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Sears spinoff to franchise its Nevada outlet stores

A spinoff of retailing giant Sears is looking for a Nevada entrepreneur to run its three Silver State outlets stores under a franchise arrangement. The cost: $1.8 million.

Sears is a prominent name in the retail industry with brands such as Kenmore, Craftsman, and DieHard. But its Kmart and Sears stores have been struggling.

Its outlet stores in Las Vegas, Henderson and Sparks are part of a young spinoff venture that’s been a profitable game changer as it converts shops that had been company-owned to a franchise model.

In October of 2012, Sears Holdings Co., which owned all of the Sears and Kmart branded stores, spun off a small group of stores that included Sears Hometown &Outlet Stores. And while Sears Chairman Edward Lampert owns a majority stake in the business through his ESL Investments Inc., the Hometown &Outlet Stores are operated as a totally separate company. This spin-off has successfully increased the stock value and profits of both Sears Holding Company and Sears Hometown and Outlet Stores, Inc.

Part of what has made the Sears Outlet Stores more profitable is a franchise model that they adopted shortly after the spin-off. In this model, a franchisee invests from $400,000 up to $3.5 million per store, depending on the location and size of the market. With that investment, the franchisee assumes the store property lease and all the products in the store are placed on consignment, supplied by Sears Holdings Co., for which Sears is paid a commission on each sale.

According to Scott Nichols, director of franchise development, “We have found that we sell more products by working with franchise owners who know the local market and are involved in their own business, than we do by operating the stores through the company and hiring a store manager.”

There are 150 Sears Outlet Stores across the country and 65 of those stores are operated by franchisees. Three of the Outlet Stores are operating in Las Vegas, Henderson and Sparks, and according to Nichols. Sears Outlet Stores wants a single franchise owner to take over all three Nevada locations for a total cost of $1.8 million.

The Sears Outlet Stores only sell appliances, apparel, mattresses, sporting goods, tools, and lawn and garden equipment. Some of the products may be new items that have been discontinued or overstocked; many items may be one-of-a-kind, out-of-carton, used, reconditioned, and scratch-and-dented merchandise. The condition and availability of items may vary from store to store, as may the price, but everything is sold at a discount of between 20 and 60 percent off regular retail price. Most products still carry the full manufacturer’s warranty.

In addition to the physical location, Sears Outlet Stores are also supported with a website presence www.SearsOutlet.com where customers can locate a store near them and browse the inventory, order online if they wish, and arrange for delivery.

Securities regulations prevented Nichols from disclosing operating performance and profit expectations, but that information is available to perspective franchisees once they have signed the required confidentiality agreements and appropriate Securities and Exchange documents. Franchise inquiries can be made at www.OwnaSearsStore.com.

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