Pawn Stars Is a Hit! Pawn Shops Can Be a Legitimate Cash Cow…
Here’s How to Do Them Right!
I’ve been talking about the viability of pawn shops for a long time.
My good friend (and secret mentor) J.K. operates six pawn shops in Arizona, Nevada and California. All of his locations have been profitable since day one.
And get this…..his employee turnover is less than 2%… which is unheard of in this business. J.K. takes care of people, offers nice commission and fun bonuses (like a trip to the Kentucky Derby).
But more important…and this is a major point…..pawn shops can be very profitable in a Depression.
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I had just read the TIME magazine article and then I stumbled upon this. It’s was hard to believe at first but then I found out something even crazier…
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Have you seen the hit TV show Pawn Stars on the History Channel?
If not, you should. It’s a great show!
But it’s more than entertainment. You can learn the “essence” of how to make money with pawn shops from the inside. Making money is the objective. Sadly, if you check the statistics you’ll find most pawn shops are either broke, crushed with debt or both.
What’s more, pawn shops are typically run or managed by people with almost no business expertise or insight whatsoever. My friend loves this because it makes his business look really good!
Anyway, pawn shops can be an excellent source of income in a recession, depression or even during boom times.
But the bulk of profit, according to J.K. is made when the economy turns south. People are looking for ways to accumulate cash FAST.
I made an amazing discovery about this market and business recently. I’ll tell you what it is in a second…but first….a warning.
Most of the pawn shop franchise opportunities available today are over-hyped and overpriced!
The best way to approach this business is to build your own brand…like the Pawn Stars did, and franchise YOUR BRAND if you want to expand.
But I found one franchise which may be worth a look.
First…… I like the concept of a “franchise”.
A franchise is simply an authorization to sell a company’s goods or services in a particular place. Modern franchises typically include a specific geographic area like McDonalds, Burger King or Wendy’s.
Franchising can be applied to hundreds of markets and products. Franchising your product, service, or business is a great way to build a fortune.
Will Wright applied the concept of franchising to his software game The Sims in 2000, and the rest is history. The Sims “franchise” recently hit the 100 million units sold. At $39 a pop that’s a nice payday.
On a smaller scale, one-store franchises like The Mail Box Stores can be profitable too. Sometimes you can acquire an existing franchise at a discount (if the owner is struggling) and hire someone to run it for you (for a piece of the action).
The Golden Rule of Franchising: Tap into a Rising Trend
When it comes to successful franchising it’s about flowing into a rising trend.
Trends are constantly changing, and some are longer than others.
A hot franchise ten years ago could be history today because the trend is toast.
Pawn shops and cash advance stores tap into hot rising trends.
eBay Drop-Off Franchise Bites the Dust
One business that tried to tap into the rising pawn shop trend is the eBay Drop-Off franchise.
The business catered to people who understood the concept of eBay but do not have the time to post, sell and/or monitor eBay auction listings.
ISold It is another franchise designed to help people sell stuff on eBay for a fee.
eBay “drop-off centers” may be a rising trend but not in the current form.
Most eBay drop-off centers today are riddled with problems, ridiculous up-selling fees (like $19.95 to change photographs or images) and excessive packing, shipping and handling charges.
But the concept of “eBay drop-off center” within an established company or franchise such as rental centers, Internet ISPs or computer businesses should do well.
An eBay drop-off center is not technically a pawn shop.
An eBay drop-off center differs from a pawn shop in a couple of ways. The main difference is cash.
In other words, when someone drops stuff off at an eBay center is more like a consignment shop. If the product sells, everyone gets paid.
But at a pawn shop most customers’ are looking for immediate cash, or credit at the store.
The Cash America Franchise Opportunity
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Make no mistake about it, pawnshops can be very profitable…and especially in hard times. I’ll show you the numbers.
The “pawnshop business model” has existed in one form or another for thousands of years. It’s certainly been around longer than most blue-chip companies.
Ten years ago, most people wouldn’t be caught dead in a pawnshop.
If people needed cash they would borrow from a relative, get a cash advance on a credit card, or tap into the equity in their homes.
But today the old methods for obtaining cash are drying up. In other parts of the world, like Mexico, China and India, pawnshops are a common way of doing business.
There are more than 2,600 pawn shops in Mexico today, and the market is growing like wildfire.
Value Pawn and Jewelry in Orlando opened their first pawn shop in Mexico two years ago.
In the U.S., pawn shops are becoming an acceptable way of getting cash for every income level. The attitude is changing.
If you like the concept of a pawn shop, then a Cash America franchise may be worth considering… for a couple of reasons.
The concept of an upscale pawn shop hasn’t caught on with consumers yet.
The trend, though rising, is still in its infancy. But in most cases it will mean the franchises, like those offered through Cash America, are not overpriced (yet).
What Is a Cash America Franchise?
A Cash America franchise is a local store that provides a simple and convenient way for people to get cash for the items they own.
Customers can sell thousands of different categories of products and items to Cash America on the spot.
