Embroidery Start-Up

by Emily Lambert

Decorated apparel is an $8 billion industry, predicted to grow "at a brisk pace" in the decade ahead, according to Jennifer Cox, president of the National Network of Embroidery Professionals, in Kent, OH. "In the early '90s it was a $4 billion industry. Every decade the industry doubles in size."

The decorated apparel industry includes screen-printers and embroiderers, Cox explains. "But we have no industry statistics on the percentage of the market that's due solely to embroiderers," she says. "If I had to guess, I would estimate that embroidery is about one-third of that $8 billion market."

Of course, embroidery industry professionals love to hear statistics like that, but they don't need numbers to convince them that embroidery businesses are money-makers. They sing the industry's praises every day.

Haile Bekele, president of Pensacola, FL-based Embroidery Station, Inc., which offers a kiosk-based embroidery franchise, says, "Right now, the customized business is a really profitable business." Ray Barnes, owner of Embroid Now in Cincinnati, OH, a year-round cart he launched three years ago in Eastgate Mall, has had such strong sales that he launched his franchise early this year. Embroidered carts generate "tons of repeat business," he says.

Why are embroidered items so popular with shoppers? Because "people love personalization," according to Larissa Carlson, marketing manager for Denver, CO-based Melco Industries, Inc., a maker of embroidery systems for retailers of all sizes worldwide, which also offers a start-up package for specialty retailers. Even off-the-shelf items that aren't custom-made onsite can be tailored to fit a local audience, giving retailers even more flexibility and the chance to capture more impulse sales.

Luckily for specialty retail entrepreneurs who want to get in on the action, the start-up packages offered by Embroidery Station, Embroid Now and Melco make getting into the embroidery business much easier—and faster—than starting from scratch. In addition to supplying specialty retailers with embroidery machinery, computer hardware and software, the merchandise to be embroidered, and an array of embroidery supplies, these companies also provide equipment training and ongoing support that can help retailers avoid costly mistakes during (and after) start-up. Thanks to developments in embroidery equipment as well as the related computer hardware and software that turns digital designs into beautifully stitched final products, retailers don't need to be master-embroiderers to get started. In fact, they don't have to know how to sew a stitch.

Elements of a start-up

At Embroidery Station, the start-up package is structured as a franchise that focuses on the headwear market but T-shirt and purse embroidery is also an option for franchisees. The company estimates start-up costs at $35,000 for a cart and $40,000 for a kiosk, including the franchise fee and initial inventory. The franchise fee for a cart or kiosk is $6,500, and all franchisees pay a five percent royalty on gross sales.

The Embroidery Station start-up package includes all necessary embroidery equipment, computer hardware and software, $5,000 in initial inventory and two weeks of training (one at the company's Pensacola headquarters and one at the retailer's location). Training covers equipment, software, quality control, equipment repair, management procedures, opening and closing, and customer service.

When training is complete, franchisees know how to operate the relevant equipment. They learn, for example, how to use the computer system to convert a customer's logo into a digital file that controls how the embroidery machine stitches the final image. Retailers also know how to make minor equipment repairs and use selling techniques that turn browsers into buyers.

Specialty retailers also can open their own franchise with Embroid Now, based in Cinncinatti, OH, which recently put the final touches on its franchise after a three-year test and fine-tuning by owner Ray Barnes. He decided to get into the franchising business after opening his own cart from scratch—in other words, the hard way—in Eastgate mall three years ago. Starting the business from the ground up "was a lot tougher than I thought," he says.

But the hard work paid off. Since opening Barnes has had "very strong sales, especially with no advertising," and has built an extensive customer base. His growth has been due to "walk-by traffic and word of mouth—the best advertising, of course." Now his business is "a fixture in the mall," he says. "We're the place everybody knows they can go to get something embroidered while they wait."

Barnes's new franchise aims to remove the headaches and obstacles for aspiring embroidery retailers and give them all the tools they need to start and run a successful business. The embroidery equipment "is easy to work when you learn it," he says, but retailers still need thorough training and complete support leading up to and after opening day.

