Are you intrigued by the world of franchising but unsure where to start? On this week’s episode of The Level Up Show, we have the incredible opportunity to hear from Kenny Rose, the mastermind behind FranShares. Kenny discusses how FranShares is changing the game, allowing entrepreneurship to meet accessibility. It provides a unique and accessible path to diversify your portfolio while supporting franchise owners in their growth journey, and you can get started with as little as $500! This is not your typical investment opportunity. If you are an aspiring business owner, franchise enthusiast, or even just a newcomer, trust us, you do not want to miss this episode. Tune in now and level up your investment game!
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Welcome to the show where we have the absolute pleasure of learning from thought leaders in business, franchising, and high-performance personal development. Today’s guest goes without exception. He originally spent time in the finance world and investing. He stumbled into franchising. He has worked with hundreds of franchise brands and currently heading a very unique value-ad in the franchise space. I’m excited to dive in with the Founder and CEO of FranShares. Kenny Rose, welcome to the show.
Thanks for having me, Nick. I’m very excited to chat with you.
I’ve been wanting to dive into this conversation and pick your brain about what you’re doing. You have a very innovative solution that I’m excited to share with the world. Before we dive into FranShares, so many folks have ideas of what franchising is. They drive by McDonald’s, Burger King, and the like. That is usually what franchising is thought of.
It is known that if it’s ethical, makes money, and is legal, it can be franchised. That includes things like a painting brand, a home cleaning brand, yogurt stands, or whatever it is, and everything in between. As I said, if it’s ethical, makes money, and is legal, it can be franchised. Not a lot of folks say, “I’m going to get into the franchise space,” and deliberately do that. Franchising has a way of finding folks. Kenny, I wanted to hear from you. How did franchising find you?
Everyone always has a very different answer to that. I came from the world of finance. I was at Merrill Lynch up in San Francisco. Many years ago, I saw robo-advisors come in and I was like, “I need to see what else is out there.” A family friend who is the CEO of a company that coaches CEOs said, “Let’s chat about your next step.” I said, “Of course. Why not?” He’s a great person to talk to.
He threw me an absolute curveball. He said, “What do you know about franchising?” I said pretty much what you said, “McDonald’s, Subway, Taco Bell. What do you know about franchising?” He told me that his company is a franchise, which I never knew. I was like, “There’s a franchise for coaching CEOs?” That’s when I found out they franchise everything. I had that same thought that this is a very big industry to not know that much about and a lot of people don’t. I was like the big fish in a little pond and just dove headfirst into it.
It’s exciting how franchising has a way of breaking paradigms. As Matt Haller, the CEO of the International Franchise Association, puts it, “It’s the greatest wealth-generating platform.” It’s capitalism at its finest. It’s a fast track to entrepreneurship, the American dream, and all the benefits of being a business owner. You can do that in community with others.
Franchising is a space that has a lot of different supporting partners that make the space successful, and partners around data collecting or marketing. There are so many components of running a successful company. As a result, it leads to a lot of innovation. I’ve been mentioning it and holding off, but the moment is here. How did you come about founding a company like FranShares? What is it? How did you start it? Let the people know.
I’m happy to. When I got into the franchise world, I got into the side of franchise brokerage. I know you’ve had plenty of guests on here talking about that side of things. As I did it throughout the years, I was with the largest brokerage at the time called FranNet, and eventually started my own shop. Throughout this time, I kept hearing a lot of the same things that most people don’t have 6 or 7 figures of cash to throw into a business. Sometimes they have transferable skillsets, but we’re not sure if they’re the right ones for it. Also, maybe they’re happy in their full-time job and don’t want to move out of it.
I was like, “How can you invest in franchises like stocks?” I had been sitting on this idea for a couple of years, and then the pandemic hit. I read an article that people were gambling on the stock market because sports were on. I was like, “Now is the time. I’m late, but better now than never.” I shut down my brokerage and started putting this together and creating FranShares, which is the first platform that allows anyone to invest in franchises like stocks for as little as $500. We’re connecting retail and institutional investors to franchisees and franchisors seeking capital.
If I am somebody wanting to put my money somewhere and I don’t want to put it into stocks, how do I look at this as a diversification strategy?
It’s like you put your portfolio into different assets like real estate, maybe collectibles, gold bonds, or stocks. There are different ways that you want to diversify different types of assets. Franchising is one where you can add that income side of things to it. Most people are looking for a passive income stream, but outside of real estate, it’s pretty tough to find. It’s also something that is not as correlated with the stock market. Apple stock could be going down, but people are still painting houses and getting their hair cut. It’s something that allows you to invest in small businesses to diversify away from all the very big ones you find in the stock market.
It’s like investing in a stock, but what would you call this form? Is this a type of investing? Coming from a layman’s standpoint, what bucket would this be?
