WINMARK CORPORATION_September 27, 2025

Nine Months Ended

September 27, 2025

September 28, 2024

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flow outflow from operating leases

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

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

For the quarterly period ended September 27, 2025

☐

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, MN 55441

(Address of principal executive offices) (Zip Code)

(763) 520-8500

(Registrant’s telephone number, including area code)

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

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, 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Common stock, no par value, 3,562,135 shares outstanding as of October 13, 2025.

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WINMARK CORPORATION AND SUBSIDIARIES

INDEX


		PAGE

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	CONSOLIDATED CONDENSED BALANCE SHEETS September 27, 2025 and December 28, 2024	3

	CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS Three Months Ended September 27, 2025 and September 28, 2024 Nine Months Ended September 27, 2025 and September 28, 2024	4

	CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) Three Months Ended September 27, 2025 and September 28, 2024 Nine Months Ended September 27, 2025 and September 28, 2024	5

	CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS Nine Months Ended September 27, 2025 and September 28, 2024	6

	NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18

Item 4.	Controls and Procedures	18

PART II.	OTHER INFORMATION	18

Item 1.	Legal Proceedings	18

Item 1A.	Risk Factors	18

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19

Item 3.	Defaults Upon Senior Securities	19

Item 4.	Mine Safety Disclosures	19

Item 5.	Other Information	19

Item 6.	Exhibits	20

	SIGNATURES	21

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PART I. FINANCIAL INFORMATION

ITEM 1: Financial Statements

WINMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)


	September 27, 2025		December 28, 2024
ASSETS
Current Assets:
Cash and cash equivalents	$	39,734,800	$	12,189,800
Restricted cash		140,000		140,000
Receivables, less allowance for credit losses of $500 and $500		1,652,900		1,336,400
Income tax receivable		3,000		96,400
Inventories		283,700		397,600
Prepaid expenses		1,249,900		1,205,400
Total current assets		43,064,300		15,365,600
Property and equipment, net		1,296,600		1,419,400
Operating lease right of use asset		1,856,100		2,108,700
Intangible assets, net		2,374,800		2,640,300
Goodwill		607,500		607,500
Other assets		496,200		491,200
Deferred income taxes		4,051,700		4,211,800
	$	53,747,200	$	26,844,500

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable	$	1,373,200	$	1,562,000
Accrued liabilities		4,195,700		1,866,200
Deferred revenue		1,663,200		1,659,700
Total current liabilities		7,232,100		5,087,900
Long-term Liabilities:
Line of credit/Term loan		30,000,000		30,000,000
Notes payable, net of unamortized debt issuance costs of $43,500 and $57,200		29,956,500		29,942,800
Deferred revenue		8,355,600		8,027,600
Operating lease liabilities		2,594,000		3,092,800
Other liabilities		1,950,200		1,739,500
Total long-term liabilities		72,856,300		72,802,700
Shareholders’ Equity (Deficit):
Common stock, no par value, 10,000,000 shares authorized, 3,561,550 and 3,539,744 shares issued and outstanding		17,792,700		14,790,500
Retained earnings (accumulated deficit)		(44,133,900)		(65,836,600)
Total shareholders' equity (deficit)		(26,341,200)		(51,046,100)
	$	53,747,200	$	26,844,500

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

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WINMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 27, 2025		September 28, 2024		September 27, 2025		September 28, 2024
Revenue:
Royalties	$	20,911,300	$	19,512,500	$	57,348,000	$	54,555,700
Leasing income		46,600		316,200		2,401,100		1,677,400
Merchandise sales		693,600		702,500		2,438,500		2,738,500
Franchise fees		417,600		451,200		1,088,100		1,182,700
Other		563,800		528,500		1,693,700		1,586,800
Total revenue		22,632,900		21,510,900		64,969,400		61,741,100
Cost of merchandise sold		663,300		662,500		2,318,100		2,562,600
Leasing expense		—		—		—		36,600
Provision for credit losses		—		—		—		(1,500)
Selling, general and administrative expenses		7,046,400		5,919,800		21,070,500		18,979,000
Income from operations		14,923,200		14,928,600		41,580,800		40,164,400
Interest expense		(610,300)		(704,100)		(1,833,900)		(2,163,300)
Interest and other income		310,300		386,400		714,800		855,200
Income before income taxes		14,623,200		14,610,900		40,461,700		38,856,300
Provision for income taxes		(3,486,700)		(3,490,200)		(8,767,500)		(8,485,100)
Net income	$	11,136,500	$	11,120,700	$	31,694,200	$	30,371,200
Earnings per share - basic	$	3.13	$	3.16	$	8.94	$	8.65
Earnings per share - diluted	$	3.02	$	3.03	$	8.61	$	8.29
Weighted average shares outstanding - basic		3,553,211		3,520,334		3,543,766		3,510,461
Weighted average shares outstanding - diluted		3,693,154		3,671,121		3,679,745		3,663,309

