If Warren Buffett Owned a Franchise Would You Buy It?
There is a lot of talk today about Warren Buffett and his acquisition of railroad operator Burlington Northern Santa Fe for $44 billion. This was Warren's largest acquisition in Berkshire Hathaway's history. So why am I blogging about Warren Buffett on a franchise blog? What does Warren Buffett have to do with franchising?
Well... Many people seem to follow the same investment patterns as Mr. Buffett. If you were given investment advice from Warren himself would you follow that advice? If Warren Buffet owned a franchise would you buy it?
If you answered "yes" to the last 2 questions then Dairy Queen might be the franchise for you. The Dairy Queen franchise is a wholly owned subsidiary of Warren Buffets' company Berkshire Hathaway. In October of 1997 Berkshire Hathaway Inc. purchased Dairy Queen for $585 million.
So... If Warren Buffett owned a franchise company would you buy it? I would.
1. I would buy the stock.
2. But I would not buy the store.
The first commenter makes an interesting point. Buffett is known for buying undervalued companies, but does the profitability of those companies increase, or just the underlying stock value?
Interesting question. I am not sure. There is certainly no guarantee of success, no matter who owns the franchise company.
However, if I was a betting man, I’d bet that it would be a winner.
Of course, onc would have to be franchisee material-which I am not.
The Franchise King
Joel Libava
Buffet is owns the royalty collecting entity, not a store that pays the royalties. The difference is important to note.
I’d probably buy some ice cream at the store and maybe a grilled cheese with some fries and call it a day. Retail franchises are a lot of work and owners rarely get to golf or lounge by the pool.
I’d look at the stock before the franchise as the franhisor’s stock is based on the royatlies collected. Like Tom, I’d probably get a milkshake and I’d make sure I grabbed plenty of napkins as I sometimes make a mess.
I’d also consider carefully any store that has a 3,500 square foot and usually has it’s own pad site. I’d also carefully consider the overall marketplace for family friendly low end food. It is a crowded market right now with a lot of big names seeing store sales soften like a vanilla ice cream cone in August, but what do I know?