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Episode 109: Why Harvard MBAs Left Finance for Thrift Stores Franchising

• Mike Halpern • Season 1 • Episode 109

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How do you turn a "dusty" thrift store into a $275M international powerhouse? In this huddle, Mike Halpern sits down with Tyler and Zach Gordon, co-CEOs of Basecamp Franchising, to reveal how they are disrupting the $50 billion resale industry through advanced technology and data-driven operations.

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Mike Halpern, CAFC
mike@franchiseqb.com

Joining us in the huddle are Tyler and Zach Gordon, co-CEOs of Basecamp Franchising. Welcome to the show, guys. Thanks so much, mate. Yeah, great to have you guys here. So you're brothers. You both graduated from Harvard with degrees in economics and then subsequently earned your MBAs from Harvard Business School. And you both entered the world of investment banking and private equity. Your current business. Basecamp franchising is one of the country's largest clothing resale companies with over$275 million in annual system wide sales and 270 stores across 32 US states, Canada, Portugal and Spain. So it's an international business. Congrats on all the success. Basecamp owns and operates two brands that listeners might be familiar with, Kid2Kid and Uptown Cheapskate. We'll talk about those concepts. And as Honda system over three decades that delivers incredible value to franchisees, consumers and their communities, Basecamp's model has environmental sustainability at its core, helping keep tens of millions of products out of landfills each year. And I know that matters to consumers. So before we jump into Basecamp and your franchise brands, how did you guys get into the retail and the franchising space? So Mike, you mentioned that Tyler and I both have a background in finance and investing, which describes the bulk of our careers. However, I also spent a number of years at a company called Restaurant Brands International, which is the parent company of Burger King and Popeyes, a couple other fast food brands based in Miami. And so by virtue of that, I got a crash course in franchising, of course applied to the restaurant space. But then when Tyler and I went into business together at this point, a little over five years ago, so around the... COVID pandemic coming out of it. Franchising was naturally a place that we spent some time. Okay, very cool. So I wanted to ask, is there a significance behind the name Basecamp? It seems like a mountain climber vibe. Yeah, so there definitely is some of that vibe. And we were based here in Salt Lake City where there's a pretty avid following of just outdoor activity of all types, but then obviously also mountain climbing. And so some of it is a nod to just where we're based. But more fundamentally, the way we think about our company and how we think about franchising is really what we're supposed to be doing is helping budding entrepreneurs, launch their business, optimize their business, and become really successful. And in that context, Basecamp, the analogy there would be we're helping people as they prepare for their journey up the business ownership mountain. Now I'd say that the one nuance is that we plan to be there every step of the way. So it's not just, hey, helping you prepare for the climb, but helping you ascend the mountain and then... I'd go with you from there. But yeah, that's the origin of the name. It makes perfect sense. like the analogies. Thanks for that. So, you your brands are both in the thrift space. Can you guys kind of at a macro level, tell me a little bit about the thrift space and how it's evolved over time? Yeah, I would say two things. One, as we sit here today in 2025, the thrift space is huge. It's way bigger than I think most people realize. So it's about $50 billion of value. And it's also growing really quickly. It has been growing really quickly, pretty much nonstop for the past few decades. But that certainly has continued this year in 2025. So that's just one reality of the space, I would say, that a lot of people just aren't so much aware of. Okay, so then what, my second point, what is driving that growth over the last several decades? I would say that most fundamentally, it is the decline and I would even say disappearance of a stigma that has historically existed in the thrift space where, gee, I'm only gonna shop thrift if I absolutely need to, if I don't have enough money to pay full price, go rummage through a cluttered store and find the one piece of treasure that's buried in there. um That that I think is what comes to mind when still a lot of people think of the word thrift, know, what do you visualize? So what have you seen over the last 10 years even the last 20 years you've seen that stigma Really start to go away, especially with younger consumers. So you have this real pickup in demand for secondhand clothing Why has this thing gone away? I think there are a couple of important drivers, but uh one for sure is sustainability. So you have an increasing focus on resource conservation, on doing right by the planet. There's much more awareness today that the fashion industry is the number two polluter globally. And