First, the bad news: Several analysts are predicting a potential stock market downturn in 2019. Thanks to skyrocketing debt, ongoing trade disputes and an unpredictable political situation, this year should at least give traders plenty of zigs and zags.
If you’re in debt, you obviously want to get out of it. But how? We’ve prepared this in-depth guide to help you pay off the nasty debt that’s been keeping you awake.
We’ve been hearing a lot in recent years about data breaches and online security threats. It often seems as if anytime we go online we’re stepping into a “cyber haunted house.” Now, that may be more than a little bit of an exaggeration, but it does make you wonder if it’s safe to trade stocks online. After all, if you’re a regular trader, you’re putting yourself at risk every time you go online to make a trade.
Part of the reason picking winning stocks is so difficult is because a great company isn’t always a great investment. That may sound like a contradiction in terms, but when it comes to investing and all the complexities of modern markets, it’s also a very real potential outcome.
It’s sometimes said that one of the best investments is to invest in yourself. You can do that by getting additional training or education, developing new career or business skills, or by investing in a business. That last one – investing in a business – opens up the question of franchises: Do franchises make good investments? We’ve all heard plenty of stories – or at least rumors – about people who bought into certain franchises and made a fortune. Who can forget the line by “CJ,” the young son in the movie The Blind Side, who said, “My Dad owns like a million Taco Bells…”? (Actually, it was “only” 89, and it was Taco Bell and Long John Silver restaurants, but who’s counting?) It was a movie of course, but it’s based on the real-life Tuohy family, who did in fact get rich with fast-food restaurant franchises. It’s not an isolated incident, either. So do franchises make good investments? Let’s take a closer look. What is a Franchise? Investopedia defines a franchise as follows: “A franchises a type of license that a party (franchisee) acquires to allow them to have access to a business’s (franchisor) proprietary knowledge, processes and trademarks in order to allow the party to sell a product or provide a service under the business’s name. In exchange for gaining the franchise, the franchisee usually pays the franchise or an initial start-up and annual licensing fees.” Basically, a franchise is a way to buy the benefits of an established business. You’re actually creating a new business from the ground up, but you’re doing it within the framework of an already successful business model. Common franchise examples include fast-food restaurants, like McDonald’s and Wendy’s, real estate companies, like RE/MAX, and haircutting salons, like Great Clips. Even though some of these franchisors are corporate giants, their businesses are full of independently owned shops and outlets in hundreds or thousands of locations. Franchises come in all shapes and sizes; they’re not actually standard. For example, with some franchises, you’re just purchasing participation, logos, advertising, and perhaps leasehold of certain types of equipment. With others you’re buying the entire package, including the real estate and all the equipment. There are ongoing benefits as well. A big one is marketing, including advertising. This is one of the primary reasons for buying into a franchise rather than building a business from the ground up. You’re able to take advantage of the franchisor’s image and marketing reach, and even benefiting from local advertising. Franchises – Part Investment, Part Business Venture When you buy into a franchise, it’s really a hybrid of investing and starting a business. The investing side is the upfront capital that’s required to buy into the franchise. That price can be steep (see the next section). But when you buy in, you’ll be responsible for managing the operation. In a real way, buying into a franchise can become an all-encompassing economic activity. Not only are you moving a substantial chunk of capital into the business, but you’re also turning it into a full-time career (many would say full-time+, particularly in the startup phase.) How Much do Popular Franchises Cost? Here’s where we get into the investment side of franchises. You might be able to buy into some franchises for just a few thousand dollars. Those will be the ones where you’re getting name recognition, organization, and some limited marketing exposure. But better-known franchises can require millions. With franchises of that caliber, it’s not uncommon for the franchisor to provide financing. But you still need to come up with a large percentage of the upfront investment from your own resources. For example, if the initial investment is $1.5 million, you may be required to come up with $500,000, and the franchisor will provide financing for $1 million. Entrepreneur.com issued its 2018 Franchise 500 Ranking, listing the investment cost range for each of the 500 most popular franchises. Check out the list to find a franchise that interests you. But to give you an idea what the investment is, here is what it looks like for the top 10 franchises:
- McDonalds, between $1 million and $2.2 million
- 7-Eleven, between $38,000 and $1.1 million
- Dunkin Donuts, between $229,000 and $1.7 million
- The UPS Store, between $178,000 and $403,000
- RE/MAX LLC, between $38,000 and $225,000
- Sonic Drive-In Restaurants. Between $1.1 million and $2.4 million
- Great Clips, between $137,000 in $258,000
- Taco Bell, between $525,000 and $2.6 million
- Hardee’s, between $1.4 million and $1.9 million
- Jimmy John’s Gourmet Sandwiches, between $330,000 and $558,000
- The franchisor may recognize your success, and promote you to a corporate position with a fat salary and very generous bonuses and perks.
- When you decide to give up the franchise life, you can sell your outlets for more than enough money to retire comfortably.
- The potential to create an operation with lucrative profits.
- The ability to one day sell the operation at a substantial gain.
- Franchisor business model – you won’t have to design one from scratch, the franchisor will have it all provided for you.
- Corporate marketing – large, well-known franchisors, like McDonald’s and Subway, provide substantial national and local advertising. You’ll have to pay a fee toward that advertising, but it’s highly effective.
- Financing – many franchisors will provide financing, so there’s no need to tangle with the banks.
- Location analysis – several years ago I attended a restaurant seminar, and it was revealed that McDonald’s and other large franchisors do extensive research in determining where to locate outlets. That’s why it’s extremely rare to see a McDonald’s restaurant shut down.
- High upfront investment for the better established franchises.
- Even if the franchisor provides financing, the debt service will cut into your profits until the loan is repaid.
- Franchises are not passive investments. You may even find yourself “married to your business”, to the exclusion of all else in your life, especially in the early years.
- Corporate oversight. Yes, you get the benefit of powerful branding. But you’ll pay a price for that power in the form of compliance. In the more successful franchises, every phase of the operation is carefully designed and monitored by the company. You’ll be required to comply. Despite your investment of time and money, it isn’t the same as being self-employed.
One of the dirty little secrets in the financial community is that the majority of Americans don’t adequately save and invest for retirement. Sadly, millions of people will enter retirement the same way they lived during their working years: broke.
Sooner or later, we’re all going to need to pick a retirement savings account. And if you’ve decided an IRA (individual retirement account) is right for you, you’ve got yet another choice to make: Should you open a Roth or traditional IRA?
The 401(k) loan has grown to become one of the most popular loan sources. In fact, where lending is concerned, it’s not an exaggeration to say that 401(k) loans have become an American institution. According to the Employee Benefit Research Institute, 18% of 401(k) plan participants have outstanding loan balances.
If you have $10,000 available, it’s seriously time to think about where to invest it. It’s not the kind of money you can take wild chances with, but you will want to start investing it in a way that will enable it to grow.