First, let me apologize on two fronts, one for the fact that I promised this to you last week, and secondly that it is in the written form rather than my now more usual (and admittedly easier to take in) media of video. The reason is quite simple, I lost my voice at the beginning of last week and as of yet I have not fully recovered. Nevertheless I wanted to get something out there about another rather unique option for investing for your future. 
In the fervor of modern investing, with real-time results on dividends and interest rates, I think that sometimes we lose track of the other purpose of investing: we invest to make more money, yes, however we should also invest with the idea that our money is being utilized to create something, whether a good or service, that is productive towards our society. Not only do we miss the “point” of investing by ignoring this message, but I believe we also miss a substantial and sustainable opportunity for growth. With that concept in mind, I want to talk about franchise investment.

 

Immediately I want to delineate between franchise investment and franchise operation. Most people who think about franchises think about the potential nightmare of ownership and management of a company; that is not what we are talking about here. The example that I want to actually use today is a program called Dental Plus. Dental Plus is a company that works with dental practices to restructure and market their services to make their businesses more efficient. This is just one of many franchise investment programs that are available, however I feel that it is one of the best available. Here are some reasons why.

 

Dentistry is a consistent business. Almost every person in the United States has seen a dentist for some reason (whether they wanted to or not); indeed dentistry is a service that always is and always will be in demand. In fact, the success rate for all dentistry practices in the United States is 98%, while they are only operating at an average estimated 55% efficiency. As potential investors, what does this mean to us? Well if we look at the dental industry as if it was a corporation in which we were considering investing, we would look at this corporate profile and see two things: One, that the corporation is solid and reliable and two, that there is a great potential for growth. To put it frankly, the Dental Plus business model closes that efficiency gap and thus increases the profitability and value of that practice.

 

Since we just made the comparison between a franchise investment and a typical investment in a publicly traded company (stock), let’s now talk about the differences between these two options. There are really two major differences; one is in regards to how an investor is paid, and the other is how that investment is valued and grows over time. First, about how an investor is paid: in a stock, an investor is paid via dividends which are a reflection of a company’s ability to pay said dividends as determined by a board of directors. Franchise owners are literally paid a portion of every dollar that is earned by the practice, there is no board deciding how much the investor can receive. An even larger difference is how the two investments are valued i.e. the stock price versus franchise value. A stock price is subject to the pressures of the market. A perfectly decent company with a solid foundation can be devalued on the stock market simply due to the fact that the markets are experiencing a downward trend, thus losing the investor money without a justifiable cause. A franchise owner is only subject to the performance of their company; if the company is doing well, the value of that business is increased, and thus the investment gains value, pretty simple. This is not to say that there is more or less risk, a franchise can just as easily go out of business as any other company but this is where we turn back to our evaluation of the industry as one with great stability and growth potential.

 

This is a very basic overview about franchise investment. There are many more important (and I think, exciting) details to this unique and purposeful investment option, and I encourage you to get in touch with our office to learn more!