so people are, in my view, kind of giving themselves permission to go check out secondhand because this is something that they feel is sustainable and responsible to do. If it were just that, I think that the trend would be less durable. However, when people come into thrift stores, especially more modern thrift stores like ours, what do they find? They find... inventory that they actually want to buy. They find the brands that they love at 70 % off retail, maybe items that have been worn a handful of times, plenty of actually items that we sell in our store haven't ever been worn. They still have the tag attached. So why then, if you're seeing the products that you really want to buy at 70 % off, why would you pay full price? So what keeps people interested in the category, and then they tell their friends and get them to come, and check it out as well, is value. So sustainability, think, is a big part of why the stigma has declined. And then people are realizing, holy smokes, there is so much value in... Yeah, and as the father of two teenage sons, I can tell you that going thrifting is like their primary choice as opposed to going to the mall where it was backwards back in the nineties when I was coming up, we go to the mall first and thrifting was more of an afterthought. So I can see how that trend has changed. And you guys have a kid to kid location, a franchise location in Northern Virginia, not too far from where I live in Centerville. And my wife and I have been there many times over the years. I mentioned that to you in the green room as our kids have outgrown their clothes and their toys and So is the primary difference when we're looking at your two concepts that kid to kid clearly has a bent towards children's items and uptown cheapskate is more catering to an adult or a teen audience? Yeah, that's exactly right. You can think of them as more or less the same exact business model, but with that fundamental difference being the demographic. so kid to kid is typically kids ages zero to 14. And then Uptown takes over where kid to kid left off. And so we'll be predominantly focused on those teenage, young adult demographic. I will say that the other nuances, if you look at Uptown, Uptown really focuses the vast majority of its sales on apparel and shoes. Whereas Kid2Kid is trying to be more of a one-stop shop for all of your needs as a young parent. And so that's both apparel and shoes, but also equipment and toys. And so that would be the other, I would say nuance, but fundamentally it's a very similar business model, which I think in large part explains why we have so many franchisees that end up owning both concepts, because they're very similar and very complimentary. Yeah, so I'm curious. I would think a lot of candidates that are exploring franchise ownership in the retail space are nervous because of Amazon and Walmart and all the big guys out there that are doing e-commerce. And you guys are completely the opposite of that, right? So while a lot of businesses are probably struggling because of that, it seems like your stores are performing really well. So how are you guys performing in the current marketplace? So I'd say there's a very important reality for our business relative to any e-commerce player, whether it's Amazon or eBay or anywhere where people might be transacting online, which is that our price point is very low. So at Uptown, our average item is going to cost between $12 and $13. At Kid2Kid, it's going to be about $5. And it's really hard to transact at those price points in a way that makes sense on the internet. There's a lot of friction associated, for instance, with posting something on eBay, haggling with somebody who's going to buy it from you. And as a consumer, if you're going to consider buying something online, you are going to have to pay for a shipping cost. So that's going to be at least $10. And so if the item price is $5 or $12, and then you're paying $10 in shipping, it really defeats the purpose of the whole exercise, which is to get great value. So I'd say that that is a very important kind of reality. ah Then on top of that, I would say that, This experiential component that you brought up that kids really do like to come in and not just, hey, transact, buy and sell clothes, but they like to spend time in our clothes. They like to touch and feel the clothes, which after all are used, right? So it's even more important that you would be touching and feeling them. Taking photos of each other and videos. It's really an experiential thing as well that drives people into our stores. Yeah. And thank God for that because they're on their phone so much. It's nice when they get out in the world and actually interact with people and know what it's like to go in a store and buy something. So that's awesome. So you guys, your co-CEOs of the company, how do you guys divvy up the roles and responsibilities as being a franchisor? Like who does what? Yeah, so the way that we have done it, at least to date, is really by functional area. And so I uh oversee mainly our franchise development, our marketing, and our finance functions. Zach then oversees principally our operations and technology functions. And then there are some that we jointly oversee, so think human resources