,652,400
Cash dividends	—		—		(19,257,900)		(19,257,900)
Comprehensive income (Net income)	—		—		39,424,900		39,424,900
BALANCE, December 31, 2022	3,459,673		1,806,700		(63,438,800)		(61,632,100)
Repurchase of common stock	—		—		—		—
Stock options exercised	37,304		4,009,700		—		4,009,700
Compensation expense relating to stock options	—		1,952,400		—		1,952,400
Cash dividends	—		—		(43,664,200)		(43,664,200)
Comprehensive income (Net income)	—		—		40,178,100		40,178,100
BALANCE, December 30, 2023	3,496,977	$	7,768,800	$	(66,924,900)	$	(59,156,100)

The accompanying notes are an integral part of these consolidated financial statements.

21

WINMARK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	Fiscal Year Ended
	December 30, 2023		December 31, 2022		December 25, 2021
OPERATING ACTIVITIES:
Net income	$	40,178,100	$	39,424,900	$	39,919,900
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment		418,700		411,400		430,600
Amortization of intangible assets		354,000		191,700		—
Provision for credit losses		(5,600)		(57,900)		(206,600)
Compensation expense related to stock options		1,952,400		1,652,400		1,435,500
Deferred income taxes		(512,000)		(287,700)		(1,362,000)
Gain from disposal of property and equipment		—		(9,400)		—
Deferred initial direct costs		—		—		(2,100)
Amortization of deferred initial direct costs		—		—		18,900
Operating lease right of use asset amortization		290,100		266,000		244,300
Tax benefits on exercised stock options		1,138,500		858,300		2,479,600
Change in operating assets and liabilities:
Receivables		(36,700)		(335,200)		478,500
Principal collections on lease receivables		556,000		3,646,700		9,915,400
Income tax receivable/payable		(611,200)		(749,500)		(2,925,900)
Inventories		384,500		(445,400)		(218,600)
Prepaid expenses		(81,700)		(301,800)		(13,400)
Other assets		(41,600)		(11,400)		17,600
Accounts payable		(402,600)		23,000		329,400
Accrued and other liabilities		(16,900)		222,800		(948,500)
Rents received in advance and security deposits		(275,200)		(819,200)		(1,046,600)
Deferred revenue		705,500		109,600		(199,800)
Net cash provided by operating activities		43,994,300		43,789,300		48,346,200
INVESTING ACTIVITIES:
Proceeds from sales of property and equipment		—		9,400		—
Purchase of property and equipment		(383,900)		(139,100)		(74,700)
Reacquired franchise rights		—		(3,540,000)		—
Purchase of equipment for lease contracts		—		—		(208,400)
Net cash used for investing activities		(383,900)		(3,669,700)		(283,100)
FINANCING ACTIVITIES:
Proceeds from borrowings on line of credit/term loan		—		33,700,000		—
Payments on line of credit/term loan		—		(3,700,000)		—
Proceeds from borrowings on notes payable		—		—		30,000,000
Payments on notes payable		(4,250,000)		(4,250,000)		(4,250,000)
Repurchases of common stock		—		(49,119,800)		(44,217,500)
Proceeds from exercises of stock options		4,009,700		4,751,700		8,320,000
Dividends paid		(43,664,200)		(19,257,900)		(33,162,600)
Net cash used for financing activities		(43,904,500)		(37,876,000)		(43,310,100)
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(294,100)		2,243,600		4,753,000
Cash, cash equivalents and restricted cash, beginning of period		13,680,600		11,437,000		6,684,000
Cash, cash equivalents and restricted cash, end of period	$	13,386,500	$	13,680,600	$	11,437,000
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$	3,049,400	$	2,722,500	$	1,388,900
Cash paid for income taxes	$	10,874,300	$	11,308,800	$	11,555,100
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets to the total of the same amounts shown above:
	Fiscal Year Ended
	December 30, 2023		December 31, 2022		December 25, 2021
Cash and cash equivalents	$	13,361,500	$	13,615,600	$	11,407,000
Restricted cash		25,000		65,000		30,000
Total cash, cash equivalents and restricted cash	$	13,386,500	$	13,680,600	$	11,437,000

The accompanying notes are an integral part of these consolidated financial statements.

22

WINMARK CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 30, 2023, December 31, 2022 and December 25, 2021

1.     Organization and Business:

Winmark Corporation and subsidiaries (the Company) offers licenses to operate franchises using the service marks Plato’s Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore® and Music Go Round®. In addition, the Company sells point-of-sale system hardware to its franchisees and certain merchandise to its Play It Again Sports franchisees. The Company also operates a middle-market equipment leasing businesses under the Winmark Capital® mark. The Company has a 52/53-week fiscal year that ends on the last Saturday in December. Fiscal year 2022 was a 53-week fiscal year, while 2023 and 2021 were 52-week fiscal years.

2.     Significant Accounting Policies:

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Winmark Capital Corporation, Wirth Business Credit, Inc. and Grow Biz Games, Inc. All material inter-company transactions have been eliminated in consolidation.

Cash Equivalents

Cash equivalents consist of highly liquid investments with an original maturity of three months or less when purchased. Cash equivalents are stated at cost, which approximates fair value. As of December 30, 2023 and December 31, 2022, the Company had $143,600 and $9,900, respectively, of cash located in Canadian banks. The Company holds its cash and cash equivalents with financial institutions and at times, such balances may be in excess of insurance limits.

Receivables

The Company provides an allowance for credit losses on trade receivables. The allowance for credit losses was $600 and $800 at December 30, 2023 and December 31, 2022 respectively. If receivables in excess of the provided allowance are determined uncollectible, they are charged to expense in the year the determination is made. Trade receivables are written off when they become uncollectible (which generally occurs when the franchise terminates and there is no reasonable expectation of collection), and payments subsequently received on such receivable are credited to the allowance for credit losses. Historically, receivables balances written off have not exceeded allowances provided.

Restricted Cash

The Company is required by certain states to maintain initial franchise fees in a restricted bank account until the franchise opens. Cash held in escrow totaled $25,000 and $65,000 at December 30, 2023 and December 31, 2022, respectively.

Investment in Leasing Operations

The Company uses the direct finance method of accounting to record income from direct financing leases. At the inception of a lease, the Company records the minimum future lease payments receivable, the estimated residual value of the leased equipment and the unearned lease income. Initial direct costs related to lease originations are deferred as part of the investment and amortized over the lease term. Unearned lease income is the amount by which the total lease receivable plus the estimated residual value exceeds the cost of the equipment.

Leasing Income Recognition

Leasing income for direct financing leases is recognized under the effective interest method. The effective interest method of income recognition applies a constant rate of interest equal to the internal rate of return on the lease.

For sales-type leases in which the equipment has a fair value greater or less than its carrying amount, selling profit/loss is recognized at commencement. For subsequent periods or for leases in which the equipment’s fair value is equal to its carrying amount, the recording of income is consistent with the accounting for a direct financing lease.

23

WINMARK CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 30, 2023, December 31, 2022 and December 25, 2021

For leases that are accounted for as operating leases, income is recognized on a straight-line basis when payments under the lease contract are due.

Generally, when a lease is more than 90 days delinquent (when more than three monthly payments are owed), the lease is classified as being on non-accrual and the Company stops recognizing leasing income on that date. Payments received on leases in non-accrual status generally reduce the lease receivable. Leases on non-accrual status remain classified as such until there is sustained payment performance that, in the Company’s judgment, would indicate that all contractual amounts will be collected in full.

Leasing Expense

Leasing expense includes the cost of financing equipment purchases, the cost of equipment sales as well as depreciation expense for operating lease assets.

Lease Residual Values

Residual values reflect the estimated amounts to be received at lease termination from sales or other dispositions of leased equipment to unrelated parties. The leased equipment residual values are based on the Company’s best estimate.

Allowance for Credit Losses

The Company maintains an allowance for credit losses at an amount that it believes to be sufficient to absorb losses inherent in its existing lease portfolio as of the reporting dates. Leases are collectively evaluated for potential loss. The Company’s methodology for determining the allowance for credit losses includes consideration of the level of delinquencies and non-accrual leases, historical net charge-off amounts and review of any significant concentrations.

A provision is charged against earnings to maintain the allowance for credit losses at the appropriate level. If the actual results are different from the Company’s estimates, results could be different. The Company’s policy is to charge-off against the allowance the estimated unrecoverable portion of accounts once they reach 121 days delinquent.

Inventories

The Company values its inventories at the lower of cost, as determined by the weighted average cost method, and net realizable values. Inventory consists of computer hardware and related accessories, all of which is finished goods merchandise held for resale.

Impairment of Long-lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying amount of the asset exceeds expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value.

Property and Equipment

Property and equipment is stated at cost. Depreciation and amortization for financial reporting purposes is provided on the straight-line method. Estimated useful lives used in calculating depreciation and amortization are: three to five years for computer and peripheral equipment, five to seven years for furniture and equipment and the shorter of the lease term or useful life for leasehold improvements. Major repairs, refurbishments and improvements which significantly extend the useful lives of the related assets are capitalized. Maintenance and repairs, supplies and accessories are charged to expense as incurred.

Intangible Assets

Intangible assets are amortized over the estimated useful life on a straight line basis. The Company reviews its intangible assets for impairment at its fiscal year end or whenever events or changes in circumstances indicate that there has been impairment in the value of its intangible assets. No impairment was noted during fiscal years ended 2023 and 2022. Intangible assets of $3.0 million and $3.3 million in the consolidated balance sheets at December 30, 2023 and December 31, 2022, respectively, are all attributable to the Franchising segment.

24

WINMARK CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 30, 2023, December 31, 2022 and December 25, 2021

Goodwill

The Company reviews its goodwill for impairment at its fiscal year end or whenever events or changes in circumstances indicate that there has been impairment in the value of its goodwill. No impairment was noted during fiscal years ended 2023, 2022 and 2021. Goodwill of $0.6 million in the consolidated balance sheets at December 30, 2023 and December 31, 2022 is all attributable to the Franchising segment.

Use of Estimates

The preparation of financial statements in conformity with generally accepted U.S. accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The ultimate results could differ from those estimates.

Advertising

Advertising costs are charged to selling, general and administrative expenses as incurred. Advertising costs were $0.7 million, $0.5 million and $0.3 million for fiscal years 2023, 2022 and 2021, respectively.

Accounting for Stock-Based Compensation

The Company recognizes the cost of all share-based payments to employees, including grants of employee stock options, in the consolidated financial statements based on the grant date fair value of those awards. This cost is recognized over the period for which an employee is required to provide service in exchange for the award.

The Company estimates the fair value of options granted using the Black-Scholes option valuation model. The Company estimates the volatility of its common stock at the date of grant based on its historical volatility rate. The Company’s decision to use historical volatility was based upon the lack of actively traded options on its common stock. The Company estimates the expected term based upon historical option exercises. The risk-free interest rate assumption is based on observed interest rates for the expected term. The Company uses historical data to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest. For options granted, the Company amortizes the fair value on a straight-line basis. All options are amortized over the vesting periods, which are generally four years beginning from the date of grant.

Revenue Recognition – Franchising

The following is a description of the principal sources of revenue for the company’s franchising segment. The Company’s performance obligations under franchise agreements consist of (a) a franchise license, including a license to use one of our brands, (b) a point-of-sale software license, (c) initial services, such as pre-opening training and marketing support, and (d) ongoing services, such as marketing services and operational support. These performance obligations are highly interrelated so we do not consider them to be individually distinct and therefore account for them under ASC 606 as a single performance obligation, which is satisfied by providing a right to use our intellectual property over the estimated life of the franchise. The disaggregation of the Company’s franchise revenue is presented within the Revenue lines of the Consolidated Statements of Operations with the amounts included in Revenue: Other delineated below.

Royalties

The Company collects royalties from each retail franchise based upon a percentage of retail sales. The Company recognizes royalties at the time the underlying sales occur.

Merchandise Sales

Merchandise sales include the sale of point-of-sale technology equipment to franchisees and the sale of a limited amount of sporting goods to certain Play It Again Sports franchisees. Merchandise sales, which includes shipping and handling charges, are recognized at a point in time when the product has been shipped to the franchisee. Shipping and handling costs associated with outbound freight are accounted for as a fulfillment cost and included in cost of merchandise sold.

25

WINMARK CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 30, 2023, December 31, 2022 and December 25, 2021

Franchise Fees

The Company collects initial franchise fees when franchise agreements are signed. The Company recognizes franchise fee revenue over the estimated life of the franchise, beginning with the opening of the franchise, which is when the Company has performed substantially all initial services required by the franchise agreement and the franchisee benefits from the rights afforded by the franchise agreement. The Company had deferred franchise fee revenue of $7.1 million and $6.7 million at December 30, 2023 and December 31, 2022, respectively.

Marketing Fees

Marketing fee revenue is included in the Revenue: Other line of the Consolidated Statements of Operations. The Company bills and collects annual marketing fees from its franchisees at various times throughout the year. The Company recognizes marketing fee revenue on a straight line basis over the franchise duration. The Company recognized $1.6 million, $1.5 million and $1.3 million in marketing fee revenue for each of the fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021, respectively.

Software License Fees

Software license fee revenue is included in the Revenue: Other line of the Consolidated Statements of Operations. The Company bills and collects software license fees from its franchisees when the point-of-sale system is provided to the franchisee. The Company recognizes software license fee revenue on a straight line basis over the franchise duration. The Company recognized $0.4 million, $0.3 million and $0.3 million in software license fee revenue for each of the fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021, respectively. The Company had deferred software license fees of $1.8 million and $1.6 million at December 30, 2023 and December 31, 2022, respectively.

Contract Liabilities

The Company’s contract liabilities for its franchise revenues consist of deferred revenue associated with franchise fees and software license fees described above.

Commission Fees

The Company capitalizes incremental commission fees paid as a result of obtaining franchise agreement contracts. Capitalized commission fees of $0.6 million and $0.5 million are outstanding at December 30, 2023 and December 31, 2022, respectively and are included in Prepaid expenses and Other assets in the Consolidated Balance Sheets.

Capitalized commission fees are amortized over the life of the franchise and are included in selling, general and administrative expenses. During the fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021, the Company recognized $109,700, $100,800 and $95,200 of commission fee expense, respectively.

Income Taxes

The Company accounts for incomes taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits in income tax expense.

Sales Tax

The Company’s accounting policy is to present taxes collected from customers and remitted to government authorities on a net basis.

26

WINMARK CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 30, 2023, December 31, 2022 and December 25, 2021

Earnings Per Share

The Company calculates earnings per share by dividing net income by the weighted average number of shares of common stock outstanding to arrive at the Earnings Per Share — Basic. The Company calculates Earnings Per Share — Diluted by dividing net income by the weighted average number of shares of common stock and dilutive stock equivalents from the potential exercise of stock options using the treasury stock method.

The following table sets forth the presentation of shares outstanding used in the calculation of basic and diluted earnings per share (“EPS”):

	Year Ended
	December 30, 2023	December 31, 2022	December 25, 2021
Denominator for basic EPS — weighted average common shares	3,479,936	3,487,732	3,671,980
Dilutive shares associated with option plans	160,588	104,724	138,500
Denominator for diluted EPS — weighted average common shares and dilutive potential common shares	3,640,524	3,592,456	3,810,480
Options excluded from EPS calculation — anti-dilutive	2,913	21,153	20,294

Fair Value Measurements

The Company defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  The Company uses three levels of inputs to measure fair value:

● Level 1 — quoted prices in active markets for identical assets and liabilities.

● Level 2 — observable inputs other than quoted prices in active markets for identical assets and liabilities.

● Level 3 — unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions.

Due to their nature, the carrying value of cash equivalents, receivables, payables and debt obligations approximates fair value.

Recently Issued Accounting Pronouncements

Segment Reporting – In November 2023, the FASB issued guidance that expands segment disclosures for public entities, including requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), the title and position of the CODM and an explanation of how the CODM uses reported measures of segment profit or loss in assessing segment performance and allocating resources. The new guidance also expands disclosures about a reportable segment’s profit or loss and assets in interim periods and clarifies that a public entity may report additional measures of segment profit if the CODM uses more than one measure of a segment’s profit or loss. The new guidance does not remove existing segment disclosure requirements or change how a public entity identifies its operating segments, aggregates those operating segments, or determines its reportable segments. The guidance is effective for fiscal years beginning after December 15, 2023, and subsequent interim periods with early adoption permitted, and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact this new guidance will have on its financial statements and disclosures.

Improvements to Income Tax Disclosures – In December 2023, the FASB issued guidance that expands income tax disclosures for public entities, including requiring enhanced disclosures related to the rate reconciliation and income taxes paid information. The guidance is effective for annual disclosures for fiscal years beginning after December 15, 2024, with early adoption permitted. The guidance should be applied on a prospective basis, with retrospective application to all prior periods presented in the financial statements permitted. The Company is currently evaluating the impact this new guidance will have on its financial statements and disclosures.

Reclassifications

Certain reclassifications of previously reported amounts have been made to conform to the current year presentation. Such reclassifications did not impact net income or shareholders’ equity (deficit) as previously reported.

27

WINMARK CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 30, 2023, December 31, 2022 and December 25, 2021

3.     Investment in Leasing Operations:

In May 2021, the Company made the decision to no longer solicit new leasing customers in its middle-market leasing business and will pursue an orderly run-off of this leasing portfolio.

Investment in leasing operations consists of the following:

	December 30, 2023		December 31, 2022
Direct financing and sales-type leases:
Minimum lease payments receivable	$	77,100	$	294,100
Estimated unguaranteed residual value of equipment		17,700		461,700
Unearned lease income, net of initial direct costs deferred		(6,700)		(103,800)
Security deposits		(28,100)		(303,300)
Total investment in direct financing and sales-type leases		60,000		348,700
Allowance for credit losses		(1,500)		(7,100)
Net investment in direct financing and sales-type leases		58,500		341,600
Operating leases:
Operating lease assets		876,500		716,100
Less accumulated depreciation and amortization		(859,900)		(707,400)
Net investment in operating leases		16,600		8,700
Total net investment in leasing operations	$	75,100	$	350,300

As of December 30, 2023, the $75,100 total net investment in leases consisted of $75,100 classified as current and $0 classified as long-term. As of December 31, 2022, the $350,300 total net investment in leases consisted of $344,900 classified as current and $5,400 classified as long-term.

As of December 30, 2023 and December 31, 2022, no customers had leased assets totaling more than 10% of the Company’s total assets.

Future minimum lease payments receivable under lease contracts and the amortization of unearned lease income, net of initial direct costs deferred, is as follows as of December 30, 2023:

	Direct Financing and Sales-Type Leases
	Minimum Lease		Income
Fiscal Year	Payments Receivable		Amortization
2024	$	77,100	$	6,700
Thereafter		—		—
	$	77,100	$	6,700

The Company’s key credit quality indicator for its investment in direct financing and sales-type leases is the status of the lease, defined as accruing or non-accrual. Leases that are accruing income are considered to have a lower risk of loss. Non-accrual leases are those that the Company believes have a higher risk of loss. The Company experienced no credit losses in its lease portfolio during the fiscal years ended December 30, 2023, December 31, 2022, and December 25, 2021. At December 30, 2023 and December 31, 2022, no leases in the Company’s lease portfolio were past due, and all were on accrual status.

The Company leases high-technology and other business-essential equipment to its leasing customers. Upon expiration of the initial term or extended lease term, depending on the structure of the lease, the customer may return the equipment, renew the lease for an additional term, or purchase the equipment. Due to the uncertainty of such outcome at the end of the lease term, the lease as recorded at commencement represents only the current terms of the agreement. As a lessor, the Company’s leases do not contain non-lease components. The residual values reflect the estimated amounts to be received at lease termination from sales or other dispositions of leased equipment to unrelated parties. The leased equipment residual values are based on the Company’s best estimate. The Company’s risk management strategy for its residual value includes the contractual obligations of its customers to maintain, service, and insure the leased equipment, the use of third party remarketers as well as the analytical review of historical asset dispositions.

28

WINMARK CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 30, 2023, December 31, 2022 and December 25, 2021

Leasing income as presented on the Consolidated Statements of Operations consists of the following:

	Year Ended		Year Ended			Year Ended
	December 30, 2023		December 31, 2022			December 25, 2021
Interest income on direct financing and sales-type leases	$	246,200	$	760,500	-	$	1,755,200
Selling profit (loss) at commencement of sales-type leases		94,900		1,326,900			1,829,800
Operating lease income		2,999,400		2,243,300			2,017,300
Income on sales of equipment under lease		834,500		1,798,000			4,799,400
Other		591,200		809,000			746,600
Leasing income	$	4,766,200	$	6,937,700		$	11,148,300

4.     Receivables:

The Company’s current receivables consisted of the following:

	December 30, 2023		December 31, 2022
Trade	$	189,600	$	145,000
Royalty		1,110,500		1,216,600
Other		175,200		77,000
	$	1,475,300	$	1,438,600

As part of its normal operating procedures, the Company requires Standby Letters of Credit as collateral for a portion of its trade receivables.

5.     Intangible Assets:

In June 2022, Winmark terminated an agreement that contained the rights for eleven Play It Again Sports stores to operate separately from Winmark’s franchise system. In terminating the agreement, which included $3.54 million of consideration paid by Winmark, Winmark reacquired the franchise rights to these eleven stores. Upon termination of the agreement, individual franchise agreements were signed for these eleven stores, each with an initial term of ten years.

