stock trading at nine times trough earnings. Nor do huge growth opportunities and a founder/CEO
with heavy insider ownership, come along with a business that sells for an incredible six times next
year’s earnings. Did I also mention the company just announced a 3% annual dividend and has a
buyback in place as well?
Let me introduce you to HireQuest (NASDAQ: HQI), a franchise staffing company that no one has
ever heard of, but that is sure to be revalued substantially over the next six to twelve months.
HireQuest’s Franchise Model
HireQuest is the only publicly traded staffing company that operates solely on a franchise model.
HQI’s focus is on day laborers. What kind of jobs do HQI’s workers fulfill? HQI workers help load
trucks, move materials on construction sites, hospitality, clean stadiums, help in recycling facilities,
etc. Jobs known as light industrial work.
The total addressable market for staffing in light industrial is 37-40% of the total staffing market.
HireQuest is a big player in their niche, direct dispatch, which is 10% of the light industrial market.
HireQuest workers come to the local office and then are dispatched to work sites and HQI often
even helps the workers coordinate transportation (with COVID there have been some changes in
that often workers go directly to the site). The local franchised office also helps with any
specialized equipment needs such as hard hats or goggles, and at the end of the day workers will
return this equipment, collect pay and check out. HireQuest is primarily in the Southeast,
Northwest, Texas and the Great Plains. HireQuest is not in California or New York, and has a
limited presence in the Midwest, though it is in Indianapolis, Des Moines, Green Bay and East
Chicago).
HQI is a very different kind of franchiser. They lend money to help support a strong franchisee and
do not ask for upfront money for the purchase of a franchise. Instead, a franchisee pays back the
“purchase” of the franchise through revenue and earnings. The company believes it is creating real
entrepreneurs. Many times, HireQuest has cultivated talent inside their network, by getting star
assistant managers to start new franchise branches in adjacent territories. From 2009 to 2018,
almost all of HireQuest’s growth was from lending to aspiring franchisees.
HQI allows franchisees to focus on recruiting day laborers and selling their staffing services to
companies and organizations. HQI provides almost everything else including accounts receivable
management, financing, workers compensation, technology and national accounts. The genius of
the HQI system is to centralize and control the parts of the staffing business that don’t need to be
handled by a franchisee. Once you remove the financial hurdles, you are enabling franchisees to
really just focus on sales and people. HireQuest’s franchise model is one of the few that doesn’t
require capital from the franchisee if someone has the right profile, ambition and hustle.