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HOBBYTOWN OFFERS PLANES, TRAINS AND ROCKETS

By Margaret Jackson

Lisa and Michael Daley spent thousands of dollars and countless hours at HobbyTown USA in Littleton, Colo. In fact, they loved the store so much, they bought a franchise about a year ago.

They and their teen-age boys, Matthew and Christopher, were into models, rockets and remote-controlled airplanes. “When you find yourself after dinner saying, ‘Let’s go to HobbyTown, you know it’s time to buy it,” said Lisa Daley, who was an account manager at a call center before buying the store. Her husband still works for a computer company.

Learning their new trade was no problem. HobbyTown USA provides training for new franchisees at HTUniversity, at its Lincoln, Neb., headquarters, as well as some brief on-site training after a franchise opens. In addition, the Daleys recently attended HobbyTown USA’s annual convention in Lincoln, where the company offered its franchisees classes in accounting, marketing and inventory management.

Today the Daleys and their four employees help customers build models and select games and educational toys at their 6,200-square-foot store in the Denver suburb. “We have a lot of regulars and try to get to know everybody by name,” Daley said.

HobbyTown USA has grown steadily at a rate of about 15 stores per year, and management is considering international expansion. Merlin Hayes and Thomas Walla founded the company in 1980 through the purchase of a local business in Lincoln, Neb. The company franchised its first store in 1986 in Colorado Springs, Colo., and has grown to 190 franchises (open or under development) across 43 states.

Its franchise stores are usually located near regional retail or town centers with populations of over 100,000 people. The company is looking for growing markets that are underserved by full-line hobby and specialty toy retailers.

The chain’s in-line stores typically measure about 4,500 square feet, and the stand-alone stores measure at least 10,000 square feet. The company prefers its stores to be located near retailers that draw a diverse customer base, such as big-box home improvement centers, and electronics and general merchandise stores.

Franchisees will need about $75,000 to $100,000 in startup capital to get financing to open a store. The company also likes its franchisees to have some business or retailing experience to complement any hobby experience they may already have.

HobbyTown USA’s customers range from kids to senior citizens. “Our product mix is targeted to service new and experienced hobbyists while also offering specialty toys and games not found in mass-market, big-box retailers,” said Bob Wilke, the company’s senior vice president.

But despite that broad customer base, the chain is still struggling to find its niche market, says Britt Beemer, founder of Charleston, S.C.-based America’s Research Group. Beemer says consumers have told him there is little at HobbyTown USA that they cannot find in other stores. “If you’re going to be a specialty store, you need to find something that makes you unique in the marketplace,” said Beemer. “They need to figure out which category they are going to feature the most, where consumers feel if they have to find that particular item, they go to HobbyTown USA.”

Beemer, whose firm talks with up to 15,000 consumers a week, says the hobby category is fragmented, with no single chain having emerged as market leader. He estimates that less than 8 percent of U.S. consumers visit a hobby shop in a given month, versus the 38 percent that go to electronics and computer stores, or the 55 percent that patronize a drugstore over that period. “At Christmastime they [HobbyTown USA] may get 12 to 18 percent, but it’s not a big percentage,” Beemer said.

While the company’s focus is the $2 billion hobby industry (that is nearly double what it was in 1995), the stores also offer some crafts, games and educational toys. About 57 percent of U.S. households have participated in the $29.5 billion craft industry over the past year.

The Daley’s store and a selection of others contain Animal Creation Stations where “you can create your own furry friend,” as the Web site has it. Though the stores do offer radio-controlled cars, planes and trains, they do not carry electronic toys that are already assembled. “It’s not like RadioShack,” said Lisa Daley. “All the parts are replaceable. Part of the hobby is to fix the car yourself, as well as operate it. You take the car apart and rebuild it.”

In a world where goods are increasingly disposable, HobbyTown USA prides itself on offering products that will last. “In this present age of rising consumer costs, such as energy and food, HobbyTown USA offers a renewable entertainment option,” said Wilke. “Products sold at HobbyTown USA are generally reusable, expandable, and provide educational opportunities, providing outstanding value for the consumer investment.”

The company requires its franchisees to include seven of nine categories of hobbies or crafts in their stores, though it does not ask them to carry any specific product. The categories are railroad equipment, games, radio-controlled land vehicles, paints and tools, models, radio-controlled airplanes, toys and miscellaneous, the stuffed-animal creation section and sports cards. This kind of support from the company has impressed the Daleys. “If you want a lot of help from Lincoln, they’re there for you,” Lisa Daley said. “It’s a good franchise.”