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

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WINMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(Unaudited)


				Retained
				Earnings
	Common Stock			(Accumulated
	Shares	Amount		Deficit)		Total
BALANCE, December 28, 2024	3,539,744	$	14,790,500	$	(65,836,600)	$	(51,046,100)
Repurchase of common stock	(7,383)		(2,249,900)		—		(2,249,900)
Stock options exercised	210		47,700		—		47,700
Compensation expense relating to stock options	—		536,600		—		536,600
Cash dividends ($0.90 per share)	—		—		(3,186,000)		(3,186,000)
Comprehensive income (Net income)	—		—		9,956,400		9,956,400
BALANCE, March 29, 2025	3,532,571		13,124,900		(59,066,200)		(45,941,300)
Repurchase of common stock	(561)		(168,900)		—		(168,900)
Stock options exercised	16,448		1,538,600		—		1,538,600
Compensation expense relating to stock options	—		529,000		—		529,000
Cash dividends ($0.96 per share)	—		—		(3,398,500)		(3,398,500)
Comprehensive income (Net income)	—		—		10,601,200		10,601,200
BALANCE, June 28, 2025	3,548,458		15,023,600		(51,863,500)		(36,839,900)
Repurchase of common stock	—		—		—		—
Stock options exercised	13,092		2,167,700		—		2,167,700
Compensation expense relating to stock options	—		601,400		—		601,400
Cash dividends ($0.96 per share)	—		—		(3,406,900)		(3,406,900)
Comprehensive income (Net income)	—		—		11,136,500		11,136,500
BALANCE, September 27, 2025	3,561,550	$	17,792,700	$	(44,133,900)	$	(26,341,200)


				Retained
				Earnings
	Common Stock			(Accumulated
	Shares	Amount		Deficit)		Total
BALANCE, December 30, 2023	3,496,977	$	7,768,800	$	(66,924,900)	$	(59,156,100)
Stock options exercised	453		70,000		—		70,000
Compensation expense relating to stock options	—		485,900		—		485,900
Cash dividends ($0.80 per share)	—		—		(2,797,900)		(2,797,900)
Comprehensive income (Net income)	—		—		8,819,000		8,819,000
BALANCE, March 30, 2024	3,497,430		8,324,700		(60,903,800)		(52,579,100)
Stock options exercised	22,897		2,634,200		—		2,634,200
Compensation expense relating to stock options	—		454,600		—		454,600
Cash dividends ($0.90 per share)	—		—		(3,165,800)		(3,165,800)
Comprehensive income (Net income)	—		—		10,431,400		10,431,400
BALANCE, June 29, 2024	3,520,327		11,413,500		(53,638,200)		(42,224,700)
Stock options exercised	75		10,800		—		10,800
Compensation expense relating to stock options	—		517,600		—		517,600
Cash dividends ($0.90 per share)	—		—		(3,168,300)		(3,168,300)
Comprehensive income (Net income)	—		—		11,120,700		11,120,700
BALANCE, September 28, 2024	3,520,402	$	11,941,900	$	(45,685,800)	$	(33,743,900)

