Purchasing stock in a franchise
Purchasing stock in a successful franchise may be more affordable than you think—and well-established brands generally offer a more secure investment than other companies. Because franchises have multiple outlets, a failure in a few individual cases is less likely to threaten the financial stability of the company as a whole. But do your homework. Share values can go down as well as up, so there's always an element of risk, and you should always understand the terms and conditions fully before parting with your hard-earned cash. For example, there are differences between how public and private companies operate. Some companies only sell shares through their own trading company, and some require a minimum investment.
Although it's possible to purchase shares directly, such as via an online share dealing site, consulting a professional financial adviser or stockbroker will help you make informed decisions—see here for what you should know before choosing a financial advisor.
You'll also need to know what a share dividend is: It's the amount of "profit" made on each share over a period of time. The exact amount is decided by the company directors and usually paid quarterly. Dividends can be in the form of cash, stock, or a scrip (certificate of guarantee).
Entrepreneur.com publishes the Franchise 500 ranking annually, based on a variety of factors, including financial strength and stability. So if you're looking to invest in a franchise, this could be a good place to start. Let's take a look at some of the most well-known franchises you can invest in.
(All financial information taken from Yahoo Finance on January 5, 2018.)
Who'd have thought that three college buddies opening a shop selling coffee beans in Seattle would lead to a worldwide franchise? Starting as a single outlet in Pike Place Market in 1971, Starbucks grew under the leadership of CEO Howard Schultz to become one of the world's most successful coffee shop chains, netting over $22 billion between 2013 and 2017. Did you know Starbucks' prices vary around the world? See where the most expensive Starbucks is.
Stock symbol (unique stock market ID): SBUX
Share price: $58.87
Five Year Average Dividend Yield (the five-year average of the dividend paid on each share): $1.34
Forward Annual Dividend Rate (the predicted dividend rate per share for the coming year): $1.20 (2.04% of stock rate)
McDonald's started life as a small hamburger stand run by brothers Dick and Mac McDonald. In 1954, milkshake mixer salesman Ray Kroc saw them running eight mixers simultaneously. Impressed with the slickness of their operation (and with an eye for an opportunity to increase his own sales), he partnered with the brothers to open their first restaurant in 1955. The rest is history.
Stock symbol: MCD
Share price: $173.13
5 Year Average Dividend Rate: $3.04
Forward Average Dividend Rate: $4.04 (2.34% of stock rate)
CJ GUNTHER/EPA EFE/REX/Shutterstock Fancy dunkin' your cash into a few shares of Dunkin' Donuts? Bill Rosenberg opened The Open Kettle doughnut shop in Quincy, Massachusetts in 1950. Following its renaming to Dunkin' Donuts, (with maybe another name change to come?), he went on to develop it into a world-beating brand that operates in 32 countries and serves a mouth-watering 70 varieties of delicious doughnuts. The parent company, Dunkin' Brands Inc. also owns Baskin-Robbins, and sometimes their outlets serve both brands.
Stock symbol: DNKN
Share price: $64.76
Five Year Average Dividend Rate: $2.03
Forward Average Dividend Rate: $1.29 (1.95% of stock rate)
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No-one can resist a bowl of tasty chicken wings—here's how to eat them properly. So who could resist investing in Wingstop Restaurants? Antonio Swad was quick to recognize the universal appeal of chicken wings as a staple American dish, so he started his own restaurant specializing in this popular food in 1994. Four years later, the company was so successful it began franchising, and now has over 1,000 outlets in the United States, Mexico, Singapore, The Philippines, Indonesia and the United Arab Emirates.
Stock symbol: WING
Share price: $40.20
Forward Annual Dividend Rate: $0.28 (0.69% of stock rate)
Trailing Annual Dividend Rate (Annual dividend rate for the last year): $0.07 (0.17% of stock rate)
Stepping away from the delights of fast food, Re/Max is all about real estate marketing. In 1973, Dave and Gail Liniger started Re/Max as a real estate franchise offering high commission splits and giving each agent responsibility for their own business, including matters such as office expenses. Re/Max has since grown into a worldwide network of almost 100,000 agents across 95 countries.
If you're selling your home, check out our tips for success.
Stock symbol: RMAX
Share price: $47.55
Forward Annual Dividend Rate: $0.72 (1.5% of stock rate)
Trailing Average Dividend Rate: $0.60 (1.4%)
QualityHD/shutterstock Almost 100 years ago, there was a single tool for each job (see how you can use your DIY tools to do some unusual tasks). But in 1920, William Seidemann and Joseph Johnson revolutionized the concept of the wrench by creating ten sockets that "snapped on" to five interchangeable handles, and Snap-on Tools was born. A century later, and the company sells over 22,000 products, using mainly mobile trucks which bring the tools directly to trade customers like mechanics, airports and car dealerships.
Stock symbol: SNA
Share price: $177.09
Five Year Average Dividend Rate: $1.51
Forward Average Dividend Rate: $3.28 (1.87%)
Intercontinental Hotel Group
Universal Images Group/REX/Shutterstock
Nothing beats a stay in a beautiful hotel—take a look at these most photographed hotels on Instagram. So investing in a hotel franchise could be a smart move. Originally established by Pan American Airlines in 1952, then sold to Bass (UK) in 1988, the Intercontinental Hotel Group incorporates nine hotel brands. These include household names like: Holiday Inn Hotels & Resorts, Holiday Inn Express, Crowne Plaza Hotels & Resorts and InterContinental Hotels & Resorts. The brand now operates on six continents.
Stock symbol: IHG
Share price: $63.59
Five Year Average Dividend Rate: $2.06
Forward Average Dividend Rate: $0.65 (1.05%)
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In 1983, John Schnatter graduated from college with a degree in business. He then went home and demolished his dad's broom closet, sold his car to fund second-hand kitchen equipment, and began delivering pizza. He opened his first pizza restaurant in 1985, and Papa John's now franchises thousands of restaurants internationally. (Why not discover how your other favorite pizza brands got their name?)
Stock symbol: PZZA
Share price: $59.17
Trailing Average Dividend Rate: $0.82 (1.42%)
Forward Average Dividend Rate: $0.90 (1.6%)