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The Benefits Of Franchises For Investors

Investors looking for growth stocks would be wise to seek out companies that franchise. The Street reports that many stocks of companies with more franchised locations than company-owned stores are outpacing the return on the S&P 500 this year. These stocks are especially enticing to investors because the entrepreneurial spirit delivers a steady cash stream and reduces expenses for these public companies.

"The benefit of franchising is that, if you have a system that can be replicated well, then franchising is a good growth strategy," says Lorne Fisher, chief executive and founder of Fish Consulting, a public relations and consulting firm for franchises such as Dunkin’ Donuts and Popeyes.

Still, franchising does have its obstacles because it is a federally regulated business model that is closely watched by the Federal Trade Commission and individual states. Though there may be upfront costs in regard to legal paperwork and filings, franchises ultimately benefit by eliminating the costs of opening, operating and maintaining stores long-term.

To help investors navigate the often confusing realm of franchising, The Street recently identified 10 publicly traded companies that get a substantial portion of their revenue from franchise operations, starting with costs collected from potential franchisees. These companies include:

1. Sonic Corp., which operates and franchises a chain of quick-service drive-in restaurants in the U.S.

2. Denny’s, which operates a family-style restaurant chain throughout the U.S. with the Denny's brand name.

3. Tim Horton’s, which develops and franchises quick-service restaurants that serve food, including baked goods, sandwiches and soups, as well as coffee and other hot and cold beverages in the U.S. and Canada.

4. Krispy Kreme, which is a retailer and wholesaler of doughnuts and packaged sweets, who owns and franchises locations in the U.S. and internationally.

5. McDonald’s, which franchises and operates McDonald's restaurants in the food-service industry worldwide.

6. Jack in the Box, which operates and franchises Jack in the Box and Qdoba Mexican Grill quick-service restaurants in the U.S.

7. DineEquity, which franchises IHOP and Applebee’s restaurants in the U.S.

8. AFC Enterprises, which operates and franchises quick-service restaurants under the brand names Popeyes Chicken & Biscuits and Popeyes Louisiana Kitchen in the U.S. and internationally.

9. Winmark Corp., which franchises retail locations under the brands Plato's Closet, Play it Again Sports, Once Upon a Child and Music Go Round across North America.

10. Pizza Inn, which is mainly a franchisor and food and supply distributor to restaurants operating as Pizza Inn, along with locations within college campus buildings, convenience stores and airport terminals in the U.S. and internationally.

The future of franchising is looking strong with the International Franchise Association estimating that the number of franchise establishments will grow 2.5% this year with the economic output projected to grow 4.7% to $739.9 billion. In these difficult economic times, franchise companies appear to offer numerous opportunities for investors looking for good, solid growth.

Read "Why Franchises Are Good for Investors" article.

MDG Advertising is a full-service South Florida advertising agency, with offices in Florida and New York, that specializes in developing targeted franchise marketing solutions, exceptional online executions, and solid branding and media buying strategies that give franchises a real competitive advantage. MDG Advertising handles creative, media, and interactive marketing for Coverall, one of the world’s leading commercial-cleaning franchising companies, with a global network of more than 90 support centers and 9,000 franchisees.

Our core capabilities include advertising, branding, creative, digital marketing, media planning and buying, public relations, Web design and development, email marketing, direct mail, video marketing, social media marketing and SEO. To view MDG’s portfolio, click here. For more information, email MDG, call 561-338-7797 or log on to

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