By JOAN VERDON
STAFF WRITER

Michael Kaplan first drew up a plan for a chain of plus-size women's clothing stores as a way to win a Harvard Business School contest. He didn't come close to winning that competition, but since then his idea has been making the grade with shoppers and retail investors.

Fashion to Figure, the clothing chain Kaplan and his brother Nicholas created in 2004, is preparing to open its third store, in Jersey City, and has just secured $2 million in investment capital that will enable it to open up to five stores next year.

Thus far, the Fashion to Figure story reads like a business school case study in growing a start-up. In Phase One, the Kaplans secured half a million dollars in financing from private investors and opened a "Petri-dish" store at Palisades Center Mall in West Nyack. That store was the trial balloon where they tested their new concept for selling plus-size clothes.

Phase Two involved creating and testing a prototype store that could be duplicated in malls around the country. They entered that phase a year ago at the Livingston Mall.

The third phase -- what Michael Kaplan calls "building critical mass" -- began last month as the company closed on the latest round of private investment. The company is in discussions with malls in Bergen and Passaic counties and expects to open a store in North Jersey next year.

The Kaplan brothers also have a personal reason for wanting their idea to succeed. They're the great-grandsons of Lena Himmelstein Bryant -- better known as Lane Bryant -- the woman who in 1899 launched America's first plus-size clothing line.

The Fashion to Figure name came from a quote of their great-grandmother: "You should never ask women to conform their figures to fashion, but rather bring fashion to the figure."

Because of their family history, the brothers face the emotional challenge of "wanting to be the best there is in the plus-size market," Michael Kaplan said. But, he added, "to accomplish that emotional challenge, you also have to be very practical. We had to get a great merchant, we had to get funding, we had to create a successful business model. Now that we've done those things, it's really up to us to execute."

The "great merchant" is Frances Freixas, who previously was a woman's sportswear buyer at Saks Fifth Avenue and joined the brothers as a partner in January.

"It's just a great fit for what we're doing because of her buying background, her merchandising expertise and the fact that she really brings a woman's vision to the partnership," Michael Kaplan said. "She basically has been the most talented merchant that we've had, and sales show it."

Fashion to Figure hopes to fill a need by seeking out the best plus-size offerings from many manufacturers, rather than offering a single company brand, as some of its competitors do. "We're finding new resources every day to bring to this customer," Freixas said, noting that as the company adds stores, it will be able to convince more manufacturers to produce custom orders for the chain.

Sales at both the Palisades Center and Livingston Mall stores are expected to be close to $1 million this year. Sales at the Palisades Center store this August were up 20 percent compared with the same period last year, Kaplan said. Palisades Center currently achieves sales per square foot of over $350 and is on target to reach sales of $450 a square foot, demonstrating it can compete with national chains in major malls. Both stores are now profitable, Michael Kaplan said.

Kaplan said the investors from the latest round of financing include individuals from a West Coast money management firm and partners in a New York-area hedge fund.

The Kaplans -- who are sharing an apartment to save money and are drawing minimal salaries -- made presentations this summer to private equity firms, hedge funds and institutional investors to line up financing. Institutional investors looking to invest a minimum of $5 million to $10 million in new ventures expressed interest, but Kaplan said the brothers weren't at the stage where they were seeking an investment of that size.

"We basically wanted to take the minimum necessary to get to a nucleus of stores so that we could demonstrate the viability of our concept," he said. "What we're trying to do, in the cheapest way possible, is to get to critical mass. That's really what the investment thesis is. The company hopes to have 10 stores within two years.

One of the private investors, Tony Campbell, a hedge fund manager based on Long Island, said he became intrigued with the Kaplans, and their business proposal, "because they're driven to succeed." The brothers, he said, "handle themselves extremely well and they've got a lot of retail contacts, so everybody's willing to help them, which is a terrific advantage when you're setting out."

Campbell also believes that the plus-size market is a profitable niche to be in. "It's huge. It's growing. Look at Charming Shoppes," he said, referring to the company that currently owns Lane Bryant and has been impressing Wall Street with its growth potential.

The Kaplans' father, Steven, was president of Lane Bryant until it was sold to The Limited Inc. in 1986. Lane Bryant later was sold to Charming Shoppes Inc. and the Kaplan family is no longer involved with the company.

Nicholas Kaplan, 35, was a buyer for Saks, general merchandise manager for Bluefly.com and co-founder of The Designer Warehouse liquidation chain before co-founding Fashion to Figure. Michael, 33, worked on Wall Street for five years, including three years with a venture capital firm, before attending Harvard Business School.