and admin. But the reality is we work really collaboratively together on everything. And so we like to at least tell our franchisees and firmly believe that they are getting two people who are really competitive with each other even. so Zach does something great in operations, that just gives me even more incentive to show them up by rolling out something great in marketing. And certainly if I can help with something in a department's deck overseas or vice versa, we do a lot of that. But we found that just splitting things up by functional area ends up keeping things fairly simple, at least from a design principle standpoint. Yeah, that makes sense. Appreciate that. So you guys mentioned before, $50 billion industry, which is massive. There seems to be a new thrift concept popping up every day. There's lots of options. So how do your stores stand out, whether it's operationally or with the consumer? Yeah, I'd say that there are two things in my mind. One, I would say is very obvious and important, but the second one might be even more important than the obvious one. So what would be obvious? It's the look and feel of our store. If you walk into an uptown or a kid-to-kid, the design, the look and feel of the store, the smell of the store, which is very important in the context of thrift, resembles much more of a boutique than it does your traditional thrift store. Again, if somebody walks down the street and you pull them and say, okay, what's word association with thrift? I think you'd hear a lot of dusty, dirty, disorganized, again, maybe even smelly. Whereas if you walk into our stores, it's a really high-end, upscale, vibrant shopping experience. And so that is something that if you walked into our stores would hit you immediately. And the number of times we hear from people, I didn't realize I was shopping in a secondhand store until I looked at the price. I feel like that's a good, again, description of how most of our customers feel when they first walk in. So if that is the customer-facing side of things, what again I think is the more important is the infrastructure that we have to support our franchisees and to really support a very high-volume operation. Most importantly within that, I would say it's our technology. So somewhat counterintuitively as a clothing resale franchise, our biggest team, so an over 20 person team, is our tech team. We spend a few million dollars every year on our technology. And that really ends up being, I would say, the backbone of our in-store operations. And what that allows our franchisees to do is take a model that is inherently very subjective. What do I buy? At what point in the year do I buy it? What do I pay the vendor who walked in? How much do I mark it up? Okay, at what point do I put it on my floor? When do I mark it down by how much? A lot of that is very subjective. And for a traditional thrift store, if it's anywhere, it's trapped in the head of the owner. Heaven forbid, trends evolve, that owner wants to take a weekend off or retire. All of that institutional knowledge walks out with them. In our case, it's all systematized and data-driven. And so it delivers a level of efficiency. that enables the volume we're talking about. And when we say volume, we're talking about selling and buying hundreds and hundreds of thousands of items from a single store every single year. That's great. Zach, did you want to add anything to that? only other thing I would add is the fact that we have already a relevant amount of scale. So if we've got about 275 stores, that brings two distinct advantages, more even than these two, but two in particular that I would highlight. One, when we think about our software that is helping our franchisees more precisely price different items that are coming into their store, that is fundamentally based on the not only prices that we paid for similar items in the past, but even more importantly, what those items with similar attributes ended up selling at. And so we keep track of all of that. We're generating millions of data points every day. And we are updating in function of those data points what then is the market clearing price for whatever item is coming into the store. So that's a huge advantage underneath our technology. And then another one, if you consider being an independent thrift store, am I doing well? Would be a question that would be really hard to answer. Maybe I'm profitable. Okay, so that sounds like I'm doing well, but how profitable? How profitable should I be in order to feel like I'm doing well? The only way to reliably answer a question, even as simple as that, is through benchmarking. So understand how other similar businesses are doing, either as it relates to sales or profit or anything in between. And you can get really granular with the KPIs when you have a base of other stores to compare your performance against. And so as a franchisee in our system, You're able for legitimately every single metric that you would care about in your store, see how you're doing year over year, see how you're doing relative to other stores in your DMA, in your region, in the whole country, the top core tile, and you can understand, what actually is the size of the prize? Should I make this operational change? If I do, what can I