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

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WINMARK CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended
	September 27, 2025		September 28, 2024
OPERATING ACTIVITIES:
Net income	$	31,694,200	$	30,371,200
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment		295,500		345,600
Amortization of intangible assets		265,500		265,500
Provision for credit losses		—		(1,500)
Compensation expense related to stock options		1,666,900		1,458,200
Deferred income taxes		160,100		135,100
Operating lease right of use asset amortization		252,700		228,200
Tax benefits on exercised stock options		1,091,900		943,300
Change in operating assets and liabilities:
Receivables		(316,500)		(126,900)
Principal collections on lease receivables		—		104,700
Income tax receivable/payable		(998,500)		(881,600)
Inventories		113,900		(55,700)
Prepaid expenses		(44,500)		220,500
Other assets		(5,000)		(7,200)
Accounts payable		(188,800)		(118,700)
Accrued and other liabilities		2,054,900		472,200
Rents received in advance and security deposits		—		(28,000)
Deferred revenue		331,500		375,100
Net cash provided by operating activities		36,373,800		33,700,000
INVESTING ACTIVITIES:
Purchase of property and equipment		(172,700)		(194,900)
Net cash used for investing activities		(172,700)		(194,900)
FINANCING ACTIVITIES:
Payments on notes payable		—		(3,187,500)
Repurchases of common stock		(2,418,700)		—
Proceeds from exercises of stock options		3,754,000		2,715,000
Dividends paid		(9,991,400)		(9,132,100)
Net cash used for financing activities		(8,656,100)		(9,604,600)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		27,545,000		23,900,500
Cash, cash equivalents and restricted cash, beginning of period		12,329,800		13,386,500
Cash, cash equivalents and restricted cash, end of period	$	39,874,800	$	37,287,000
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$	1,815,500	$	2,149,200
Cash paid for income taxes	$	8,514,100	$	8,281,400

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Condensed Balance Sheets to the total of the same amounts shown above:
	Nine Months Ended
	September 27, 2025		September 28, 2024
Cash and cash equivalents	$	39,734,800	$	37,197,000
Restricted cash		140,000		90,000
Total cash, cash equivalents and restricted cash	$	39,874,800	$	37,287,000

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

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WINMARK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. Management’s Interim Financial Statement Representation:

The accompanying consolidated condensed financial statements have been prepared by Winmark Corporation and subsidiaries (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The Company has a 52/53 week year which ends on the last Saturday in December. The information in the consolidated condensed financial statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of such financial statements. The consolidated condensed financial statements and notes are presented in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for Form 10-Q, and therefore do not contain certain information included in the Company’s annual consolidated financial statements and notes. This report should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K.

Revenues and operating results for the nine months ended September 27, 2025 are not necessarily indicative of the results to be expected for the full year.

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.

Recently Issued Accounting Pronouncements

Disaggregation – Income Statement Expenses – In November 2024, the Financial Accounting Standards Board (“FASB”) issued guidance requiring additional disclosure of the nature of expenses included in the income statement in response to requests from investors for more information about an entity’s expenses. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as disclosures about selling expenses. The guidance is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods within annual reporting periods beginning after December 15, 2027. The requirements will be applied prospectively with the option for retrospective application. Early adoption is permitted. 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.

2. Organization and Business:

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®. The Company also operates a middle market equipment leasing business under the Winmark Capital® mark.

3. 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 the first nine months of 2025 and 2024, respectively:


	September 27, 2025		September 28, 2024
Balance at beginning of period	$	9,687,300	$	9,323,600
Franchise and software license fees collected from franchisees, excluding amount earned as revenue during the period		1,567,200		1,659,700
Fees earned that were included in the balance at the beginning of the period		(1,235,700)		(1,284,600)
Balance at end of period	$	10,018,800	$	9,698,700

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The following table illustrates future estimated revenue to be recognized for the remainder of 2025 and full fiscal years thereafter related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 27, 2025.


Contract Liabilities expected to be recognized in	Amount
2025	$	414,800
2026		1,616,400
2027		1,441,600
2028		1,272,200
2029		1,123,900
Thereafter		4,149,900
	$	10,018,800

4. 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.

5. Investment in Leasing Operations:

In May 2021, the Company made the decision to no longer solicit new leasing customers and will pursue an orderly run-off for its leasing portfolio.

