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    6 Replies Latest reply on May 30, 2008 12:46 AM by PeoplePawn

    Why pawn shops are a great investment opportunity!

    PeoplePawn Wayfarer
      I'm posting this topic for a strategic reason. I'm in the process of launching a new start-up within this industry under the brand name I've had experience and success in this space before building a 2 store base to a 27 store chain that currently experiences revenues in excess of $30M per year.

      Like most people on this site, I have decided to work for myself. I want to live the american dream, provide for my family, offer and professional and much needed service and contribute back to the community.

      I've spent the last year building the brand, and the necessary infrastructure in order to launch and scale the brand. I'm now in the process of raising the initial angel funding round to open and operate the first stores. Over the 4 months I've been engaging investors via the angel groups and have soft circled $200K from the $500K needed.

      The pawn industry is an industry with a "black eye". I hear that every day. That said, I've had incredible success previously, and have built a competitively different business model for PeoplePawn to ensure greater sucess. Almost 30% of the population is "unbanked" or "underbanked"! 59% of all US households are "cash constrained", "credit constrained" or both "cash & credit constrained".

      Unlike many business models, the pawn broker model is a secured and insured business model. The industry has some 14, 000 operators nationwide, with heavy fragmentation. 85% of the operators are single store "mom and pop" type businesses.

      I would like to ask for your consensus on my concept.....I'm ready and willing to address all questions. Thank you for your time.


      Patrick Kane -
        • Re: Why pawn shops are a great investment opportunity!
          Lighthouse24 Ranger

          I think this is an excellent concept and that your timing is absolutely perfect. The one challenge I see (and a possible "void" in the plan -- at least, I don't see it addressed anywhere) is safety and security.

          According to two sources (Bureau of Justice Statistics and National Institute for Occupational Safety and Health) a pawnshop owner or employee is statistically one of the most dangerous jobs in America -- they're even more likely to assaulted or murdered on the job than a convenience store clerk or taxi driver. So I think a key element of your "new approach" to pawnshops has to include safety and security measures that dramatically change that terrible statistic, and I think that highlighting that safety and security element will be essential to attracting more investors and franchisees.

          Best wishes!
            • Re: Why pawn shops are a great investment opportunity!
              PeoplePawn Wayfarer
              Thank you LightHouse for your response and feedback. I have included the security and risk elements of the business PeoplePawn business model compared to the industry standard into our detailed business plan and operations manual. Security is a fundamental competative difference when comparing the PeoplePawn model to the industry fact, one of the goals for PeoplePawn is to continuasly raise the bar in the industry through applying the PeoplePawn model via store rollout.

              Let me first address the reasoning as to how PeopePawn plans on minimizing the security risk:

              *Firearms will never be a part of the PeoplePawn financial model
              *Store locations will be positioned at main traffic area's for maximum visability
              *Stores will have state-of-the-art internal and external security hardware and software - both hard line and wirlessly linked to both corporate office and connected to the local police stations
              *Stores will not offer "check cashing" as a competative difference for security and customer service
              *Signgae regarding security and safetu will be posted within stores

              These are just a few of the fundamental features of the PeoplePawn model and solution for a safe and professional shopping environment and business platform. Let me also add, that with my previous experince of opening and launching a 27 store chain over a 5 year period, almost 49,000 days of business, I experienced only 2 break-in's after hours.......
            • Re: Why pawn shops are a great investment opportunity!
              designer Tracker
              With all due respect, pawn shops are absolutely awesome for the owner, but not for a customer. A customer has to be pretty down on their luck and desperate to go to a pawn shop. It is not a great feeling. I will never forget being a young teenager and needing some spending money for the weekend. I went to a pawn shop with a beautiful thick gold necklace that I paid quite a bit for and never really wore. When I was told how much I would be given for the piece, my eyes nearly popped out of my head. It was such a low amount, I walked back out and just said I will have to struggle until next payday, but at least I would have my gold necklace.
              • Re: Why pawn shops are a great investment opportunity!
                EL_DollarShop Adventurer
                I have to agree with designer's reply, sorry.

