SecProbe.io

CORRESP
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May 19, 2005

Mr. Mike Moran

Accounting Branch Chief

United States Securities
and Exchange Commission

Mail Stop 0308

Washington, DC  20549

Re:                               SEC
2nd Comment Letter on Form 10K for the Year-Ended December 25,
2004

File
No.: 0-22012

Dear Mr. Moran:

We are writing in
response to your letter of May 5, 2005 in which you made additional
comments relating to our annual report on Form 10-K for the
year-ended December 25, 2004 (“2nd Comment Letter”).  The goal of this letter is to provide you
with detailed answers where requested.
Where we have analyzed your comment and agree with your conclusion we
simply agree to implement your requests in future filings as requested in the 2nd Comment
Letter.  The numbers set forth below
correspond to the numbered comments in the 2nd Comment Letter.

Below we have responded
to each of your 6 comments in the 2nd Comment Letter after restating
each question in its entirety (in italics):

General

1.                                       Unless otherwise indicated, where a comment below requests additional
disclosures or other revisions to be made, please include the additional
disclosures and revisions in your future filings.

We
agree to make all additional disclosures and/or other revisions to be made in
accordance with your comments in Winmark’s future filings, beginning with our
next filing on Form 10-Q for the three month period ending June 25,
2005 or on Form 10-K for the year ending December 31, 2005 as
indicated in the response to each comment.
Where our analysis supports a conclusion different from that in the 2nd
Comment Letter, our analysis and explanation is in this letter (or
attachment).  In accordance with your
requests contained in the 2nd Comment Letter, we have not included
the actual disclosures we intend to make in future filings.

Item 7:
Management’s Discussion and Analysis of Financial Condition and Results of
Operations Overview, page 15

2.                                      We
note your response to our prior comment number 8.  Please tell us whether you intend to expand
your analysis in future filings to discuss the potential variability in cash
flows, including known trends and uncertainties that will have or are
reasonably likely to have a material impact on your liquidity.

As suggested, we agree to expand our analysis in
future filings to discuss the potential variability in cash flows, including
known trends and uncertainties that will have, or are reasonable likely to
have, a material impact on our liquidity.
We agree to provide such additional analysis and disclosure, beginning
with our Form 10-Q for the three months ending June 25, 2005.

Item 8: Financial Statements and Supplementary Data

General

3.                                       We note that your response in our prior comment number 10 and your
representation that you satisfy the exception from the definition of investment
company as provided in Section 3(b)(1) of the Investment Company Act
of 1940 (“Investment Company Act”).
Please provide to us the basis for your determination, including a
detailed analysis of each Tonopah factor as it applies to you.  In your analysis relating to the activities
of your directors and officers, please explain how much time such persons have
devoted, and currently devote, to overseeing and/or managing your investments
in securities.  Please also explain to us
what you mean by “aggressively pursuing a strategy” to reduce your percentage
of investment securities below 40% of your total assets.  In doing so, explain what actions you have
taken or plan to take, the expected outcome of the actions and the expected
time frame within which the percentage of investment securities is expected to
drop below 40% of your total assets.
Please also disclose in your Form 10-K risk disclosure that
you have not registered as an investment company in reliance on the primary
business standard under Section 3(b)(1) of the Investment Company Act
and the effects that registration as an investment company, if required, might
have on your business.

We
have attached as Exhibit A, a memorandum of our legal advisor, Lawrence P.
Stadulis of Stradley Ronan Stevens and Young, LLP, Washington, D.C.  Such analysis provides a basis for our
determination that we are exempt from the Investment Company Act under Section 3(b)(1) and
includes a detailed analysis of each Tonopah factor as it applies to us.

The
memorandum also includes an analysis of the activities of the directors and
officers of Winmark Corporation and how much time each has devoted to
overseeing and/or managing our investments in 2004 and thus far in 2005.  In addition, the memorandum estimates how
much time each officer and the directors will spend on our investments in
2005.  The statements in the memorandum
in this regard are based on factual representations of the officers of Winmark
Corporation.

We
reiterate that we are aggressively pursuing a strategy to reduce our investment
securities below 40% of our total assets.
The strategy is comprised of two parts: (i) we are adding leased
assets to our balance sheet as part of the execution of our business strategy
to grow our small-ticket and middle-ticket leasing operations and (ii) we
have executed a non-binding letter of intent to purchase Pinnacle Capital, LLC,
a Washington-based small-ticket leasing company.

