Brett Heffes

About Brett D. Heffes

Brett D. Heffes, age 57, is Chair of the Board (since March 1, 2020) and Chief Executive Officer (since February 2016) of Winmark Corporation; he previously served as President (February 2011–February 2016) and held finance leadership roles including President of Finance & Administration, Chief Financial Officer and Treasurer (November 2002–February 2011) . Winmark reports long-term TSR of approximately 19.6% per year from fiscal 2003 through fiscal 2024, and uses royalty revenues as its primary pay-for-performance measure; 2024 royalty revenues were $72.2M and net income was $40.0M . Heffes holds dual roles as Chair and CEO with a Lead Director structure to mitigate governance concerns; the Board states this combined role is appropriate given Winmark’s ownership and operating structure .

Past Roles

External Roles

• Proxy notes prior service on other public company boards of directors, but does not list specific organizations or dates .

Fixed Compensation

Notes:

• Bonus opportunity is capped at 100% of base; ~70% of annual bonus opportunity is non-discretionary .

Performance Compensation

Annual Incentive (FY 2024)

Equity Incentives (Stock Options)

Additional details:

• Long-term equity is delivered via two semi-annual option grants with combined grant value targeting ~100% of base salary; options are granted at fair market value and vest equally over four years .
• In 2H 2023, NEOs voluntarily forewent equity grants (Heffes: $323,722 fair value) due to significant share price appreciation; this reduced 2023 reported equity comp .

Equity Ownership & Alignment

Unexvested Options by Grant (as of 12/28/2024; potential acceleration value at $396.20):

• 1,000 at $195.82 → $200,380
• 2,775 at $261.32 → $374,292
• 4,680 at $197.80 → $928,512
• 2,870 at $238.60 → $452,312
• 3,090 at $325.99 → $216,949
• 3,580 at $355.90 → $144,274
• 3,260 at $400.97 → out-of-the-money at $396.20 (no value)

Employment Terms

• Status: At-will employment; no employment contracts .
• Severance: No pre-determined severance arrangements; company may negotiate severance at termination at its discretion .
• Change-of-Control: Under the 2020 Stock Option Plan, upon a “Transaction” (sale of substantially all assets, merger, etc.), outstanding unvested options generally become immediately exercisable unless the Board elects to cancel, cash-out, or continue options in the successor entity; option acceleration is effectively single-trigger under the plan’s default unless the Board selects an alternative .
• Clawback/Ownership Guidelines: Company emphasizes voluntary long-term ownership; no formal executive ownership requirement is disclosed; no clawback policy is disclosed in the proxy .

Board Governance

• Board Service: Director since 2016; Chair since March 1, 2020; CEO since February 2016 .
• Committees: Majority of directors are independent; Audit, Compensation, and Nominating Committees are fully independent. Heffes is not considered independent and is not listed as a committee member .
• Dual Role Mitigation: Combined Chair/CEO structure with a Lead Director (Percy C. Tomlinson) to enhance oversight; Board determined this structure appropriate for Winmark’s context .
• Attendance: Board held four meetings in 2024; all directors attended at least 75% of Board and committee meetings; all directors attended the prior annual meeting .
• Director Compensation: Executives serving on the Board (including Heffes) do not receive separate director compensation .

Say‑on‑Pay & Shareholder Feedback

• 2024 shareholder outreach contacted holders of ~71% of outstanding shares; feedback indicated strong alignment and support for compensation program; no negative feedback reported during outreach .
• Company states CEO total compensation is below the median range of companies competing for talent .

Compensation Peer Group (Benchmarking)

Investment Implications

• Alignment: High “skin-in-the-game” with 4.1% beneficial ownership and holdings equal to ~52x base salary; long-standing program emphasizes at-risk equity via options with four-year vesting, aligning incentives with shareholder value creation .
• Selling Pressure: Significant option exercises in 2024 (19,787 shares; $4.82M value realized) suggest ongoing liquidity events tied to vesting schedules; unvested options include several in-the-money grants that could accelerate upon change-of-control, creating potential supply over time and meaningful sensitivity to share price .
• Governance: Combined Chair/CEO is mitigated by a Lead Director and independent committees; hedging is prohibited for directors/officers, supporting alignment. Absence of employment contracts and guaranteed severance reduces fixed obligations but places greater emphasis on continued equity value accrual for retention .
• Pay-for-Performance: Bonus payouts are materially tied to operating metrics (royalty revenue growth, store count, ROA) with a capped structure (≤100% of base) limiting short-term risk-taking; 2024 CEO bonus paid at 69.6% amid mixed financials (royalty revenue up 2.8%; EPS down 1.4%) .
• Shareholder Support: Rising say‑on‑pay support to 95% in 2024 and proactive engagement indicate investor acceptance of the simple, option-centric plan and its long-term orientation .

Overall, Heffes’ compensation structure is conservative in cash, heavily equity-linked, and paired with substantial personal ownership, which together imply strong alignment and lower pay inflation risk. Watch option exercise cadence and any changes to the 2020 Stock Option Plan’s change-of-control terms for signals on potential selling pressure or governance shifts .