The toy master

JONATHAN LEVY, CO-FOUNDER AND CEO, MASTERMIND LP

Mastermind may be a strange name for a toy store, but Jonathan and Andy Levy’s company originally sold educational PCcomputer games. Since those early days in 1984, when the brothers were toiling in a 300-square-foot location in North Toronto, the company has transitioned into one of the best-known toy stores in Ontario, Alberta and British Columbia, offering more than 10,000 unique, educational and fun toys and books from 36 locations and a web store. In 2010, Jonathan Levy partnered with Birch Hill Partners, giving the chain the cash needed to further expand, and Mastermind has plans to open more stores across the country in 2015.

FP How has the competition in the toy business changed since you started?

JL The landscape in the early and mid ’80s was department store toy departments and independent retailers selling as much as a full range of toys as they could fit in their shop. The landscape was as competitive as it is today. There was television advertising, Sears, Eatons and Simpsons all brought out circulars and flyers, and you had Kmart and Zellers was a big player then. There was no shortage of lots of things being on sale and the independents had to compete. We’re in a segment in the toy business as specialty toy. The Walmarts and Amazons are mass market merchants and Toys R Us, once commented about as category killer in the ’80s, is a specialist and sometimes gets wrapped into specialty toys but is a generalist. They carry everything, we carry a very curated selection.

FP Was the original plan to grow across the country or was it more organic?

JL Organically for sure, especially because we were capitalized on a shoestring. I sold my car, my brother sold a bond, and we were capitalized for $40,000. We fixed up a 300-square-foot store and we were off to the races. It really was a hand-to-mouth business experience and a hand-to-mouth learning experience. While you’re trying to create all of this goodness and staying focused, you absolutely have a dream to always be a bit bigger. I haven’t met an entrepreneur yet who said, “I met my dream, I built my business, I made my widget and I sell the 37 a month that I need to pay my wage and my rent and I’m super happy and go home everyday at 4:30.” They want another widget, they want 37 to be 57, they want to expand the market, change the colour mix. We’re a quirky bunch.

FP Why did you decide to bring in an outside backer?

JL Mybrother wanted to retire. He’s 10 years older than me. When you’re sitting at 50 and your brother is sitting at 60, and you say let’s expand this business nationally, the guy who’s 60 might say, ‘You know, that might not be my first choice.’ But the guy who’s 50 might say, ‘I’ve got 10, 15, 20 years, let’s go.’ I found some partners to help us bridge the complexities at that juncture and a 25-year partnership. The partner I decided to go with said to me, ‘I see Mastermind as one of the great retail brands on the national retail landscape of Canada,’ and our partnership was just born.

FP You often hear horror stories about the demands of private-equity partners to turn a quick profit.

JL That certainly did keep me up at night, but as a startup retailer, I was one of the less than 1% that had any hope to succeed. A startup is a little like baby turtles running across the beach into the ocean. Getting stopped out isn’t new. We had a lot of struggles in our business and it toughened us up. We didn’t make much of a living for almost our first 10 years in business, just a stipend to live in our family environments and it really wasn’t much. You get hardened up by that, but you also become very principled and understand where your values lie. Mine lie in continuing to provide great products in a