Intangible assets consist of these reacquired franchise rights. The Company amortizes the fair value of the reacquired franchise rights over the contract term of the franchise. The Company recognized $354,000 and $191,700 of amortization expense for the years ended December 30, 2023 and December 31, 2022, respectively.

Intangible assets consist of the following:

	December 30, 2023		December 31, 2022
Reacquired franchise rights	$	3,540,000	$	3,540,000
Accumulated amortization		(545,700)		(191,700)
	$	2,994,300	$	3,348,300

The following table illustrates future amortization to be expensed for the next five fiscal years and fiscal years thereafter related to reacquired franchise rights as of December 30, 2023.

Amortization expected to be expensed in	Amount
2024	$	354,000
2025		354,000
2026		354,000
2027		354,000
2028		354,000
Thereafter		1,224,300
	$	2,994,300

29

WINMARK CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 30, 2023, December 31, 2022 and December 25, 2021

6. Shareholders’ Equity (Deficit):

Dividends

In 2023, the Company declared and paid quarterly cash dividends totaling $3.10 per share ($10.8 million) and a $9.40 per share special cash dividend (the “2023 Special Dividend”). The 2023 Special Dividend totaled $32.9 million and was paid by cash on hand.

In 2022, the Company declared and paid quarterly cash dividends totaling $2.55 per share ($8.9 million) and a $3.00 per share special cash dividend (the “2022 Special Dividend”). The 2022 Special Dividend totaled $10.4 million and was paid by cash on hand.

In 2021, the Company declared and paid quarterly cash dividends totaling $1.60 per share ($5.9 million) and a $7.50 per share special cash dividend (the “2021 Special Dividend”). The 2021 Special Dividend totaled $27.3 million and was paid by cash on hand.

Repurchase of Common Stock

In 2022, the Company purchased 226,165 shares of our common stock for an aggregate purchase price of $49.1 million.

In 2021, the Company purchased 225,839 shares of our common stock for an aggregate purchase price of $44.2 million.

Under the Board of Directors’ authorization, as of December 30, 2023 the Company has the ability to repurchase an additional 78,600 shares of its common stock. Repurchases may be made from time to time at prevailing prices, subject to certain restrictions on volume, pricing and timing.

Stock Option Plans and Stock-Based Compensation

The Company had authorized up to 700,000 shares of common stock for granting either nonqualified or incentive stock options to officers and key employees under the Company’s 2010 Stock Option Plan (the “2010 Plan”). The 2010 Plan expired on February 24, 2020. The Company had also sponsored a Stock Option Plan for Nonemployee Directors (the “Nonemployee Directors Plan”), which had reserved a total of 350,000 shares for issuance to directors of the Company who are not employees.

At the April 29, 2020 Annual Shareholders Meeting, the Company’s shareholders approved a new stock option plan, the 2020 Stock Option Plan (the “2020 Plan”). The 2020 Plan (as described more completely in the Company’s definitive Proxy Statement filed with the United States Securities and Exchange Commission on March 10, 2020) provides for the issuance of up to 100,000 shares of common stock plus (i) the number of common stock authorized and unissued under the 2010 Plan (as of April 29, 2020, 125,465 shares), and (ii) the number of shares of common stock authorized and unissued under the Nonemployee Director Plan (as of April 29, 2020, 24,500 shares) in the form of either nonqualified or incentive stock option grants. Participants in the 2020 Plan may include employees, officers, directors, consultants and advisors of the Company.

Grants under the 2020 Plan are (as they were under the 2010 Plan and Nonemployee Directors Plan) made by the Compensation Committee of the Board of Directors at a price of not less than 100% of the fair market value on the date of grant. If an incentive stock option is granted to an individual who owns more than 10% of the voting rights of the Company’s common stock, the option exercise price may not be less than 110% of the fair market value on the date of grant. The term of the options may not exceed 10 years, except in the case of nonqualified stock options, whereby the terms are established by the Compensation Committee. Options may be exercisable in whole or in installments, as determined by the Compensation Committee.

30

WINMARK CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 30, 2023, December 31, 2022 and December 25, 2021

Stock option activity under the 2010 Plan, 2020 Plan and Nonemployee Directors Plan (collectively, the “Option Plans”) as of December 30, 2023 was as follows:

				Weighted Average
				Remaining
	Number of	Weighted Average		Contractual Life
	Shares	Exercise Price		(years)	Intrinsic Value
Outstanding, December 26, 2020	393,488	$	113.19	5.61	$	27,864,900
Granted	72,600		226.96
Exercised	(105,617)		78.78
Forfeited	(4,850)		158.48
Outstanding, December 25, 2021	355,621		146.03	6.32		39,320,600
Granted	62,540		217.03
Exercised	(50,032)		94.97
Forfeited	(6,501)		183.28
Outstanding, December 31, 2022	361,628		164.70	6.40		26,688,200
Granted	21,320		328.68
Exercised	(37,304)		107.49
Forfeited	(3,752)		204.26
Outstanding, December 30, 2023	341,892	$	180.73	5.98	$	81,017,600
Exercisable, December 30, 2023	230,739	$	153.64	4.87	$	60,894,300

The fair value of options granted under the Option Plans during 2023, 2022 and 2021 were estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions and results:

	Year Ended
	December 30, 2023			December 31, 2022			December 25, 2021
Risk free interest rate		3.88	%		3.15	%		1.13	%
Expected life (years)		6			6			6
Expected volatility		28.10	%		27.58	%		25.51	%
Dividend yield		2.94	%		4.29	%		3.13	%
Option fair value	$	79.88		$	40.59		$	37.90

The total intrinsic value of options exercised during 2023, 2022 and 2021 was $9.2 million, $6.6 million and $16.2 million, respectively. The total fair value of shares vested during 2023, 2022 and 2021 was $11.7 million, $10.9 million and $9.0 million, respectively.

All unexercised options at December 30, 2023 have an exercise price equal to the fair market value on the date of the grant.

Compensation expense of $1,952,400, $1,652,400 and $1,435,500 relating to the vested portion of the fair value of stock options granted was expensed to “Selling, General and Administrative Expenses” in 2023, 2022 and 2021, respectively. As of December 30, 2023, the Company had $4.2 million of total unrecognized compensation expense related to stock options that is expected to be recognized over the remaining weighted average vesting period of approximately 2.3 years.

31

WINMARK CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 30, 2023, December 31, 2022 and December 25, 2021

7.     Debt:

Line of Credit/Term Loan

During 2021, the Company’s Line of Credit with CIBC Bank USA (the “Line of Credit”) was amended to, among other things:

● Permit the Company to issue up to $30.0 million in additional term notes to one or more affiliates or managed accounts of PGIM, Inc. (formerly Prudential Investment Management, Inc.) (collectively, “Prudential”);

● Remove the tangible net worth covenant minimum requirement, amend the fixed charge coverage ratio definition, and amend the restricted payments covenant to allow the Company more flexibility with respect to shareholder distributions and/or common stock repurchases as long as certain conditions are met (as defined within the amendment);

● Amend the provisions that allow for the replacement of LIBOR as an interest rate option in connection with borrowings under the Line of Credit.

During 2022, the Line of Credit was amended to, among other things:

● Provide for a new $30.0 million delayed draw term facility, with available draws summarized as follows:

o The Company may draw up to five (5) loans over a period of 18 months, each draw having a principal amount not less than $3.0 million (or higher integral multiples of $1.0 million), with aggregate draws outstanding not to exceed $30.0 million;

o The final maturity of all drawn loans of April 12, 2029, with all payments of principal due on such date;

o Interest at a rate to be determined at the time of each draw, payable monthly in arrears on the outstanding aggregate principal balance.

● Decrease the aggregate commitments for revolving loans from $25.0 million to $20.0 million;

● Extend the termination date for revolving loans from August 31, 2024 to April 12, 2027;

● Remove the borrowing base covenant restriction for revolving loans;

● Replace LIBOR with SOFR as an interest rate option in connection with borrowings on revolving loans and adjust the definition of and reduce the applicable margin to reflect such replacement;

● Amend the fixed charge coverage ratio definition to exclude principal payments on non-amortizing term loans that are refinanced with proceeds from permitted debt (as defined within the amendment);

● Permit the Company to issue additional term notes under a new Private Shelf Agreement with Prudential as described below.

As of December 30, 2023, there were no revolving loans outstanding under the Line of Credit, leaving $20.0 million available for additional revolving borrowings. During the year ended December 30, 2023, the Company had delayed draw term loan borrowings totaling $30.0 million under the Line of Credit bearing interest ranging from 4.60% to 4.75%.

The Line of Credit has been and will continue to be used for general corporate purposes. The Line of Credit is secured by a lien against substantially all of the Company’s assets, contains customary financial conditions and covenants, and requires maintenance of minimum levels of debt service coverage and maximum levels of leverage (all as defined within the Line of Credit). As of December 30, 2023, the Company was in compliance with all of its financial covenants.

The Line of Credit allows the Company to choose between two interest rate options in connection with its borrowings. The interest rate options are the Base Rate (as defined) and the SOFR Rate (as defined) plus an applicable margin of 0% and 1.75%, respectively. Interest periods for SOFR borrowings can be one month. The Line of Credit also provides for non-utilization fees of 0.25% per annum on the daily average of the unused commitment.

32

WINMARK CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 30, 2023, December 31, 2022 and December 25, 2021

Notes Payable

The Company has a Note Agreement (the “Note Agreement”) with Prudential. During 2021, the Note Agreement was amended to, among other things:

● Provide for the issuance of $30.0 million in new senior secured notes;

● Remove the tangible net worth covenant minimum requirement, amend the fixed charge coverage ratio definition, and amend the restricted payments covenant to allow the Company more flexibility with respect to shareholder distributions and/or common stock repurchase as long as certain conditions are met (as defined within the amendment).

During 2022, the Note Agreement with Prudential was amended to, among other things:

● Permit the Company to incur the obligations described in and conform to the changes made by the Company’s entry into the amendments to the Line of Credit described above;

● Permit the Company to incur the obligations described in and conform to the changes made by the Company’s entry into the Shelf Agreement described below.

As of December 30, 2023, the Company had aggregate principal outstanding of $39.2 million under the Note Agreement; consisting of $4.5 million in principal outstanding from the $25.0 million Series A notes issued in May 2015, $4.7 million in principal outstanding from the $12.5 million Series B notes issued in August 2017 and $30.0 million in principal outstanding from the $30.0 million Series C notes issued in September 2021.

The final maturity of the Series A and Series B notes is 10 years from the issuance date. The final maturity of the Series C notes is 7 years from the issuance date. For the Series A notes, interest at a rate of 5.50% per annum on the outstanding principal balance is payable quarterly, along with required prepayments of the principal of $500,000 quarterly for the first five years, and $750,000 quarterly thereafter until the principal is paid in full. For the Series B notes, interest at a rate of 5.10% per annum on the outstanding principal balance is payable quarterly, along with required prepayments of the principal of $312,500 quarterly until the principal is paid in full. For the Series C notes, interest at a rate of 3.18% per annum on the outstanding principal balance is payable quarterly until the principal is paid in full. The Series A, Series B and Series C notes may be prepaid, at the option of the Company, in whole or in part (in a minimum amount of $1.0 million), but prepayments require payment of a Yield Maintenance Amount, as defined in the Note Agreement.

The Company’s obligations under the Note Agreement are secured by a lien against substantially all of the Company’s assets (as the notes rank pari passu with the Line of Credit), and the Note Agreement contains customary financial conditions and covenants, and requires maintenance of minimum levels of fixed charge coverage and maximum levels of leverage (all as defined within the Note Agreement). As of December 30, 2023, the Company was in compliance with all of its financial covenants.

In connection with the Note Agreement, the Company incurred debt issuance costs, of which unamortized amounts are presented as a direct deduction from the carrying amount of the related liability.

In April 2022, the Company entered into a Private Shelf Agreement (the “Shelf Agreement”) with Prudential, summarized as follows:

● For a period three years from entry into the Shelf Agreement, subject to certain customary conditions, the Company may offer and Prudential may purchase from the Company privately negotiated senior notes (“Shelf Notes”) in the aggregate principal amount up to (i) $100.0 million, less (ii) the aggregate principal amount of notes outstanding at such point (including notes outstanding under the existing Prudential Note Agreement);

● Each Shelf Note issued will have an average life and maturity of no more than 12.5 years from the date of original issuance, with interest payable at a rate per annum determined at the time of each issuance;

● The Shelf Notes will be secured by all of the Company’s assets and the Shelf Notes will rank pari passu with the Company’s obligations to the lenders under the amended Line of Credit and the amended Note Agreement;

● The Shelf Notes may be prepaid, at the option of the Company, in whole or in part (in a minimum amount of $1 million), but prepayments require payment of a Yield Maintenance Amount (as defined within the Shelf Agreement);

● The Shelf Agreement contains customary affirmative covenants and negative covenants that are substantially the same as those contained in the amended Line of Credit and amended Note Agreement.

33

WINMARK CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 30, 2023, December 31, 2022 and December 25, 2021

As of December 30, 2023, the Company had not issued any notes under the Shelf Agreement and was in compliance with all of its financial covenants.

As of December 30, 2023, required payments of the notes payable and term loans for each of the next five years and thereafter are as follows:

	Notes Payable		Term Loans
2024	$	4,250,000	$	—
2025		2,750,000		—
2026		1,250,000		—
2027		937,500		—
2028		30,000,000		—
Thereafter		—		30,000,000
Total	$	39,187,500	$	30,000,000

8.     Accrued Liabilities:

Accrued liabilities at December 30, 2023 and December 31, 2022 are as follows:

	December 30, 2023		December 31, 2022
Accrued compensation and benefits	$	587,700	$	755,100
Rent related liabilities		590,200		542,100
Accrued interest		244,200		282,300
Accrued purchases of goods and services		637,000		129,400
Other		799,100		902,800
	$	2,858,200	$	2,611,700

9.     Contract Liabilities:

The Company’s contract liabilities for its franchise revenues consist of deferred revenue associated with franchise fees and software license fees. The table below presents the activity of the current and noncurrent deferred franchise revenue during fiscal years 2023 and 2022, respectively:

	December 30, 2023		December 31, 2022
Balance at beginning of period	$	8,618,100	$	8,508,500
Franchise and software license fees collected from franchisees, excluding amount earned as revenue during the period		2,470,600		1,951,800
Fees earned that were included in the balance at the beginning of the period		(1,765,100)		(1,842,200)
Balance at end of period	$	9,323,600	$	8,618,100

The following table illustrates future estimated revenue to be recognized for the next five fiscal years and fiscal years thereafter related to performance obligations that are unsatisfied (or partially unsatisfied) as of December 30, 2023:

Contract Liabilities expected to be recognized in	Amount
2024	$	1,666,100
2025		1,449,800
2026		1,245,300
2027		1,070,700
2028		901,200
Thereafter		2,990,500
	$	9,323,600

We have applied the optional exemption, as provided for under ASC Topic 606, Revenue from Contracts with Customers, which allows us to not disclose the transaction price allocated to unsatisfied performance obligations when the transaction price is a sales-based royalty.

34

WINMARK CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 30, 2023, December 31, 2022 and December 25, 2021

10.     Operating Leases:

As of December 30, 2023, the Company leases its Minnesota corporate headquarters in a facility with an operating lease that expires in December 2029. Our lease includes both lease (fixed payments including rent) and non-lease components (common area or other maintenance costs and taxes) which are accounted for as a single lease component as we have elected the practical expedient to group lease and non-lease components for all leases. The lease provides us the option to extend the lease for two additional five year periods. The lease renewal option is at our sole discretion; therefore, the renewals to extend the lease term are not included in our right of use asset and lease liabilities as they are not reasonably certain of exercise. The weighted average remaining lease term for this lease is 6.0 years and the discount rate is 5.5%. As our lease does not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. The Company recognized $1,171,700, $1,207,200 and $1,178,400 of rent expense for the periods ended December 30, 2023, December 31, 2022 and December 25, 2021, respectively.

Maturities of operating lease liabilities is as follows as of December 30, 2023:

Operating Lease Liabilities expected to be recognized in	Amount
2024	$	784,400
2025		806,000
2026		828,200
2027		851,100
2028		874,600
Thereafter		898,700
Total lease payments		5,043,000
Less imputed interest		(755,900)
Present value of lease liabilities	$	4,287,100

Of the $4.3 million operating lease liability outstanding at December 30, 2023, $0.6 million is included in Accrued liabilities in the Current liabilities section of the Consolidated Balance Sheets.

For leases that contain predetermined fixed escalations of the minimum rent, we recognize the related rent expense on a straight-line basis from the date we take possession of the property to the end of the initial lease term. We record any difference between the straight-line rent amounts and amounts payable under the leases as an adjustment to the amortization of the operating lease right of use asset and operating lease liabilities.

Cash or lease incentives received upon entering into certain leases (“tenant allowances”) are recognized on a straight-line basis as a reduction to rent from the date we take possession of the property through the end of the initial lease term. In 2019, we recorded a $2.1 million tenant allowance for non-cash landlord leasehold improvements received as a reduction to the operating lease right of use asset. The reduction in rent also causes a reduction in the amortization of the operating lease right of use asset through the end of the initial lease term.

The Company’s policy for leases with a term of twelve months or less is to exclude these short-term leases from our right of use asset and lease liabilities.

Supplemental cash flow information related to our operating leases is as follows for the periods ended December 30, 2023 and December 31, 2022:

	Year Ended
	December 30, 2023		December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow outflow from operating leases	$	763,300	$	742,900

35

WINMARK CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 30, 2023, December 31, 2022 and December 25, 2021

11.     Income Taxes:

A reconciliation of the expected federal income tax expense based on the federal statutory tax rate to the actual income tax expense is provided below:

	Year Ended
	December 30, 2023		December 31, 2022		December 25, 2021
Federal income tax expense at statutory rate (21%, 21%, 21%)	$	10,785,900	$	10,664,500	$	10,472,100
Change in valuation allowance		(551,600)		(6,600)		(1,914,400)
State and local income taxes, net of federal benefit		1,513,100		1,515,900		1,546,400
Permanent differences, including stock option expenses		(1,372,300)		(955,900)		(2,332,600)
Expiration of attributes		528,600		—		2,057,000
Adjustment to uncertain tax positions		240,100		185,300		163,400
Other, net		39,400		(44,600)		(44,500)
Actual income tax expense	$	11,183,200	$	11,358,600	$	9,947,400

Components of the provision for income taxes are as follows:

	Year Ended
	December 30, 2023		December 31, 2022		December 25, 2021
Current:
Federal	$	9,237,600	$	8,892,200	$	8,782,000
State		1,883,900		2,167,900		2,193,900
Foreign		573,800		586,200		333,500
Current provision		11,695,300		11,646,300		11,309,400
Deferred:
Federal		(504,700)		(351,500)		(1,435,000)
State		(7,400)		63,800		73,000
Deferred provision		(512,100)		(287,700)		(1,362,000)
Total provision for income taxes	$	11,183,200	$	11,358,600	$	9,947,400

The tax effects of temporary differences that give rise to the net deferred income tax assets and liabilities are presented below:

	December 30, 2023		December 31, 2022
Deferred tax assets:
Accounts receivable and lease reserves	$	500	$	1,900
Non-qualified stock option expense		1,769,200		1,540,100
Deferred revenue		1,612,200		1,584,600
Trademarks		36,900		34,700
Lease deposits		6,700		72,700
Impairment of note investments		—		529,500
Lease revenue and initial direct costs		29,200		63,400
Foreign tax credits		631,100		372,100
Valuation allowance		(350,000)		(901,600)
Depreciation and amortization		25,500		—
Other		291,100		271,600
Total deferred tax assets		4,052,400		3,569,000
Deferred tax liabilities:
Depreciation and amortization		—		(28,600)
Total deferred tax liabilities		—		(28,600)
Total net deferred tax assets	$	4,052,400	$	3,540,400

36

WINMARK CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 30, 2023, December 31, 2022 and December 25, 2021

The Company has assessed its taxable earnings history and prospective future taxable income. Based upon this assessment, the Company has determined that it is more likely than not that its deferred tax assets will be realized in future periods and no valuation allowance is necessary, except for the deferred tax assets related to the impairment of note investments (which is a capital loss for tax purposes) and the foreign tax credits. The foreign tax credits will expire after 10 years. As a result, valuation allowances of $0.4 million and $0.9 million as of December 30, 2023 and December 31, 2022, respectively, have been recorded.

The amount of unrecognized tax benefits, including interest and penalties, as of December 30, 2023 and December 31, 2022, was $1,345,000 and $1,050,300, respectively, primarily for potential state taxes. All of these unrecognized tax benefits, if recognized, would impact the effective tax rate.

The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense for all periods presented. The Company had accrued approximately $261,900 and $179,000 for the payment of interest and penalties at December 30, 2023 and December 31, 2022, respectively.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

	Total
Balance at December 25, 2021	$	677,200
Increases related to current year tax positions		266,800
Expiration of the statute of limitations for the assessment of taxes		(72,700)
Balance at December 31, 2022		871,300
Increases related to current year tax positions		277,600
Subtractions for tax positions of prior years		(65,800)
Balance at December 30, 2023	$	1,083,100

The Company and its subsidiaries file income tax returns in the U.S. federal, numerous state and certain foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2019. We expect various statutes of limitation to expire during the next 12 months. Due to the uncertain response of taxing authorities, a range of outcomes cannot be reasonably estimated at this time.