It’s an alternative investment. That bucket is usually real estate and things like that. It’s franchise investing as a whole new type of bucket. It’s shares of franchises, hence FranShares.
It is not like you’re directly investing in stocks. You’re going to work with FranShares directly who is going to make connections and pull groups of franchise brands together that allow you to invest in a segment within the franchise space, for example.
You can invest in individual franchisees, different verticals within it, or diversified portfolios.
You can go as far as investing in particular franchise owners, not just a brand or multiple brands, but all the way down to the franchisees.
We start in specific verticals. When you’re investing, you get to see who these owners are, understand their story, and why you want to be a part of it. Eventually, you’ll be able to stand a location and be able to invest directly in those owners. It’s coming a few months from now, hopefully.
This is very cutting-edge. You’re right at the forefront of developing these investment solutions in the franchise space.
We’re excited over here.
How do you go about finding brands that you’re going to invest in, or even franchise owners? I’m an investor and I’m interested in the franchise space. I want to invest and have some passive income. How do you formalize that ability for an investor to invest this way?
We take a top-down approach to how we look at it. First, we want to look at different industries and see which industries have been growing over time and have a lot of long-term growth potential. They’re more Amazon-resistant, or people have been heading in that direction. These industries are ones that we see are growing. What are the better brands within there? This also came from decades in the franchise brokerage space, but tearing through all the top franchises in those different areas, typically looking at some of the bigger brands that are out there for now.
We’re introduced to owners by the franchisors themselves because they know these are the best operators who are looking to expand but can’t get access to a loan. They’re very good at what they do, or they’re the prospective franchisees that have all of the great backgrounds for it but lack the capital for it. Franchisors know who performs best in their systems. Especially, when they’re working with someone like us, they want to make sure they’re bringing the best ones to us so that we can keep investing more in the future.
Also, strengthen that relationship. There’s mutual value there on all sides. You took the thought right out of my head there around your background with BrandNet, one of the world’s largest franchise consulting networks. The brokerage firm that you’re referring to, all you did was do just this, investigate, and do due diligence on franchise brands. From what I know, no one standardized this. I love the name FranShares. Thank you for painting this picture of what FranShares is in the franchise space.
It’s a unique diversification strategy that has never been done before. It is very innovative. Kenny Rose, congratulations. I look forward to seeing the value that you bring to the space and the ease of investing. There is value on the franchisor, the franchisee, and the investor side. Everybody wins in this model. It’s spearheaded by due diligence and expertise of the industry which you have had plenty of exposure throughout your career. When you talk about crowdfunding, how is that different than raising money in general? Can you speak to this whole idea of crowdfunding and how it relates to FranShares?
The other options that you typically could have are you’re going for a bank loan or private equity. I will say 99.9% of owners aren’t going to fall into the private equity realm of things. They want to deploy $20 million, $30 million, or $40 million at a time. You have to be a very well-ramped-up franchisee to even be worked at by private equity. Even then, the ones I’ve talked to that have gotten franchisees, a lot of them say it’s like getting a boss. I don’t want to be a boss for these franchisees. I want to be a partner with them, help them grow, provide all the resources I can, and let them work.
When you look at the bank lending side of things, they’re asking you to have a couple of million in assets or so that you can guarantee and be able to secure the loan. Especially after you get that first loan for maybe your first, second, or third location when you go back for the next one and you’re ready to expand, they look at it like you own a bunch of houses. They’re like, “We’ve got all this debt from these three other houses, why would we give you a loan for a fourth?”
In franchising, you spend all the time to build up this foundation. They know how to do it now. Now they’re ready to scale. When the banks are shutting the doors on them, that’s when you want to be investing in them. They’ve done the hardest part of it, now they’re ready to scale. Besides that, we don’t just bring a check. We want to bring all these other resources for them. For franchisees, you’re a small business owner. A lot of times it can be hard to get things like doing permits, construction project management, and how you do insurance with employees.
We provide all those different resources for them so that we can help them make their business even more successful, both for how they grow themselves and also for the benefits they can offer employees. When you’re able to offer better benefits for employees, you get higher quality talent and less turnover, and you could increase your returns. That’s why we wanted to provide all these different resources that they’ll have access to so we can increase their returns over time.
It’s tremendous. You can see that it’s a passive investment opportunity. You’re investing in a franchise owner who’s passed that initial investment, which the SBA or some alternative funding options are going to allow for an owner to open the doors and get into business. When they’re ready to take the next step, that’s where FranShares can come in and help a franchise partner go to the next level. As an investor, that provides a pretty turnkey option for an investment opportunity. Can you speak to how this is passive? I hear passive investment pretty often. It’s been a running trend in the past few years in a lot of different ways. That can be applied in franchising. What do you mean by passive investing through FranShares?
