Pizza Inn (PZZI) – Tons Of Potential Value

GuruFocus.com:

Those of you who have followed me for a while may have noticed that I really like the franchised business model (you may also remember my promise to start writing more interesting blog titles… Whoops!).

There’s a reason- it’s a really amazing business model. It costs nothing to grow (actually, new franchisees generally pay a franchising fee to start a franchise, so you get paid for letting them grow your business), the margins on incremental franchised revenues is almost 100% (almost all costs are fixed, so expanding your franchising rev. either through increased sales or new franchisees is basically pure profit), the cash flows are incredibly stable, and the ROIC is incredible. And that ignore quite possibly the best part of the franchise model- your franchisees are required to put a portion of sales to advertising, so other people pay to build up your own brand, which should increase brand value and attract new franchisees! Carry on reading.

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