Embroid Now start-up costs including franchise fee and initial inventory are estimated at $68,550 for a cart to $131,200 for a kiosk. The franchise fee on either is $25,000 and franchisees pay a five percent royalty on gross sales. The franchise includes the embroidery equipment, computer hardware and software, extensive training and $1,000 or more in initial inventory, depending on the location. Embroid Now franchisees can customize a huge selection of merchandise, including hats, T-shirts, stadium blankets, baby blankets, fleece apparel, golf shirts, outerwear, aprons, apparel, umbrellas, children's apparel and towels. Franchisees can tailor their initial inventory assortment to their particular location and shopper demographics, and can change their assortment to target certain holidays or seasons. Hats can be showcased for Father's Day, for example, and later in the year fleece and outerwear can be featured.

"Embroidered products are great year-round sellers," Barnes says. "Because there's such a wide range of products available to be embroidered, retailers can easily change-up their products throughout the year and across many holidays—from weddings and birthdays to gag gifts and sports apparel—so they can give shoppers what they want, when they want it, no matter what the time of year."

Melco Industries, Inc. offers a variety of retailer start-up packages for as low as $10,000, which includes the embroidery machinery, embroidery software, and 5,000 embroidery designs. Melco does not supply its retailers with blank goods ready to be embroidered, but encourages them to join the National Network of Embroidery Professionals, an organization that connects retailers with wholesalers who specialize in blank goods.

The Melco start-up package does include two days of training that gives retailers important selling and marketing strategies. Start-up packages are customized to meet each retailer's planned product line. For instance, a specialty retailer who only wants to sell caps doesn't need certain equipment for T-shirt embroidering.

Melco also offers training CDs for retailers who prefer to supplement (or skip) the formal training sessions. However, Carlson says retailers who want to sell embroidered caps need to undergo training on the equipment, because some cap-embroidering techniques "can be tricky."

Based in Hauppague, NY, Hirsch International offers "Smart Start" start-up packages for retailers of all kinds. The packages include single-head embroidery machines, embroidery design software, start-up supplies, 5,000 stock embroidery designs, up to five days of training at one of 13 training centers across the country and unlimited refresher training for the first 12 months. The company also offers toll-free phone support seven days a week and has 50 factory-certified technicians for service available "just about everywhere" in the US, says McEvoy.

Smart Start packages range from $15,000-$25,000.

"Software training is important for production and quality of work," says Mike McEvoy, vice president of marketing, adding that equipment training eliminates trial-and-error mistakes by showing retailers how to embroider on a variety of apparel before they get started on a customer's order. But learning is easy, he says. Retailers can "receive their machine in the morning and do jobs in the afternoon."

McEvoy adds, "One of the nice things about the decorated apparel business is, it's a mainstay product and tends to do well in any sort of economy." Compared to other categories, "It doesn't have big swings."

Customers from every angle

Embroidery carts and kiosks have the ability to capture significant secondary-market sales, says Cox of the National Network of Embroidery Professionals. Not only are they very visible retail locations, but Cox points out that any customer in the mall, airport or other retail venue might also be a business owner who needs a logo on 100 company caps, or a football coach who needs two dozen custom-embroidered uniforms, or an exec of any number of charity organizations who might need hundreds of great looking fundraising sweatshirts. "It's the 'you touch one person, you touch many' concept," Cox says.

Barnes at Embroid Now says he has filled numerous secondary-market orders—300 jackets for a local school, 400 shirts for the school district—because his cart got noticed in the mall.

Specialty retailers also cater to individual customers who bring their own blank goods—whether from home or a nearby store. "That happens a ton," says Barnes. "The only cost to you is thread."

This makes it ideal to be located near a uniform shop or Christmas store that sells stockings and Santa hats, since these are items customers often want embroidered. Bekele advises retailers to establish relationships with other stores in the mall for this reason, whether the retailer is a bed-and-bath shop that can refer customers for towel embroidery or a uniform store referring doctors and nurses who want their names stitched into their scrubs.

No matter who the customer is, cart and kiosk locations make the embroidery process especially convenient. Customers can drop off their items, continue their shopping and swing back to pick up their custom-embroidered merchandise before they leave the mall.

Another reason the common area is ideal: "The [embroidery] machinery itself attracts people," says Barnes. "That's a big selling point. They think it's the coolest thing to watch it go."

With a popular product line that has the ability to attract attention and generate sales year-round, the embroidery business is a great fit for the cart and kiosk market. Add in the ability to generate additional business from neighboring retailers and the virtually unlimited potential to make big secondary-market sales to a variety of businesses and organizations, and that's a selling combination any specialty retailer would welcome.

If your goals are clear and you have a willingness to contribute sweat equity, "you can reap the benefits of a low-cost and high-profit business," Barnes says.