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


	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 27, 2025		September 28, 2024		September 27, 2025		September 28, 2024
Interest income on direct financing and sales-type leases	$	—	$	100	$	—	$	6,700
Operating lease income		46,600		90,600		139,900		970,400
Income on sales of equipment under lease		—		72,100		200,000		368,700
Other		—		153,400		2,061,200		331,600
Leasing income	$	46,600	$	316,200	$	2,401,100	$	1,677,400

6. Intangible Assets

Intangible assets consist of reacquired franchise rights. The Company amortizes the fair value of the reacquired franchise rights over the contract term of the franchise. The Company recognized $265,500 and $265,500 of amortization expense for the nine months ended September 27, 2025 and September 28, 2024, respectively.

The following table illustrates future amortization to be expensed for the remainder of 2025 and full fiscal years thereafter related to reacquired franchise rights as of September 27, 2025.


Amortization expected to be expensed in	Amount
2025	$	88,500
2026		354,000
2027		354,000
2028		354,000
2029		354,000
Thereafter		870,300
	$	2,374,800

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7. Earnings Per Share:

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


	Three Months Ended		Nine Months Ended
	September 27, 2025	September 28, 2024	September 27, 2025	September 28, 2024
Denominator for basic EPS — weighted average common shares	3,553,211	3,520,334	3,543,766	3,510,461
Dilutive shares associated with option plans	139,943	150,787	135,979	152,848
Denominator for diluted EPS — weighted average common shares and dilutive potential common shares	3,693,154	3,671,121	3,679,745	3,663,309
Options excluded from EPS calculation — anti-dilutive	6,312	3,413	11,723	4,267

8. Shareholders’ Equity (Deficit):

Dividends

On January 29, 2025, the Company’s Board of Directors approved the payment of a $0.90 per share quarterly cash dividend to shareholders of record at the close of business on February 12, 2025, which was paid on March 3, 2025.

On April 16, 2025, the Company’s Board of Directors approved the payment of a $0.96 per share quarterly cash dividend to shareholders of record at the close of business on May 14, 2025, which was paid on June 2, 2025.

On July 15, 2025, the Company’s Board of Directors approved the payment of a $0.96 per share quarterly cash dividend to shareholders of record at the close of business on August 13, 2025, which was paid on September 2, 2025.

Repurchase of Common Stock

During the first nine months of 2025, the Company repurchased 7,944 shares of its common stock. Under the Board of Directors’ authorization, as of September 27, 2025, the Company has the ability to repurchase an additional 70,656 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

Stock option activity under the Company’s option plans as of September 27, 2025 was as follows:


				Weighted Average
				Remaining
	Number of	Weighted Average		Contractual Life
	Shares	Exercise Price		(years)		Intrinsic Value
Outstanding, December 28, 2024	319,844	$	203.89
Granted	24,232		402.64
Exercised	(29,750)		126.19
Forfeited	(1,165)		301.01
Outstanding, September 27, 2025	313,161	$	226.29	5.62	$	86,758,100
Exercisable, September 27, 2025	227,605	$	186.92	4.62	$	71,824,700

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The fair value of options granted under the Option Plans during the first nine months of 2025 and 2024 were estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions and results:


	Nine Months Ended			Nine Months Ended
	September 27, 2025			September 28, 2024
Risk free interest rate		4.05	%		4.57	%
Expected life (years)		6.8			6.0
Expected volatility		29.31	%		29.33	%
Dividend yield		2.70	%		2.93	%
Option fair value	$	109.37		$	93.88

All unexercised options at September 27, 2025 have an exercise price equal to the fair market value on the date of the grant.

Compensation expense of $1,666,900 and $1,458,200 relating to the vested portion of the fair value of stock options granted was expensed to “Selling, General and Administrative Expenses” in the first nine months of 2025 and 2024, respectively. As of September 27, 2025, the Company had $5.4 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 2.8 years.

9. Debt:

Line of Credit/Term Loan

As of September 27, 2025, there were no revolving loans outstanding under the Company’s credit facility with CIBC Bank USA (the “Line of Credit”), leaving $20.0 million available for additional borrowings. As of September 27, 2025, 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, (as the Line of Credit ranks pari passu with the Prudential facilities described below) 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 September 27, 2025, the Company was in compliance with all of its financial covenants.

Notes Payable

As of September 27, 2025, the Company had aggregate principal outstanding of $30.0 million under its Note Agreement (“the Note Agreement”) with PGIM, Inc (formerly Prudential Investment Management, Inc.) its affiliates and managed accounts (collectively, “Prudential”) consisting of $30.0 million in principal outstanding from the $30.0 million Series C notes issued in September 2021.

