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Non-Tech : Boston Market (BOSTQ)
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To: Sr K who wrote (1562)1/9/2000 5:19:00 PM
From: Adelantado  Read Replies (1) of 1567
 
Someone advised us in these pages that BOSTQ was a house of cards because it reported interests on loans to its franchisees as income. As the company grew in numbers of stores, the earnings numbers grew, but were really dominated by the interest income from the stores instead of income from sales of chicken dinners in the stores. The growing earnings figures attracted all sorts of folks to take their hard-earned savings and become owners of the next KFC. Eventually, as the franchisees could no longer carry the debt from lack of adequate sales of chicken, the escalating closures of the various stores caused BOSTQ to collapse.

Perhaps reporting interest from loans to franchisees as income with the same weight as income from sales of chicken dinners is OK to you, but gosh, how is an investor to know by just reading earnings?

Joe
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