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Toy Joy for Sale: Open Letter from the Owners About the Past 7 Years

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Lizzy Newsome and Trevor Yopp, Toy Joy Owners

Lizzy Newsome and Trevor Yopp, Toy Joy owners

We’ve been the owners of Toy Joy for the past 5 years, and the management team for the past 7. A lot has happened, and we’ve been asked to share our story. No names, just an account of our
experiences.

There is a TL;DR at the bottom for you lazy lurkers. I know this is a long read.

My husband and I started working at Toy Joy in 2006. My first holiday season, I worked 55 hours a week. We LOVED it. The colors, the excited customers, the smell of plastic. We started at $7.50 an hour, but we didn’t care. And we were good at it. Within 1 year, we had both been promoted up to store managers, and learned a lot of amazing things about my favorite store. I was selecting the toys to put in the store, and building displays, and making the signs. Some things were odd – the owners only showed up every month or so – but it was our first experience working at a small business right out of college. We were happy being a part of Toy Joy.

Becoming Owners

Toy Joy Austin Interior

Toy Joy on 29th Street – interior

In 2007, the owners approached us with the suggestion that we purchase the store. We were shocked, and concerned. We couldn’t imagine our beloved store going away. We wanted it to be there forever, an icon to wonderfully weird Austin. My husband talked me into considering it. That was all it took. Once you start putting work into getting an SBA loan, you don’t want to give up. Our families saw that we were good at our jobs and supported us. We had no idea what we were getting them into.

Hindsight is 20/20. We were moving forward on the loan paperwork, but things kept coming up. The sellers wanted a certain price for the business, and it was our job to make sure it happened. 30 year-old me laughs, but when the 3rd-party appraisal for the business came in low, I emailed them for a 2nd (higher) evaluation. Old inventory in various warehouses was written into a $50,000 note to increase the purchase price. A failing cafe was rolled into the purchase to also increase the cost. We loved the business so much, and we saw good numbers that we thought we could improve on. In 2007 the numbers worked, even with a sudden increase to the seller’s interest rate.

We signed the loan papers in October 2008, just as news of the recession was hitting. We heard the beginnings of the news, and almost thought the bank would pull the loan. We went right to work. Learning even more about the business, and how to run it. We eliminated costs when possible, and installed a POS system to finally track inventory. We also tried to improve the business. We started recycling at Toy Joy for the first time, and removed the strange mobile home storage from the parking lot. The sales came in and they were great – we made $150,000 in profit. All of which went to the bank as a loan payment. Year 1 was over, and we were already worried.

Toy Joy Austin

Toy Joy on 29th Street

The next 3 years were spent trying to solve Toy Joy’s liquidity problem. The business made money, but only in the last 3 months of the year, when the holiday shoppers came in. No one could give us the financial support to keep the inventory in the first 9 months, despite the business being profitable at this point. We had to start lowering the inventory level to handle the cashflow. Lots of projects to get more business were started, in which we learned the truth of the old adage “it takes money to make money.” Webstores, custom toys, toy subscriptions, all with varying levels of success, and investors that never seemed to pan out.

Meanwhile, the business was starting to falter. As new owners, we don’t deny our mistakes: we spent too much money on employee salaries, over-staffing the store, and didn’t catch it fast enough.

Additionally, our sales traffic was decreasing. When we asked customers why they came in less, they complained about the location: “I can’t park here,” “the traffic is too crazy,” “I avoid the campus area now.” At the same time, the rent was increasing despite our protests, and the neighborhood was becoming more expensive to do business in. We were spending thousands of dollars on a custom paint job that was being tagged with spray paint on a weekly basis, and that was just the beginning of the maintenance costs.

Moving Downtown

After the winter of 2012, we realized we would need to close in 6 months or move, so we started to look. We didn’t want to give up our baby without a fight; maybe there was a place for us? The perfect new location ended up being less than half the operating cost of the 29th Street location, and in the middle of downtown Austin. We saw it as a chance for Toy Joy to claim its birthright as Austin’s weirdest toy store. We moved quickly in an attempt to get the business profitable again.

Toy Joy Downtown

Toy Joy Downtown

At this point, we were down to a skeleton crew at the new Toy Joy. Luckily, most of our lovely staff had moved on to new, more stable jobs of their own accord. My husband and I started working 7 days a week in June 2013. It was the only way to keep the business going. We hated it when we were sore at home, but we forgot about it when we were at the store. Our customers were happy, and that made us happy.