The final maturity of the Series C notes is 7 years from the issuance date. 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 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 debt service coverage and maximum levels of leverage (all as defined within the Note Agreement). As of September 27, 2025, 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.

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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);

●

Any Shelf Note issued would 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;

●

Any Shelf Notes would 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 Line of Credit and the Note Agreement;

●

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

●

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

The Shelf Agreement expired in April of 2025 and was not extended or replaced. No notes were issued under the agreement.

10. Operating Leases:

As of September 27, 2025, the Company leases its Minnesota corporate headquarters in a facility with an operating lease that expires in December 2029. The remaining lease term for this lease is 4.25 years and the discount rate is 5.5%. The Company recognized $761,100 and $778,500 of rent expense for the periods ended September 27, 2025 and September 28, 2024, respectively.

Maturities of operating lease liabilities is as follows for the remainder of fiscal 2025 and full fiscal years thereafter as of September 27, 2025:


Operating Lease Liabilities expected to be recognized in	Amount
2025	$	205,200
2026		828,200
2027		851,100
2028		874,600
2029		898,700
Thereafter		—
Total lease payments		3,657,800
Less imputed interest		(466,100)
Present value of lease liabilities	$	3,191,700

Of the $3.2 million operating lease liability outstanding at September 27, 2025, $0.6 million is included in Accrued liabilities in the Current liabilities section of the Consolidated Condensed Balance Sheets.

Supplemental cash flow information related to our operating leases is as follows for the period ended September 27, 2025:

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11. Segment Reporting:

The Company currently has 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 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 chief operating decision maker (“CODM”) is its Chief Executive Officer. The Company’s CODM primarily reviews revenue and income from operations for purposes of allocating resources and evaluating financial performance. Expenses are reviewed on a consolidated basis. 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 income from operations:


	Three Months Ended				Nine Months Ended
	September 27, 2025		September 28, 2024		September 27, 2025		September 28, 2024
Revenue:
Franchising	$	22,586,300	$	21,194,700	$	62,568,300	$	60,063,700
Other		46,600		316,200		2,401,100		1,677,400
Total revenue	$	22,632,900	$	21,510,900	$	64,969,400	$	61,741,100

Franchising segment operating expenses:
Merchandise COGS	$	663,300	$	662,500	$	2,318,100	$	2,562,600
Selling, general and administrative expenses		7,042,700		5,769,200		20,979,000		18,672,900
Total franchising segment expenses	$	7,706,000	$	6,431,700	$	23,297,100	$	21,235,500

Reconciliation to operating income:
Franchising segment income from operations	$	14,880,300	$	14,763,000	$	39,271,200	$	38,828,200
Other operating segment income from operations		42,900		165,600		2,309,600		1,336,200
Total income from operations	$	14,923,200	$	14,928,600	$	41,580,800	$	40,164,400

Depreciation and amortization:
Franchising	$	187,700	$	188,900	$	561,000	$	527,300
Other		—		21,000		—		83,800
Total depreciation and amortization	$	187,700	$	209,900	$	561,000	$	611,100

12. Subsequent Events:

On October 15, 2025, the Company’s Board of Directors approved the payment of a $10.00 per share special cash dividend (the ”2025 Special Dividend”) to shareholders of record at the close of business November 12, 2025, which will be paid on December 1, 2025. The 2025 Special Dividend will be approximately $35.6 million based on the current number of shares outstanding and is expected to be financed with cash on hand.

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ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Winmark – the Resale Company is focused on sustainability and small business formation. As of September 27, 2025, we had 1,377 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 the first nine months of 2025, our royalties increased $2.8 million or 5.1% compared to the first nine months of 2024.

Management continually monitors the level and timing of selling, general and administrative expenses. The major components of selling, general and administrative expenses include compensation and benefits, marketing and advertising, professional services, and occupancy. During the first nine months of 2025, selling, general and administrative expenses increased $2.1 million, or 11.0% compared to the first nine months of 2024.