expect that will turn into in terms of profitability for me? So that's another huge source of value. interesting. Like when you think thrift store and like some of the adjectives that Tyler used about being dark and dingy and smelly and all that, you have to kind of change that mindset for franchisees because like you're in that space, but you're providing a very tech forward, detailed, like data driven solution and tons of value for your franchise owners, which you're not going to get if you just try to step into the space and go in on your own. So that's, that's really appreciate you sharing those differentiators with us. So what are your, what's your vision for the future? What do you expect the business to look like in 10 years? Yeah, so I would say that we have pretty broad ambitions for where we think we can take our two brands. I would say the starting point is really to become the category defining concepts in thrift in the US and then build on that internationally from there. And so as somebody thinks about, what are some of the best or the best big box retailers out there? Somebody might say, a Costco of the world. I certainly love Costco. I would hope that if you ask the same question 10 years from now about the thrift space, Word Association would very naturally bring up Kid2Kid and Uptown as just a category defining concepts in the space. From there, would say Zach brought up a point earlier than I fully believe. I think that we and our franchisees and our concepts have all the ingredients in the world to deliver an exceptional customer experience. And if we can do that, my hope would be the customers in our store, when they leave, would ask themselves a simple question. Why would I ever shop full price again? And so in that context, it's not just defining the retail category, but really disrupting retail more broadly. Because you're taking Thrift, which is already huge in scale, the $50 billion plus that Zach referenced, but taking it even more mainstream. And so that, I would say, is the the size of the prize for us. How do you get there? It is fundamentally a focus on quality and not quantity. I don't care at all how many stores we open next year. All I care about is that every store that does open crushes it and delivers an incredible customer experience. Because if you get the quality component right and you focus on that as the most important ingredient, the quantity side will follow and will solve itself. And so that's really where we focus that Hey, every customer who walks into every uptown or kid to kid has just an incredible customer experience. If we're successful in that regard and our franchisees are incredibly happy, are making a lot of money, again, we'll then be able to realize those ambitious goals. But you have to focus on the core ingredients, which again, really is that customer experience and franchisee success more than anything else. Yeah, I mean, if you focus on franchise owner profitability and the consumer experience, then like you said, the quantity will follow. So that's cool. um So you guys have been at it for three years since you've acquired the business. How do you guys enjoy running it so far? I know it's been a little different than what you were doing in your previous lives. How's it going? It's been a lot of fun, honestly. And I would say two things. I'm sure Tyler's got some things coming to mind as well. One is that fundamentally the business is really stimulating. It's really fun. Really what we're doing is we're solving puzzles all over the place all day. There's a huge amount of friction in thrift, which is why, generally speaking, the consumer experience has been so disappointing, because it's just really hard to give a good experience. And so. We've got a giant tech team where, hey, why don't we create a program to solve that problem and we can just do it. That's really fun. And then I would say one thing that really drew us together in terms of wanting to work together and then we've found to be such a great fit here at Basecamp is that we have this very long-term mentality. We'd love to be doing this for the next 20 years. And there's something really satisfying, I would say, about building tools, processes, resources, relationships in a cumulative sense such that you focus on, hey, maybe brushing something up in operations or marketing, and then you move on to the next thing and the next thing, and it's just getting better and better, the level of service that we can provide over time. I would say that for a large part of my career, I was very project-oriented, where I'd work on a project, and then I'd zoom over to some completely unrelated project or even. unrelated company and start the process over again. So I've personally found it very Yeah, yeah, that two things one is a high level comment and then maybe one with more specificity the high level comment is Unfortunately, I know very few people In my life, this would be friends former colleagues family members Who even like what they do? They view work as a necessary Evil to enjoy their life outside of work. And so just put up with it, which is too bad given how much time Certainly if you're waking hours you spend at work. I not only like what I do I love it I love every minute of it which is a