12.     Commitments and Contingencies:

Employee Benefit Plan

The Company provides a 401(k) Savings Incentive Plan which covers substantially all employees. The plan provides for matching contributions and optional profit-sharing contributions at the discretion of the Board of Directors. Employee contributions are fully vested; matching and profit sharing contributions are subject to a five-year service vesting schedule. Company contributions to the plan for 2023, 2022 and 2021 were $371,200, $397,700 and $348,200, respectively.

Litigation

From time to time, the Company is exposed to asserted and unasserted legal claims encountered in the normal course of business. Management believes that the ultimate resolution of these matters will not have a material adverse effect on the consolidated financial position or results of operations of the Company.

37

WINMARK CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 30, 2023, December 31, 2022 and December 25, 2021

13.     Segment Reporting:

For 2023, the Company’s leasing business did not reach any of the quantitative thresholds for a reportable segment, and the Company does not expect the results from its leasing business to be of significance in the future periods. The revenues and operating income from the Company’s leasing business are included in Other in its reportable segment disclosures. Disclosures for 2022 and 2021 have been recast to be consistent with the 2023 presentation.

The Company currently has one reportable business segment, franchising, and one non-reportable operating segment. The franchising segment franchises value-oriented retail store concepts that buy, sell and trade merchandise. The non-reportable operating segment includes the Company’s equipment leasing business. Segment reporting is intended to give financial statement users a better view of how the Company manages and evaluates its businesses. The Company’s internal management reporting is the basis for the information disclosed for its operating segments. The following tables summarize financial information by segment and provide a reconciliation of segment contribution to operating income:

	Year ended
	December 30, 2023		December 31, 2022		December 25, 2021
Revenue:
Franchising	$	78,477,300	$	74,473,100	$	67,067,900
Other		4,766,200		6,937,700		11,148,300
Total revenue	$	83,243,500	$	81,410,800	$	78,216,200
Reconciliation to operating income:
Franchising segment contribution	$	49,375,900	$	49,007,900	$	44,832,100
Other operating segment contribution		3,904,700		4,604,900		6,504,100
Total operating income	$	53,280,600	$	53,612,800	$	51,336,200
Depreciation and amortization:
Franchising	$	646,900	$	463,100	$	243,900
Other		125,800		140,000		186,700
Total depreciation and amortization	$	772,700	$	603,100	$	430,600

	As of
	December 30, 2023		December 31, 2022
Identifiable assets:
Franchising	$	7,570,000	$	8,901,000
Other		281,200		784,300
Unallocated		21,116,500		20,770,400
Total	$	28,967,700	$	30,455,700

Revenues are all generated from United States operations other than franchising revenues from Canadian operations of $6.8 million, $6.4 million and $4.9 million in each of fiscal 2023, 2022 and 2021, respectively. All long-lived assets are located within the United States.

38

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Winmark Corporation

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Winmark Corporation (a Minnesota corporation) and subsidiaries (the “Company”) as of December 30, 2023 and December 31, 2022, the related consolidated statements of operations, shareholders’ equity (deficit), and cash flows for each of the three years in the period ended December 30, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 30, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 30, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 28, 2024 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2006.

Minneapolis, Minnesota

February 28, 2024

39

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Winmark Corporation

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of Winmark Corporation (a Minnesota corporation) and subsidiaries (the “Company”) as of December 30, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 30, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 30, 2023, and our report dated February 28, 2024 expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP

Minneapolis, Minnesota

February 28, 2024

40

ITEM 9:     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A:  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on that evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective as of December 30, 2023.

Attestation Report of Independent Registered Public Accounting Firm

The attestation report required under Item 9A is contained earlier in the Form 10-K under the heading ‘Item 8, Financial Statements and Supplementary Data.’

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control — Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 30, 2023.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Changes in Internal Control Over Financial Reporting

During the most recent fiscal quarter ended December 30, 2023, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B:  OTHER INFORMATION

All information required to be reported in a report on Form 8-K during the fourth quarter covered by this Form 10-K has been reported.

During the three months ended July 31, 2023, no director or officer of the Company adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

ITEM 9C: DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

41

PART III

ITEM 10:   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The sections entitled “Election of Directors,” “Executive Officers,” “Audit Committee,” “Majority of Independent Directors; Committees of Independent Directors,” and “Code of Ethics and Business Conduct,” appearing in our proxy statement for the annual meeting of stockholders to be held on April 24, 2024 are incorporated herein by reference.

ITEM 11:   EXECUTIVE COMPENSATION

The sections entitled “Executive Compensation,” “2023 Director Compensation,” “Compensation Committee Report” and “Compensation Committee Interlocks and Insider Participation” appearing in our proxy statement for the annual meeting of stockholders to be held on April 24, 2024 are incorporated herein by reference.

ITEM 12:   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The sections entitled “Security Ownership of Certain Beneficial Owners, Directors and Executive Officers” and “Securities Authorized for Issuance Under Equity Compensation Plans” appearing in our proxy statement for the annual meeting of stockholders to be held on April 24, 2024 are incorporated herein by reference.

ITEM 13:   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The sections entitled “Transactions with Related Persons, Promoters and Certain Control Persons,” “Review, Approval or Ratification of Transactions with Related Persons” and “Majority of Independent Directors; Committees of Independent Directors” appearing in our proxy statement for the annual meeting of stockholders to be held on April 24, 2024 is incorporated herein by reference.

ITEM 14:   PRINCIPAL ACCOUNTANT FEES AND SERVICES

The section entitled “Principal Accountant Fees and Services” appearing in our proxy statement for the annual meeting of stockholders to be held April 24, 2024 is incorporated herein by reference.

PART IV

ITEM 15:   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as a part of this Report:

1.           Financial Statements

The financial statements filed as part of this report are listed on the Index to Consolidated Financial Statements on page 18.

2.           Financial Statement Schedules

All schedules for which provision is made in the applicable accounting regulations of the SEC have been omitted as not required or not applicable, or the information required has been included elsewhere by reference in the consolidated financial statements and related items.

3.           Exhibits

Exhibits that are not filed herewith have been previously filed with the Securities and Exchange Commission and are incorporated herein by reference.

42

Exhibit Number	Description
3.1	Articles of Incorporation, as amended (Exhibit 3.1)(1)
3.2	By-laws, as amended and restated to date (Exhibit 3.2)(2)
4.1	Description of the Company’s Common Stock (Exhibit 4.1) (18)
10.1	Amended and Restated Stock Option Plan for Nonemployee Directors (Exhibit 10.3)(3)(4)
10.2	Multi-Tenant Office Lease with Utah State Retirement Investment Fund for Corporate Headquarters dated September 28, 2008 (Exhibit 10.1)(5)
10.3	2010 Stock Option Plan, including forms of stock option agreements (Exhibit 10.18)(3) (6)
10.4	Credit Agreement, dated July 13, 2010, among Winmark Corporation and its subsidiaries and CIBC Bank USA (formerly known as The PrivateBank and Trust Company) (Exhibit 10.2)(7)
10.5	Amendment No. 1 to Credit Agreement, among Winmark Corporation and its subsidiaries, CIBC Bank USA (formerly known as The PrivateBank and Trust Company), and BMO Harris Bank N.A., dated January 30, 2012 (Exhibit 10.1)(8)
10.6	Amendment No. 2 to Credit Agreement, among Winmark Corporation and its subsidiaries, CIBC Bank USA (formerly known as The PrivateBank and Trust Company), and BMO Harris Bank N.A., dated February 29, 2012 (Exhibit 10.1)(9)
10.7	Lease Amending Agreement No. 1 to Multi-Tenant Office Lease by and between Winmark Corporation and AX Waterford L.P. dated October 21, 2013 (Exhibit 10.1)(10)
10.8	Amendment No. 3 to Credit Agreement, among Winmark Corporation and its subsidiaries, CIBC Bank USA (formerly known as The PrivateBank and Trust Company), and BMO Harris Bank N.A., dated February 21, 2014 (Exhibit 10.1)(11)
10.9	First Amendment to the 2010 Stock Option Plan (Exhibit 10.1)(3)(12)
10.10	First Amendment to the Amended and Restated Stock Option Plan for Nonemployee Directors (Exhibit 10.2)(3)(12)
10.11	Amendment No. 4 to Credit Agreement, among Winmark Corporation and its subsidiaries, CIBC Bank USA (formerly known as The PrivateBank and Trust Company), and BMO Harris Bank N.A., dated April 14, 2015 (Exhibit (b)(2))(13)
10.12	Amended and Restated Security Agreements, dated May 14, 2015, among Winmark Corporation, each of its subsidiaries and CIBC Bank USA (formerly known as The PrivateBank and Trust Company) (Exhibit 10.4)(14)
10.13	Amended and Restated Pledge Agreement, dated May 14, 2015, among Winmark Corporation and CIBC Bank USA (formerly known as The PrivateBank and Trust Company) (Exhibit 10.5)(14)
10.14	Trademark Security Agreement, dated May 14, 2015, among Winmark Corporation and its subsidiaries and CIBC Bank USA (formerly known as The PrivateBank and Trust Company) (Exhibit 10.6)(14)
10.15	Intercreditor and Collateral Agency Agreement, dated May 14, 2015, among CIBC Bank USA (formerly known as The PrivateBank and Trust Company), BMO Harris Bank N.A. and Prudential Investment Management, Inc., its affiliates and managed accounts (Exhibit 10.7)(14)
10.16	Note Agreement, dated May 14, 2015, among Winmark Corporation and its subsidiaries and Prudential Investment Management, Inc., its affiliates and managed accounts (Exhibit 10.8)(14)
10.17	Amendment No. 5 to Credit Agreement, among Winmark Corporation and its subsidiaries, CIBC Bank USA (formerly known as The PrivateBank and Trust Company), and BMO Harris Bank N.A., dated July 18, 2017 (Exhibit (b)(7)) (15)
10.18	Amendment No. 1 to Note Agreement dated July 19, 2017 among Winmark Corporation and its subsidiaries and Prudential Investment Management, Inc., its affiliates and managed accounts (Exhibit (b)(8))(15)

43

Exhibit Number	Description
10.19	Amendment No. 1 to Intercreditor and Collateral Agency Agreement dated July 19, 2017 (Exhibit (b)(9))(15)
10.20	Second Amendment to the 2010 Stock Option Plan (Exhibit (d)(7))(3)(15)
10.21	Lease Amending Agreement No. 2 dated May 17, 2018 between Winmark Corporation and G&I VIII 605 Waterford LLC (Exhibit 10.1)(16)
10.22	Amendment No. 6 to Credit Agreement, among Winmark Corporation and its subsidiaries, CIBC Bank USA (formerly known as The PrivateBank and Trust Company), and BMO Harris Bank N.A., dated December 16, 2019 (Exhibit (b)(6))(17)
10.23	Amendment No. 2 to Note Agreement dated December 16, 2019 among Winmark Corporation and its subsidiaries and Prudential Investment Management, Inc., its affiliates and managed accounts (Exhibit (b)(7))(17)
10.24	2020 Stock Option Plan, including forms of stock option agreements (Exhibit 10.34) (3) (18)
10.25	Amendment No.7 to Credit Agreement, among Winmark Corporation and its subsidiaries, CIBC Bank USA (formerly known as The PrivateBank and Trust Company), and BMO Harris Bank N.A., dated September 2, 2020 (Exhibit 10.1) (19)
10.26	Amendment No.3 to Note Agreement dated September 2, 2020, among Winmark Corporation and its subsidiaries and Prudential Investment Management, Inc. its affiliates and managed accounts (Exhibit 10.3) (19)
10.27	Amendment No.2 to Intercreditor and Collateral Agency Agreement, dated September 2, 2020 (Exhibit 10.5) (19)
10.28	Amendment No. 8 to Credit Agreement, among Winmark Corporation and its subsidiaries and CIBC Bank USA (formerly known as The PrivateBank and Trust Company), dated October 14, 2020 (Exhibit 10.1) (20)
10.29	Consent and Amendment No. 4 to Note Agreement dated October 14, 2020 among Winmark Corporation and its subsidiaries and Prudential Investment Management, Inc., its affiliates and managed accounts (Exhibit 10.3) (20)
10.30	Amendment No. 9 to Credit Agreement, among Winmark Corporation and its subsidiaries and CIBC Bank USA, dated September 10, 2021 (Exhibit 10.1) (21)
10.31	Amendment No. 5 to Note Agreement dated September 10, 2021 among Winmark Corporation and its subsidiaries and PGIM, Inc. (formerly Prudential Investment Management, Inc.) its affiliates and managed accounts (exhibit 10.3) (21)
10.32	Amendment No. 3 to Intercredit and Collateral Agency Agreement dated September 10, 2021 (exhibit 10.5) (21)
10.33	Amendment No. 10 to Credit Agreement dated April 12, 2022 (Exhibit 10.1) (22)
10.34	Private Shelf Agreement dated April 12, 2022, among Winmark Corporation and its subsidiaries and PGIM, Inc., its subsidiaries and managed accounts (Exhibit 10.3) (22)
10.35	Amendment No. 6 to Note Agreement dated April 12, 2022 (Exhibit 10.4) (22)
10.36	Amended and Restated Intercreditor and Collateral Agency Agreement dated April 12, 2022 (Exhibit 10.6) (22)
10.37	Omnibus Amendment to Collateral Documents dated April 12, 2022 (Exhibit 10.7) (22)
21.1	Subsidiaries: Grow Biz Games, Inc., a Minnesota corporation; Winmark Capital Corporation, a Minnesota corporation and Wirth Business Credit, Inc., a Minnesota corporation
23.1*	Consent of GRANT THORNTON LLP; Independent Registered Public Accounting Firm
24.1	Power of Attorney (Contained on signature page to this Form 10-K)
31.1*	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002
97*	Winmark Corporation Policy For the Recovery of Erroneously Awarded Compensation

44

Exhibit Number	Description
101	Interactive Data Files Pursuant to Rule 405 of Regulation S-T: Financial statements from the Annual Report on Form 10-K of Winmark Corporation and Subsidiaries for the year ended December 30, 2023, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Shareholders’ Equity (Deficit), (iv) Consolidated Statements of Cash Flows, and (v) Notes to the Consolidated Financial Statements.
104	The Cover page from the Annual Report on Form 10-K of Winmark Corporation and subsidiaries for the year ended December 30, 2023; formatted in Inline XBRL (contained in Exhibit 101).

* Filed Herewith

(1) Incorporated by reference to the specified exhibit to the Registration Statement on Form S-1, effective August 24, 1993 (Reg. No. 33-65108).

(2) Incorporated by reference to the specified exhibit to the Annual Report on Form 10-K for the fiscal year ended December 30, 2006.

(3) Indicates management contracts, compensation plans or arrangements required to be filed as exhibits.

(4) Incorporated by reference to the specified exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 27, 2009.

(5) Incorporated by reference to the specified exhibit to the Current Report on Form 8-K filed on October 2, 2008.

(6) Incorporated by reference to the specified exhibit to the Annual Report on Form 10-K for the fiscal year ended December 26, 2009.

(7) Incorporated by reference to the specified exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 26, 2010.

(8) Incorporated by reference to the specified exhibit to the Current Report on Form 8-K filed on January 31, 2012.

(9) Incorporated by reference to the specified exhibit to the Current Report on Form 8-K filed on March 1, 2012.

(10) Incorporated by reference to the specified exhibit to the Current Report on Form 8-K filed on October 23, 2013.

(11) Incorporated by reference to the specified exhibit to the Current Report on Form 8-K filed on February 21, 2014.

(12) Incorporated by reference to the specified exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2014.

(13) Incorporated by reference to the specified exhibit to the Schedule TO filed on April 15, 2015.

(14) Incorporated by reference to the specified exhibit to the Current Report on Form 8-K filed on May 18, 2015.

(15) Incorporated by reference to the specified exhibit to the Schedule TO filed on July 19, 2017.

(16) Incorporated by reference to the specified exhibit to the Current Report on Form 8-K filed on May 18, 2018.

(17) Incorporated by reference to the specified exhibit to the Schedule TO filed on December 17, 2019.

(18) Incorporated by reference to the specified exhibit to the Annual Report on Form 10-K for the fiscal year ended December 28, 2019.

(19) Incorporated by reference to the specified exhibit to the Current Report on Form 8-K filed on September 2, 2020.

(20) Incorporated by reference to the specified exhibit to the Current Report on Form 8-K filed on October 14, 2020.

(21) Incorporated by reference to the specified exhibit to the Current Report on Form 8-K filed on September 10, 2021.

(22) Incorporated by reference to the specified exhibit to the Current Report on Form 8-K filed on April 13, 2022.

ITEM 16:   FORM 10-K SUMMARY

Not Applicable.

45

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WINMARK CORPORATION

By:	/s/ BRETT D. HEFFES	Date: February 28, 2024
	Brett D. Heffes
	Chair of the Board and Chief Executive Officer

KNOWN TO ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Brett D. Heffes and Anthony D. Ishaug and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any amendments to this Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated.

SIGNATURE	TITLE	DATE
/s/ BRETT D. HEFFES	Chair of the Board and Chief Executive Officer	February 28, 2024
Brett D. Heffes	(principal executive officer)
/s/ Anthony D. Ishaug	Executive Vice President, Chief Financial Officer and Treasurer	February 28, 2024
Anthony D. Ishaug	(principal financial and accounting officer)
/s/ LAWRENCE A. BARBETTA	Director	February 28, 2024
Lawrence A. Barbetta
/s/ AMY C. BECKER	Director	February 28, 2024
Amy C. Becker
/s/ JENELE C. GRASSLE	Director	February 28, 2024
Jenele C. Grassle
/s/ PHILIP I. SMITH	Director	February 28, 2024
Philip I. Smith
/s/ GINA D. SPRENGER	Director	February 28, 2024
Gina D. Sprenger
/s/ PERCY C. TOMLINSON, JR.	Director	February 28, 2024
Percy C. Tomlinson, Jr.
/s/ MARK L. WILSON	Director	February 28, 2024
Mark L. Wilson

46

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our reports dated February 28, 2024 with respect to the consolidated financial statements and internal control over financial reporting included in the Annual Report of Winmark Corporation on Form 10-K for the year ended December 30, 2023. We consent to the incorporation by reference of said reports in the Registration Statements of Winmark Corporation on Forms S-8 (File No. 33-85792, File No. 333-120489, File No. 333-143281, File No. 333-172745, File No. 333-197600, File No. 333-197601, File No. 333-221109 and File No. 333-239999).

/s/ GRANT THORNTON LLP

Minneapolis, Minnesota

February 28, 2024

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brett D. Heffes, certify that:

1. I have reviewed this annual report on Form 10-K of Winmark Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:  

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 28, 2024	/s/ Brett D. Heffes
	Brett D. Heffes Chair of the Board and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Anthony D. Ishaug, certify that:

1. I have reviewed this annual report on Form 10-K of Winmark Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:  

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

E
Date: February 28, 2024	Signature:	/s/ Anthony D. Ishaug
		Anthony D. Ishaug Executive Vice President, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Winmark Corporation (the “Company”) on Form 10-K for the year ended December 30, 2023 as filed with the Securities and Exchange Commission (the “Report”), I, Brett D. Heffes, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to Winmark Corporation and will be retained by Winmark Corporation and furnished to the Securities and Exchange Commission upon request.

Date: February 28, 2024	/s/ Brett D. Heffes
	Brett D. Heffes Chair of the Board and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Winmark Corporation (the “Company”) on Form 10-K for the year ended December 30, 2023 as filed with the Securities and Exchange Commission (the “Report”), I, Anthony D. Ishaug, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to Winmark Corporation and will be retained by Winmark Corporation and furnished to the Securities and Exchange Commission upon request.

Date: February 28, 2024	/s/ Anthony D. Ishaug
	Anthony D. Ishaug Executive Vice President, Chief Financial Officer and Treasurer

EX-97

Exhibit 97

WINMARK CORPORATION

POLICY FOR THE

RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION

A.OVERVIEW

InaccordancewiththeapplicablerulesofThe Nasdaq Stock Market (the “Nasdaq Rules”), Section 10D and Rule 10D-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (“Rule 10D-1”), the Board of Directors (the “Board”)of Winmark Corporation (the “Company”) has adopted this Policy(the “Policy”) to provide for the recovery of erroneously awarded Incentive-based Compensation from Executive Officers. AllcapitalizedtermsusedandnototherwisedefinedhereinshallhavethemeaningssetforthinSectionH, below.

B.RECOVERYOFERRONEOUSLYAWARDEDCOMPENSATION

(1)IntheeventofanAccountingRestatement,theCompanywillreasonablypromptlyrecover the Erroneously Awarded Compensation Received in accordance with Nasdaq Rules and Rule 10D-1 as follows:

(i)After an Accounting Restatement, the Compensation Committee (if composed entirely of independent directors, or in the absence of such a committee, a majority of independent directors serving on the Board) (the “Committee”) shall determine the amount ofany ErroneouslyAwardedCompensationReceivedbyeachExecutiveOfficerandshall promptly notify each Executive Officer with a written notice containing the amount of any ErroneouslyAwardedCompensationandademandforrepaymentorreturnofsuch compensation, as applicable.