We’re bringing together a crowd of investors. What they’re investing in is actual owner-operators. The person who owns it is someone who’s there every day. It is their full-time ownership and they are running it. You’re providing capital that’s going to allow them to scale. As they continue to scale, they pay out dividends to investors. It’s the most true passive form of income. It’s very much like real estate, not if you’re being the property manager. If you’re investing in a real estate fund, they have property managers and management companies. It’s the same type of thing, but replacing real estate with franchising.
From your experience in franchising, FranShares is launching and will only continue to bring value in time, but before getting into FranShares and throughout your experience in the space, what makes for a savvy investor?
Savvy investors are educated investors. I’ve always been education-first in everything. We saw crypto, NFTs, and all that stuff blow up over the last few years. That’s due to a lack of education. Even though franchising is a great investment, I don’t believe in investing in something you don’t understand. We’d like to provide a ton of educational materials, everything from white papers to blogs to videos. We want people to understand everything about first franchising and then the actual investment opportunity that you’re looking at. The best way to become savvy is to know what you’re investing in and truly understand it. It’s not like shooting into the wind and hopefully, it comes back. You should be educated and prepared, understand how it works, and be able to explain it to yourself too.
What is your vision for FranShares as it continues to provide this new option in franchising and a turnkey way for investors to plug in and supercharge operators? Where do you see FranShares going here in the next 2 or 3 years? Maybe that’s a long time with how quickly things go nowadays, but keeping a 2 to 3-year trajectory, what does that look like?
One thing I noticed over the decade on the brokerage side is that there seems to be a big separation between where the money is and who the operators are. We’re trying to separate these two. We see it as something that in the next 2 or 3 years, we’ve already had so many franchise brands reach out to us that want to offer this to their franchisees, both existing and prospective ones. Honestly, I see this as one of the biggest ways that people are funding their businesses and that they’re bringing on equity partners, not just taking on a bunch of debt.
We see it as this should be the new normal. You want people who are in your corner backing you, not just trying to make you afraid of making payments back. They’re partners in you with this. We also want to expand into all sorts of different verticals. We’ve done food and waste management. We are looking into a bunch of others right now. Two to three years from now, I’d love it if we’ve touched on most of the categories that franchising exists in and offer those investment opportunities for people.
How do you go about finding investors?
The good thing is investors are naturally curious people. We like to go to where they’re learning about stuff. That could be financial education websites or places where they’re learning about franchising. Other alternative investing platforms don’t do franchising. We like to advertise and speak to people who are already interested in this area. Those are your early adopters. They are the ones who have a natural curiosity in it. They’re looking to do new things. When they’re already looking for new ideas, they tend to get this pretty quickly. Just meet them where they’re trying to get educated because we’re pretty educational first.
Do you have any targets for funding targets that are on the whiteboard and a twelve-month projection in terms of the amount of funds to raise?
Within the next eighteen months, our goal is to get to $150 million on the platform, which we already had the largest launch ever for an alternative investing platform with over $18 million in investment subscriptions. We think that’s very doable. Especially with a lot of the opportunities that we have and we’re bringing more on, we see that’s very possible. We have over 40,000 people on the waitlist. We have hungry investors, and excited franchisors and franchisees. Now it’s just connecting the two. It sounds simple when I say it that way.
Deploying those efforts and bringing them full circle, is there a platform or some way for an investor to reach out with interests? You talk about these capital raises. How does that work? If I’m an investor, how do I get involved?
If you go to the website, you can hop on our waitlist and you can check out whatever is already open, or stay on that waitlist for future offerings. You’ll know as soon as they’re coming out. We love to ask our investors things too. We want to see what interests them. I like to say that you can’t tell people how it’s going to work. You should find out what they’re looking for and be able to build it for them. Hop on the wait list and stay tuned for stuff. I always encourage people to follow me on LinkedIn too. I do a lot of stuff on there and drop little Easter eggs and breadcrumbs for things that are coming up soon. Those are the best ways.
In a world where folks are so full of immediate gratification and they are going onto your waitlist, how long should they expect to wait?
It depends on the offerings coming up. It could be a couple of weeks or months. Time will tell there, but you won’t have the option if you’re not on that. That’s why I say hop on the wait list and keep an eye out for what’s coming out.
Anything else you would share related to getting involved and learning more?
I love it when people reach out to me, especially on LinkedIn, and ask questions on there. It helps to understand people’s interests, how they hear about us, what they’re hoping for, and being able to engage with people. In 2022, I did a three-month span, where I talked to 600 people on our waitlist one-on-one for fifteen minutes each. I want to understand what people are looking for and what their goals are. I take consumer feedback with the highest priority.
That’s great to hear. I love to hear that. When did you start raising?
We launched in 2022, so it’s pretty fast. We’re excited for the next 2 to 3 years.
When are you planning on deploying these investments?
