Why Franchise Businesses That Target Low-Income Uneducated Consumers Are Crushing It

How can they sleep at night?

They,” being the CEO’s of companies like Aaron’s Rents, ColorTyme and other retailers in the rent-to-own sector of franchising.

And, let’s not forget the individual franchisees…the people who invested $300,000 or more to become their own bosses in these retail setups. Are they sleeping well at night? Are they comfortable with the rent-to-own business model?

The Rent-To-Own Business Model

It’s a doozy.

According to Consumer Reports, the model is a high-profit one…to say the least. The editors there put the scenario together below to show it’s readers how the model works…

Consider the deal for a $612 Toshiba laptop computer we found at one rent-to-own store. It was being offered at $38.99 a week for 48 weeks, for a total of $1,872, excluding sales tax and other charges. That’s the same as buying the laptop at the manufacturer’s suggested retail price and financing it at an interest rate of 311 percent. Read more

That’s cray-cray. It’s absolutely ridiculous. They’re crushing their customers.

The Target Market

Do you know what the target market is for these franchisors?

Let me rephrase that; do you know what the real target market is for a rent-to own retail business?

Hint: It’s not the target market described on a rent-to-own franchise opportunity website. It’s actually closer to this one:

According to a Federal Trade Commission report on the rent-to-own industry, nearly all rent-to-own customers have a household income below $50,000 and the vast majority have attained a high school education or less.

That’s pretty accurate, but I’ll go one-step further, without sugar-coating it.

The target market is the poor and uneducated. Period.

  • It’s the people who are unemployed more than they are employed.
  • It’s the people who can hardly afford decent food and decent clothes.
  • It’s the people who don’t know how to do product research.
  • It’s the people who can’t shop around for the best price on an expensive item because no one will extend them credit. (Credit cards etc.)
  • It’s the people who really don’t have a choice if they want furniture, a television, and maybe even a laptop computer.

It’s the perfect market for predatory retailers.

A Question

Why?

Why do rent-to-own stores have to charge the kind of prices that no one in their right mind would ever consider paying? (No one in their right mind refers to people who possess credit cards, homes, late-model vehicles, along with access to online publications that offer product/pricing research advice.)

Here’s why: Because they can. But, do they have to?

An Opportunity For A Real Entrepreneur

If you’ve always wanted to start a business that could impact lives in a good way, here’s your chance to do it.

Come up with a radically different rent-to-own business model. One that rewards customers for paying on time. While you’re at it, start off at a lower price-point.

It’s important for you to know that I’m The Franchise King®. I’m a guy who encourages people to become their own bosses through franchise ownership. I’m pro-franchising. I teach people how to find, research, and buy a franchise-safely. Here’s what I’m not: I’m not an advocate for franchise businesses that rip-off consumers.

Someone please start a fresh, new, rent-to-own franchise business.

A good one.