                But I also have a different look at pawn shops, and not just from a consumers point of veiw. Pawn shops are in the business to either loan money on a short term basis, or buy an item straight out at a cost for that item that can later be sold at a profit margin way above the cost of buying it originally.

                The problem I see because when I worked constrution for many years and would look for tools that might have value at a lower price than retail. The one thing I could never get was warranty on the tools if I had bought them new. Also the price would be grossly inflated that I would spend maybe 20% to 30% more and just buy the item new!

                Now the other part wrong right now with pawn shops I believe. Yea you buy or loan money to someone, and maaybe right now the loan never gets paid back because thats why they came to you in the first place. They are struggling to feed their children or just gas to make it to work till payday. Their struggle continues and never repay the loan.
                You end up with the item, but one problem you can't sell it because no one wants to buy it, you end up with reportable inventory you have to pay taxes on.

                I diagree with Lighthouse's post, this is the worst time to get into a pawn shop biz. If you like taking advantage of the disadvateged hey you on your way, but remember also you pay in the long run.
                  • Re: Why pawn shops are a great investment opportunity!
                    PeoplePawn Wayfarer

                    El-Dollarshop: Thank you for your response. You have just confirmed my reasoning for posting an ad on this forum. I like the fact that you give an opinion, and your opinion is obviously based upon "perception" and not "reality"!

                    The pawn industry is one with a "black eye",where many of the "mom and pop" operators do little to increase the public perception of awareness or reality. This is where I see the "opportunity" El-Dollarshop! My goal is to "educate" and "leverage" to historical perception compared to actual "reality".

                    The reality is that the business is a "for profit". Of course you need to offer a loan service (offering fee revenues) or a retail service (offering retail margin revenues) in order to be successfull. My disagreement with your statement is that we overprice merchandise....the PeoplePawn business model is based upon selling merchandise at a 40% to 60 % savings compared to retail. Too many pawnbrokers price merchandise close or above retail. This for me again is a competitive difference.

                    The additional comment you make with regards to not being offered a warranty is again valid. The PeoplePawn business model offers a warranty on all merchandise that we will sell. That said, I offer a experience in the construction business is that there happens to be a high default rate in equipment when OEM pieces are sold directly to the construction trade....this is a whole other conversation EL-Dollarshop.

                    You end your email with a statement relating to the leveraged customer base, default rate and the tax liability of inventory cost. This confuses me. The PeoplePawn model is a for profit model. I am in the business of loaning money and not creating inventory default that is un-sellable. I believe we also have a seperate mentality with regards to tax liability on merchandise....I respectfully disagree with your perspective on the tax liability....your business model and mine are very different from that perspective.


                    I also totally disagree with your last statement...."if you like taking advantage of the disadvantaged....hey go on your way...but remember that you pay in the long run". I again fundamentally object....the PeoplePawn business model offers a business for profit balanced with integrity and compassion for customers and the community. here are a few thought points:

                    *state regulated interest rates
                    *free loan extensions
                    *customer loyalty programs
                    *customer referral programs
                    *neighborhood education assistance
                    *customer education evenings
                    *community scholorship programs
                    *free community event staging to support "Boys & Girls" clubs, "Sports Team Uniforms" and "Care For" events

                    I respect that you have probably based your opinions upon experience or perception. Please take the time to understand that this is exactly whey I see so much opportunity in the industry. Visit the web site, ask for additional information on our unique business model and then rethink your position based upon information pertaining to, and education directly relating to the PeoplePawn model and positioning.

                    I feel it is always better to do a little homework on an alternative business model before you write in "hyperspace" for the entire world to read. I posted the ad for a reason and want to thank you for reaffirming my belief......the general public have a biased, uninformed and unexperienced critique positioning.


                    Patrick Kane -