First,
we continue to expand our small-ticket and middle-ticket leasing
businesses.  Our CEO, John L. Morgan, has
a 30-year history in the leasing business.  In 1997, he was CEO of a publicly trading
leasing business that merged with TCF Financial (NYSE; TCB).  Mr. Morgan left TCF in 1999, and was
subject to a five-year noncompetition agreement through April 1,
2004.  Since April 1, 2004, we have
built infrastructure, hired personnel and started leasing assets.  Our plan is to utilize a combination of our
cash flow from our existing businesses and debt to grow our leasing operations.  We anticipate that the growth of our leasing
operations and the corresponding increase in total assets of Winmark
Corporation will result in investment securities being less than 40% of total
assets before the end of the first quarter of 2006 (without giving any effect
to the proposed acquisition).

Second,
our acquisition target, Pinnacle Capital, had total assets of over $13.7
million at December 31, 2004.  We
estimate that closing will be late June or early July of 2005.  We estimate that (without giving any effect
to the future growth of our small-ticket and middle-ticket leasing businesses)
the acquisition of Pinnacle Capital would reduce the percentage of investment
securities to total assets to below 40%.
This percentage is only an approximation at this point as valuation
activities, which are a normal part of the acquisition process, may change the
purchase price of Pinnacle Capital.  We
cannot assure you that this transaction will close.

As
suggested, we agree to make additional disclosures requested in this comment in
our Form 10-K for the year ending December 31, 2005 if our
investment securities exceed 40% of total assets or another exemption is not
available to us at that time.  Specifically,
in such case, we agree to disclose that we are not registered as an investment
company in reliance on Section 3(b)(1) of the Investment Company Act
and will discuss and disclose the effects that registration as an investment
company, if required, might have on our business.

Notes to
the Consolidated Financial Statements, page 29

Note 3:
Investments, page 32

4.                                       We note your response to our prior comment number 18.  Please tell us whether you intend to comply
with the disclose requirements in paragraph 22 of EITF 03-1 in future
filings.

We
will comply with the disclosure requirements in paragraph 22 of EITF 03-1
in future filings.  We agree to make the
additional disclosures requested by this comment in each annual report on Form 10-K
filed in the future.

Item 9A:
Controls and Procedures, page 42

5.                                      We
note your response to our prior comment number 20 and your representation that
you will make the additional disclosures in future filings beginning with your
fiscal year ended December 25, 2004.
The additional disclosures should be made in your quarterly reports as
well.  Please disclose the conclusions of
your principal executive and principal financial officers regarding the
effectiveness of your disclosure controls and procedures as of the end of the
period covered by the report in your quarterly reports on Form10-Q.

Our Form 10-Q
for the first quarter ended March 26, 2005 and filed May 9, 2005
included the changes to Item 4: Controls and Procedures requested by you in
your original Comment Letter.

Signatures

6.                                       We note your response to our prior comment number 23 and your
representation to file an amendment containing the signature of your principal
accounting officer and indicating that Brett D. Heffes is your principal
financial officer.  Please file the
amendment.

On May 13,
2005, we filed an amendment to annual report on Form 10-K including
the signatures of Gary Stofferahn our controller and principal accounting
officer and indicating that Brett D. Heffes is our principal financial officer.

If you have any questions
regarding the above analysis, please contact Mark Hooley, our Vice President
and General Counsel at 763/520-8405, or me at 763/520-8415.

  Best Regards,

  WINMARK
  CORPORATION

  By

  /s/ Brett D.
  Heffes

  Brett D. Heffes

  Chief Financial
  Officer and Treasurer

  BDH/ks

  cc:

  Bill
  Thompson

  Mark
  Hooley

Stradley Ronon Stevens &
Young, LLP

1220 19th Street, N.W.

Washington, DC  20036

(202) 822-9611

  To:

  Winmark
  Corporation

  From:

  Lawrence P.
  Stadulis

  Date:

  May 16,
  2005

  Subject:

  Status of
  Winmark Corporation Under the Investment Company Act of 1940

This memorandum analyzes
the status of Winmark Corporation (“Winmark”) under Section 3(a)(1)(C) of
the Investment Company Act of 1940 (“1940 Act”). (1)  While the analysis
as to whether an exemption under Section 3(b)(1) of the 1940 Act
applies to Winmark is fact intensive, and, therefore, I am unable to render a
formal legal opinion, reasonable arguments can be made that Winmark is
currently exempt from this definition under Section 3(b)(1).(2)

Section 3(a)(1)(C) of
the 1940 Act defines an “investment company” as any issuer that is engaged or
proposes to engage in the business of investing, reinvesting, owning, holding,
or trading in securities and owns or proposes to acquire investment securities
having a value exceeding 40 percent of the value of its total assets on an
unconsolidated basis (exclusive of U.S. government securities and cash
items).  Section 3(a)(2) defines
“investment securities” for purposes of Section 3(a)(1)(C) to include
all securities except Government securities, securities issued by employees’
securities companies, and securities issued by majority-owned subsidiaries of
the owner which are not investment companies.
Winmark currently meets the Section 3(a)(1)(C) definition of
investment company because more than 40% of its assets, on an unconsolidated
basis, are comprised of investment securities.

