How to Finance a HobbyTown Franchise: Inventory, Fees and SBA
By Marc Cornella
A HobbyTown franchise loan finances a specialty retail store whose biggest asset sits on the shelves. Radio-control vehicles, model trains, kits, games, puzzles and collectibles have to be bought, displayed and restocked before they earn a dollar, and the store’s lease, build-out and fixtures come on top of that opening inventory.
US Professional Funding is not affiliated with, sponsored by or endorsed by HobbyTown; the name is used only to describe the business. Figures from the franchisor’s disclosure document and website can change, loan programs and terms vary by lender and borrower, and every loan is subject to lender review and approval. Nothing here is legal, tax or investment advice, and buyers should review the current Franchise Disclosure Document (FDD) and franchise agreement with a qualified franchise attorney and accountant.
HobbyTown Franchise Loan at a Glance
- Initial franchise fee: $49,500 for the first store, according to HobbyTown’s franchise FAQ. Additional stores are discounted when they are purchased at the same time the first franchise agreement is signed.
- Veteran discount: $10,000 off the initial fee for a new store.
- Royalty: 4.75% of gross sales.
- Cash to invest: the franchisor says qualified owners need $150,000 to $200,000 in liquid assets to invest in opening a store, which it describes as about 33% of the total investment.
- Net worth: HobbyTown notes that most lenders and commercial landlords require a minimum net worth of $500,000.
- Total investment: disclosed in Item 7 of the FDD; the franchisor says it varies with store size, opening inventory and build-out.
- System size: more than 90 franchise stores in 35 states, according to the company.
- Franchisor financing: HobbyTown says it does not offer its own financing but can help owners pursue an SBA loan.
- SBA Franchise Directory: listed as HobbyTown under code S0804, with no additional notes.
What Is HobbyTown?
HobbyTown Unlimited, Inc. was founded in 1985 by Thom Walla, Merlin Hayes and Mary Hayes, and the first franchise store opened in 1986. The company is headquartered in Lincoln, Nebraska, where it also hosts franchise candidates and trains new owners.
The company describes HobbyTown as a leader in hobby and specialty toy retail and calls itself the largest retailer in the hobby industry. Stores combine enthusiast categories such as radio-control vehicles, trains, model kits and rockets with games, puzzles and collectibles, and many host events that bring customers back.
Support behind the store. HobbyTown lists merchandising and buying teams, a distribution center it calls BuyersClub with low minimum orders and prepaid freight, proprietary point-of-sale and inventory software, and a real estate partner that helps with site selection, lease negotiation and buildout.
Why lenders view HobbyTown the way they do. Lenders generally like a system with decades of history, defined training and centralized buying. They also know a hobby store is a specialty retailer: holiday months matter a great deal, and the main collateral is inventory and fixtures rather than real estate. A clear inventory plan and enough working capital make any HobbyTown franchise loan request stronger.
HobbyTown Franchise Costs
Initial franchise fee
The franchise FAQ lists a $49,500 initial franchise fee for a first store. Owners who buy additional franchises at the time they sign the first franchise agreement receive a discount on those later stores, and veterans receive $10,000 off the initial fee for a new store. Confirm the current fee and any discount terms in Item 5 of the FDD you receive.
Lease and build-out
HobbyTown stores generally operate in leased retail space, so most buyers will not finance real estate. The build-out covers walls, flooring, lighting, a checkout counter, storage and special areas such as a test track or game tables, plus shelving, display cases, signage and the point-of-sale system. The franchisor’s real estate partner helps negotiate the lease, and any tenant improvement allowance reduces what you need to borrow.
Opening inventory
Inventory is the line that sets a hobby store apart. The franchisor says the cost of opening varies with store size, opening inventory and build-out requirements, and its merchandising team helps select the mix based on company experience, national sales data and vendor relationships.
Grand opening and working capital
New owners need funds for payroll, rent, utilities, insurance, marketing and restocking while sales ramp up. HobbyTown suggests opening outside the November and December peak so owners learn daily procedures first, which means carrying the store until holiday sales arrive.
