Build-A-Bear will convert the stores into its own nameplate, and executives plan to open five to eight stores a year in the UK, eventually bringing its total unit count in that country to between 70 and 75. The retailer, which operates about 200 stores in North America, currently franchises about a dozen UK units.

"This is an exciting growth- and profit-enhancement opportunity," said Barry Erdos, Build-A-Bear's president and chief operating officer, during a conference call announcing details of the deal. He says he expects the deal to close some time near the end of this quarter or the beginning of the second quarter.

The Bear Factory had revenues of $38.6 million in the 12 months that ended March 26 last year. The company opened its first store in 2000. Most of the company's units are in "A" and "B" malls, Build-A-Bear executives say.