Saturday, August 15, 2009

Investing

A friend of mine, after observing the long line of people and the crowded parking lot at a Yogurtland, said she wished she had the seed money to buy one of their franchises because it looked like a gold mine.

Yogurt does indeed seem hot these days (figuratively, that is) as new locations seem to be popping up everywhere. What's next is probably a yogurt shop that conducts seminars on decluttering. Has Oprah been talking about that? It seems like everywhere I turn now, I hear mention of "decluttering."

The more popular something becomes however, the more competition arises. First you've got to worry about having the right location (a yogurt place near a school seems like a pretty good place, doesn't it?) because you can't just put one anywhere. Then as the popularity increases, more people jump into the business and eventually a price war erupts. Or if not a price war, you still lose some business because everyone and their uncle are doing the same thing.

My question to her was whether yogurt is here to stay or if it is another fad.

I read an article in the Wall Street Journal the other day about the microloan industry. There are institutions that make small loans to small business enterprises in third-world and disadvantaged countries - loans of something like one or two hundred dollars to people who, for example, operate a pushcart food stand.

The microloan industry has become saturated, however, with too much money and not enough worthy enterprises to loan it to. So just like what happened in our country with the housing bubble and banks making loans to anyone without regards to their creditworthiness, now it is happening among the poverty stricken in other countries.

While these loans are on a much smaller scale than a mortgage loan, the difficulties of collecting on them must be an administrative nightmare. For example, the collateral can't be worth that much. And a house can't disappear but a pushcart can. How can you find someone if they just take off in the night?

Now when Greg was back in elementary school, maybe he could have used one of those microloans to finance his Slim Jim business. He would get one of those big boxes of preservative-filled meat sticks from Costco and then sell the individual Slim Jims (the ones marked "not for individual resale") to kids at school and make a nice profit on them.

But then other kids saw what he was doing and wanted some of the action for themselves so with competition came a lowering of prices until it was no longer profitable to keep selling them and he quit.

I bet that's the only economics or finance-based lesson he learned during his grade school years because they sure don't teach anything practical like that in the formal curriculum!

(note: the relevant part of today's video is a few minutes in..about 2:45)





1 comment:

Anonymous said...

Pinkberry, Frozen FrUz (with the fake umlat like Hagen DAz), Yogurtland, TCBY, Red Mango, Orangetree, Spoonme, and others are just killing Baskin Robins and Cold Stone. I've seen Korean yogurt places back east try but they don't have the volume to turn over their fruit and keep it fresh. The yogurt places on the westside and OC look OK, but are not as hot as a few years ago. I can't see them going the way of the Jamba Juice but it may happen. I'm thinking the market may follow the Starbucks trend.