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Why Franchises Are Good for Investors

Denny's (DENN)
Company Profile: Denny's operates a family-style restaurant chain in America with the Denny's brand name.
Share price return: 12.9% this year
Franchise locations: As of March 30, Denny's counted 1,665 restaurants, with 1,439 franchised or licensed and the other 226 company-owned and operated.
Revenue from franchises: Franchise revenue accounted for 23% of Denny's $135.8 million in total revenue last quarter. Company sales totaled $104.5 million in the most recent quarter, compared with $31.2 million from franchise and license revenue.
Franchise costs: Denny's says franchisees must meet a minimum financial requirement of $350,000 liquid capital to invest and a net worth of $1 million. Denny's estimates that the total initial investment is between $1.2 million and $2.6 million. There is a royalty fee of 4% of gross sales and an advertising fee of 3% to 4% of gross sales, the company says. For new restaurants, there is an opening training fee.
Analyst view: Five of six analysts covering Denny's say investors should buy the stock. CL King analysts even have a "strong buy" rating. Only one firm -- EVA Dimensions -- has a "sell" rating on Denny's.

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