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 first nine months ended September 27, 2025:


					AVAILABLE
	TOTAL			TOTAL	FOR	COMPLETED
	12/28/2024	OPENED	CLOSED	9/27/2025	RENEWAL	RENEWALS	% RENEWED
Plato’s Closet	515	15	(4)	526	29	29	100	%
Once Upon A Child	430	13	(4)	439	35	35	100	%
Play It Again Sports	302	13	(6)	309	15	14	93	%
Style Encore	69	1	(2)	68	8	8	100	%
Music Go Round	34	2	(1)	35	3	3	100	%
Total Franchised Stores	1,350	44	(17)	1,377	90	89	99	%

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. During the first nine months of 2025, we renewed 89 of the 90 franchise agreements available for renewal.

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.

In May 2021, we made the decision to no longer solicit new leasing customers and pursue an orderly run-off of our middle-market leasing portfolio. Leasing income net of leasing expense for the first nine months of 2025 was $2.4 million compared to $1.6 million in the first nine months of 2024. $2.2 million of the $2.4 million of leasing income for the first nine months of 2025 was related to the settlement of outstanding customer litigation. The run-off of our leasing portfolio is now substantially complete and we anticipate that we will have no leasing income to recognize after the fourth quarter of 2025.

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Results of Operations

The following table sets forth selected information from our Consolidated Condensed Statements of Operations expressed as a percentage of total revenue:


	Three Months Ended				Nine Months Ended
	September 27, 2025		September 28, 2024		September 27, 2025		September 28, 2024

Revenue:
Royalties	92.4	%	90.7	%	88.3	%	88.4	%
Leasing income	0.2		1.5		3.7		2.7
Merchandise sales	3.1		3.3		3.7		4.4
Franchise fees	1.8		2.1		1.7		1.9
Other	2.5		2.4		2.6		2.6
Total revenue	100.0		100.0		100.0		100.0

Cost of merchandise sold	(2.9)		(3.1)		(3.6)		(4.2)
Leasing expense	—		—		—		(0.1)
Provision for credit losses	—		—		—		—
Selling, general and administrative expenses	(31.2)		(27.5)		(32.4)		(30.6)
Income from operations	65.9		69.4		64.0		65.1
Interest expense	(2.7)		(3.3)		(2.8)		(3.6)
Interest and other income	1.4		1.8		1.1		1.4
Income before income taxes	64.6		67.9		62.3		62.9
Provision for income taxes	(15.4)		(16.2)		(13.5)		(13.7)
Net income	49.2	%	51.7	%	48.8	%	49.2	%

Comparison of Three Months Ended September 27, 2025 to Three Months Ended September 28, 2024

Revenue

Revenues for the quarter ended September 27, 2025 totaled $22.6 million compared to $21.5 million for the comparable period in 2024.

Royalties and Franchise Fees

Royalties increased to $20.9 million for the third quarter of 2025 from $19.5 million for the third quarter of 2024, a 7.2% increase. The increase is primarily from higher franchise retail sales and from having additional franchise stores in the third quarter of 2025 compared to the same period in 2024.

Franchise fees of $0.4 million for the third quarter of 2025 were comparable to $0.5 million for the third quarter of 2024.

Leasing Income

Leasing income decreased to $46,600 for the third quarter of 2025 compared to $316,200 for the same period in 2024. The decrease is due to our nearing completion of the portfolio runoff.

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 of $0.7 million for the third quarter of 2025 were comparable to $0.7 million in the same period of 2024.

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 of $0.7 million for the third quarter of 2025 was comparable to $0.7 million in the same period of 2024. Cost of merchandise sold as a percentage of Direct Franchisee Sales for the third quarter of 2025 and 2024 was 95.6% and 94.3%, respectively.

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Selling, General and Administrative

Selling, general and administrative expenses increased 19.0% to $7.0 million in the third quarter of 2025 compared to $5.9 million in the same period of 2024. The increase was primarily due to an increase in compensation related expenses and the timing of advertising production expense.

Interest Expense

Interest expense decreased to $0.6 million for the third quarter of 2025 compared to $0.7 million for the third quarter of 2024. The decrease is primarily due to lower average borrowing when compared to the same period last year.

Income Taxes

The provision for income taxes was calculated at an effective rate of 23.8% and 23.9% for the third quarter of 2025 and 2024, respectively.