At this point, the bank was getting worried. We had paid them faithfully for many years, but we had not anticipated properly how expensive the move would be. There were no profits coming in to pay the bank with. Our operating costs were very reduced, but there was no money left to advertise our new location. Many Austinites assumed we had closed. Others thought we were selling out by moving downtown, even those who had neglected the former location.

Money came in from various sources, trying to inject the business for long enough to get through the holiday. Much of the profit went to paying vendors and creditors, without any new stock to properly fill the shelves. We were also starting to wear down from the lack of rest. Just as we were starting to regrow the business in the new location, the bank decided to play hardball. They wanted their money now. We asked for time, and consulted lawyers. All the profit from 2013 ended up going to legal fees, rather than the business.

Bankruptcy on any level is not simple, and for a business it is very complex. We saw hope in selling the business to someone who wanted to carry on the dream. The idea was that the new purchaser would get a new Toy Joy, free of the giant debt that had overshadowed our experience. We started the process of finding a buyer, while working 10-hour shifts at the store. Keeping Toy Joy intact was our only goal. We didn’t care what we ended up with.

On March 5, 2014, we went to what we expected would be a normal hearing for our bankruptcy case. With SXSW around the corner, we were asking for more time to sell the business. The judge ruled a dismissal with no appeal, in favor of the bank. We spent the rest of the day in shock, but somehow kept the store operating. It’s hard to explain how unexpected it suddenly was, despite the constant threat we had been operating under. All of a sudden, Toy Joy was no longer ours, and we had no time to prepare, to warn our customers or say goodbye.

What’s Next

The bank can do several things from here. The most likely outcome is that someone will buy Toy Joy from the bank at a MUCH lower price than we paid. Among the potential buyers are the former owners. We are trying to comprehend how a bank can give a million dollars to someone for a business purchase, and then accept 10% of that amount to repurchase the business 5 years later. Maybe one day the math will make sense, but I don’t think the sentiment will ever feel right for us.

There is a lot we left out. How much we LOVED Toy Joy has nothing to do with our failures. How much we loved the amazing employees who loved Toy Joy as much as we did. How much we enjoyed the customers, especially the wide-eyed little ones. We loved the art and the creativity, and we loved being part of the Austin community. We loved being a part of your celebrations, and your weirdness.

Lizzy Newsome Toy Joy

Loving Toy Joy

We will be holding a Reddit AMA on March 10, 2014 at 11 AM Central, and we will continue answering questions via email, Facebook, and Twitter. Toy Joy will be operating as long as the bank allows. We love you all too much to leave you now.

Keep Austin Fun!

TL;DR: Toy Joy was saddled with a giant pre-recession loan that it could never pay off. It will probably survive the bankruptcy, but as a new entity. If you care, you will read the article we spent so long writing.

-Lizzy Newsome and Trevor Yopp

Lizzy Newsome
Latest posts by Lizzy Newsome (see all)

Filed Under: Discoveries, Local Business

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Comments

  1. Extremely sorry to hear the news, but kudos on the effort of keeping it afloat this long. You guys just received a Doctorate in Entrepreneurship, it’s a tough pill to swallow to be sure. But I am confident this experience will lead to greater successes in the future!

  5. Thank you both for all that you did. This was truly one of my favorite places in my hometown, I will be sad to see it go, or change. I hope you guys come out on top of this. Just know that you are loved and greatly appreciated for what you did. Austin will not be the same. To spread happiness is the noblest of pursuits, and y’all are saints in my book. -M

  6. Thank you so much for introducing a toy store that embodied Austin’s eclectic, quirky vibe. I remember when my sister got accepted to University, and my excitement for visiting was mostly fueled by your store. In a way, you two inspired several people to pursue their passions and keep in touch with your inner kid well into adulthood. Once again, thank you for the sweet memories, can’t wait to see what to future brings for you two 🙂

    • Would love to know that too. I’m a little surprised the bank didn’t perform their own business evaluation and allowed them to perform multiple 3rd party valuations. Having said that, I’m not too familiar with the SBA’s procedures nor this bank’s lending practices, plus the credit markets have changed considerably since the crash.

      On a side note, all small business owners should consider joining one of these organizations if they don’t have an advisory board. Sounds as if one of these groups would have helped.

