With all the different types of franchises available these days, are there certain ones you’d never consider buying? Like for example, a rent to own franchise?
For the purpose of this discussion, I don’t mean “I’m not interested in fast food because it’s too difficult to find good help” or “Joel, I’m not at all interested in owning the type of small business where I’d have to go out and make cold calls to sell a product or service.”
Instead, I’m referring to a a type of franchise you’d potentially feel guilty owning.
Have I got you thinking? Good.
Because I’d feel guilty myself if I didn’t put one specific business-type in the spotlight. Which one? Keep reading.
A Rent To Own Franchise
Have you ever looked into owning and operating a rent to own franchise business?
Heck…did you even know you could buy a rent-to-own business?
Provided you have the ability to invest $283,270 – $852,820 (for an Aaron’s Sales & Leasing franchise), you can. That’s the franchise cost. And here are some of the things you’d offer customers.
- Rent to own electronics
- Rent to own appliances
- Rent to own computers
- Rent to own laptops
- Rent to own tvs
- Rent to own bedroom sets
And from what I’ve read, in some areas of the country you could even offer those wonderful payday loans. Fantastic! It gets better.
New Product! “Lease-To-Own”
That’s right folks!
Instead of paying crazy-high interest rates with a rent-to-own product, you can lease-to-own instead.
According to Aaron’s, “Leasing is a convenient way to get the items you want without a big upfront payment, using credit, or making a long-term commitment. Aaron’s offers a great selection of name brand products, with affordable payments and flexible choices on how to own your merchandise.”
That doesn’t sound bad.* Nothing to feel guilty about. Heck, Colortyme offers “lease-to-own,” too.
* In 1994, the Minnesota Supreme Court ruled in Miller v. ColorTyme that the lease agreements offered by ColorTyme were covered under the state’s Consumer Credit Sales Act, and that the lease agreements were therefore not leases but sales on credit. The court further held that the company was charging usurious rates of interest to its customers. A similar lawsuit, filed by the office of Wisconsin Attorney General James E. Doyle in 1993, resulted in the company being fined $25,000 and required to disclose interest rates and other credit terms to consumers. ColorTyme later settled a class action lawsuit brought by the Legal Aid Society of Milwaukee by agreeing to pay $2.9 million, including $675,000 in interest-free loans to low-income individuals and families. See court documents.
Let’s Lease A 65″ Class QLED 4K UHD Smart TV
If you became a franchisee of an Aaron’s rent-to-own franchise business, here’s what a typical transaction would look like.
65″ Class QLED 4K UHD Smart TV
Cash price: $1,549.99 (in-store only)
Monthly Lease Payment (24 months)
$109.99 (plus tax)
Cost of Lease Services: $1,089.77
Total Cost of Ownership (plus tax): $2,639.76
And provided that your customer paid every monthly lease payment on time, he’d end up paying $2,639.76 for a nice televison that has a retail cost of $1549.99.
And you, as the franchisee, would make $1,089.77. That’s a 70% profit margin!
Wait. I forgot something.
You probably only paid $1100.00 for the television. That’s another $450 in profit. You just doubled your money. Feeling any guilt?
Note: I have never visited an Aaron’s Sales & Leasing store.
In addition, I’ve never talked to a franchisee or anyone at headquarters.
Could the executives be nice people? Absolutely.
Could they also be considered predators…because they’re part of an industry that a good number of people feel is involved in predatory lending?
Is A Rent To Own Franchise Predatory?
I call things like I see em’, but in this case, I’d like you to judge for yourself.
What follows is an excerpt of a report on the rent-to-own industry. It comes courtesy of the National Consumer Law Center®.
“As a result of the industry’s efforts to avoid meaningful consumer protections, RTO transactions are both exorbitantly expensive and targeted at those who can least afford it. Even worse, the RTO industry uses the criminal system to extract wealth from low-income consumers by using the threat of arrest and criminal sanctions to obtain payments, and by initiating criminal theft charges against borrowers who fall behind on payments.
The industry’s use of the criminal courts to enforce its contracts effectively criminalizes financial distress. It threatens devastating criminal consequences for those on tight budgets who have simply lost the ability to keep up with payments due to all too common misfortunes like loss of income, rent increases, an accident or illness, divorce, or the need to care for a family member in distress. Even if ultimately dropped, criminal charges can cause lifelong negative consequences—from the traumas of arrest and pre-trial jail (for the individual arrested and the consequences on the person’s children), to onerous court costs that can often be imposed regardless of the outcome of the case, to interference with maintaining a current job and threats to future employment opportunities.”
“Just as RTO customers are frequently confused about the nature of the rental agreement they have entered into, they also are shocked to learn that failure to make timely payments or return the property could result in these criminal charges.”
“Someone” Needs To Own These Types Of Franchises!
Yada, yada, yada.
“C’mon, Joel. You’re an expert. Somebody has to do it. Someone needs to provide options for people of low-means.”
Does that mean “someone” needs to charge 2-3 times the price of a sectional or a television?
The rent-to-own industry has an “association.”
Blah, blah, blah.
I’d wager that those same rent-to-own industry representatives did not sit down with lawmakers and voluntarily bring up the fact that consumers who do business in their stores pay 2-3 times the retail price for goods they buy. Or that their stores file criminal charges when their customers don’t pay, screwing their “customers” lives up even more.
Several Rent-To-Own Franchises Are Available For You To Feel Guilty About Owning
Aaron’s isn’t the only franchise business opportunity in the rent-to-own category. Here are some of the others:
- Buddy’s Home Furnishings
- Premier Rental-Purchase and Premier Home Furnishings
- Rent A Center
At the present time, as long as profit margins remain ridiculously high, and the Federal Trade Commission doesn’t crack down harder on these rent-to-own businesses, consumers are going to continue to get hosed.
In addition, the profit potential the industry provides will continue to attract new players-along with some old ones, too.
Case in point: an industry veteran like R.T. may find 70%-100% profit margins too hard to resist. And his track record makes him the perfect candidate to launch a rent-to-own franchise that not only preys on consumers…but also targets unsuspecting would-be franchisees. A real double-whammy!
More On Feeling Guilty About Owning These Types Of Franchises
In my view, there are only handful of prospective franchisees who (armed with the right information), would invest in a rent-to-own type of franchising business. Most people would feel too guilty if they owning one of more of them. I think.
Let me guess.
You think I’m wrong.
You feel that there are plenty of people who would gladly buy a business format franchise that offers a potential $1500.00 payday on a $1549.00 item.
Gosh…I hope you’re wrong.
P.S. Do you think I’ll get any hate letters from current rent-to-own franchise business owners?