Comparison of Nine Months Ended September 27, 2025 to Nine Months Ended September 28, 2024

Revenue

Revenues for the first nine months of 2025 totaled $65.0 million compared to $61.7 million for the comparable period in 2024.

Royalties and Franchise Fees

Royalties increased to $57.3 million for the first nine months of 2025 from $54.6 million for the first nine months of 2024, a 5.1% increase. The increase is primarily from higher franchise retail sales and from having additional franchise stores in the first nine months of 2025 compared to the same period in 2024.

Franchise fees of $1.1 million for the first nine months of 2025 were comparable to $1.2 million for the first nine months of 2024.

Leasing Income

Leasing income increased to $2.4 million for the first nine months of 2025 compared to $1.7 million for the same period in 2024. The increase is primarily due to the settlement of outstanding customer litigation when compared to the same period last year.

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 decreased to $2.4 million for the first nine months of 2025 compared to $2.7 million in the same period of 2024. The decrease is primarily due to a decrease in technology 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 decreased to $2.3 million for the first nine months of 2025 compared to $2.6 million in the same period of 2024. The decrease is due to a decrease in Direct Franchise Sales discussed above. Cost of merchandise sold as a percentage of Direct Franchisee Sales for the first nine months of 2025 and 2024 was 95.1% and 93.6%, respectively.

Selling, General and Administrative

Selling, general and administrative expenses increased 11.0% to $21.1 million in the first nine months of 2025 compared to $19.0 million in the same period of 2024. The increase was primarily due to an increase in compensation related expenses and a non-recurring expense related to third party software licenses for franchisees.

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Interest Expense

Interest expense was $1.8 million for the first nine months of 2025 compared to $2.2 million for the first nine months of 2024. The decrease is primarily due to lower average borrowings when compared to the same period last year.

Income Taxes

The provision for income taxes was calculated at an effective rate of 21.7% and 21.8% for the first nine months of 2025 and 2024, respectively.

Segment Comparison of Three Months Ended September 27, 2025 to Three Months Ended September 28, 2024

Franchising Segment Operating Income

The franchising segment’s operating income for the third quarter of 2025 increased to $14.9 million from $14.8 million for the third quarter of 2024. The increase in segment contribution was due to increased royalty revenues, partially offset by an increase in selling, general, and administrative expenses.

Other Operating Segment Income

The other operating segment income for the third quarter of 2025 decreased to $42,900 from $165,600 for the third quarter of 2024. The decrease in segment contribution was due to a decrease in leasing income.

Segment Comparison of Nine Months Ended September 27, 2025 to Nine Months Ended September 28, 2024

Franchising Segment Income

The franchising segment operating income for the first nine months of 2025 increased to $39.3 million from $38.8 million for the first nine months of 2024. The increase in segment contribution was due to increased royalty revenues, partially offset by an increase in selling, general and administrative expenses.

Other Operating Segment Income

The other operating segment income for the first nine months of 2025 increased to $2.3 million from $1.3 million for the first nine months of 2024. The increase in segment contribution was due to the settlement of outstanding customer litigation in the Company’s equipment leasing business.

Liquidity and Capital Resources

Our primary sources of liquidity have historically been cash flows from operations and borrowings. The components of the consolidated condensed 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 the third quarter of 2025 with $39.9 million in cash, cash equivalents and restricted cash compared to $37.3 million in cash, cash equivalents and restricted cash at the end of the third quarter of 2024.

Operating activities provided $36.4 million of cash during the first nine months of 2025, compared to $33.7 million provided during the same period last year. The increase in cash provided by operating activities during the first nine months of 2025 compared to 2024 was primarily due to an increase in net income and a decrease in non-cash working capital.

Investing activities used $0.2 million of cash during the first nine months of 2025, compared to $0.2 million used during the same period last year. The 2025 activities consisted of the purchase of property and equipment.

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Financing activities used $8.7 million of cash during the first nine months of 2025. Our most significant financing activities during the first nine months of 2025 consisted of $10.0 million for the payment of dividends and $2.4 million to repurchase 7,944 shares of our common stock; partially offset by $3.8 million of proceeds from exercise of stock options. (See Note 8 — “Shareholders’ Equity (Deficit).”