      – http://www.thealternativeboard.com
      – http://www.vistage.com

  9. Thank you for sharing your story. It’s neat to actually see the faces behind the store. I think you guys did your best in a crummy situation and should be nothing but proud of you accomplishments. Maybe there is a silver lining though. Have you considered writing a book? Owning a store in Austin is no small feat and I think I would enjoy reading about your experiences.

    Thanks again.

  10. Thank you so much for a store that brought me true joy everyday when I would walk home from a grueling day of class or work. I described my neighborhood as “close to Toy Joy” for years as I think many others in that part of town did. Please know your store will live on in my fond memories of my time in Austin!

  11. I have been shopping at Toy Joy since I was a little kid, and it is so sad to hear this story. I hope whoever takes over the store next is able to keep the original atmosphere. I will never forget the amazing selection of Hello Kitty toys and gifts you sold. Hands down the best toy store in Austin.

  13. Lizzie, thank you for sharing your story. Your energy and enthusiasm made Toy Joy such a fun place to shop. I’m sorry for all that y’all are going through–this sucks!

  14. So sorry to see all the wonder inside that place disappear. Your hard work had a massive impact and the bank can never take that away. Y’all are rock stars.

  16. I’m so sad to hear this. I love Toy Joy, and I love that you both have such a passion for it even still. Is it too late for an Indiegogo campaign or something like that?

  18. Thank you for all you tried to do to save Toy Joy. It’s been a happy long-standing Austin institution that thousands of Austinites will miss. I wish you all the best with your future, and would also like to know the name of the Bank.

  19. No one who pursues their dream can be considered a failure, my Babies! Always keep the glitter in your eyes, and the joy in your hearts, for it’s who you are…!!! I love you and am so proud of you!!!

  20. The right thing for the original owners to do is repurchase Toy Joy and allow Lizzy and Trevor to earn equity in the business over time as full time operators of the business. Given the terms of the original deal, I doubt that will happen but one can hope can’t they?

  21. Very sad to hear the news, Toy Joy means more to me then you could realize. I first visited 4 years ago, I was 15 and a patient down the street at austin state hospital, I was a very depressed teen and one day they allowed my family to pick me up for visitation and we didnt know the area, but we stopped at toy joy. Nothing made me light up with JOY more then when I first stepped into your store, I think it really made me realize there is enough happy colorful people and things in this world that I didnt need to be sad or alone anymore, Thank you, for keeping me and Toy Joy alive <3

    • Helena,

      I hope the owners see your message as I expect it will bring them comfort in knowing their work made a difference in someone’s life.

  22. You should think about crowdfunding Toy Joy. I’m sure that Austin would come together to save/revive this iconic business. The regulations for crowdfund investing should be finalized by summer and it could be a viable option. Keep Austin Funded – Keep Austin Weird!

  23. Am I living in a fantasy world when I think that maybe we could save it with a Kickstarter campaign? Maybe paying off the debt and moving it to a more workable location? North Loop? I don’t know. Maybe I’m dreaming over here. I just hate to see it go. Toy Joy has always been one of my top 5 favorite places on earth.

  24. The sadness is felt not just here, but by my many far-flung friends and family members, who ALWAYS made Toy Joy a stop on their visits to Austin. I truly wish you the best of luck with whatever comes next.

  25. I sure hope this has a happy ending for you guys. As an Austenite who moved abroad I was able to bring my son to Toy Joy on each of our visits to Austin. We spent hours there, and we bought lots of stuff. It sounds almost to late but I sure would like to. I hope someone looks up the bank and the judge and posts the names. Perhaps some public pressure will help. Thank you.

  27. Wouldn’t a store of this kind be perfectly suited to a South Congress location? Massive foot traffic made up of people who are looking for a whimsical, keep-Austin-weird kind of store and who come with money looking to make an impulse buy?

  29. ugh – so sorry – I promise yall will survive this & be better for it. You can walk away with your head held high for the way you handled it. We went thru something similar – it was a hard lesson but changed our lives for the better in so many ways.

  30. the city should have bailed you out, without ToyJoy in local hands, ATX loses another bit of its true identity. Eff the bank, eff the judge and eff city council for that matter.

    • Hard to say. They might have overpaid from the start which makes debt service more difficult, didn’t have much business experience as they “learned on the job”, didn’t properly estimate the cost of the move, and no telling what else.

      I have to applaud them for being so open with their story, it takes guts to announce your failures to the world when most folks try to hide theirs.

      I suspect they have the entrepreneurial bug, will find themselves another venture, and take all the lessons learned at Toy Joy and increase the odds of success.