(a)ForIncentive-basedCompensationbasedon(orderivedfrom)theCompany’sstock priceortotalshareholderreturn,wheretheamountofErroneouslyAwarded Compensation is not subject to mathematical recalculation directly from the information in the applicable Accounting Restatement:

i. The amount to be repaid or returned shall be determined by the Committee based on a reasonable estimate of the effect of the Accounting Restatement on the Company’s stock price or total shareholder return upon which the Incentive-based Compensation was Received; and

ii. The Company shall maintain documentation of the determination of such reasonable estimate and provide the relevant documentation as required to the Nasdaq.

(ii) The Committee shall have discretion to determine the appropriate means of recovering Erroneously Awarded Compensation based on the particular facts and circumstances.Notwithstanding theforegoing, except as setforth in Section B(2) below, in no eventmay the Company accept an amount that is less than the amount of Erroneously Awarded Compensation in satisfaction of an Executive Officer’s obligations hereunder.

(iii) To the extent that the Executive Officer has already reimbursed the Company for any ErroneouslyAwardedCompensationReceivedunderanyduplicativerecoveryobligations established by the Company or applicable law, it shall be appropriate for any such reimbursed amount to be credited to the amount of Erroneously Awarded Compensation that is subject to recovery under this Policy.

Page 1 of 4

(iv) To the extent that an Executive Officer fails to repay all Erroneously Awarded Compensation to the Company when due, the Companyshall take all actions reasonable andappropriatetorecover suchErroneouslyAwarded Compensationfrom theapplicable Executive Officer. The applicable Executive Officer shall be required to reimburse the Company for any and all expenses reasonably incurred (including legal fees) by the CompanyinrecoveringsuchErroneouslyAwardedCompensation in accordance with the immediately preceding sentence.

(2)Notwithstandinganythinghereintothecontrary,theCompanyshallnotberequiredtotake theactionscontemplatedbySectionB(1)aboveiftheCommitteedetermines that recovery would be impracticable and any of the following two conditions are met:

(i)The Committee has determined that the direct expenses paid to a third party to assist in enforcing the Policy would exceed the amount to be recovered. Before making this determination,theCompanymustmakeareasonable attempttorecovertheErroneously Awarded Compensation, documentsuch attempt(s)and provide such documentation tothe Nasdaq;

(ii) Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of Section 401(a)(13) or Section 411(a) of the Internal Revenue Code of 1986, as amended, and regulations thereunder.

C. DISCLOSUREREQUIREMENTS

The Company shall file all disclosures with respect to this Policy required by applicable U.S. Securities and Exchange Commission (“SEC”) filings and rules.

D. PROHIBITIONOFINDEMNIFICATION

TheCompanyshallnotbepermittedtoinsureorindemnifyanyExecutiveOfficeragainst(i)thelossof anyErroneouslyAwardedCompensationthatisrepaid,returnedorrecoveredpursuanttothetermsofthis Policy,or(ii)anyclaimsrelatingtotheCompany’senforcementof itsrightsunderthisPolicy.Further,the Companyshallnotenter into anyagreementthatexempts anyIncentive-basedCompensationthatis granted, paidorawardedtoanExecutiveOfficerfromtheapplicationofthisPolicyorthatwaivestheCompany’sright torecoveryofanyErroneouslyAwardedCompensation,andthisPolicyshallsupersedeanysuchagreement (whetherenteredintobefore,onoraftertheEffectiveDateofthisPolicy).

E.ADMINISTRATIONANDINTERPRETATION

This Policy shall be administered by the Committee, and any determinations made by the Committee shall be final and binding on all affected individuals.

The Committee is authorized to interpret and construe this Policy and to make all determinations necessary,appropriate,oradvisablefortheadministrationofthisPolicyandfortheCompany’scompliance with Nasdaq Rules, Section 10D, Rule 10D-1 and any other applicable law, regulation, rule or interpretation of the SEC or Nasdaq promulgated or issued in connection therewith.

F. AMENDMENT;TERMINATION

TheCommitteemayamendthisPolicyfromtimetotimeinitsdiscretionandshallamendthisPolicy as it deems necessary. Notwithstanding anything in this Section F to the contrary, no amendment or terminationofthisPolicyshallbeeffectiveifsuchamendmentorterminationwould(aftertakinginto account any actions taken by the Company contemporaneously with such amendment or termination)cause the Company to violate any federal securities laws, SEC rule or Nasdaq rule.

Page 2 of 4

G. OTHERRECOVERYRIGHTS

This Policy shall be binding and enforceable against all Executive Officers and, to the extent required by applicable law or guidance from the SEC or Nasdaq, their beneficiaries, heirs, executors, administrators or other legal representatives. The Committee intends that this Policy will be applied to the fullest extent required by applicable law. Any employment agreement, equity award agreement,compensatoryplanoranyotheragreementorarrangementwithanExecutiveOfficershallbe deemed to include, as a condition to the grant of any benefit thereunder, an agreement by the Executive Officer to abide by the terms of this Policy.Any right of recovery under this Policy is in addition to, and not in lieu of, any other remedies or rights of recovery that may be available to the Company under applicablelaw,regulationorruleorpursuanttothetermsofanypolicyoftheCompanyoranyprovisionin any employment agreement, equity award agreement, compensatory plan, agreement or other arrangement.

H.DEFINITIONS

ForpurposesofthisPolicy,thefollowingcapitalizedtermsshallhavethemeaningssetforthbelow.

(1)“Accounting Restatement” means an accounting restatement due to the material noncomplianceoftheCompanywithanyfinancialreportingrequirementunderthesecuritieslaws,including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.

(2)“ClawbackEligibleIncentiveCompensation”meansallIncentive-basedCompensation ReceivedbyanExecutiveOfficer(i)onoraftertheeffectivedateoftheapplicableNasdaqrules,(ii) after beginning service as an Executive Officer, (iii) who served as an Executive Officer at any time during the applicable performance period relating to any Incentive-based Compensation (whether or not such Executive Officer is serving at the time the Erroneously Awarded Compensation is required to be repaid to the Company), (iv) while the Company has a class of securities listed on a national securities exchange or a national securities association, and (v) during the applicable Clawback Period (as defined below).

(3)“Clawback Period” means, with respect to any Accounting Restatement, the three completed fiscal years of the Company immediately preceding the Restatement Date (as defined below), andiftheCompanychangesitsfiscalyear,anytransitionperiodoflessthanninemonthswithinor immediately following those three completed fiscal years.

(4)“Erroneously Awarded Compensation” means, with respect to each Executive Officer in connection with an Accounting Restatement, the amount of Clawback Eligible Incentive Compensation thatexceedstheamountofIncentive-basedCompensationthatotherwisewouldhavebeenReceivedhad it been determined based on the restated amounts, computed without regard to any taxes paid.

(5)“Executive Officer”means each individual whoiscurrentlyor was previouslydesignated as an “officer” of the Company as defined in Rule 16a-1(f) under the Exchange Act. For the avoidance of doubt,theidentificationofanexecutiveofficerforpurposesofthisPolicyshallincludeeachexecutiveofficer whoisorwasidentifiedpursuanttoItem401(b)ofRegulationS-KorItem6.AofForm20-F,asapplicable, aswellastheprincipalfinancialofficerandprincipalaccountingofficer(or,ifthereisnoprincipalaccounting officer, the controller).

(6)“FinancialReportingMeasures”meansmeasures thataredeterminedandpresentedin accordance with the accounting principles used in preparing the Company’s financial statements, and all other measures that are derived wholly or in part from such measures. Stock price and total shareholder return(andanymeasuresthatarederivedwhollyorinpartfromstockpriceortotalshareholderreturn)shall, for purposes of this Policy, be considered Financial Reporting Measures. For the avoidance of doubt, a FinancialReportingMeasureneednotbepresentedintheCompany’sfinancialstatementsorincludedina filing with the SEC.

Page 3 of 4

(7)“Incentive-based Compensation” means any compensation that is granted, earned or vested based wholly or in part upon the attainment of a Financial Reporting Measure.

(8)“Nasdaq” means The Nasdaq Stock Market.

(9)“Received”means,withrespecttoanyIncentive-basedCompensation,actualordeemed receipt,andIncentive-basedCompensationshallbedeemedreceivedintheCompany’sfiscalperiodduring which the Financial Reporting Measure specified in the Incentive-based Compensation award is attained, evenifthepaymentorgrantoftheIncentive-basedCompensationtotheExecutiveOfficeroccursafterthe end of that period.

(10)“Restatement Date” means the earlier to occur of (i) the date the Board, a committee of the Board or the officers of the Company authorized to take such action if Board action is not required, concludes, or reasonablyshould have concluded, that the Companyis required to prepare an Accounting Restatement, or (ii) the date a court, regulator or other legally authorized body directs the Company to prepare an Accounting Restatement.

EffectiveasofDecember 1, 2023.

Page 4 of 4

XML

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 30, 2023	Feb. 26, 2024	Jul. 01, 2023
Document and Entity Information
Entity Registrant Name	WINMARK CORPORATION
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 30, 2023
Document Transition Report	false
Entity File Number	000-22012
Entity Incorporation, State or Country Code	MN
Entity Tax Identification Number	41-1622691
Entity Address, Address Line One	605 Highway 169 North, Suite 400
Entity Address, City or Town	Minneapolis
Entity Address, State or Province	MN
Entity Address, Postal Zip Code	55441
City Area Code	763
Local Phone Number	520-8500
Title of 12(b) Security	Common Stock, no par value per share
Trading Symbol	WINA
Security Exchange Name	NASDAQ
Amendment Flag	false
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
ICFR Auditor Attestation Flag	true
Document Financial Statement Error Correction [Flag]	false
Entity Shell Company	false
Entity Public Float			$ 759,915,375
Entity Common Stock, Shares Outstanding		3,497,430
Current Fiscal Year End Date	--12-30
Entity Central Index Key	0000908315
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	FY
Auditor Name	GRANT THORNTON LLP
Auditor Firm ID	248
Auditor Location	Minneapolis, Minnesota

XML

CONSOLIDATED CONDENSED BALANCE SHEETS - USD ($)	Dec. 30, 2023	Dec. 31, 2022
Current Assets:
Cash and cash equivalents	$ 13,361,500	$ 13,615,600
Restricted cash	25,000	65,000
Receivables, less allowance for credit losses of $600 and $800	1,475,300	1,438,600
Net investment in leases - current	75,100	344,900
Income tax receivable	31,400	558,700
Inventories	386,100	770,600
Prepaid expenses	1,392,100	1,310,400
Total current assets	16,746,500	18,103,800
Net investment in leases - long-term	0	5,400
Property and equipment:
Furniture and equipment	3,602,900	3,484,200
Building and building improvements	2,952,100	2,952,100
Less - accumulated depreciation and amortization	(4,885,200)	(4,731,700)
Property and equipment, net	1,669,800	1,704,600
Operating lease right of use asset	2,425,900	2,716,000
Intangible assets, net	2,994,300	3,348,300
Goodwill	607,500	607,500
Other assets	471,300	429,700
Deferred income taxes	4,052,400	3,540,400
Total assets	28,967,700	30,455,700
Current Liabilities:
Notes payable, net of unamortized debt issuance costs of $32,100 and $32,100	4,217,900	4,217,900
Accounts payable	1,719,400	2,122,000
Accrued liabilities	2,858,200	2,611,700
Deferred revenue	1,666,100	1,643,900
Total current liabilities	10,461,600	10,595,500
Long-term Liabilities:
Line of credit/Term loan	30,000,000	30,000,000
Notes payable, net of unamortized debt issuance costs of $96,700 and $120,800	34,848,800	39,066,700
Deferred revenue	7,657,500	6,974,200
Operating lease liabilities	3,715,800	4,287,000
Other liabilities	1,440,100	1,164,400
Total long-term liabilities	77,662,200	81,492,300
Commitments and Contingencies (Note 12)
Shareholders' Equity (Deficit):
Common stock, no par value, 10,000,000 shares authorized, 3,496,977 and 3,459,673 shares issued and outstanding	7,768,800	1,806,700
Retained earnings (accumulated deficit)	(66,924,900)	(63,438,800)
Total shareholders' equity (deficit)	(59,156,100)	(61,632,100)
Total liabilities and shareholders' equity (deficit)	$ 28,967,700	$ 30,455,700

XML

CONSOLIDATED CONDENSED BALANCE SHEETS (Parenthetical) - USD ($)	Dec. 30, 2023	Dec. 31, 2022
CONSOLIDATED CONDENSED BALANCE SHEETS
Receivables, allowance for doubtful accounts	$ 600	$ 800
Unamortized debt issuance costs - Current	32,100	32,100
Unamortized debt issuance costs - Noncurrent	$ 88,700	$ 120,800
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	3,496,977	3,635,806
Common stock, shares outstanding	3,459,673	3,459,673

XML

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022	Dec. 25, 2021
Revenue:
Leasing income	$ 4,766,200	$ 6,937,700	$ 11,148,300
Total revenue	83,243,500	81,410,800	78,216,200
Cost of merchandise sold	4,461,500	3,712,800	2,940,500
Leasing expense	398,300	984,700	1,850,300
Provisions for credit losses	(5,600)	(57,900)	(206,600)
Selling, general and administrative expenses	25,108,700	23,158,400	22,295,800
Income from operations	53,280,600	53,612,800	51,336,200
Interest expense	(3,091,000)	(2,914,900)	(1,453,900)
Interest and other income	1,171,700	85,600	(15,000)
Income before income taxes	51,361,300	50,783,500	49,867,300
Provision for income taxes	(11,183,200)	(11,358,600)	(9,947,400)
Net income	$ 40,178,100	$ 39,424,900	$ 39,919,900
Earnings per share - basic (in dollars per share)	$ 11.55	$ 11.30	$ 10.87
Earnings per share - diluted (in dollars per share)	$ 11.04	$ 10.97	$ 10.48
Weighted average shares outstanding - basic	3,479,936	3,487,732	3,671,980
Weighted average shares outstanding - diluted	3,640,524	3,592,456	3,810,480
Royalties
Revenue:
Revenue	$ 70,230,700	$ 67,148,100	$ 60,779,300
Merchandise sales
Revenue:
Revenue	4,761,100	3,921,600	3,100,100
Franchise fees
Revenue:
Revenue	1,512,000	1,575,400	1,496,900
Other
Revenue:
Revenue	$ 1,973,500	$ 1,828,000	$ 1,691,600

XML

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) - USD ($)	Common Stock	Retained Earnings (Accumulated Deficit).	Total
BALANCE at Dec. 26, 2020	$ 9,281,800	$ (20,660,500)	$ (11,378,700)
BALANCE (in shares) at Dec. 26, 2020	3,756,028
Shareholders' Equity (Deficit)
Repurchase of common stock	$ (19,037,300)	(25,180,200)	(44,217,500)
Repurchase of common stock (in shares)	(225,839)
Stock options exercised	$ 8,320,000		8,320,000
Stock options exercised (in shares)	105,617
Compensation expense relating to stock options	$ 1,435,500		1,435,500
Cash dividends		(33,162,600)	(33,162,600)
Comprehensive income (Net income)		39,919,900	39,919,900
BALANCE at Dec. 25, 2021		(39,083,400)	(39,083,400)
BALANCE (in shares) at Dec. 25, 2021	3,635,806
Shareholders' Equity (Deficit)
Repurchase of common stock	$ (4,597,400)	(44,522,400)	(49,119,800)
Repurchase of common stock (in shares)	(226,165)
Stock options exercised	$ 4,751,700		4,751,700
Stock options exercised (in shares)	50,032
Compensation expense relating to stock options	$ 1,652,400		1,652,400
Cash dividends		(19,257,900)	(19,257,900)
Comprehensive income (Net income)		39,424,900	39,424,900
BALANCE at Dec. 31, 2022	$ 1,806,700	(63,438,800)	$ (61,632,100)
BALANCE (in shares) at Dec. 31, 2022	3,459,673		3,635,806
Shareholders' Equity (Deficit)
Stock options exercised	$ 4,009,700		$ 4,009,700
Stock options exercised (in shares)	37,304
Compensation expense relating to stock options	$ 1,952,400		1,952,400
Cash dividends		(43,664,200)	(43,664,200)
Comprehensive income (Net income)		40,178,100	40,178,100
BALANCE at Dec. 30, 2023	$ 7,768,800	$ (66,924,900)	$ (59,156,100)
BALANCE (in shares) at Dec. 30, 2023	3,496,977		3,496,977

XML

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022	Dec. 25, 2021
OPERATING ACTIVITIES:
Net Income	$ 40,178,100	$ 39,424,900	$ 39,919,900
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment	418,700	411,400	430,600
Amortization of intangible assets	354,000	191,700
Provisions for credit losses	(5,600)	(57,900)	(206,600)
Compensation expense related to stock options	1,952,400	1,652,400	1,435,500
Deferred income taxes	(512,000)	(287,700)	(1,362,000)
Loss from disposal of property and equipment		(9,400)
Deferred initial direct costs			(2,100)
Amortization of deferred initial direct costs			18,900
Operating lease right of use asset amortization	290,100	266,000	244,300
Tax benefits on exercised stock options	1,138,500	858,300	2,479,600
Change in operating assets and liabilities:
Receivables	(36,700)	(335,200)	478,500
Principal collections on lease receivables	556,000	3,646,700	9,915,400
Income tax receivable/payable	(611,200)	(749,500)	(2,925,900)
Inventories	384,500	(445,400)	(218,600)
Prepaid expenses	(81,700)	(301,800)	(13,400)
Other assets	(41,600)	(11,400)	17,600
Accounts payable	(402,600)	23,000	329,400
Accrued and other liabilities	(16,900)	222,800	(948,500)
Rents received in advance and security deposits	(275,200)	(819,200)	(1,046,600)
Deferred revenue	705,500	109,600	(199,800)
Net cash provided by operating activities	43,994,300	43,789,300	48,346,200
INVESTING ACTIVITIES:
Proceeds from sales of property and equipment		9,400
Purchase of property and equipment	(383,900)	(139,100)	(74,700)
Reacquired franchise rights		(3,540,000)
Purchase of equipment for lease contracts			(208,400)
Net cash used for investing activities	(383,900)	(3,669,700)	(283,100)
FINANCING ACTIVITIES:
Proceeds from borrowings on line of credit/term loan		33,700,000
Payments on line of credit/term loan		(3,700,000)
Proceeds from borrowings on notes payable			30,000,000
Payments on notes payable	(4,250,000)	(4,250,000)	(4,250,000)
Repurchases of common stock		(49,119,800)	(44,217,500)
Proceeds from exercises of stock options	4,009,700	4,751,700	8,320,000
Dividends paid	(43,664,200)	(19,257,900)	(33,162,600)
Net cash used for financing activities	(43,904,500)	(37,876,000)	(43,310,100)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(294,100)	2,243,600	4,753,000
Cash, cash equivalents and restricted cash, beginning of period	13,680,600	11,437,000	6,684,000
Cash, cash equivalents and restricted cash, end of period	$ 13,386,500	$ 13,680,600	$ 11,437,000

XML

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - Supplemental Disclosures - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022	Dec. 25, 2021
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$ 3,049,400	$ 2,722,500	$ 1,388,900
Cash paid for income taxes	10,874,300	11,308,800	11,555,100
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	13,361,500	13,615,600	11,407,000
Restricted cash	25,000	65,000	30,000
Total cash, cash equivalents and restricted cash	$ 13,386,500	$ 13,680,600	$ 11,437,000

XML

Organization and Business:

12 Months Ended

Dec. 30, 2023

Organization and Business:

Organization and Business:

1.     Organization and Business:

Winmark Corporation and subsidiaries (the Company) offers licenses to operate franchises using the service marks Plato’s Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore® and Music Go Round®. In addition, the Company sells point-of-sale system hardware to its franchisees and certain merchandise to its Play It Again Sports franchisees. The Company also operates a middle-market equipment leasing businesses under the Winmark Capital® mark. The Company has a 52/53-week fiscal year that ends on the last Saturday in December. Fiscal year 2022 was a 53-week fiscal year, while 2023 and 2021 were 52-week fiscal years.

XML

Significant Accounting Policies:

12 Months Ended

Dec. 30, 2023

Significant Accounting Policies:

Significant Accounting Policies:

2.     Significant Accounting Policies:

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Winmark Capital Corporation, Wirth Business Credit, Inc. and Grow Biz Games, Inc. All material inter-company transactions have been eliminated in consolidation.

Cash Equivalents

Cash equivalents consist of highly liquid investments with an original maturity of three months or less when purchased. Cash equivalents are stated at cost, which approximates fair value. As of December 30, 2023 and December 31, 2022, the Company had $143,600 and $9,900, respectively, of cash located in Canadian banks. The Company holds its cash and cash equivalents with financial institutions and at times, such balances may be in excess of insurance limits.

Receivables

The Company provides an allowance for credit losses on trade receivables. The allowance for credit losses was $600 and $800 at December 30, 2023 and December 31, 2022 respectively. If receivables in excess of the provided allowance are determined uncollectible, they are charged to expense in the year the determination is made. Trade receivables are written off when they become uncollectible (which generally occurs when the franchise terminates and there is no reasonable expectation of collection), and payments subsequently received on such receivable are credited to the allowance for credit losses. Historically, receivables balances written off have not exceeded allowances provided.

Restricted Cash

The Company is required by certain states to maintain initial franchise fees in a restricted bank account until the franchise opens. Cash held in escrow totaled $25,000 and $65,000 at December 30, 2023 and December 31, 2022, respectively.