huge reason why I hope I'm doing this for the next 30 plus years because I know how rare that is And so if you find something where you have that fit Yeah, embrace it and appreciate it. So I couldn't feel any more lucky about Again where we've ended up and what is a really key reason for it? This is a business where at the end of the year, you can feel really good about what you've done and the impact that you've made. We've talked about the sustainability element of it, and certainly that's very important, much more in window dressing. There's the community aspect of it. So you're helping people in your local community stretch their paychecks further, which is really important in challenging economic environments or uncertain ones like we're in today. So you feel great in that dimension. And then at the franchise or level, we're helping individuals realize their business ownership dreams and make more money than they ever could have thought of. I think of more recently, we've got a franchisee, Kayla and her husband Austin, who just opened a Kid2Kid in Spanish Fort, Alabama. And I still remember her at Discovery Day, which is the last step in our candidate evaluation process. And it just became so clear. that she felt she was put on earth to do this, to bring this concept to her community. And now to see her a few months in, thriving, loving her business, both in terms of the opportunities it creates for her and her family financially, but the impact it has on her community. Yeah, it's hard not to feel great about the small part that we can play in that process. So yeah, I love it and hope we're doing it for a really, really long time from here. Yeah, it seems extremely gratifying and fulfilling on both of those aspects. So let's kind of take it from there. So who is the ideal franchise owner for one of your stores? I know you mentioned before that your sister and your brother-in-law are now in training. You guys have a big training session going on right now, which is great. But aside from family, who else is a good owner for you guys? Yeah, I'd say it's interesting. This is not something where we can see the definition of success residing in a resume. We had people from all different walks of life, the vast majority of which have no prior business ownership experience, no prior retail experience. Now you have every now and again, somebody who has managed a TJ Maxx or a Ross stores will come in. some people who are multi-unit franchisees of other concepts, and so they've got the business ownership side. But the vast majority I would qualify as, at least historically, more on the mom and pop side. So former teachers, former nurses would probably be some of the most representative jobs. And so it's not that you have to have a certain set of experiences. It's much more around the softer skills. And so are you willing to work hard and roll up your sleeves? Do you have this perspective that no task is too small? That if I expect a person on my team to do it, I need to know how to do it myself and I need to be willing to do it myself. Everything from the most sexy task to cleaning the toilets. Is that your mentality? Are you good at building and managing and motivating teams? Do you really uh focus on delivering that high quality customer experience such that When Mike walks in, it's, Mike, thanks so much for coming. Let me know if there's anything I can do to help. You take pride in that dimension of owning and running a business. And so it's much more around those softer skills of having a real desire to be a business owner, not just for the good of it, not just because, oh, all the economic benefits accrue to my bank account, or, I get to dictate my own schedule. I get to be the boss. But the full spectrum of it, there's a lot of responsibility that comes along with being a business owner, a lot of hard work. And so it's really that dimension that I would say differentiates the top performers in our store. They just double and triple down on those cooler, softer skills. Yeah. Zach, any other characteristics you'd add to the mix? Yeah, I would just say that the reality is we're a high volume business. So the more you buy and sell at an individual location, the better you're going to do, not just financially, but the better you're going to serve your customers. So the people who are selling to you and the people who are shopping with you, um everybody wants the same thing, which is more selection, better pricing. And so this is a volume game. I come from the fast food world, which is also very high volume. And I would say that while our concepts are simpler and easier in pretty much every way than, for instance, the Burger King in terms of the operations, the pace is not dissimilar. And so somebody who, at a minimum, understands that, ah but then I would say on top of that can really roll up their sleeves and get excited about serving their community in this very fast-paced kind of way, that also is a important criterion. Very cool. Thank you guys. So if someone's listening and they're really interested in getting into kid to kid, we're getting into uptown and they just want to evaluate the base camp brands. What are the costs to get in in your item seven? I know it's kind of loaded because different condition of