  35. “Ever tried. Ever failed.
    No matter. Try again. Fail again. Fail better.” ~ Samuel Beckett

    Best wishes to you both as you embark on your next adventure with the lessons from this adventure under your belts.

  36. I am so sorry to hear this news! It makes me wanna cry and hug you all. Lizzie you used to make my day when you came into Austin java with awesome trinkets (: I wish you all the best in your future endeavors. I know the universe has wonderful things in store.

  37. My husband worked at Toy Joy while we were pregnant with our first child. He brought home so many sweet toys to prepare for our little Leo. I loved to visit and shop and talk to the amazing staff. Some of my happiest memories are of Toy Joy, as an adult and a child. We’ve moved out of Austin because of its insane housing prices. It makes my heart ache to know that one more beloved peice of my home will be gone when i return and never shared with my children. I’m so sorry for the struggle you’ve had to ensure. Every year you kept it alive was worth it to those that loved you! Thank you

    • sadly, Austin is losing its cool vibe. I have been here on and off for 15 years and that is about to come to a close. So heartbreaking to see that so many local businesses are going away. I strongly suggest visiting before moving back tis changed/changing a lot and its not what it used to be. Cheapos is gone, Little City is gone, Lamar Plaza is gone, just very sad….good luck on your future endeavors

  38. I hate to say it but your love for Toy Joy IS the reason why it is closing. Keeping Austin Weird is one thing but buying a business to save the name is another. It sounds like you were focused in the wrong direction. You were focused on having cool toys and less focused on the business side of things. While that sounds like a cool idea it should be known the managing a business and owning a business are two totally different things. And I think your love for the toys got in the way of your business becoming a success story. Toy Joy made it’s name on being funky and that’s what made it the place it has been. I can appreciate your efforts but PLEASE let people know that loving your job and OWNING your job are two VERY different things.

  39. So sorry to hear this.. below is a photo of my daughter’s dollhouse I built for her 10 years ago….it’s filled with toys, animals, and little plastic creepy crawly things from countless visits to your store! Thanks for the great memories…you will always be a part of her childhood!

  42. I have found banks really don’t care, and Judges rule by law they say. I wish there were a better answer for you. Are you allowed to buy the business at the lower price from the bank? I know nothing about Chapter 7 or 11. I too do not go downtown because of the traffic and the lack of parking. I bought a $10 burger from a food truck last weekend and paid $10 for an hour of parking.

  44. Getting ready to start my dream coffee business from the bottom as a mobile street vendor in Portland, OR- coffeeLove- and I’m an Austin, TX native. Thanks for the good fight, and especially sharing your story! Rumi says, “He ruins the house to make room for something better. The treasure is not found anywhere else but under the Royal Ruins!” Namaste!

  45. Kudos for chasing the dream! We’ll miss Toy Joy, and I think you all deserve a big break on your next venture. Good luck, and thanks for sharing your story.

  46. Thank you for all the years you put into keeping this Austin icon alive. Please know that you gave probably thousands of kids… big and small… a chance to know the wonderful world of Toy Joy, and that is way freaking awesome. You’ve got good karma coming your way. Best of luck around the bend!

  47. Sounds to me like the previous owners knew too much to divulge at the time of your faithful offer to keep the legend alive…and their opportunity to buy it back at a discount smacks of collusion w/ the bank. The Austin arena is rife w/ escalating costs for business owners due to the popularity generated by the media and it’s not going to get any easier to honestly make a buck in that city. I applaud your earnest efforts to hold fast to the essence of Toy Joy. Mirth, happiness, and the BEST place to find and purchase a unique toy has been the legacy of the store for generations. My thoughts and prayers are with you guys to keep the store open wherever you can. May the institutions who hold such heavy sway over your heads perhaps read some of these comments as a reassurance of their endorsement for your finance woes.

  48. I commend you guys for this open and honest letter. I admit I had my moments when I did not fully support you guys and wish I had. I have come to respect Toy Joy as an iconic Austin business. A friend of mine worked there in the 90s (29th /Gdalupe) and I loved going in there. Its that “wake up” call of supporting your local business. Seen too many cool Austin businesses close down due to this. I do blame us as consumers, but I also blame corporations/hipsters and anything else that contributes to the lack of support to local businesses. Hopefully once the “bloom falls off of the Austin buzz” the Austin we loved will rise from the ashes and we will learn from our mistakes. Hopefully we wont have to lose anymore local places before that happens…

  49. “when the 3rd-party appraisal for the business came in low, I emailed them for a 2nd (higher) evaluation”

    Oh man, as someone currently negotiating with two owners to buy their business I can understand how you ended up in this position.