Our debt facilities include a Line of Credit with CIBC Bank USA and a Note 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 September 27, 2025, we were in compliance with all of the financial covenants under the Line of Credit and the Note Agreement.

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 September 27, 2025, we had no revolving loans outstanding, and had delayed draw term loan borrowings totaling $30.0 million that mature in 2029.

See Part I, Item 1, Note 9 – “Debt” for more information regarding the Line of Credit and Note 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 our Form 10-K for the fiscal year ended December 28, 2024 and under Item 1A below. 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 business and our Line of Credit will be adequate to fund our planned operations through 2026.

Critical Accounting Policies

A discussion of our critical accounting policies is contained in our annual report on Form 10-K for the year ended December 28, 2024. There have been no changes to our critical accounting policies from those disclosed on our Form 10-K for the year ended December 28, 2024.

Forward Looking Statements

The statements contained in this Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are not strictly historical fact, including without limitation, the Company’s 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 are 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 that 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. See the section appearing in our Annual Report on Form 10-K for the fiscal year ended December 28, 2024 entitled “Risk Factors” and Part II, Item 1A in this Report for a more complete discussion of certain factors that may cause the Company’s actual results to differ from those in its forward looking statements. 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 statements for any reason.

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ITEM 3: Quantitative and Qualitative Disclosures About Market Risk

The Company incurs financial market 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 September 27, 2025, 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 September 27, 2025 under this Line of Credit. The Company had no interest rate derivatives in place at September 27, 2025. The Company’s fixed rate debt exposes the company to changes in the market interest rate only to the extent that the Company may need to refinance maturing debt with new debt at a higher rate.

None of the Company’s cash and cash equivalents at September 27, 2025 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 nine months ended September 27, 2025. During fiscal 2024, approximately 9% of the Company’s total revenues and a de minimis amount 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 $730,000. 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 4: Controls and Procedures

As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of its 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 upon, and as of the date of that evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. There was no change in the Company’s internal control over financial reporting during its most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1: 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 1A: Risk Factors

In addition to the other information set forth in this report, including the important information in “Forward-Looking Statements,” you should carefully consider the “Risk Factors” discussed in our Annual Report on Form 10-K for the year ended December 28, 2024. If any of those factors were to occur, they could materially adversely affect our financial condition or future results, and could cause our actual results to differ materially from those expressed in its forward-looking statements in this report. We are aware of no material changes to the Risk Factors discussed in our Annual Report on Form 10-K for the year ended December 28, 2024.

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ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

The following table summarizes the Company’s common stock repurchases during the third quarter of 2025.


				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

June 29, 2025 to August 2, 2025	—	$	—	—	70,656
August 3, 2025 to August 30, 2025	—	$	—	—	70,656
August 31, 2025 to September 27, 2025	—	$	—	—	70,656

(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 September 27, 2025 was limited to 5,400,000 shares, of which 70,656 may still be repurchased.

ITEM 3: Defaults Upon Senior Securities

None.

ITEM 4: Mine Safety Disclosures

Not applicable.

ITEM 5: Other Information

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

During the nine months ended September 27, 2025, 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.

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ITEM 6: Exhibits

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)

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 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

101		Interactive Data Files Pursuant to Rule 405 of Regulation S-T: Financial statements from the Quarterly Report on Form 10-Q of Winmark Corporation and Subsidiaries for the quarter ended September 27, 2025, formatted in Inline XBRL: (i) Consolidated Condensed Balance Sheets, (ii) Consolidated Condensed Statements of Operations, (iii) Consolidated Condensed Statements of Shareholders’ Equity (Deficit), (iv) Consolidated Condensed Statements of Cash Flows, and (v) Notes to Consolidated Condensed Financial Statements.
104		The cover page from the Quarterly Report on Form 10-Q of Winmark Corporation and Subsidiaries for the quarter ended September 27, 2025, 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. 333-65108).

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

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SIGNATURES

Pursuant to the requirements 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


Date: October 15, 2025	By:	/s/ Brett D. Heffes
		Brett D. Heffes Chair of the Board and Chief Executive Officer (principal executive officer)


Date: October 15, 2025	By:	/s/ Anthony D. Ishaug
		Anthony D. Ishaug Executive Vice President Chief Financial Officer and Treasurer (principal financial and accounting officer)