Investment in Leasing Operations

The Company uses the direct finance method of accounting to record income from direct financing leases. At the inception of a lease, the Company records the minimum future lease payments receivable, the estimated residual value of the leased equipment and the unearned lease income. Initial direct costs related to lease originations are deferred as part of the investment and amortized over the lease term. Unearned lease income is the amount by which the total lease receivable plus the estimated residual value exceeds the cost of the equipment.

Leasing Income Recognition

Leasing income for direct financing leases is recognized under the effective interest method. The effective interest method of income recognition applies a constant rate of interest equal to the internal rate of return on the lease.

For sales-type leases in which the equipment has a fair value greater or less than its carrying amount, selling profit/loss is recognized at commencement. For subsequent periods or for leases in which the equipment’s fair value is equal to its carrying amount, the recording of income is consistent with the accounting for a direct financing lease.

For leases that are accounted for as operating leases, income is recognized on a straight-line basis when payments under the lease contract are due.

Generally, when a lease is more than 90 days delinquent (when more than three monthly payments are owed), the lease is classified as being on non-accrual and the Company stops recognizing leasing income on that date. Payments received on leases in non-accrual status generally reduce the lease receivable. Leases on non-accrual status remain classified as such until there is sustained payment performance that, in the Company’s judgment, would indicate that all contractual amounts will be collected in full.

Leasing Expense

Leasing expense includes the cost of financing equipment purchases, the cost of equipment sales as well as depreciation expense for operating lease assets.

Lease Residual Values

Residual values reflect the estimated amounts to be received at lease termination from sales or other dispositions of leased equipment to unrelated parties. The leased equipment residual values are based on the Company’s best estimate.

Allowance for Credit Losses

The Company maintains an allowance for credit losses at an amount that it believes to be sufficient to absorb losses inherent in its existing lease portfolio as of the reporting dates. Leases are collectively evaluated for potential loss. The Company’s methodology for determining the allowance for credit losses includes consideration of the level of delinquencies and non-accrual leases, historical net charge-off amounts and review of any significant concentrations.

A provision is charged against earnings to maintain the allowance for credit losses at the appropriate level. If the actual results are different from the Company’s estimates, results could be different. The Company’s policy is to charge-off against the allowance the estimated unrecoverable portion of accounts once they reach 121 days delinquent.

Inventories

The Company values its inventories at the lower of cost, as determined by the weighted average cost method, and net realizable values. Inventory consists of computer hardware and related accessories, all of which is finished goods merchandise held for resale.

Impairment of Long-lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying amount of the asset exceeds expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value.

Property and Equipment

Property and equipment is stated at cost. Depreciation and amortization for financial reporting purposes is provided on the straight-line method. Estimated useful lives used in calculating depreciation and amortization are: three to five years for computer and peripheral equipment, five to seven years for furniture and equipment and the shorter of the lease term or useful life for leasehold improvements. Major repairs, refurbishments and improvements which significantly extend the useful lives of the related assets are capitalized. Maintenance and repairs, supplies and accessories are charged to expense as incurred.

Intangible Assets

Intangible assets are amortized over the estimated useful life on a straight line basis. The Company reviews its intangible assets for impairment at its fiscal year end or whenever events or changes in circumstances indicate that there has been impairment in the value of its intangible assets. No impairment was noted during fiscal years ended 2023 and 2022. Intangible assets of $3.0 million and $3.3 million in the consolidated balance sheets at December 30, 2023 and December 31, 2022, respectively, are all attributable to the Franchising segment.

Goodwill

The Company reviews its goodwill for impairment at its fiscal year end or whenever events or changes in circumstances indicate that there has been impairment in the value of its goodwill. No impairment was noted during fiscal years ended 2023, 2022 and 2021. Goodwill of $0.6 million in the consolidated balance sheets at December 30, 2023 and December 31, 2022 is all attributable to the Franchising segment.

Use of Estimates

The preparation of financial statements in conformity with generally accepted U.S. accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The ultimate results could differ from those estimates.

Advertising

Advertising costs are charged to selling, general and administrative expenses as incurred. Advertising costs were $0.7 million, $0.5 million and $0.3 million for fiscal years 2023, 2022 and 2021, respectively.

Accounting for Stock-Based Compensation

The Company recognizes the cost of all share-based payments to employees, including grants of employee stock options, in the consolidated financial statements based on the grant date fair value of those awards. This cost is recognized over the period for which an employee is required to provide service in exchange for the award.

The Company estimates the fair value of options granted using the Black-Scholes option valuation model. The Company estimates the volatility of its common stock at the date of grant based on its historical volatility rate. The Company’s decision to use historical volatility was based upon the lack of actively traded options on its common stock. The Company estimates the expected term based upon historical option exercises. The risk-free interest rate assumption is based on observed interest rates for the expected term. The Company uses historical data to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest. For options granted, the Company amortizes the fair value on a straight-line basis. All options are amortized over the vesting periods, which are generally four years beginning from the date of grant.

Revenue Recognition – Franchising

The following is a description of the principal sources of revenue for the company’s franchising segment. The Company’s performance obligations under franchise agreements consist of (a) a franchise license, including a license to use one of our brands, (b) a point-of-sale software license, (c) initial services, such as pre-opening training and marketing support, and (d) ongoing services, such as marketing services and operational support. These performance obligations are highly interrelated so we do not consider them to be individually distinct and therefore account for them under ASC 606 as a single performance obligation, which is satisfied by providing a right to use our intellectual property over the estimated life of the franchise. The disaggregation of the Company’s franchise revenue is presented within the Revenue lines of the Consolidated Statements of Operations with the amounts included in Revenue: Other delineated below.

Royalties

The Company collects royalties from each retail franchise based upon a percentage of retail sales. The Company recognizes royalties at the time the underlying sales occur.

Merchandise Sales

Merchandise sales include the sale of point-of-sale technology equipment to franchisees and the sale of a limited amount of sporting goods to certain Play It Again Sports franchisees. Merchandise sales, which includes shipping and handling charges, are recognized at a point in time when the product has been shipped to the franchisee. Shipping and handling costs associated with outbound freight are accounted for as a fulfillment cost and included in cost of merchandise sold.

Franchise Fees

The Company collects initial franchise fees when franchise agreements are signed. The Company recognizes franchise fee revenue over the estimated life of the franchise, beginning with the opening of the franchise, which is when the Company has performed substantially all initial services required by the franchise agreement and the franchisee benefits from the rights afforded by the franchise agreement. The Company had deferred franchise fee revenue of $7.1 million and $6.7 million at December 30, 2023 and December 31, 2022, respectively.

Marketing Fees

Marketing fee revenue is included in the Revenue: Other line of the Consolidated Statements of Operations. The Company bills and collects annual marketing fees from its franchisees at various times throughout the year. The Company recognizes marketing fee revenue on a straight line basis over the franchise duration. The Company recognized $1.6 million, $1.5 million and $1.3 million in marketing fee revenue for each of the fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021, respectively.

Software License Fees

Software license fee revenue is included in the Revenue: Other line of the Consolidated Statements of Operations. The Company bills and collects software license fees from its franchisees when the point-of-sale system is provided to the franchisee. The Company recognizes software license fee revenue on a straight line basis over the franchise duration. The Company recognized $0.4 million, $0.3 million and $0.3 million in software license fee revenue for each of the fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021, respectively. The Company had deferred software license fees of $1.8 million and $1.6 million at December 30, 2023 and December 31, 2022, respectively.

Contract Liabilities

The Company’s contract liabilities for its franchise revenues consist of deferred revenue associated with franchise fees and software license fees described above.

Commission Fees

The Company capitalizes incremental commission fees paid as a result of obtaining franchise agreement contracts. Capitalized commission fees of $0.6 million and $0.5 million are outstanding at December 30, 2023 and December 31, 2022, respectively and are included in Prepaid expenses and Other assets in the Consolidated Balance Sheets.

Capitalized commission fees are amortized over the life of the franchise and are included in selling, general and administrative expenses. During the fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021, the Company recognized $109,700, $100,800 and $95,200 of commission fee expense, respectively.

Income Taxes

The Company accounts for incomes taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits in income tax expense.

Sales Tax

The Company’s accounting policy is to present taxes collected from customers and remitted to government authorities on a net basis.

Earnings Per Share

The Company calculates earnings per share by dividing net income by the weighted average number of shares of common stock outstanding to arrive at the Earnings Per Share — Basic. The Company calculates Earnings Per Share — Diluted by dividing net income by the weighted average number of shares of common stock and dilutive stock equivalents from the potential exercise of stock options using the treasury stock method.

The following table sets forth the presentation of shares outstanding used in the calculation of basic and diluted earnings per share (“EPS”):

	Year Ended
	December 30, 2023	December 31, 2022	December 25, 2021
Denominator for basic EPS — weighted average common shares	3,479,936	3,487,732	3,671,980
Dilutive shares associated with option plans	160,588	104,724	138,500
Denominator for diluted EPS — weighted average common shares and dilutive potential common shares	3,640,524	3,592,456	3,810,480
Options excluded from EPS calculation — anti-dilutive	2,913	21,153	20,294

Fair Value Measurements

The Company defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  The Company uses three levels of inputs to measure fair value:

● Level 1 — quoted prices in active markets for identical assets and liabilities.

● Level 2 — observable inputs other than quoted prices in active markets for identical assets and liabilities.

● Level 3 — unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions.

Due to their nature, the carrying value of cash equivalents, receivables, payables and debt obligations approximates fair value.

Recently Issued Accounting Pronouncements

Segment Reporting – In November 2023, the FASB issued guidance that expands segment disclosures for public entities, including requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), the title and position of the CODM and an explanation of how the CODM uses reported measures of segment profit or loss in assessing segment performance and allocating resources. The new guidance also expands disclosures about a reportable segment’s profit or loss and assets in interim periods and clarifies that a public entity may report additional measures of segment profit if the CODM uses more than one measure of a segment’s profit or loss. The new guidance does not remove existing segment disclosure requirements or change how a public entity identifies its operating segments, aggregates those operating segments, or determines its reportable segments. The guidance is effective for fiscal years beginning after December 15, 2023, and subsequent interim periods with early adoption permitted, and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact this new guidance will have on its financial statements and disclosures.

Improvements to Income Tax Disclosures – In December 2023, the FASB issued guidance that expands income tax disclosures for public entities, including requiring enhanced disclosures related to the rate reconciliation and income taxes paid information. The guidance is effective for annual disclosures for fiscal years beginning after December 15, 2024, with early adoption permitted. The guidance should be applied on a prospective basis, with retrospective application to all prior periods presented in the financial statements permitted. The Company is currently evaluating the impact this new guidance will have on its financial statements and disclosures.

Reclassifications

Certain reclassifications of previously reported amounts have been made to conform to the current year presentation. Such reclassifications did not impact net income or shareholders’ equity (deficit) as previously reported.

XML

Investment in Leasing Operations:

12 Months Ended

Dec. 30, 2023

Investment in Leasing Operations:

Investment in Leasing Operations:

3.     Investment in Leasing Operations:

In May 2021, the Company made the decision to no longer solicit new leasing customers in its middle-market leasing business and will pursue an orderly run-off of this leasing portfolio.

Investment in leasing operations consists of the following:

	December 30, 2023		December 31, 2022
Direct financing and sales-type leases:
Minimum lease payments receivable	$	77,100	$	294,100
Estimated unguaranteed residual value of equipment		17,700		461,700
Unearned lease income, net of initial direct costs deferred		(6,700)		(103,800)
Security deposits		(28,100)		(303,300)
Total investment in direct financing and sales-type leases		60,000		348,700
Allowance for credit losses		(1,500)		(7,100)
Net investment in direct financing and sales-type leases		58,500		341,600
Operating leases:
Operating lease assets		876,500		716,100
Less accumulated depreciation and amortization		(859,900)		(707,400)
Net investment in operating leases		16,600		8,700
Total net investment in leasing operations	$	75,100	$	350,300

As of December 30, 2023, the $75,100 total net investment in leases consisted of $75,100 classified as current and $0 classified as long-term. As of December 31, 2022, the $350,300 total net investment in leases consisted of $344,900 classified as current and $5,400 classified as long-term.

As of December 30, 2023 and December 31, 2022, no customers had leased assets totaling more than 10% of the Company’s total assets.

Future minimum lease payments receivable under lease contracts and the amortization of unearned lease income, net of initial direct costs deferred, is as follows as of December 30, 2023:

	Direct Financing and Sales-Type Leases
	Minimum Lease		Income
Fiscal Year	Payments Receivable		Amortization
2024	$	77,100	$	6,700
Thereafter		—		—
	$	77,100	$	6,700

The Company’s key credit quality indicator for its investment in direct financing and sales-type leases is the status of the lease, defined as accruing or non-accrual. Leases that are accruing income are considered to have a lower risk of loss. Non-accrual leases are those that the Company believes have a higher risk of loss. The Company experienced no credit losses in its lease portfolio during the fiscal years ended December 30, 2023, December 31, 2022, and December 25, 2021. At December 30, 2023 and December 31, 2022, no leases in the Company’s lease portfolio were past due, and all were on accrual status.

The Company leases high-technology and other business-essential equipment to its leasing customers. Upon expiration of the initial term or extended lease term, depending on the structure of the lease, the customer may return the equipment, renew the lease for an additional term, or purchase the equipment. Due to the uncertainty of such outcome at the end of the lease term, the lease as recorded at commencement represents only the current terms of the agreement. As a lessor, the Company’s leases do not contain non-lease components. The residual values reflect the estimated amounts to be received at lease termination from sales or other dispositions of leased equipment to unrelated parties. The leased equipment residual values are based on the Company’s best estimate. The Company’s risk management strategy for its residual value includes the contractual obligations of its customers to maintain, service, and insure the leased equipment, the use of third party remarketers as well as the analytical review of historical asset dispositions.

Leasing income as presented on the Consolidated Statements of Operations consists of the following:

	Year Ended		Year Ended			Year Ended
	December 30, 2023		December 31, 2022			December 25, 2021
Interest income on direct financing and sales-type leases	$	246,200	$	760,500	-	$	1,755,200
Selling profit (loss) at commencement of sales-type leases		94,900		1,326,900			1,829,800
Operating lease income		2,999,400		2,243,300			2,017,300
Income on sales of equipment under lease		834,500		1,798,000			4,799,400
Other		591,200		809,000			746,600
Leasing income	$	4,766,200	$	6,937,700		$	11,148,300

XML

Receivables:

12 Months Ended

Dec. 30, 2023

Receivables:

Receivables:

4.     Receivables:

The Company’s current receivables consisted of the following:

	December 30, 2023		December 31, 2022
Trade	$	189,600	$	145,000
Royalty		1,110,500		1,216,600
Other		175,200		77,000
	$	1,475,300	$	1,438,600

As part of its normal operating procedures, the Company requires Standby Letters of Credit as collateral for a portion of its trade receivables.

XML

Intangible Assets:

12 Months Ended

Dec. 30, 2023

Intangible Assets

Intangible Assets

5.     Intangible Assets:

In June 2022, Winmark terminated an agreement that contained the rights for eleven Play It Again Sports stores to operate separately from Winmark’s franchise system. In terminating the agreement, which included $3.54 million of consideration paid by Winmark, Winmark reacquired the franchise rights to these eleven stores. Upon termination of the agreement, individual franchise agreements were signed for these eleven stores, each with an initial term of ten years.

Intangible assets consist of these reacquired franchise rights. The Company amortizes the fair value of the reacquired franchise rights over the contract term of the franchise. The Company recognized $354,000 and $191,700 of amortization expense for the years ended December 30, 2023 and December 31, 2022, respectively.

Intangible assets consist of the following:

	December 30, 2023		December 31, 2022
Reacquired franchise rights	$	3,540,000	$	3,540,000
Accumulated amortization		(545,700)		(191,700)
	$	2,994,300	$	3,348,300

The following table illustrates future amortization to be expensed for the next five fiscal years and fiscal years thereafter related to reacquired franchise rights as of December 30, 2023.

Amortization expected to be expensed in	Amount
2024	$	354,000
2025		354,000
2026		354,000
2027		354,000
2028		354,000
Thereafter		1,224,300
	$	2,994,300

XML

Shareholders' Equity (Deficit):

12 Months Ended

Dec. 30, 2023

Shareholders' Equity (Deficit):

Shareholders' Equity (Deficit):

6. Shareholders’ Equity (Deficit):

Dividends

In 2023, the Company declared and paid quarterly cash dividends totaling $3.10 per share ($10.8 million) and a $9.40 per share special cash dividend (the “2023 Special Dividend”). The 2023 Special Dividend totaled $32.9 million and was paid by cash on hand.

In 2022, the Company declared and paid quarterly cash dividends totaling $2.55 per share ($8.9 million) and a $3.00 per share special cash dividend (the “2022 Special Dividend”). The 2022 Special Dividend totaled $10.4 million and was paid by cash on hand.

In 2021, the Company declared and paid quarterly cash dividends totaling $1.60 per share ($5.9 million) and a $7.50 per share special cash dividend (the “2021 Special Dividend”). The 2021 Special Dividend totaled $27.3 million and was paid by cash on hand.

Repurchase of Common Stock

In 2022, the Company purchased 226,165 shares of our common stock for an aggregate purchase price of $49.1 million.

In 2021, the Company purchased 225,839 shares of our common stock for an aggregate purchase price of $44.2 million.

Under the Board of Directors’ authorization, as of December 30, 2023 the Company has the ability to repurchase an additional 78,600 shares of its common stock. Repurchases may be made from time to time at prevailing prices, subject to certain restrictions on volume, pricing and timing.

Stock Option Plans and Stock-Based Compensation

The Company had authorized up to 700,000 shares of common stock for granting either nonqualified or incentive stock options to officers and key employees under the Company’s 2010 Stock Option Plan (the “2010 Plan”). The 2010 Plan expired on February 24, 2020. The Company had also sponsored a Stock Option Plan for Nonemployee Directors (the “Nonemployee Directors Plan”), which had reserved a total of 350,000 shares for issuance to directors of the Company who are not employees.

At the April 29, 2020 Annual Shareholders Meeting, the Company’s shareholders approved a new stock option plan, the 2020 Stock Option Plan (the “2020 Plan”). The 2020 Plan (as described more completely in the Company’s definitive Proxy Statement filed with the United States Securities and Exchange Commission on March 10, 2020) provides for the issuance of up to 100,000 shares of common stock plus (i) the number of common stock authorized and unissued under the 2010 Plan (as of April 29, 2020, 125,465 shares), and (ii) the number of shares of common stock authorized and unissued under the Nonemployee Director Plan (as of April 29, 2020, 24,500 shares) in the form of either nonqualified or incentive stock option grants. Participants in the 2020 Plan may include employees, officers, directors, consultants and advisors of the Company.

Grants under the 2020 Plan are (as they were under the 2010 Plan and Nonemployee Directors Plan) made by the Compensation Committee of the Board of Directors at a price of not less than 100% of the fair market value on the date of grant. If an incentive stock option is granted to an individual who owns more than 10% of the voting rights of the Company’s common stock, the option exercise price may not be less than 110% of the fair market value on the date of grant. The term of the options may not exceed 10 years, except in the case of nonqualified stock options, whereby the terms are established by the Compensation Committee. Options may be exercisable in whole or in installments, as determined by the Compensation Committee.

Stock option activity under the 2010 Plan, 2020 Plan and Nonemployee Directors Plan (collectively, the “Option Plans”) as of December 30, 2023 was as follows:

				Weighted Average
				Remaining
	Number of	Weighted Average		Contractual Life
	Shares	Exercise Price		(years)	Intrinsic Value
Outstanding, December 26, 2020	393,488	$	113.19	5.61	$	27,864,900
Granted	72,600		226.96
Exercised	(105,617)		78.78
Forfeited	(4,850)		158.48
Outstanding, December 25, 2021	355,621		146.03	6.32		39,320,600
Granted	62,540		217.03
Exercised	(50,032)		94.97
Forfeited	(6,501)		183.28
Outstanding, December 31, 2022	361,628		164.70	6.40		26,688,200
Granted	21,320		328.68
Exercised	(37,304)		107.49
Forfeited	(3,752)		204.26
Outstanding, December 30, 2023	341,892	$	180.73	5.98	$	81,017,600
Exercisable, December 30, 2023	230,739	$	153.64	4.87	$	60,894,300

The fair value of options granted under the Option Plans during 2023, 2022 and 2021 were estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions and results:

	Year Ended
	December 30, 2023			December 31, 2022			December 25, 2021
Risk free interest rate		3.88	%		3.15	%		1.13	%
Expected life (years)		6			6			6
Expected volatility		28.10	%		27.58	%		25.51	%
Dividend yield		2.94	%		4.29	%		3.13	%
Option fair value	$	79.88		$	40.59		$	37.90

The total intrinsic value of options exercised during 2023, 2022 and 2021 was $9.2 million, $6.6 million and $16.2 million, respectively. The total fair value of shares vested during 2023, 2022 and 2021 was $11.7 million, $10.9 million and $9.0 million, respectively.

All unexercised options at December 30, 2023 have an exercise price equal to the fair market value on the date of the grant.

Compensation expense of $1,952,400, $1,652,400 and $1,435,500 relating to the vested portion of the fair value of stock options granted was expensed to “Selling, General and Administrative Expenses” in 2023, 2022 and 2021, respectively. As of December 30, 2023, the Company had $4.2 million of total unrecognized compensation expense related to stock options that is expected to be recognized over the remaining weighted average vesting period of approximately 2.3 years.