    Actually, I’m surprised the bank allowed this 3rd party evaluation and didn’t do their own, but apparently your debt service coverage ratio was in range.

  50. So when the appraisal came in low, instead of going back to the seller and negotiating a lower price you guys decided to sandbag the appraiser’s estimate so the bank would approve the loan??

    That’s doing yourself (the purchaser) a great disservice – the bank has the purchase appraised to protect the buyer.

    • Yah, I suspect there is more to the story because I’m a little surprised the bank didn’t do their own business evaluation and they didn’t notice the increase in values from one appraisal to the next? I suspect we are missing pieces.

  52. I get the impression the previous owners wanted more than it was worth, being more selfish than seeing the survival of something they built. It’s even more sad the bank wasn’t willing to work with the current owners rather than deal with more paperwork and then holding a note and property that may die beyond continued viability.

    Banks use little common sense, these days. They look at numbers and that’s it. Several years ago, I bought a new car as a courier. I had practically no tax liability due to the massive mileage write-off. The bank looked at the lower adjusted gross income as a negative. That is, they’d rather I take less write-off of an intangible expense and give the IRS more money meaning I’d have less cash in hand. That made no sense whatsoever. Idiots!

  53. Why this dramatic public cry? You were young and inexperienced. Fools for buying the business, Toy Joy was not a dream of yours, it was a chance you had. Your open letter is rude in parts. Your starting pay and long hours were better left out of your saga. I stopped supporting Toy Joy with my love and money as soon as I experienced the new ownership. It became a cold space with happy plastic. I thought the move was like a bad movie. Please write again, when you find jobs as former owners of a failed business. Or, start a new business! Austin really needs a an old time Prison Rodeo! If you build it, they will come! Think of the benefits of your current situation, you can go back to working for 7.50/hour! Yay!

    • Feels good to kick people when they’re down doesn’t it Sparkey? Makes you feel better, smarter, stronger, faster, etc. The world would be a better place with more hate like yours.

    • I bet this a-hole typed this out in public to show people how s/he is such a hip, cool, jaded writer. Ugh, mainstream, and people trying to keep a business going, so lame, amiright? Everything should just stay like it is, people should just stop trying, why does anyone ever care about anything ever? Whatever, man, $7.50 an hour is still better than being some snarky douche for free.

    • From reading the article, here are the owner’s problems
      1) Why did they get approved for large loan to start with?
      2) Why did they have any employees instead of each of them working 10 hours a day or more starting in 2008 instead of 2013?
      3) Overestimating how much you loved and put into Toy Joy and underestimating how much previous owners loved and put into Toy Joy.

      This was a cool established place that could have weathered the economic crash if managed with more experience.

  54. I appreciate your honesty and accountability, and hope the bank will give you some grace. People that are truly passionate about their business are too rare these days. This too, shall pass. One way or the other, you will survive and thrive past this trouble and be all the wiser for it. I hope all the publicity turns into tons of sales!

  56. Beautiful article about beautiful people. You could honestly feel the love you put in the business and I’m sorry it didn’t work out…

  57. Emotions don’t change mathematics. You two forced a poorly priced deal to go through, fudged an appraisal, were terrible at negotiating, and didn’t manage your cash flow. It sounds like you had absolutely no business owning your own company.

    That being said, I admire your passion. But, some people make better employees than they make employers

  58. I am so sorry to hear about the closing and appreciate your candid article. You are not the only ones who have been through these types of struggles, and you’ve run a great store! Be proud of your accomplishments and I hope to see something about how Toy Joy will be kept open. But if not, I know you will be successful in other endeavors. Take all you’ve learned and regroup…you’ve been through a lot!

  59. I first stumbled into Toy Joy in 1990 when I moved to Austin and 20-odd years later it became one of my kid’s favorite stops too. It’s always been a great Austin tradition and I was lucky to make it by at SXSW this year before the end. Thanks for the memories, and sorry about all the b-school dicks making comments on this story.

  60. Lizzy and Trevor – thank you. For trying so hard to make something so intrinsically part of this city work. And for sharing your story so candidly. It may feel like you have failed. You didn’t.

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