Total investment
HobbyTown says owners typically put in cash of $150,000 to $200,000, roughly a third of the total investment, and that the full range appears in Item 7 of the FDD. When you receive the FDD, expect the Item 7 table to cover categories such as:
- Initial franchise fee
- Training-related travel and living expenses
- Lease deposits and rent before opening
- Leasehold improvements and build-out
- Fixtures, furniture and signage
- Point-of-sale hardware and software
- Opening inventory
- Grand opening marketing
- Insurance, licenses and professional fees
- Additional funds for the initial operating period
Ongoing Fees and How They Affect Your Loan
Royalty. HobbyTown’s royalty is 4.75% of gross sales. It is charged on sales, so it applies even in slow months.
Marketing and other fees. The franchisor describes a national branding program supported by vendor cooperative funds. Any advertising contribution, local marketing requirement, technology fee, transfer fee or renewal fee will be listed in Item 6 of the FDD, so read that table before building projections.
How lenders factor these costs in. Lenders start with projected sales, subtract cost of goods, royalty, rent, payroll and other expenses, then compare what remains with the loan payment. Because the holidays carry much of the year, they look closely at the off-season cash cushion when sizing a HobbyTown franchise loan.
Franchisor Requirements for New Owners
- Liquid assets: $150,000 to $200,000 to invest in opening a store.
- Net worth: the franchisor notes that most lenders and commercial landlords require at least $500,000.
- Passion and business focus: the company factors an owner’s own hobby interests into store merchandising, and a background in retail, management or a hobby category can help.
- Training: new owners train at an established mentoring store, complete one week of HobbyUniversity training at the corporate facility in Lincoln and receive three weeks of onsite training and store setup from the field team, through the grand opening.
The approval process. Candidates submit an information request, receive the FDD if qualified, attend a Discovery Day at headquarters in Lincoln and then sign the franchise agreement. After signing, HobbyTown begins the store opening process, which includes help with financing if needed, site selection, training, merchandising and grand opening support.
Ways to Own a HobbyTown
Opening a new store. A new store is a start-up loan: the lender relies on projections, the franchisor’s support and the owner’s equity and experience. Our retail start-up financing page explains how we approach new stores.
Buying an existing store. Established HobbyTown stores sometimes change hands when owners retire or relocate. The buyer purchases the inventory, fixtures and goodwill, assumes or renegotiates the lease and must be approved by the franchisor. Lenders can underwrite actual sales history, which often makes an acquisition easier to finance than a start-up. Our article on buying a franchise resale covers transfer approval, and our retail business acquisition loans page describes acquisition financing.
Financing Options for a HobbyTown Franchise
SBA 7(a) loans. Because HobbyTown is listed on the SBA Franchise Directory, the SBA 7(a) loan program is often a practical fit for a new store or a resale. A 7(a) loan can cover the franchise fee, build-out, fixtures, opening inventory and working capital in one package.
SBA 504 loans. The SBA 504 program finances owner-occupied real estate and long-lived fixed assets. It fits only if you buy the building your store will occupy, which is uncommon for a mall or strip-center hobby store.
Conventional term loans. Buyers with strong credit and collateral, or existing owners adding a store, may use a conventional business loan. Terms and requirements vary by lender and borrower.
Equipment and fixture financing. Shelving, display cases, point-of-sale systems, signage, a test track or a demonstration area can be financed separately. See our retail equipment financing and leasing options.
Working capital and lines of credit. A line of credit can fund pre-holiday inventory buys, new product launches and seasonal payroll, then be paid down after the holidays. Learn more about retail working capital and lines of credit.
Seller financing on resales. When buying an existing store, a seller may agree to carry part of the price. A seller note is typically subordinate to the senior loan, and SBA rules can limit how seller financing is structured, so discuss it with your lender before you sign a letter of intent.