Notwithstanding this
fact, Section 3(b)(1) provides that an issuer will not be deemed an
investment company as defined in Section 3(a)(1)(C) if it is
primarily engaged, directly or through wholly-owned subsidiaries, in a business
other than that of investing, reinvesting, owning, holding or trading in
securities.  Thus, Winmark is not a Section 3(a)(1)(C) investment
company if it meets the self-executing terms of Section 3(b)(1).

(1)                                  You
have provided all of the factual representations on which the analysis is based
and I have not conducted any independent inquiry to substantiate their
validity.

(2)                                  This
memorandum does not address Winmark’s status under Section 3(a)(1)(A) of
the 1940 Act.  That section alternatively
defines investment company as an issuer that is, holds itself out as, or
proposes to be engaged primarily in the business of investing, reinvesting, or
trading in securities.  The section was
designed to capture “orthodox investment companies, “i.e.,
a company that knows that it is an investment company and does not claim to be
anything else.”  Securities
and Exchange Comm’n v. Fifth Avenue Coach Lines, Inc., 289 F.
Supp. 3, 27 (S.D.N.Y. 1968), aff’d, 435 F.2d 510 (2d Cir. 1970).  You believe that Winmark is clearly not an
orthodox investment company and, therefore, that an analysis under this section is
not necessary.

The Securities and
Exchange Commission historically has taken the position that its determination
of an issuer’s primary business under Section 3(b)(1) is based on
five principal factors: (1) the issuer’s historical development; (2) its
public representations of policy; (3) the activities of its officers and
directors; (4) the nature of its present assets; and (5) the sources
of its present income.  Tonopah Mining
Co. of Nevada, 26 S.E.C. 426 (1947).  The two most important factors are the
composition of the issuer’s assets and the sources of its income.  A discussion of each of these factors, as it
applies to Winmark, is set forth below.

1.                         Historic Development

Winmark was incorporated
in Minnesota in 1988.  From the very
beginning, Winmark’s core business has been to act as a franchisor of
value-oriented retail store concepts that buy, sell, trade and consign
merchandise.  Winmark currently conducts
this franchising business through four store brands.  The evolution of each brand is discussed
below.

Play
It Again SportsÒ— Winmark
began franchising the Play It Again Sports® brand in 1988.  Play It Again SportsÒ
stores sell, buy, trade and consign used and new sporting goods, equipment and
accessories for a variety of athletic activities including hockey, wheeled
sports (in-line skating, skateboards, etc.), fitness, ski/snowboard, golf and
baseball/softball.  The stores offer a
flexible mix of merchandise that is adjusted to adapt to seasonal and regional
differences.  Play It Again Sports®
is known for providing the highest value to the customer by offering a mix of
used and new sporting goods.  At the end
of fiscal 2004, Play It Again Sports® had 412 franchised stores
open, with approximately $245 million in aggregate revenue.

Once
Upon A ChildÒ — Winmark began franchising the Once Upon
A Child® brand in 1993.  Once
Upon A ChildÒ stores sell and buy used and new
children’s clothing, toys, furniture, equipment and accessories.  This store brand primarily targets
cost-conscious parents of children ages infant to 10 years with emphasis on
children age’s seven years old and under.
These customers have the opportunity to sell their used children’s items
to a Once Upon A ChildÒ store when outgrown and to purchase
quality used children’s clothing, toys, furniture and equipment at prices lower
than new merchandise.  New merchandise is
offered to supplement the used merchandise. At the end of fiscal 2004, Once
Upon A Child® had 208 franchised stores open, with approximately $88
million in aggregate revenue.

Plato’s
ClosetÒ— Winmark
began franchising the Plato’s Closet® brand in 1999.  Plato’s ClosetÒ
stores sell and buy used and new clothing and accessories geared toward the
teenage and young adult market.
Customers also have the opportunity to sell their used items to a Plato’s
ClosetÒ store when outgrown and to purchase
quality used clothing and accessories at prices lower than new merchandise. At
the end of fiscal 2004, Plato’s Closet® had 128 franchised stores
open, with over $50 million in aggregate revenue.

Music
Go RoundÒ— Finally,
Winmark began franchising the Music Go Round® brand in 1994.  Music Go RoundÒ
stores sell,