XML

Debt:

12 Months Ended

Dec. 30, 2023

Debt:

Debt:

7.     Debt:

Line of Credit/Term Loan

During 2021, the Company’s Line of Credit with CIBC Bank USA (the “Line of Credit”) was amended to, among other things:

● Permit the Company to issue up to $30.0 million in additional term notes to one or more affiliates or managed accounts of PGIM, Inc. (formerly Prudential Investment Management, Inc.) (collectively, “Prudential”);

● Remove the tangible net worth covenant minimum requirement, amend the fixed charge coverage ratio definition, and amend the restricted payments covenant to allow the Company more flexibility with respect to shareholder distributions and/or common stock repurchases as long as certain conditions are met (as defined within the amendment);

● Amend the provisions that allow for the replacement of LIBOR as an interest rate option in connection with borrowings under the Line of Credit.

During 2022, the Line of Credit was amended to, among other things:

● Provide for a new $30.0 million delayed draw term facility, with available draws summarized as follows:

o The Company may draw up to five (5) loans over a period of 18 months, each draw having a principal amount not less than $3.0 million (or higher integral multiples of $1.0 million), with aggregate draws outstanding not to exceed $30.0 million;

o The final maturity of all drawn loans of April 12, 2029, with all payments of principal due on such date;

o Interest at a rate to be determined at the time of each draw, payable monthly in arrears on the outstanding aggregate principal balance.

● Decrease the aggregate commitments for revolving loans from $25.0 million to $20.0 million;

● Extend the termination date for revolving loans from August 31, 2024 to April 12, 2027;

● Remove the borrowing base covenant restriction for revolving loans;

● Replace LIBOR with SOFR as an interest rate option in connection with borrowings on revolving loans and adjust the definition of and reduce the applicable margin to reflect such replacement;

● Amend the fixed charge coverage ratio definition to exclude principal payments on non-amortizing term loans that are refinanced with proceeds from permitted debt (as defined within the amendment);

● Permit the Company to issue additional term notes under a new Private Shelf Agreement with Prudential as described below.

As of December 30, 2023, there were no revolving loans outstanding under the Line of Credit, leaving $20.0 million available for additional revolving borrowings. During the year ended December 30, 2023, the Company had delayed draw term loan borrowings totaling $30.0 million under the Line of Credit bearing interest ranging from 4.60% to 4.75%.

The Line of Credit has been and will continue to be used for general corporate purposes. The Line of Credit is secured by a lien against substantially all of the Company’s assets, contains customary financial conditions and covenants, and requires maintenance of minimum levels of debt service coverage and maximum levels of leverage (all as defined within the Line of Credit). As of December 30, 2023, the Company was in compliance with all of its financial covenants.

The Line of Credit allows the Company to choose between two interest rate options in connection with its borrowings. The interest rate options are the Base Rate (as defined) and the SOFR Rate (as defined) plus an applicable margin of 0% and 1.75%, respectively. Interest periods for SOFR borrowings can be one month. The Line of Credit also provides for non-utilization fees of 0.25% per annum on the daily average of the unused commitment.

Notes Payable

The Company has a Note Agreement (the “Note Agreement”) with Prudential. During 2021, the Note Agreement was amended to, among other things:

● Provide for the issuance of $30.0 million in new senior secured notes;

● Remove the tangible net worth covenant minimum requirement, amend the fixed charge coverage ratio definition, and amend the restricted payments covenant to allow the Company more flexibility with respect to shareholder distributions and/or common stock repurchase as long as certain conditions are met (as defined within the amendment).

During 2022, the Note Agreement with Prudential was amended to, among other things:

● Permit the Company to incur the obligations described in and conform to the changes made by the Company’s entry into the amendments to the Line of Credit described above;

● Permit the Company to incur the obligations described in and conform to the changes made by the Company’s entry into the Shelf Agreement described below.

As of December 30, 2023, the Company had aggregate principal outstanding of $39.2 million under the Note Agreement; consisting of $4.5 million in principal outstanding from the $25.0 million Series A notes issued in May 2015, $4.7 million in principal outstanding from the $12.5 million Series B notes issued in August 2017 and $30.0 million in principal outstanding from the $30.0 million Series C notes issued in September 2021.

The final maturity of the Series A and Series B notes is 10 years from the issuance date. The final maturity of the Series C notes is 7 years from the issuance date. For the Series A notes, interest at a rate of 5.50% per annum on the outstanding principal balance is payable quarterly, along with required prepayments of the principal of $500,000 quarterly for the first five years, and $750,000 quarterly thereafter until the principal is paid in full. For the Series B notes, interest at a rate of 5.10% per annum on the outstanding principal balance is payable quarterly, along with required prepayments of the principal of $312,500 quarterly until the principal is paid in full. For the Series C notes, interest at a rate of 3.18% per annum on the outstanding principal balance is payable quarterly until the principal is paid in full. The Series A, Series B and Series C notes may be prepaid, at the option of the Company, in whole or in part (in a minimum amount of $1.0 million), but prepayments require payment of a Yield Maintenance Amount, as defined in the Note Agreement.

The Company’s obligations under the Note Agreement are secured by a lien against substantially all of the Company’s assets (as the notes rank pari passu with the Line of Credit), and the Note Agreement contains customary financial conditions and covenants, and requires maintenance of minimum levels of fixed charge coverage and maximum levels of leverage (all as defined within the Note Agreement). As of December 30, 2023, the Company was in compliance with all of its financial covenants.

In connection with the Note Agreement, the Company incurred debt issuance costs, of which unamortized amounts are presented as a direct deduction from the carrying amount of the related liability.

In April 2022, the Company entered into a Private Shelf Agreement (the “Shelf Agreement”) with Prudential, summarized as follows:

● For a period three years from entry into the Shelf Agreement, subject to certain customary conditions, the Company may offer and Prudential may purchase from the Company privately negotiated senior notes (“Shelf Notes”) in the aggregate principal amount up to (i) $100.0 million, less (ii) the aggregate principal amount of notes outstanding at such point (including notes outstanding under the existing Prudential Note Agreement);

● Each Shelf Note issued will have an average life and maturity of no more than 12.5 years from the date of original issuance, with interest payable at a rate per annum determined at the time of each issuance;

● The Shelf Notes will be secured by all of the Company’s assets and the Shelf Notes will rank pari passu with the Company’s obligations to the lenders under the amended Line of Credit and the amended Note Agreement;

● The Shelf Notes may be prepaid, at the option of the Company, in whole or in part (in a minimum amount of $1 million), but prepayments require payment of a Yield Maintenance Amount (as defined within the Shelf Agreement);

● The Shelf Agreement contains customary affirmative covenants and negative covenants that are substantially the same as those contained in the amended Line of Credit and amended Note Agreement.

As of December 30, 2023, the Company had not issued any notes under the Shelf Agreement and was in compliance with all of its financial covenants.

As of December 30, 2023, required payments of the notes payable and term loans for each of the next five years and thereafter are as follows:

	Notes Payable		Term Loans
2024	$	4,250,000	$	—
2025		2,750,000		—
2026		1,250,000		—
2027		937,500		—
2028		30,000,000		—
Thereafter		—		30,000,000
Total	$	39,187,500	$	30,000,000

XML

Accrued Liabilities:

12 Months Ended

Dec. 30, 2023

Accrued Liabilities

Accrued Liabilities:

8.     Accrued Liabilities:

Accrued liabilities at December 30, 2023 and December 31, 2022 are as follows:

	December 30, 2023		December 31, 2022
Accrued compensation and benefits	$	587,700	$	755,100
Rent related liabilities		590,200		542,100
Accrued interest		244,200		282,300
Accrued purchases of goods and services		637,000		129,400
Other		799,100		902,800
	$	2,858,200	$	2,611,700

XML

Contract Liabilities:

12 Months Ended

Dec. 30, 2023

Contract Liabilities:

Contract Liabilities:

9.     Contract Liabilities:

The Company’s contract liabilities for its franchise revenues consist of deferred revenue associated with franchise fees and software license fees. The table below presents the activity of the current and noncurrent deferred franchise revenue during fiscal years 2023 and 2022, respectively:

	December 30, 2023		December 31, 2022
Balance at beginning of period	$	8,618,100	$	8,508,500
Franchise and software license fees collected from franchisees, excluding amount earned as revenue during the period		2,470,600		1,951,800
Fees earned that were included in the balance at the beginning of the period		(1,765,100)		(1,842,200)
Balance at end of period	$	9,323,600	$	8,618,100

The following table illustrates future estimated revenue to be recognized for the next five fiscal years and fiscal years thereafter related to performance obligations that are unsatisfied (or partially unsatisfied) as of December 30, 2023:

Contract Liabilities expected to be recognized in	Amount
2024	$	1,666,100
2025		1,449,800
2026		1,245,300
2027		1,070,700
2028		901,200
Thereafter		2,990,500
	$	9,323,600

We have applied the optional exemption, as provided for under ASC Topic 606, Revenue from Contracts with Customers, which allows us to not disclose the transaction price allocated to unsatisfied performance obligations when the transaction price is a sales-based royalty.

XML

Operating Leases:

12 Months Ended

Dec. 30, 2023

Operating Leases:

Operating Leases:

10.     Operating Leases:

As of December 30, 2023, the Company leases its Minnesota corporate headquarters in a facility with an operating lease that expires in December 2029. Our lease includes both lease (fixed payments including rent) and non-lease components (common area or other maintenance costs and taxes) which are accounted for as a single lease component as we have elected the practical expedient to group lease and non-lease components for all leases. The lease provides us the option to extend the lease for two additional five year periods. The lease renewal option is at our sole discretion; therefore, the renewals to extend the lease term are not included in our right of use asset and lease liabilities as they are not reasonably certain of exercise. The weighted average remaining lease term for this lease is 6.0 years and the discount rate is 5.5%. As our lease does not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. The Company recognized $1,171,700, $1,207,200 and $1,178,400 of rent expense for the periods ended December 30, 2023, December 31, 2022 and December 25, 2021, respectively.

Maturities of operating lease liabilities is as follows as of December 30, 2023:

Operating Lease Liabilities expected to be recognized in	Amount
2024	$	784,400
2025		806,000
2026		828,200
2027		851,100
2028		874,600
Thereafter		898,700
Total lease payments		5,043,000
Less imputed interest		(755,900)
Present value of lease liabilities	$	4,287,100

Of the $4.3 million operating lease liability outstanding at December 30, 2023, $0.6 million is included in Accrued liabilities in the Current liabilities section of the Consolidated Balance Sheets.

For leases that contain predetermined fixed escalations of the minimum rent, we recognize the related rent expense on a straight-line basis from the date we take possession of the property to the end of the initial lease term. We record any difference between the straight-line rent amounts and amounts payable under the leases as an adjustment to the amortization of the operating lease right of use asset and operating lease liabilities.

Cash or lease incentives received upon entering into certain leases (“tenant allowances”) are recognized on a straight-line basis as a reduction to rent from the date we take possession of the property through the end of the initial lease term. In 2019, we recorded a $2.1 million tenant allowance for non-cash landlord leasehold improvements received as a reduction to the operating lease right of use asset. The reduction in rent also causes a reduction in the amortization of the operating lease right of use asset through the end of the initial lease term.

The Company’s policy for leases with a term of twelve months or less is to exclude these short-term leases from our right of use asset and lease liabilities.

Supplemental cash flow information related to our operating leases is as follows for the periods ended December 30, 2023 and December 31, 2022:

	Year Ended
	December 30, 2023		December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow outflow from operating leases	$	763,300	$	742,900

XML

Income Taxes:

12 Months Ended

Dec. 30, 2023

Income Taxes:

Income Taxes:

11.     Income Taxes:

A reconciliation of the expected federal income tax expense based on the federal statutory tax rate to the actual income tax expense is provided below:

	Year Ended
	December 30, 2023		December 31, 2022		December 25, 2021
Federal income tax expense at statutory rate (21%, 21%, 21%)	$	10,785,900	$	10,664,500	$	10,472,100
Change in valuation allowance		(551,600)		(6,600)		(1,914,400)
State and local income taxes, net of federal benefit		1,513,100		1,515,900		1,546,400
Permanent differences, including stock option expenses		(1,372,300)		(955,900)		(2,332,600)
Expiration of attributes		528,600		—		2,057,000
Adjustment to uncertain tax positions		240,100		185,300		163,400
Other, net		39,400		(44,600)		(44,500)
Actual income tax expense	$	11,183,200	$	11,358,600	$	9,947,400

Components of the provision for income taxes are as follows:

	Year Ended
	December 30, 2023		December 31, 2022		December 25, 2021
Current:
Federal	$	9,237,600	$	8,892,200	$	8,782,000
State		1,883,900		2,167,900		2,193,900
Foreign		573,800		586,200		333,500
Current provision		11,695,300		11,646,300		11,309,400
Deferred:
Federal		(504,700)		(351,500)		(1,435,000)
State		(7,400)		63,800		73,000
Deferred provision		(512,100)		(287,700)		(1,362,000)
Total provision for income taxes	$	11,183,200	$	11,358,600	$	9,947,400

The tax effects of temporary differences that give rise to the net deferred income tax assets and liabilities are presented below:

	December 30, 2023		December 31, 2022
Deferred tax assets:
Accounts receivable and lease reserves	$	500	$	1,900
Non-qualified stock option expense		1,769,200		1,540,100
Deferred revenue		1,612,200		1,584,600
Trademarks		36,900		34,700
Lease deposits		6,700		72,700
Impairment of note investments		—		529,500
Lease revenue and initial direct costs		29,200		63,400
Foreign tax credits		631,100		372,100
Valuation allowance		(350,000)		(901,600)
Depreciation and amortization		25,500		—
Other		291,100		271,600
Total deferred tax assets		4,052,400		3,569,000
Deferred tax liabilities:
Depreciation and amortization		—		(28,600)
Total deferred tax liabilities		—		(28,600)
Total net deferred tax assets	$	4,052,400	$	3,540,400

The Company has assessed its taxable earnings history and prospective future taxable income. Based upon this assessment, the Company has determined that it is more likely than not that its deferred tax assets will be realized in future periods and no valuation allowance is necessary, except for the deferred tax assets related to the impairment of note investments (which is a capital loss for tax purposes) and the foreign tax credits. The foreign tax credits will expire after 10 years. As a result, valuation allowances of $0.4 million and $0.9 million as of December 30, 2023 and December 31, 2022, respectively, have been recorded.

The amount of unrecognized tax benefits, including interest and penalties, as of December 30, 2023 and December 31, 2022, was $1,345,000 and $1,050,300, respectively, primarily for potential state taxes. All of these unrecognized tax benefits, if recognized, would impact the effective tax rate.

The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense for all periods presented. The Company had accrued approximately $261,900 and $179,000 for the payment of interest and penalties at December 30, 2023 and December 31, 2022, respectively.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

	Total
Balance at December 25, 2021	$	677,200
Increases related to current year tax positions		266,800
Expiration of the statute of limitations for the assessment of taxes		(72,700)
Balance at December 31, 2022		871,300
Increases related to current year tax positions		277,600
Subtractions for tax positions of prior years		(65,800)
Balance at December 30, 2023	$	1,083,100

The Company and its subsidiaries file income tax returns in the U.S. federal, numerous state and certain foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2019. We expect various statutes of limitation to expire during the next 12 months. Due to the uncertain response of taxing authorities, a range of outcomes cannot be reasonably estimated at this time.

XML

Commitments and Contingencies:

12 Months Ended

Dec. 30, 2023

Commitments and Contingencies:

Commitments and Contingencies:

12.     Commitments and Contingencies:

Employee Benefit Plan

The Company provides a 401(k) Savings Incentive Plan which covers substantially all employees. The plan provides for matching contributions and optional profit-sharing contributions at the discretion of the Board of Directors. Employee contributions are fully vested; matching and profit sharing contributions are subject to a five-year service vesting schedule. Company contributions to the plan for 2023, 2022 and 2021 were $371,200, $397,700 and $348,200, respectively.

Litigation

From time to time, the Company is exposed to asserted and unasserted legal claims encountered in the normal course of business. Management believes that the ultimate resolution of these matters will not have a material adverse effect on the consolidated financial position or results of operations of the Company.

XML

Segment Reporting:

12 Months Ended

Dec. 30, 2023

Segment Reporting:

Segment Reporting:

13.     Segment Reporting:

For 2023, the Company’s leasing business did not reach any of the quantitative thresholds for a reportable segment, and the Company does not expect the results from its leasing business to be of significance in the future periods. The revenues and operating income from the Company’s leasing business are included in Other in its reportable segment disclosures. Disclosures for 2022 and 2021 have been recast to be consistent with the 2023 presentation.

The Company currently has one reportable business segment, franchising, and one non-reportable operating segment. The franchising segment franchises value-oriented retail store concepts that buy, sell and trade merchandise. The non-reportable operating segment includes the Company’s equipment leasing business. Segment reporting is intended to give financial statement users a better view of how the Company manages and evaluates its businesses. The Company’s internal management reporting is the basis for the information disclosed for its operating segments. The following tables summarize financial information by segment and provide a reconciliation of segment contribution to operating income:

	Year ended
	December 30, 2023		December 31, 2022		December 25, 2021
Revenue:
Franchising	$	78,477,300	$	74,473,100	$	67,067,900
Other		4,766,200		6,937,700		11,148,300
Total revenue	$	83,243,500	$	81,410,800	$	78,216,200
Reconciliation to operating income:
Franchising segment contribution	$	49,375,900	$	49,007,900	$	44,832,100
Other operating segment contribution		3,904,700		4,604,900		6,504,100
Total operating income	$	53,280,600	$	53,612,800	$	51,336,200
Depreciation and amortization:
Franchising	$	646,900	$	463,100	$	243,900
Other		125,800		140,000		186,700
Total depreciation and amortization	$	772,700	$	603,100	$	430,600

	As of
	December 30, 2023		December 31, 2022
Identifiable assets:
Franchising	$	7,570,000	$	8,901,000
Other		281,200		784,300
Unallocated		21,116,500		20,770,400
Total	$	28,967,700	$	30,455,700

Revenues are all generated from United States operations other than franchising revenues from Canadian operations of $6.8 million, $6.4 million and $4.9 million in each of fiscal 2023, 2022 and 2021, respectively. All long-lived assets are located within the United States.

XML

Significant Accounting Policies: (Policies)

12 Months Ended

Dec. 30, 2023

Significant Accounting Policies:

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Winmark Capital Corporation, Wirth Business Credit, Inc. and Grow Biz Games, Inc. All material inter-company transactions have been eliminated in consolidation.

Cash Equivalents

Cash Equivalents

Cash equivalents consist of highly liquid investments with an original maturity of three months or less when purchased. Cash equivalents are stated at cost, which approximates fair value. As of December 30, 2023 and December 31, 2022, the Company had $143,600 and $9,900, respectively, of cash located in Canadian banks. The Company holds its cash and cash equivalents with financial institutions and at times, such balances may be in excess of insurance limits.

Receivables

Receivables

The Company provides an allowance for credit losses on trade receivables. The allowance for credit losses was $600 and $800 at December 30, 2023 and December 31, 2022 respectively. If receivables in excess of the provided allowance are determined uncollectible, they are charged to expense in the year the determination is made. Trade receivables are written off when they become uncollectible (which generally occurs when the franchise terminates and there is no reasonable expectation of collection), and payments subsequently received on such receivable are credited to the allowance for credit losses. Historically, receivables balances written off have not exceeded allowances provided.

Restricted Cash

Restricted Cash

The Company is required by certain states to maintain initial franchise fees in a restricted bank account until the franchise opens. Cash held in escrow totaled $25,000 and $65,000 at December 30, 2023 and December 31, 2022, respectively.

Investment in Leasing Operations

Investment in Leasing Operations

The Company uses the direct finance method of accounting to record income from direct financing leases. At the inception of a lease, the Company records the minimum future lease payments receivable, the estimated residual value of the leased equipment and the unearned lease income. Initial direct costs related to lease originations are deferred as part of the investment and amortized over the lease term. Unearned lease income is the amount by which the total lease receivable plus the estimated residual value exceeds the cost of the equipment.

Leasing Income Recognition

Leasing income for direct financing leases is recognized under the effective interest method. The effective interest method of income recognition applies a constant rate of interest equal to the internal rate of return on the lease.

For sales-type leases in which the equipment has a fair value greater or less than its carrying amount, selling profit/loss is recognized at commencement. For subsequent periods or for leases in which the equipment’s fair value is equal to its carrying amount, the recording of income is consistent with the accounting for a direct financing lease.

For leases that are accounted for as operating leases, income is recognized on a straight-line basis when payments under the lease contract are due.

Generally, when a lease is more than 90 days delinquent (when more than three monthly payments are owed), the lease is classified as being on non-accrual and the Company stops recognizing leasing income on that date. Payments received on leases in non-accrual status generally reduce the lease receivable. Leases on non-accrual status remain classified as such until there is sustained payment performance that, in the Company’s judgment, would indicate that all contractual amounts will be collected in full.

Leasing Expense

Leasing expense includes the cost of financing equipment purchases, the cost of equipment sales as well as depreciation expense for operating lease assets.

Lease Residual Values

Residual values reflect the estimated amounts to be received at lease termination from sales or other dispositions of leased equipment to unrelated parties. The leased equipment residual values are based on the Company’s best estimate.