SBA Loans for HobbyTown Franchisees
SBA lenders generally require a franchise brand to appear on the SBA Franchise Directory before they can make an SBA-guaranteed loan to one of its franchisees. The directory confirms that the franchise relationship has been reviewed for eligibility; it does not approve any individual borrower.
HobbyTown’s listing. HobbyTown appears on the directory under code S0804 with no additional notes. In plain English, that means the franchise agreement itself is not a barrier to SBA financing, and the lender’s review focuses on you, the store and the deal.
Program basics. The SBA 7(a) program maximum is currently $5 million, though program rules can change. A single store will usually need far less, but the ability to combine start-up costs, inventory and working capital in one HobbyTown franchise loan is useful. Run early payment estimates with our SBA loan calculator; the results are for planning only and are not an offer or approval.
Application tips. Bring the FDD, a lease proposal, build-out and fixture quotes, an itemized inventory budget, a personal financial statement, tax returns and monthly projections that show holiday seasonality.
How Lenders Evaluate a HobbyTown Deal
Personal credit and financial history. Lenders review credit reports, tax returns and a personal financial statement, and typically require a personal guarantee from owners.
Net worth and liquidity. HobbyTown’s liquid asset guideline and its note about the $500,000 net worth many lenders and landlords look for give a starting point. Lenders also want to see reserves left after the equity injection.
Retail and management experience. Experience running a store, managing staff or buying inventory helps.
Business plan and projections. A good plan explains the trade area, competition, product mix, inventory turns, staffing and a month-by-month sales curve with the holiday peak, using realistic ramp-up assumptions. Our article on how lenders read a Franchise Disclosure Document explains which FDD items they check.
The FDD and franchise agreement. Lenders review the term, renewal and transfer provisions in Item 17, the fee tables in Items 5 and 6, and whether Item 19 includes financial performance representations. Use any Item 19 data only as a reference and build your own projections.
The lease. Because the store’s location drives traffic, lenders look at the lease term, renewal options, rent escalations, co-tenancy and any tenant improvement allowance.
Historical financials for existing stores. For a resale, expect to provide several years of profit and loss statements, sales reports and an inventory count, which lenders compare with the seller’s tax returns.
Inventory: The Heart of a HobbyTown Loan
Opening inventory. HobbyTown’s merchandising team uses national point-of-sale and online sales data, company experience and vendor relationships to shape the opening order. Ask for an itemized opening inventory budget by category so the lender can see where the money goes.
Valuing inventory in a resale. The price of an existing store usually includes inventory valued by a physical count near closing, with slow-moving items discounted. Lenders often advance less against inventory than its cost, and owners typically build stock ahead of the holidays, so a revolving line of credit often fits that cycle better than a larger term loan.
Multi-Unit Growth and Development
Financing a second store. HobbyTown discounts additional franchises bought when the first agreement is signed. Once the first store has a track record, lenders can underwrite its cash flow alongside projections for the new location. Many owners finance each store with its own loan and keep a shared line of credit for inventory. Our article on multi-unit franchise financing explains how lenders view growing operators.
Real-World Scenarios
A hobbyist turning a passion into a store. A longtime radio-control enthusiast with management experience signs a franchise agreement and finances a new store with an SBA 7(a) loan covering build-out, fixtures, opening inventory and working capital. The lender’s comfort comes from the owner’s cash injection, the franchisor’s training and a plan that shows how the store will build traffic through events.
A buyer acquiring a retiring owner’s store. A buyer purchases an established store, with the franchisor approving the transfer. The lender reviews several years of sales, values the inventory based on a physical count and finances the purchase with a 7(a) loan and a small seller note on standby.
An owner adding a second store. After a few strong holiday seasons, an owner opens a second store in a nearby market. The lender reviews the first store’s results, finances the new build-out and inventory, and adds a shared line of credit for seasonal buying.