Cash America is also a great source of quality pre-owned merchandise such as computers, jewelry, home electronics, gold, video game consoles, sporting goods, tools, and even cars and motorcycles.
Cash America has reinvented the pawn industry with its modern buildings and business practices.
Most people will not be ashamed to walk into a Cash America store.
Cash America is a leader serving the needs of the under-banked community in the United States.
The members of this community don’t have access to “mainstream” financial services offered by banks or credit card companies.
They include lower income folks, immigrants, people that have recently gone through bankruptcy, and others. Some experts put this community at nearly 15 percent of the country’s population.
That’s a lot of potential customers, and despite what you may be thinking, they can be very lucrative customers.
Cash America more than 500 locations nationwide, and the company appears to be growing. Most of the current owners (franchisers) also seem to be happy.
How Much Does a Cash America Franchise Cost?
The cost of opening a Cash America store will vary, depending upon the size and location. But start-up costs are between $200,000 and $300,000.
I know…….I tend to avoid businesses with huge start up costs like this.
But we’re talking about an established, recognized franchise in a hot rising trend.
I’m a bit more flexible when it comes to investing this kind of money in a viable franchise that’s already positioned in a rising market.
How Much Money Can I Make?
It’s all about the money!
The amount of money you could make with a Cash America franchise (or any pawn shop) will depend on your location and how efficiently you run your business.
Another consideration will be employee costs, and whether or not you want to be an absentee owner.
The most successful Cash America franchises are located at busy intersections, or a short drive to major interstate highways.
Most franchise owners rent or lease retail space in popular strip malls or shopping locations.
However, dozens of Cash America franchise owners prefer stand alone locations.
From my research, I’ve found that most Cash America franchises have much higher cash flows and lower operating expenses than a typical fast-food franchise.
For example, a typical Cash America franchise in Las Vegas might generate $650,000 in sales per year, with operating expenses (rent, employees, insurance, legal, franchise fees, etc.) of $250,000. This would leave a net profit of $400,000. That’s not bad.
On the other hand, if a typical Subway franchise at the same location generated $650,000 in sales, the operating expenses (including food costs) will usually be in the neighborhood of 70 percent to 80 percent.
If the operating expenses for the Subway were 75 percent this would mean $487,500. The net profit works out to be about $162,500!
What’s more, I think the employee requirements and turnover would be much less with Cash America.
My friend, J.K., truly and genuinely loves his employees..and they know it.
Granted, he’s not immune to employee problems…he’s been sued (unsuccessfully) three times.
But J.K. takes tremendous pride in his low employee turnover. He’s also rewarded some employees with their own stores…they manage the stores for a percentage of the net profit.
If you think that’s great, listen to this…
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The Cash America profit margins will trounce most restaurants (and even most franchise opportunities). Profit margins on some items and loans can be as high as 50 percent.
The profit margins for a sub shop or a pizza restaurant can be as low as 8 percent.
Can I Sell It If It Doesn’t Work Out?
It’s relatively simple to unload a profitable franchise quickly if things don’t work out as planned.
But, the current economic climate favors buyers.
A friend of mine tried to sell his pizza shop on a semi-popular beach for more than two years. He finally unloaded it at a huge discount.
I think a Hungry Howie’s pizza shop franchise at the same location would have sold much sooner, and without the need to extend a discount.
If a franchise has a trusted brand selling it can be much easier. Selling into a hot rising trend is also easier than selling into a sinking, dying trend.
Think about it this way: Being an entrepreneur means taking calculated risks. If you can do this before the masses jump onboard you could invest less money and make yourself a fortune.
“Can I forego the Time and Expense of a Franchise and Just Do It Myself”?
Absolutely! You can open a pawn shop in practically every town and city in the world.
But like every business you’ll need a reliable model and money making formula…just slapping a sign on a building, putting steel bars on the windows and opening the doors won’t do it.
My advice, if you plan to do this yourself is to work in a “successful” pawn shop part time, or acquire a business in a prime location. If a pawn shop in a prime location is struggling or is not profitable….you can fix it with high test marketing and copying the formula of Cash America.
Your humble host,
(Ed Note: Marc Charles is referred to as “The King of Business Opportunities” ….and for good reason. He should be known as “The King of Legitimate Business Opportunities”…because he’s launched, bought, sold reviewed and advised on hundreds of businesses and money making opportunities. He understands legitimate opportunities. Marc has agreed supply League of Power members with crucial updates regarding legitimate business and money making opportunities.)
Start your research on pawn shops today. Talk to some current owners. Watch Pawn Stars on the History Channel. Delve into the real numbers of successful pawn shops and cash advance businesses. Pawn shops can be a legitimate cash cow and especially in a deep recession or depression.
To make BIG money in any business whether you work for yourself or for someone else, you need one of two things:
1. An original idea.
2. A revolutionary product.
Why would anyone let you cash in on their original idea unless they stood to benefit by sharing it with you? Let’s get real here.
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