Allowance for Credit Losses

The Company maintains an allowance for credit losses at an amount that it believes to be sufficient to absorb losses inherent in its existing lease portfolio as of the reporting dates. Leases are collectively evaluated for potential loss. The Company’s methodology for determining the allowance for credit losses includes consideration of the level of delinquencies and non-accrual leases, historical net charge-off amounts and review of any significant concentrations.

A provision is charged against earnings to maintain the allowance for credit losses at the appropriate level. If the actual results are different from the Company’s estimates, results could be different. The Company’s policy is to charge-off against the allowance the estimated unrecoverable portion of accounts once they reach 121 days delinquent.

Inventories

Inventories

The Company values its inventories at the lower of cost, as determined by the weighted average cost method, and net realizable values. Inventory consists of computer hardware and related accessories, all of which is finished goods merchandise held for resale.

Impairment of Long-lived Assets

Impairment of Long-lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying amount of the asset exceeds expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value.

Property and Equipment

Property and Equipment

Property and equipment is stated at cost. Depreciation and amortization for financial reporting purposes is provided on the straight-line method. Estimated useful lives used in calculating depreciation and amortization are: three to five years for computer and peripheral equipment, five to seven years for furniture and equipment and the shorter of the lease term or useful life for leasehold improvements. Major repairs, refurbishments and improvements which significantly extend the useful lives of the related assets are capitalized. Maintenance and repairs, supplies and accessories are charged to expense as incurred.

Intangible Assets

Intangible Assets

Intangible assets are amortized over the estimated useful life on a straight line basis. The Company reviews its intangible assets for impairment at its fiscal year end or whenever events or changes in circumstances indicate that there has been impairment in the value of its intangible assets. No impairment was noted during fiscal years ended 2023 and 2022. Intangible assets of $3.0 million and $3.3 million in the consolidated balance sheets at December 30, 2023 and December 31, 2022, respectively, are all attributable to the Franchising segment.

Goodwill

Goodwill

The Company reviews its goodwill for impairment at its fiscal year end or whenever events or changes in circumstances indicate that there has been impairment in the value of its goodwill. No impairment was noted during fiscal years ended 2023, 2022 and 2021. Goodwill of $0.6 million in the consolidated balance sheets at December 30, 2023 and December 31, 2022 is all attributable to the Franchising segment.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with generally accepted U.S. accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The ultimate results could differ from those estimates.

Advertising

Advertising

Advertising costs are charged to selling, general and administrative expenses as incurred. Advertising costs were $0.7 million, $0.5 million and $0.3 million for fiscal years 2023, 2022 and 2021, respectively.

Accounting for Stock-Based Compensation

Accounting for Stock-Based Compensation

The Company recognizes the cost of all share-based payments to employees, including grants of employee stock options, in the consolidated financial statements based on the grant date fair value of those awards. This cost is recognized over the period for which an employee is required to provide service in exchange for the award.

The Company estimates the fair value of options granted using the Black-Scholes option valuation model. The Company estimates the volatility of its common stock at the date of grant based on its historical volatility rate. The Company’s decision to use historical volatility was based upon the lack of actively traded options on its common stock. The Company estimates the expected term based upon historical option exercises. The risk-free interest rate assumption is based on observed interest rates for the expected term. The Company uses historical data to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest. For options granted, the Company amortizes the fair value on a straight-line basis. All options are amortized over the vesting periods, which are generally four years beginning from the date of grant.

Revenue Recognition - Franchising

Revenue Recognition – Franchising

The following is a description of the principal sources of revenue for the company’s franchising segment. The Company’s performance obligations under franchise agreements consist of (a) a franchise license, including a license to use one of our brands, (b) a point-of-sale software license, (c) initial services, such as pre-opening training and marketing support, and (d) ongoing services, such as marketing services and operational support. These performance obligations are highly interrelated so we do not consider them to be individually distinct and therefore account for them under ASC 606 as a single performance obligation, which is satisfied by providing a right to use our intellectual property over the estimated life of the franchise. The disaggregation of the Company’s franchise revenue is presented within the Revenue lines of the Consolidated Statements of Operations with the amounts included in Revenue: Other delineated below.

Royalties

The Company collects royalties from each retail franchise based upon a percentage of retail sales. The Company recognizes royalties at the time the underlying sales occur.

Merchandise Sales

Merchandise sales include the sale of point-of-sale technology equipment to franchisees and the sale of a limited amount of sporting goods to certain Play It Again Sports franchisees. Merchandise sales, which includes shipping and handling charges, are recognized at a point in time when the product has been shipped to the franchisee. Shipping and handling costs associated with outbound freight are accounted for as a fulfillment cost and included in cost of merchandise sold.

Franchise Fees

The Company collects initial franchise fees when franchise agreements are signed. The Company recognizes franchise fee revenue over the estimated life of the franchise, beginning with the opening of the franchise, which is when the Company has performed substantially all initial services required by the franchise agreement and the franchisee benefits from the rights afforded by the franchise agreement. The Company had deferred franchise fee revenue of $7.1 million and $6.7 million at December 30, 2023 and December 31, 2022, respectively.

Marketing Fees

Marketing fee revenue is included in the Revenue: Other line of the Consolidated Statements of Operations. The Company bills and collects annual marketing fees from its franchisees at various times throughout the year. The Company recognizes marketing fee revenue on a straight line basis over the franchise duration. The Company recognized $1.6 million, $1.5 million and $1.3 million in marketing fee revenue for each of the fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021, respectively.

Software License Fees

Software license fee revenue is included in the Revenue: Other line of the Consolidated Statements of Operations. The Company bills and collects software license fees from its franchisees when the point-of-sale system is provided to the franchisee. The Company recognizes software license fee revenue on a straight line basis over the franchise duration. The Company recognized $0.4 million, $0.3 million and $0.3 million in software license fee revenue for each of the fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021, respectively. The Company had deferred software license fees of $1.8 million and $1.6 million at December 30, 2023 and December 31, 2022, respectively.

Contract Liabilities

The Company’s contract liabilities for its franchise revenues consist of deferred revenue associated with franchise fees and software license fees described above.

Commission Fees

The Company capitalizes incremental commission fees paid as a result of obtaining franchise agreement contracts. Capitalized commission fees of $0.6 million and $0.5 million are outstanding at December 30, 2023 and December 31, 2022, respectively and are included in Prepaid expenses and Other assets in the Consolidated Balance Sheets.

Capitalized commission fees are amortized over the life of the franchise and are included in selling, general and administrative expenses. During the fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021, the Company recognized $109,700, $100,800 and $95,200 of commission fee expense, respectively.

Income Taxes

Income Taxes

The Company accounts for incomes taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits in income tax expense.

Sales Tax

Sales Tax

The Company’s accounting policy is to present taxes collected from customers and remitted to government authorities on a net basis.

Earnings Per Share

Earnings Per Share

The Company calculates earnings per share by dividing net income by the weighted average number of shares of common stock outstanding to arrive at the Earnings Per Share — Basic. The Company calculates Earnings Per Share — Diluted by dividing net income by the weighted average number of shares of common stock and dilutive stock equivalents from the potential exercise of stock options using the treasury stock method.

The following table sets forth the presentation of shares outstanding used in the calculation of basic and diluted earnings per share (“EPS”):

	Year Ended
	December 30, 2023	December 31, 2022	December 25, 2021
Denominator for basic EPS — weighted average common shares	3,479,936	3,487,732	3,671,980
Dilutive shares associated with option plans	160,588	104,724	138,500
Denominator for diluted EPS — weighted average common shares and dilutive potential common shares	3,640,524	3,592,456	3,810,480
Options excluded from EPS calculation — anti-dilutive	2,913	21,153	20,294

Fair Value Measurements

Fair Value Measurements

The Company defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  The Company uses three levels of inputs to measure fair value:

● Level 1 — quoted prices in active markets for identical assets and liabilities.

● Level 2 — observable inputs other than quoted prices in active markets for identical assets and liabilities.

● Level 3 — unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions.

Due to their nature, the carrying value of cash equivalents, receivables, payables and debt obligations approximates fair value.

Recent Accounting Pronouncements:

Recently Issued Accounting Pronouncements

Segment Reporting – In November 2023, the FASB issued guidance that expands segment disclosures for public entities, including requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), the title and position of the CODM and an explanation of how the CODM uses reported measures of segment profit or loss in assessing segment performance and allocating resources. The new guidance also expands disclosures about a reportable segment’s profit or loss and assets in interim periods and clarifies that a public entity may report additional measures of segment profit if the CODM uses more than one measure of a segment’s profit or loss. The new guidance does not remove existing segment disclosure requirements or change how a public entity identifies its operating segments, aggregates those operating segments, or determines its reportable segments. The guidance is effective for fiscal years beginning after December 15, 2023, and subsequent interim periods with early adoption permitted, and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact this new guidance will have on its financial statements and disclosures.

Improvements to Income Tax Disclosures – In December 2023, the FASB issued guidance that expands income tax disclosures for public entities, including requiring enhanced disclosures related to the rate reconciliation and income taxes paid information. The guidance is effective for annual disclosures for fiscal years beginning after December 15, 2024, with early adoption permitted. The guidance should be applied on a prospective basis, with retrospective application to all prior periods presented in the financial statements permitted. The Company is currently evaluating the impact this new guidance will have on its financial statements and disclosures.

Reclassifications

Reclassifications

Certain reclassifications of previously reported amounts have been made to conform to the current year presentation. Such reclassifications did not impact net income or shareholders’ equity (deficit) as previously reported.

XML

Significant Accounting Policies: (Tables)

12 Months Ended

Dec. 30, 2023

Significant Accounting Policies:

Schedule of shares outstanding used in the calculation of basic and diluted earnings per share

	Year Ended
	December 30, 2023	December 31, 2022	December 25, 2021
Denominator for basic EPS — weighted average common shares	3,479,936	3,487,732	3,671,980
Dilutive shares associated with option plans	160,588	104,724	138,500
Denominator for diluted EPS — weighted average common shares and dilutive potential common shares	3,640,524	3,592,456	3,810,480
Options excluded from EPS calculation — anti-dilutive	2,913	21,153	20,294

XML

Investment in Leasing Operations: (Tables)

12 Months Ended

Dec. 30, 2023

Investment in Leasing Operations:

Schedule of investment in leasing operations

	December 30, 2023		December 31, 2022
Direct financing and sales-type leases:
Minimum lease payments receivable	$	77,100	$	294,100
Estimated unguaranteed residual value of equipment		17,700		461,700
Unearned lease income, net of initial direct costs deferred		(6,700)		(103,800)
Security deposits		(28,100)		(303,300)
Total investment in direct financing and sales-type leases		60,000		348,700
Allowance for credit losses		(1,500)		(7,100)
Net investment in direct financing and sales-type leases		58,500		341,600
Operating leases:
Operating lease assets		876,500		716,100
Less accumulated depreciation and amortization		(859,900)		(707,400)
Net investment in operating leases		16,600		8,700
Total net investment in leasing operations	$	75,100	$	350,300

Schedule of future minimum lease payments receivable under lease contracts and the amortization of unearned lease income, net of initial direct costs deferred

Future minimum lease payments receivable under lease contracts and the amortization of unearned lease income, net of initial direct costs deferred, is as follows as of December 30, 2023:

	Direct Financing and Sales-Type Leases
	Minimum Lease		Income
Fiscal Year	Payments Receivable		Amortization
2024	$	77,100	$	6,700
Thereafter		—		—
	$	77,100	$	6,700

Schedule of components of leasing income

	Year Ended		Year Ended			Year Ended
	December 30, 2023		December 31, 2022			December 25, 2021
Interest income on direct financing and sales-type leases	$	246,200	$	760,500	-	$	1,755,200
Selling profit (loss) at commencement of sales-type leases		94,900		1,326,900			1,829,800
Operating lease income		2,999,400		2,243,300			2,017,300
Income on sales of equipment under lease		834,500		1,798,000			4,799,400
Other		591,200		809,000			746,600
Leasing income	$	4,766,200	$	6,937,700		$	11,148,300

XML

Receivables: (Tables)

12 Months Ended

Dec. 30, 2023

Receivables:

Schedule of the Company's current receivables

	December 30, 2023		December 31, 2022
Trade	$	189,600	$	145,000
Royalty		1,110,500		1,216,600
Other		175,200		77,000
	$	1,475,300	$	1,438,600

XML

Intangible Assets: (Tables)

12 Months Ended

Dec. 30, 2023

Intangible Assets

Schedule of amortized intangible assets

	December 30, 2023		December 31, 2022
Reacquired franchise rights	$	3,540,000	$	3,540,000
Accumulated amortization		(545,700)		(191,700)
	$	2,994,300	$	3,348,300

Schedule of future amortization to be expensed

Amortization expected to be expensed in	Amount
2024	$	354,000
2025		354,000
2026		354,000
2027		354,000
2028		354,000
Thereafter		1,224,300
	$	2,994,300

XML

Shareholders' Equity (Deficit): (Tables)

12 Months Ended

Dec. 30, 2023

Shareholders' Equity (Deficit):

Schedule of stock option activity

				Weighted Average
				Remaining
	Number of	Weighted Average		Contractual Life
	Shares	Exercise Price		(years)	Intrinsic Value
Outstanding, December 26, 2020	393,488	$	113.19	5.61	$	27,864,900
Granted	72,600		226.96
Exercised	(105,617)		78.78
Forfeited	(4,850)		158.48
Outstanding, December 25, 2021	355,621		146.03	6.32		39,320,600
Granted	62,540		217.03
Exercised	(50,032)		94.97
Forfeited	(6,501)		183.28
Outstanding, December 31, 2022	361,628		164.70	6.40		26,688,200
Granted	21,320		328.68
Exercised	(37,304)		107.49
Forfeited	(3,752)		204.26
Outstanding, December 30, 2023	341,892	$	180.73	5.98	$	81,017,600
Exercisable, December 30, 2023	230,739	$	153.64	4.87	$	60,894,300

Schedule of weighted average assumptions used in estimation of fair value of options granted

	Year Ended
	December 30, 2023			December 31, 2022			December 25, 2021
Risk free interest rate		3.88	%		3.15	%		1.13	%
Expected life (years)		6			6			6
Expected volatility		28.10	%		27.58	%		25.51	%
Dividend yield		2.94	%		4.29	%		3.13	%
Option fair value	$	79.88		$	40.59		$	37.90

XML

Debt (Tables)

12 Months Ended

Dec. 30, 2023

Debt:

Schedule of required prepayments of the notes payable for each of the next five years and thereafter

	Notes Payable		Term Loans
2024	$	4,250,000	$	—
2025		2,750,000		—
2026		1,250,000		—
2027		937,500		—
2028		30,000,000		—
Thereafter		—		30,000,000
Total	$	39,187,500	$	30,000,000

XML

Accrued Liabilities (Tables)

12 Months Ended

Dec. 30, 2023

Accrued Liabilities

Schedule of accrued liabilities

	December 30, 2023		December 31, 2022
Accrued compensation and benefits	$	587,700	$	755,100
Rent related liabilities		590,200		542,100
Accrued interest		244,200		282,300
Accrued purchases of goods and services		637,000		129,400
Other		799,100		902,800
	$	2,858,200	$	2,611,700

XML

Contract Liabilities: (Tables)

12 Months Ended

Dec. 30, 2023

Contract Liabilities:

Schedule of activity of current and noncurrent deferred franchise revenue

	December 30, 2023		December 31, 2022
Balance at beginning of period	$	8,618,100	$	8,508,500
Franchise and software license fees collected from franchisees, excluding amount earned as revenue during the period		2,470,600		1,951,800
Fees earned that were included in the balance at the beginning of the period		(1,765,100)		(1,842,200)
Balance at end of period	$	9,323,600	$	8,618,100

Schedule of future estimated revenue to be recognized related to performance obligations

Contract Liabilities expected to be recognized in	Amount
2024	$	1,666,100
2025		1,449,800
2026		1,245,300
2027		1,070,700
2028		901,200
Thereafter		2,990,500
	$	9,323,600

XML

Operating Leases: (Tables)

12 Months Ended

Dec. 30, 2023

Operating Leases:

Schedule of maturities of operating lease liabilities

Operating Lease Liabilities expected to be recognized in	Amount
2024	$	784,400
2025		806,000
2026		828,200
2027		851,100
2028		874,600
Thereafter		898,700
Total lease payments		5,043,000
Less imputed interest		(755,900)
Present value of lease liabilities	$	4,287,100

Schedule of supplemental cash flow information related to operating leases

	Year Ended
	December 30, 2023		December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow outflow from operating leases	$	763,300	$	742,900

XML

Income Taxes: (Tables)

12 Months Ended

Dec. 30, 2023

Income Taxes:

Schedule of reconciliation of the expected federal income tax expense based on the federal statutory tax rate to the actual income tax expense

	Year Ended
	December 30, 2023		December 31, 2022		December 25, 2021
Federal income tax expense at statutory rate (21%, 21%, 21%)	$	10,785,900	$	10,664,500	$	10,472,100
Change in valuation allowance		(551,600)		(6,600)		(1,914,400)
State and local income taxes, net of federal benefit		1,513,100		1,515,900		1,546,400
Permanent differences, including stock option expenses		(1,372,300)		(955,900)		(2,332,600)
Expiration of attributes		528,600		—		2,057,000
Adjustment to uncertain tax positions		240,100		185,300		163,400
Other, net		39,400		(44,600)		(44,500)
Actual income tax expense	$	11,183,200	$	11,358,600	$	9,947,400

Schedule of components of the provision for income taxes

	Year Ended
	December 30, 2023		December 31, 2022		December 25, 2021
Current:
Federal	$	9,237,600	$	8,892,200	$	8,782,000
State		1,883,900		2,167,900		2,193,900
Foreign		573,800		586,200		333,500
Current provision		11,695,300		11,646,300		11,309,400
Deferred:
Federal		(504,700)		(351,500)		(1,435,000)
State		(7,400)		63,800		73,000
Deferred provision		(512,100)		(287,700)		(1,362,000)
Total provision for income taxes	$	11,183,200	$	11,358,600	$	9,947,400

Schedule of tax effects of temporary differences that give rise to the net deferred income tax assets and liabilities

	December 30, 2023		December 31, 2022
Deferred tax assets:
Accounts receivable and lease reserves	$	500	$	1,900
Non-qualified stock option expense		1,769,200		1,540,100
Deferred revenue		1,612,200		1,584,600
Trademarks		36,900		34,700
Lease deposits		6,700		72,700
Impairment of note investments		—		529,500
Lease revenue and initial direct costs		29,200		63,400
Foreign tax credits		631,100		372,100
Valuation allowance		(350,000)		(901,600)
Depreciation and amortization		25,500		—
Other		291,100		271,600
Total deferred tax assets		4,052,400		3,569,000
Deferred tax liabilities:
Depreciation and amortization		—		(28,600)
Total deferred tax liabilities		—		(28,600)
Total net deferred tax assets	$	4,052,400	$	3,540,400

Summary of activity related to the Company's unrecognized tax benefits

	Total
Balance at December 25, 2021	$	677,200
Increases related to current year tax positions		266,800
Expiration of the statute of limitations for the assessment of taxes		(72,700)
Balance at December 31, 2022		871,300
Increases related to current year tax positions		277,600
Subtractions for tax positions of prior years		(65,800)
Balance at December 30, 2023	$	1,083,100

XML

Segment Reporting: (Tables)

12 Months Ended

Dec. 30, 2023

Segment Reporting:

Schedule of financial information by segment and reconciliation of segment contribution to operating income

	Year ended
	December 30, 2023		December 31, 2022		December 25, 2021
Revenue:
Franchising	$	78,477,300	$	74,473,100	$	67,067,900
Other		4,766,200		6,937,700		11,148,300
Total revenue	$	83,243,500	$	81,410,800	$	78,216,200
Reconciliation to operating income:
Franchising segment contribution	$	49,375,900	$	49,007,900	$	44,832,100
Other operating segment contribution		3,904,700		4,604,900		6,504,100
Total operating income	$	53,280,600	$	53,612,800	$	51,336,200
Depreciation and amortization:
Franchising	$	646,900	$	463,100	$	243,900
Other		125,800		140,000		186,700
Total depreciation and amortization	$	772,700	$	603,100	$	430,600

	As of
	December 30, 2023		December 31, 2022
Identifiable assets:
Franchising	$	7,570,000	$	8,901,000
Other		281,200		784,300
Unallocated		21,116,500		20,770,400
Total	$	28,967,700	$	30,455,700

XML

Organization and Business: (Details) - item	12 Months Ended
	Dec. 30, 2023	Dec. 25, 2021
Organization and Business:
Number of weeks in a fiscal year	53	52

XML

Significant Accounting Policies: Balance Sheet Disclosures (Details) - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022	Dec. 25, 2021
Receivables
Allowance for Doubtful Accounts Receivable, Current	$ 600	$ 800
Restricted Cash
Restricted cash held in escrow	$ 25,000	65,000	$ 30,000
Allowance for Credit Losses
Delinquent period for charging-off against allowance for credit losses	121 days
Canadian operations
Cash Equivalents
Cash located in banks	$ 143,600	$ 9,900

