Investors Dumping The Dow To Buy Franchises

Monday, September 17, 2007

FranchiseOpportunities.com, an online franchise information site which helps people locate franchises, released a report today that confirmed a new group of franchise buyer. "What we have seen is a franchise buyer who is not looking to replace a lost job or start a small business," says Joseph Lunsford, President of FranchiseOpportunities.com. "We have coined the phrase 'Franchise Investor' which best describes this savvy group who have embraced the concept of franchising as an asset allocation move in a period when the Dow has underperformed for over two years," Lunsford continued.

Franchising has always been a hot ticket for those seeking self employment, but more recently the staff at FranchiseOpportunities.com began to see a trend among people who were not seeking a job. "We noticed that those seeking franchise information had assets far beyond that of a typical prospective franchise applicant. Upon researching further we discovered a significant trend that is changing the face of franchising," said Janice Hall, VP of sales for FranchiseOpportunities.com. "We developed a chart on the Dow over the past five years and what we saw was a distinct relationship between the performance of the Dow and franchise sales. Essentially, during the late nineties franchise purchases seemed typical and represented those that were displaced or just wanted to own their own business. However, what we have seen over the past several years is a new group of "Franchise Investor" who is looking to reduce risk, get a higher return, and take some control during a turbulent period. We feel this is not a phenomenon but a trend based on the calls we have made to investors and franchise companies. Investors are tired of being the last to know when bad things happen in companies and are willing to take a more active role in their investments to diversify their holdings. These Investors have no interest in being the manager of a restaurant or store; they hire people to do that sort of thing. They are absentee owners who are simply looking at the numbers, and the numbers look good compared to the stock market these days. One report shows that a well run franchise can return a 20% or better return while providing tax advantages. This new 'Franchise Investor" may have a higher net worth than the value of the entire franchise company itself so this will be an interesting continued story of the tail wagging the dog. The graph shows the Dow over the past 5 years compared to the franchise sales of the top franchise companies and the contrasting relationship between the two. We will continue to track this trend and report our findings," commented Lunsford.

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