the spaces and you have two different concepts. What's our kind of baseline guidance on that? Yeah, so certainly I would encourage everybody who's interested to look at our FDD in detail on our item seven. If you look at it for both brands, while there's a range, typically the upfront investment cost to open a new store is about $500,000. The biggest determinant in terms of where you fall on that is probably the size of the space. And so our typical box is about 4,500 square feet, but There are franchisees who want to open larger format and so can go up to 6,000 plus and that obviously will have an impact on the build out costs. But generally speaking, we see build out costs on average around that $500,000. And then how franchisees fund it, I would say the vast majority fund through SBA loans. And so with SBA loans, most franchisees can end up relying on that leverage for 80, sometimes 90 % of the total cost. And so the actual equity dollars that you have to contribute is less than that fall 500 meaningfully less. But that's generally speaking, the typical profile in terms of both build out cost and then how franchisees fund the investment. Great. And then in terms of earnings, do you guys have an item 19 that kind of walks through either corporate performance or franchise owner performance? We do. And so we actually try to be as transparent as we possibly can be in all of our disclosures, including in item 19. It's always surprising to me, disappointing to me when I look at another franchise concepts item 19 and there's either nothing or, I'm just going to give you sales and not just sales, it's pro forma sales or it's sales for the top 10 % of my systems. Like, okay, well, what about the other 90 %? And so what we try to do is provide individuals as much information as we can, so that they can make as informed a decision as possible. And so we have full P &L information for all poor or of our courthouse. So going all the way from sales down to net income for all poor courthouse. And so if you look at that for Uptown, as an example, the average net income across those stores is $188,000. and that's no cherry picking, that's every store that's been open for more than a year, and then top quartile is a little above 350. So you compare those to, again, the total investment of about 500,000. Yeah, great numbers. Really, really impressive stuff. And I think candidates appreciate when you have that transparency and the full P &Ls like you guys do. So that's great. This has been awesome, guys. Really appreciate it. Anything else you guys want to add to the mix before we wrap up today? No, I'd say the only other thing I would probably add is we spent a bunch of time talking about the industry fundamentals, about the financial profile just now. One thing that has uh surprised me and has certainly contributed to the amount of enjoyment I've had at Basecamp in supporting our two brands is the vibrancy that exists in the broader thrift ecosystem. You have such a passionate and growing group of thrift enthusiasts. That's only growing in environments like today where again value is so paramountly important. And so seeing the real excitement that people have when they come into our stores is awesome. uh I think again, a lot of people have this perception or think about the dusty, dirty, disorganized thrift stores of yesterday. Actually building on a comment uh that you might have made about malls before. I actually think uptown in the context of that teenage and young adult category is what a ball was 20 or 30 years ago. It's the place that people go not just for the retail component of it, but to have fun. And the number of times I speak to franchisees who are like, yeah, I was just out back and we've got a group of 16 year old girls who are having their birthday party at uptown because that's the event. uh It's such a really fun and vibrant space. And so that's been certainly a really critical part of the enjoyment I've had and I would imagine our franchisees have had as well. Yeah, Zach, any parting thoughts? Maybe I would just add in, yes, what our goals are over the next five years. uh We have an internal goal, which is just to provide the best support in the industry. And I've looked at a lot of different franchise brands. One of my main jobs at RBI was to look at other brands to potentially acquire. And I think that's an achievable goal. Let's put it that way. think that if we focus on uh building a fantastic team, which we have, building really rock solid processes, in every area of the business that will reach that goal. And that is a very important goal for us. We want to be absolutely best in class in terms of the support that we provide to our owners. Seems like you guys certainly have your eye on the ball and you've done a lot with the brands over the past three years and I'm excited to see what the next three years and beyond will look like and if anyone listening would like to connect with Tyler, Zach and the Basecamp team to learn more about becoming a franchise owner with Kid2Kid or Uptown, contact me at franchiseQB.com or on X at QB franchiseQB and I'll get you connected. Thank you guys so much for taking the time to get in the huddle with us today. Thank you, Mike. It's been a lot of fun. Thanks a mate.