XML

Significant Accounting Policies: PPE, Intangible Assets, Goodwill, Advertising, Stock-Based Comp (Details) - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022	Dec. 25, 2021
Intangible Assets
Impairment expense	$ 0	$ 0
Intangible assets	2,994,300	3,348,300
Goodwill
Goodwill impairment	0	0	$ 0
Goodwill	607,500	607,500
Advertising
Advertising costs	$ 700,000	$ 500,000	$ 300,000
Accounting for Stock-Based Compensation
Stock options, vesting period	4 years
Computer and peripheral equipment | Minimum
Property, plant and equipment
Estimated useful lives	3 years
Computer and peripheral equipment | Maximum
Property, plant and equipment
Estimated useful lives	5 years
Furniture and equipment | Minimum
Property, plant and equipment
Estimated useful lives	5 years
Furniture and equipment | Maximum
Property, plant and equipment
Estimated useful lives	7 years

XML

Significant Accounting Policies: Marketing Fees and Software License Fees (Details) - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022	Dec. 25, 2021
Revenue recognition
Deferred revenue	$ 9,323,600	$ 8,618,100	$ 8,508,500
Franchise fees
Revenue recognition
Deferred revenue	7,100,000	6,700,000
Revenue	1,512,000	1,575,400	1,496,900
Marketing Fees
Revenue recognition
Revenue	1,600,000	1,500,000	1,300,000
Software License Fees
Revenue recognition
Deferred revenue	1,800,000	1,600,000
Revenue	$ 400,000	$ 300,000	$ 300,000

XML

Significant Accounting Policies: Commission Fees (Details) - Commission Fees - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022	Dec. 25, 2021
Commission Fees
Capitalized contract costs	$ 600,000	$ 500,000
Expense	$ 109,700	$ 100,800	$ 95,200

XML

Significant Accounting Policies: Earnings Per Share (Details) - shares	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022	Dec. 25, 2021
Earnings Per Share
Denominator for basic EPS - weighted average common shares	3,479,936	3,487,732	3,671,980
Dilutive shares associated with option plans	160,588	104,724	138,500
Denominator for diluted EPS - weighted average common shares and dilutive potential common shares	3,640,524	3,592,456	3,810,480
Options excluded from EPS calculation - anti-dilutive (in shares)	2,913	21,153	20,294

XML

Investment in Leasing Operations: Summary of Leasing Operations (Details) - USD ($)	Dec. 30, 2023	Dec. 31, 2022
Direct financing and sales-type leases:
Minimum lease payments receivable	$ 77,100	$ 294,100
Estimated unguaranteed residual value of equipment	17,700	461,700
Unearned lease income net of initial direct costs deferred	(6,700)	(103,800)
Security deposits	(28,100)	(303,300)
Total investment in direct financing and sales-type leases	60,000	348,700
Allowance for credit losses	(1,500)	(7,100)
Net investment in direct financing and sales-type leases	58,500	341,600
Operating leases:
Operating lease assets	876,500	716,100
Less accumulated depreciation and amortization	(859,900)	(707,400)
Net investment in operating leases	16,600	8,700
Total net investment in leasing operations	75,100	350,300
Net investment in leases - current	75,100	344,900
Net investment in leases - long-term	$ 0	$ 5,400

XML

Investment in Leasing Operations: Risk Concentration (Details) - customer	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022
Total assets
Investment in leasing operations
Number of customers	0	0

XML

Investment in Leasing Operations: Minimum Lease Payments Receivable (Details) - USD ($)	Dec. 30, 2023	Dec. 31, 2022
Direct Financing and Sales-Type Leases, Minimum Lease Payments Receivable
2024	$ 77,100
Total	77,100	$ 294,100
Direct Financing and Sales-Type Leases, Income Amortization
2024	6,700
Total	$ 6,700

XML

Investment in Leasing Operations: Other (Details) - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022
Allowance for Credit Losses for Leasing Operations
Credit losses	$ 0	$ 0
Investment in direct financing and sales-type leases	60,000	348,700
Financial Asset, Past Due
Allowance for Credit Losses for Leasing Operations
Investment in direct financing and sales-type leases	$ 0	$ 0

XML

Investment in Leasing Operations: Leasing Income (Details) - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022	Dec. 25, 2021
Leasing income
Interest income on direct financing and sales-type leases	$ 246,200	$ 760,500	$ 1,755,200
Selling profit (loss) at commencement of sales-type leases	94,900	1,326,900	1,829,800
Operating lease income	2,999,400	2,243,300	2,017,300
Income on sales of equipment under lease	834,500	1,798,000	4,799,400
Other	591,200	809,000	746,600
Leasing income	$ 4,766,200	$ 6,937,700	$ 11,148,300

XML

Receivables: (Details) - USD ($)	Dec. 30, 2023	Dec. 31, 2022
Current receivables
Trade	$ 189,600	$ 145,000
Royalty	1,110,500	1,216,600
Other	175,200	77,000
Total current receivables	$ 1,475,300	$ 1,438,600

XML

Intangible Assets: Franchise rights (Details)	1 Months Ended	12 Months Ended
	Jun. 30, 2022 USD ($) store	Dec. 30, 2023 USD ($)	Dec. 31, 2022 USD ($)
Intangible Assets
Termination of agreement, number of stores	11
Termination of agreement, consideration paid by Winmark | $	$ 3,540,000
Number of stores in which Winmark reacquired the franchise rights	11
Number of stores that signed franchise agreements	11
Amortization of intangible assets | $		$ 354,000	$ 191,700
Franchise Rights
Intangible Assets
Useful life	10 years

XML

Intangible Assets: Net of Amortization (Details) - USD ($)	Dec. 30, 2023	Dec. 31, 2022
Intangible Assets
Reacquired franchise rights	$ 3,540,000	$ 3,540,000
Accumulated amortization	(545,700)	(191,700)
Total	$ 2,994,300	$ 3,348,300

XML

Intangible Assets: Amortization (Details) - USD ($)	Dec. 30, 2023	Dec. 31, 2022
Future amortization to be expensed:
2024	$ 354,000
2025	354,000
2026	354,000
2027	354,000
2028	354,000
Thereafter	1,224,300
Total	$ 2,994,300	$ 3,348,300

XML

Shareholders' Equity (Deficit): Dividends and Repurchase of Common Stock (Details) - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022	Dec. 25, 2021
Repurchase of Common Stock
Aggregate purchase price of shares repurchased		$ 49,119,800	$ 44,217,500
Dividends
Cash dividends declared and paid (in dollars per share)	$ 3.10	$ 2.55	$ 1.60
Aggregate quarterly cash dividends declared and paid, excluding special dividend	$ 10,800,000	$ 8,900,000	$ 5,900,000
Special cash dividend approved by Board of Directors (in dollars per share)	$ 9.40	$ 3.00	$ 7.50
Total special dividend in cash	$ 32,900,000	$ 10,400,000	$ 27,300,000
Common Stock Repurchase Program
Repurchase of Common Stock
Number of shares repurchased		226,165	225,839
Aggregate purchase price of shares repurchased		$ 49,100,000	$ 44,200,000
Number of additional shares that can be repurchased	78,600

XML

Shareholders' Equity (Deficit): Stock Options (Details) - shares	12 Months Ended
	Dec. 30, 2023	Apr. 29, 2020	Feb. 24, 2020
2020 Plan
Stock Option Plans
Number of shares authorized for issuance		100,000
2020 Plan | Employee Stock Option [Member] | Minimum
Stock Option Plans
Exercise price of stock options as a percentage of fair value on the date of grant	100.00%
Threshold voting rights above which the option exercise price may not be less than 110% of the fair market value (as a percent)	10.00%
Exercise price of stock options as a percentage of fair value on the date of grant for an individual who owns more than 10% of voting rights	110.00%
2020 Plan | Employee Stock Option [Member] | Maximum
Stock Option Plans
Term of the option	10 years
2010 Plan
Stock Option Plans
Number of shares authorized for issuance			700,000
Number of shares authorized and unissued under the plan		125,465
Nonemployee Directors Plan
Stock Option Plans
Number of shares authorized for issuance			350,000
Number of shares authorized and unissued under the plan		24,500

XML

Shareholders' Equity (Deficit): Stock Options Activity (Details) - Employee Stock Option [Member] - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022	Dec. 25, 2021	Dec. 26, 2020
Number of Shares
Outstanding at the beginning of the period (in shares)	361,628	355,621	393,488
Granted (in shares)	21,320	62,540	72,600
Exercised (in shares)	(37,304)	(50,032)	(105,617)
Forfeited (in shares)	(3,752)	(6,501)	(4,850)
Outstanding at the end of the period (in shares)	341,892	361,628	355,621	393,488
Exercisable at the end of the period (in shares)	230,739
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 164.70	$ 146.03	$ 113.19
Granted (in dollars per share)	328.68	217.03	226.96
Exercised (in dollars per share)	107.49	94.97	78.78
Forfeited (in dollars per share)	204.26	183.28	158.48
Outstanding at the end of the period (in dollars per share)	180.73	$ 164.70	$ 146.03	$ 113.19
Exercisable at the end of the period (in dollars per share)	$ 153.64
Weighted Average Remaining Contractual Life (years)
Outstanding	5 years 11 months 23 days	6 years 4 months 24 days	6 years 3 months 25 days	5 years 7 months 9 days
Exercisable at the end of the period	4 years 10 months 13 days
Intrinsic Value
Outstanding at the beginning of the period	$ 26,688,200	$ 39,320,600	$ 27,864,900
Outstanding at the end of the period	81,017,600	$ 26,688,200	$ 39,320,600	$ 27,864,900
Exercisable at the end of the period	$ 60,894,300
Weighted average assumptions and results used in estimation of fair value of options granted
Risk free interest rate (as a percent)	3.88%	3.15%	1.13%
Expected life (years)	6 years	6 years	6 years
Expected volatility (as a percent)	28.10%	27.58%	25.51%
Dividend yield (as a percent)	2.94%	4.29%	3.13%
Option fair value (in dollars per share)	$ 79.88	$ 40.59	$ 37.90

XML

Shareholders' Equity (Deficit): Additional Information (Details) - Employee Stock Option [Member] - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022	Dec. 25, 2021
Additional disclosures
Total intrinsic value of options exercised	$ 9,200,000	$ 6,600,000	$ 16,200,000
Total fair value of shares vested	11,700,000	10,900,000	9,000,000.0
Compensation expense	1,952,400	$ 1,652,400	$ 1,435,500
Total unrecognized compensation expense	$ 4,200,000
Weighted average period for recognition of unrecognized compensation expense	2 years 3 months 18 days

XML

Debt: Line of Credit (Details) $ in Millions	12 Months Ended
	Dec. 30, 2023 USD ($) loan item	Dec. 31, 2022 USD ($)
Delayed Draw Term Facility
Line of Credit
Borrowings outstanding	$ 30.0
Maximum borrowing capacity	$ 30.0
Maximum number of loans available over a period of 18 months | loan	5
Time period over which the Company may draw loans	18 months
Minimum principal amount of each draw	$ 3.0
Integral multiple	$ 1.0
Delayed Draw Term Facility | Minimum
Line of Credit
Interest rate (as a percent)	4.60%
Delayed Draw Term Facility | Maximum
Line of Credit
Interest rate (as a percent)	4.75%
Revolving Loans
Line of Credit
Borrowings outstanding	$ 0.0
Maximum borrowing capacity	20.0	$ 25.0
Maximum amount of additional term notes available for issuance	30.0
Line of credit available for additional borrowings	$ 20.0
Number of interest rate options | item	2
Non-utilization fees (as a percent)	0.25%
Revolving Loans | Base Rate
Line of Credit
Variable rate basis	Base Rate
Applicable margin (as a percent)	0.00%
Revolving Loans | LIBOR
Line of Credit
Variable rate basis	SOFR
Applicable margin (as a percent)	1.75%
Revolving Loans | One month LIBOR
Line of Credit
Variable rate basis	one month LIBOR

XML

Debt: Notes Payable (Details) - USD ($)	1 Months Ended	12 Months Ended
	Apr. 30, 2022	Dec. 30, 2023	Sep. 30, 2021	Aug. 31, 2017	May 31, 2015
Note Agreement | Notes Payable.
Notes Payable
Amount of additional senior secured notes available for issuance		$ 30,000,000.0
Principal amount outstanding		39,200,000
Minimum prepayment		1,000,000.0
Note Agreement | Series A Notes
Notes Payable
Principal amount outstanding		$ 4,500,000
Note payable, face amount					$ 25,000,000.0
Debt term		10 years
Interest rate (as a percent)		5.50%
Quarterly principal payment, first five years		$ 500,000
Quarterly principal payment, thereafter		750,000
Note Agreement | Series B Notes
Notes Payable
Principal amount outstanding		$ 4,700,000
Note payable, face amount				$ 12,500,000
Debt term		10 years
Interest rate (as a percent)		5.10%
Quarterly principal payment		$ 312,500
Note Agreement | Series C Notes
Notes Payable
Principal amount outstanding		$ 30,000,000.0
Note payable, face amount			$ 30,000,000.0
Debt term		7 years
Interest rate (as a percent)		3.18%
Shelf Agreement | Senior Notes
Notes Payable
Principal amount outstanding		$ 0
Shelf Agreement term	3 years
Maximum amount of Shelf Notes available for issuance.	$ 100,000,000.0
Minimum prepayment	$ 1,000,000
Shelf Agreement | Senior Notes | Maximum
Notes Payable
Debt term	12 years 6 months

XML

Debt: Maturities (Details)	Dec. 30, 2023 USD ($)
Notes Payable.
Required prepayments of the notes payable and term loans for each of the next five years and thereafter
2023	$ 4,250,000
2024	2,750,000
2025	1,250,000
2026	937,500
2027	30,000,000
Total	39,187,500
Delayed Draw Term Facility
Required prepayments of the notes payable and term loans for each of the next five years and thereafter
Thereafter	30,000,000
Total	$ 30,000,000

XML

Accrued Liabilities: (Details) - USD ($)	Dec. 30, 2023	Dec. 31, 2022
Accrued Liabilities
Accrued compensation and benefits	$ 587,700	$ 755,100
Rent related liabilities	590,200	542,100
Accrued interest	244,200	282,300
Accrued purchases of goods and services	637,000	129,400
Other	799,100	902,800
Accrued liabilities	$ 2,858,200	$ 2,611,700

XML

Contract Liabilities: Activity (Details) - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022
Activity of the current and noncurrent deferred franchise revenue
Balance at beginning of period	$ 8,618,100	$ 8,508,500
Franchise and software license fees collected from franchisees, excluding amount earned as revenue during the period	2,470,600	1,951,800
Fees earned that were included in the balance at the beginning of the period	(1,765,100)	(1,842,200)
Balance at end of period	$ 9,323,600	$ 8,618,100

XML

Contract Liabilities: Performance Obligations (Details)	Dec. 30, 2023 USD ($)
Future estimated revenue to be recognized related to performance obligations
Revenue, remaining performance obligation	$ 9,323,600
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-12-31
Future estimated revenue to be recognized related to performance obligations
Duration of expected recognition period for remaining performance obligation	1 year
Revenue, remaining performance obligation	$ 1,666,100
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-12-29
Future estimated revenue to be recognized related to performance obligations
Duration of expected recognition period for remaining performance obligation	1 year
Revenue, remaining performance obligation	$ 1,449,800
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-12-28
Future estimated revenue to be recognized related to performance obligations
Duration of expected recognition period for remaining performance obligation	1 year
Revenue, remaining performance obligation	$ 1,245,300
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-12-27
Future estimated revenue to be recognized related to performance obligations
Duration of expected recognition period for remaining performance obligation	1 year
Revenue, remaining performance obligation	$ 1,070,700
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2027-12-26
Future estimated revenue to be recognized related to performance obligations
Duration of expected recognition period for remaining performance obligation	1 year
Revenue, remaining performance obligation	$ 901,200
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2028-12-31
Future estimated revenue to be recognized related to performance obligations
Duration of expected recognition period for remaining performance obligation
Revenue, remaining performance obligation	$ 2,990,500

XML

Operating Leases: Summary (Details)	12 Months Ended
	Dec. 30, 2023 USD ($) item	Dec. 31, 2022 USD ($)	Dec. 25, 2021 USD ($)
Operating Leases
Remaining lease term	6 years
Discount rate (as a percent)	5.50%
Rent expense | $	$ 1,171,700	$ 1,207,200	$ 1,178,400
Corporate headquarters, Minnesota
Operating Leases
Lease renewal option	true
Number of lease extension periods | item	2
Lease renewal term	5 years

XML

Operating Leases: Maturities and other (Details) - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022
Maturities of operating lease liabilities:
2024	$ 784,400
2025	806,000
2026	828,200
2027	851,100
2028	874,600
Thereafter	898,700
Total	5,043,000
Less imputed interest	(755,900)
Present value of lease liabilities	4,287,100
Operating lease liability
Operating lease liability, current	$ 600,000
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	Accrued Liabilities, Current
Other disclosures
Tenant allowance recorded during the year as a reduction to the operating lease right of use asset	$ 2,100,000
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow outflow from operating leases	$ 763,300	$ 742,900

XML

Income Taxes: Reconciliation, Components and Deferred Taxes (Details) - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022	Dec. 25, 2021
Income Taxes:
Federal statutory tax rate (as a percent)	21.00%	21.00%	21.00%
Reconciliation of the expected federal income tax expense based on the federal statutory tax rate to the actual income tax expense
Federal income tax expense at statutory rate (21%, 21%, 21%)	$ 10,785,900	$ 10,664,500	$ 10,472,100
Change in valuation allowance	(551,600)	(6,600)	(1,914,400)
State and local income taxes, net of federal benefit	1,513,100	1,515,900	1,546,400
Permanent differences, including stock option expenses	(1,372,300)	(955,900)	(2,332,600)
Expiration of attributes	528,600		2,057,000
Adjustment to uncertain tax positions	240,100	185,300	163,400
Other, net	39,400	(44,600)	(44,500)
Total provision for income taxes	11,183,200	11,358,600	9,947,400
Current provision for income taxes:
Federal	9,237,600	8,892,200	8,782,000
State	1,883,900	2,167,900	2,193,900
Foreign	573,800	586,200	333,500
Current provision	11,695,300	11,646,300	11,309,400
Deferred provision for income taxes:
Federal	(504,700)	(351,500)	(1,435,000)
State	(7,400)	63,800	73,000
Deferred provision	(512,100)	(287,700)	(1,362,000)
Total provision for income taxes	11,183,200	11,358,600	$ 9,947,400
Deferred tax assets:
Accounts receivable and lease reserves	500	1,900
Non-qualified stock option expense	1,769,200	1,540,100
Deferred revenue	1,612,200	1,584,600
Trademarks	36,900	34,700
Lease deposits	6,700	72,700
Impairment of note investments		529,500
Lease revenue and initial direct costs	29,200	63,400
Foreign tax credits	631,100	372,100
Valuation allowance	(350,000)	(901,600)
Depreciation and amortization	25,500
Other	291,100	271,600
Total deferred tax assets	4,052,400	3,569,000
Deferred tax liabilities:
Depreciation and amortization		(28,600)
Total deferred tax liabilities		(28,600)
Total net deferred tax liabilities	$ 4,052,400	$ 3,540,400

XML

Income Taxes: Other (Details) - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022
Deferred tax assets, valuation allowance
Valuation allowance	$ 350,000	$ 901,600
Unrecognized Tax Benefits
Unrecognized tax benefits, including interest and penalties	1,345,000	1,050,300
Interest and penalties accrued related to unrecognized tax benefit	261,900	179,000
Activity related to the company's unrecognized tax benefits
Balance at the beginning of the period	871,300	677,200
Increases related to current year tax positions	277,600	266,800
Subtractions for tax positions of prior years	(65,800)
Expiration of the statute of limitations for the assessment of taxes		(72,700)
Balance at the end of the period	$ 1,083,100	$ 871,300
Period over which various statutes of limitations are expected to expire	12 months

XML

Commitments and Contingencies: (Details) - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022	Dec. 25, 2021
Employee Benefit Plan
Service period for vesting of employer contribution	5 years
Company contributions	$ 371,200	$ 397,700	$ 348,200

XML

Segment Reporting: (Details)	12 Months Ended
	Dec. 30, 2023 USD ($) segment item	Dec. 31, 2022 USD ($)	Dec. 25, 2021 USD ($)
Segment Reporting
Number of reportable operating segments | item	1
Number of non-reportable operating segments | segment	1
Total revenue	$ 83,243,500	$ 81,410,800	$ 78,216,200
Total operating income	53,280,600	53,612,800	51,336,200
Total depreciation and amortization	772,700	603,100	430,600
Total identifiable assets	28,967,700	30,455,700
Franchising | Canadian operations
Segment Reporting
Total revenue	6,800,000	6,400,000	4,900,000
Operating | Franchising
Segment Reporting
Total revenue	78,477,300	74,473,100	67,067,900
Total operating income	49,375,900	49,007,900	44,832,100
Total depreciation and amortization	646,900	463,100	243,900
Total identifiable assets	7,570,000	8,901,000
Operating | Other.
Segment Reporting
Total revenue	4,766,200	6,937,700	11,148,300
Total operating income	3,904,700	4,604,900	6,504,100
Total depreciation and amortization	125,800	140,000	$ 186,700
Total identifiable assets	281,200	784,300
Unallocated
Segment Reporting
Total identifiable assets	$ 21,116,500	$ 20,770,400

XML

Pay vs Performance Disclosure - USD ($)	12 Months Ended
	Dec. 30, 2023	Dec. 31, 2022	Dec. 25, 2021
Pay vs Performance Disclosure
Net Income (Loss)	$ 40,178,100	$ 39,424,900	$ 39,919,900

XML

Insider Trading Arrangements	12 Months Ended
	Dec. 30, 2023
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false