Common Mistakes to Avoid
- Budgeting too little for opening inventory or for restocking after the first holiday season
- Projecting mature-store sales in the first year instead of a ramp-up
- Ignoring the royalty and other Item 6 fees when calculating debt service
- Signing a lease shorter than the loan term or without renewal options
- Paying full price for slow-moving inventory in a resale
- Using a term loan for seasonal inventory that a line of credit would fit better
- Starting the lender conversation after the franchise agreement and lease are already signed
For more pitfalls that apply to store owners, read the retail store loan mistakes that cost owners the most.
Next Steps to Finance Your HobbyTown Franchise
Step 1: Confirm you meet the financial guidelines. Check your liquid assets against HobbyTown’s $150,000 to $200,000 guideline and review your net worth with an accountant.
Step 2: Request information and review the FDD. Study Items 5, 6, 7, 17 and 19 with a franchise attorney and accountant.
Step 3: Attend Discovery Day. Meet the team in Lincoln and ask about opening inventory, store size, real estate support and timelines.
Step 4: Talk with a financing specialist early. Learn how an SBA 7(a) or conventional loan would be sized for your store before you commit to a site.
Step 5: Build your budget and business plan. Turn the Item 7 categories into quotes for build-out, fixtures and inventory, and build monthly projections that show seasonality.
Step 6: Apply for financing and coordinate the lease. Submit your loan request with the FDD, lease proposal, quotes, personal financial statement and tax returns, and align loan approval with lease signing.
Step 7: Close, train and open. Complete training, finalize the build-out and opening order, and keep working capital in reserve for the first months.
HobbyTown Franchise Loan FAQs
How much does it cost to open a HobbyTown franchise?
The full range is disclosed in Item 7 of the FDD and depends on store size, opening inventory and build-out. HobbyTown says owners typically need $150,000 to $200,000 in liquid assets, which it describes as about a third of the total investment.
What is the HobbyTown franchise fee?
The franchise FAQ lists a $49,500 initial fee for a first store, with discounts on additional stores bought when the first agreement is signed and $10,000 off for veterans opening a new store.
What royalty does HobbyTown charge?
The royalty is 4.75% of gross sales. Check Item 6 of the current FDD for any marketing, technology or other ongoing fees.
How much net worth do I need?
HobbyTown notes that most lenders and commercial landlords require a minimum net worth of $500,000. Your lender and landlord will set their own standards.
Is HobbyTown eligible for SBA loans?
Yes, HobbyTown is listed on the SBA Franchise Directory under code S0804 with no additional notes. Each borrower must still qualify on their own credit, cash and plan.
Does HobbyTown offer financing?
The franchisor says it does not offer its own financing but can help owners pursue an SBA loan. Review Item 10 of the FDD for its financing disclosures.
Can I buy an existing HobbyTown store?
Yes, when a store is available and the franchisor approves the transfer. Lenders underwrite the store’s actual sales history and an inventory count, and the purchase can often be financed with a 7(a) loan.
Can a first-time business owner get a HobbyTown franchise loan?
Yes. HobbyTown’s mentoring store visit, HobbyUniversity week and three weeks of field support help offset limited retail experience, but lenders will still look for management skills, equity and a realistic plan.
How long is a HobbyTown franchise term?
The term, renewal rights and transfer conditions appear in Item 17 of the FDD. Lenders generally want the remaining term to cover the life of the loan, so confirm it before you borrow.
Can I finance fixtures and equipment separately?
Yes. Shelving, display cases, point-of-sale systems and signage can be financed through equipment financing or leasing, or included in a larger start-up loan.
Does the FDD include financial performance information?
Check Item 19 of the current FDD to see whether HobbyTown provides financial performance representations, and base your loan projections on your own market and plan.
Final Thoughts
A HobbyTown store combines a passion business with the realities of specialty retail: a well-chosen inventory, a good lease and enough cash to carry the store to its first holiday season. An SBA Franchise Directory listing and a clear budget built from the FDD help buyers present a strong, organized request.
US Professional Funding helps franchise owners and buyers finance start-ups, acquisitions, equipment and working capital. Learn more about our franchise financing solutions and retail business financing.