We’ve already started. We’ve already raised over $18 million. That’s already been underway and deployed. You have to be up on the waitlist. You’ll get added to our newsletter. You can see updates. I was at a grand opening for a location. I went and visited a couple of other ones that’ll be opening soon. We’ve got a lot coming down the pipeline that I’m excited for.
Do you find that to date, you’re starting to see trends around where the funds are being deployed, and what sectors in franchising?
When people invest, it’s not just a blank check thing. You see what brands and locations you’re investing in. You’ll be able to say, “I’m doing these industries, these specific brands, and these are the target geographies we’re opening in.” They get to know ahead of time. It’s not just a blind pool. Like in stocks, people generally want to know what they’re investing in.
Do you see new trends where those funds are falling? Maybe quick service restaurants, home improvement, health and wellness, any themes?
It’s all of those and more. It’s amazing how much it tends to be all over the place. They love the idea of franchising as a whole. Most people know franchising for fast food and quick service restaurants, but then when we bring them these home improvement, business services, and things like that, they tend to love it. They’re like, “I didn’t know this was a franchise, but I love the business model here. Let’s get in.”
It’s an easy way to diversify your cashflow and acquire some passive investments. If I’m an investor and somebody who navigates fear and uncertainty, and I am a little fearful of investing in this way, what would you say? How would you help somebody navigate some of the fear that goes into investing?
Never invest in something that you are afraid of. That’s why I say education is the biggest thing in your arsenal. You can go and start to understand it. If you have a fear, get educated on it. Understand if this fear is warranted or if it was just what got in your head. If it’s something like, “I don’t have answers on this and I don’t know,” you probably should stay away, versus if it’s something that you do understand, but you’re just getting in your head. Logic is telling you that this is right so that is right. Investigation, research, and education are the main ways I get over fear. It’s understanding.
Is there a limit on what an investor can invest?
Our minimum is $500 but there’s no maximum. We’ve seen some big ones in there.
I could see some big ones in there. It’s a great way to diversify and acquire some passive investments in the franchise space. Delivering some tremendous value to franchisors, franchisees, and passive investors. Kenny Rose, it’s been a pleasure having you on the show. Before we wrap up, I’d like to ask you this as an individual who has been hooked by franchising and has done a tremendous amount of awesome things in the space. Why do you love franchising so much?
I’m the son of an entrepreneur and I’ve watched him build things from scratch over the years. There were two things. One, I didn’t have a super unique idea, yet wanted to be a business owner. That’s how I originally ended up in franchising. These days, I feel like everything has been done. It’s more about how to do it right. Franchising gives you this platform of, “Here is the business ready to roll. It requires someone ready to go after it.” That’s what people want.
A lot of people go after owning a business with an idea that’s not fully thought out, they’re undercapitalized, or all these things. That’s increasing the odds of failure. Franchising greatly reduces them because you know what you’re getting yourself into, how to do it, and how much it’s going to cost. It’s creating the path to entrepreneurship for people.
Well said. Kenny Rose, the son of an entrepreneur, somebody who appreciates the business done right, and can have a playbook business. At the same time, he dips his toes in innovation. FranShares is an innovative solution in the franchise space. Kenny Rose, you have a huge fan in me. I’m sure the audience will become fans as well. With that being said, please like the show and subscribe. More importantly, contribute to the conversation here. Kenny and I would most certainly appreciate any context, thoughts, and questions. As we wrap up here, Kenny, how can folks get in touch with you?
The best way is to add me on LinkedIn, shoot me a message, and let me know this show you heard about us on. Also, hop on the waitlist at www.FranShares.com.
Get on the waitlist and hurry up. FranShares, Kenny Rose, welcome. I appreciate it. As always, level up.
I love it. Thanks for having me on, Nick.
Thank you.
Kenny Rose is a true innovator in the world of franchising. As the founder and CEO of FranShares, he has revolutionized the way people invest in franchises. With a decade of experience as a franchise broker, Kenny has seen it all and has worked tirelessly to create a platform that is accessible to everyone. His vision is to make franchise ownership a viable option for everyone, regardless of their background or financial status. Kenny’s expertise in franchising has not gone unnoticed. He has been featured in top publications like Business Insider and ABC, where he has shared his unique perspective on the industry.
His insights are invaluable to anyone looking to invest in a franchise, and his dedication to helping others succeed is truly inspiring. What sets Kenny apart is his unwavering commitment to making a positive impact in the world. Through FranShares, he is creating opportunities for people to build wealth, create jobs, and make a difference in their communities. Kenny truly believes that franchising can be a force for good, and he is working tirelessly to make that a reality. In short, Kenny Rose is a visionary leader who is changing the face of franchising. His passion for helping others, his wealth of experience, and his dedication to creating positive change make him an inspiration to us all.