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Show Summary
In this episode of the Investor Fuel podcast, host Michelle Kesil interviews Kenny Rose, the owner of FranShares, a platform that connects investors with franchise opportunities. Kenny discusses the concept of passive franchise investment, the challenges and successes in the franchising industry, and the importance of education for potential investors. He emphasizes the need for good investments to attract investors and shares success stories of franchise owners who have thrived with the right support. The conversation highlights the potential of franchising as a significant asset class and the ongoing support provided to investors through education and resources.
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Investor Fuel Show Transcript:
Kenny Rose (00:00)
And so we’re trying to basically bring the Chick-fil-A experience to every other brand. ⁓ Most people think a Chick-fil-A would cost two or three million bucks to get started, but it only costs $10,000. And that’s because You have to start working within Chick-fil-A, work your way up to the top, and then apply to become an owner. And if you get accepted, it’s $10,000.Michelle Kesil (01:51)
Hey everybody, welcome to the Investor Fuel podcast. I’m your host, Michelle Kesil And today I’m joined by someone that I’m looking forward to chatting with, Kenny Rose, who has been making serious moves as the owner of a company called FranShares connecting investors to franchise opportunities. So excited to have you here, Kenny.Kenny Rose (02:14)
and thanks for having Michelle. Excited to chat with you as well.Michelle Kesil (02:16)
Yeah, absolutely. think our listeners are really going to take something away from how you’re approaching diversifying the ways that investors can invest in the franchise space. let’s dive in. First off, for those that are not familiar yet with you and your business, can you give the short version of what your main focus is?Kenny Rose (02:38)
Absolutely. So typically, you you hear the word franchising, not only do you think of fast food, but that you have to run the business full time and be the operator yourself. Franshares makes franchise investing a passive asset class so you can invest into other franchisees to support and grow their business. So franchising becomes an income producing equity growing cardio portfolio in that alternative slice of the pie.Michelle Kesil (03:02)
Amazing what got you into this.Kenny Rose (03:04)
You know, I used to be a financial advisor at Merrill Lynch once upon a time and decided the wirehouse life wasn’t for me. And I got asked a question I’ve now asked thousands of times since, which is, do you know about franchising? And you know, at the time it was McDonald’s and Subway, but I learned that they franchise every industry you can imagine from pair care and automotive to fitness to business services, home services, you name it, there’s a franchise for it.So I got into the space as what’s called a franchise broker, essentially helping people who are thinking about franchise ownership ⁓ assess, you know, I’d recommend brands based on their budget, their skillset and their goals and help them do the research and purchase process. And over time, I realized that everyone who can afford to own a franchise usually doesn’t want to run the franchise. And then all these people who have the experience coming up through the franchise don’t have the money to own it. And so really I realized that there needs to be a separation between
who the franchise owners are and where the money comes from. And so that’s where Franshares was born. And really it was, had the idea years ago, but 2020 I read an article that people were gambling on the stock market because sports weren’t on. And that was like my aha moment time to get this going. So it’s been a great journey since then.
Michelle Kesil (04:18)
Amazing. I love that. think that is so cool to create a unique way for people to invest and support the people that want to own these franshares.Kenny Rose (04:30)
Thank you so much. Appreciate it.Honestly, there’s a huge disconnect between those who, like I said, have the experience and just they don’t have the network like they are qualifying people like they’re buying homes and really should be looking at it like venture investing. Like what’s your experience? What’s your background? What’s your drive and your grit? And so it’s really great to be able to invest in operators who are new like them all the way up to we’ve got ones that are top 10 largest franchisees of anything in the country.
and you can invest in like institutional quality deals. And so, you know, even within franshares investing, you can find different ⁓ risk tolerances, income versus growth. And it’s just this great big industry that people hadn’t had the ability to invest in before.
Michelle Kesil (06:00)
Yeah, absolutely. It sounds like you really cracked a niche in the market. So what has been the key to keeping this business running smoothly?Kenny Rose (06:12)
You know, it’s, I always say it’s the deals at end of the day. Like you have to have good investments in order to attract investors and keep them coming back. And, you know, even though franshares are more successful to independent businesses, it’s not a automatic get rich thing. And so you really have to vet based on the brands and the operators themselves. And so we’ve held really high standards when it comes to who we let raise on the platform.and making sure that that brand has a history of success and is growing both their same store sales as well as number of locations. But then also that the owners have a track record of success, whether in that brand or within multiple other brands. And, you know, we are very well known within the franshares space. So it’s been great, like connecting with even bigger companies like Inspire that own Dunkin, Sonic, Arby’s and a bunch of brands, Choice Hotels, which owns Comfort Inn and Sleep Inn and all these guys.
And they all have the same problems, is that their best operators want capital to go operate more, whether it’s the start or expand. so having good quality deals is what’s been keeping us going at the end of the day.
Michelle Kesil (07:18)
Yeah, absolutely. So are you the one that connects the investors with the franshares owners? Like are you finding investors? how does this process work for this connection?Kenny Rose (07:30)
Yeah, so we’re the marketplace that sits in between the investors and the franchisees. So investors get to go check out the website and explore, learn about the brand, learn about the operator and then the investment opportunity itself. And then, ⁓ yeah, they’re investing through our platform. We connect it to the franchisees that they are investing in and then help the franchisees by handling investor relations and really let it so they can focus on running the business.and then we help them handle the investor side of things.
Michelle Kesil (08:00)
So what are you focusing right now when it comes to solving something in your business or scaling to the next thing?Kenny Rose (08:10)
Yeah, you know, it’s a really we’re trying to change the face of franchising and who owns it. know, a couple decades ago, you used to be an owner operator that worked your way up and then save money and able to own it. But now everything’s so expensive, that’s really out of reach.And so we’re trying to basically bring the Chick-fil-A experience to every other brand. ⁓ Most people think a Chick-fil-A would cost two or three million bucks to get started, but it only costs $10,000. And that’s because
You have to start working within Chick-fil-A, work your way up to the top, and then apply to become an owner. And if you get accepted, it’s $10,000.
But you know, there’s good and bad things to that. Good is that everyone loves Chick-fil-A. And you could say it’s the chicken sandwich, but when you see a commercial, it’s that franchisee sitting in the chair talking to a customer. It’s really people that run franshares. And that leads to the highest average sales in franchising.
You know, the downside is that in the Chick-fil-A system, they don’t actually own equity in that business. So they’re almost, it’s almost like being a glorified manager, unfortunately. So we’re basically bringing in the Chick-fil-A experience, but getting these owners the equity they deserve by connecting them to investors. And so it’s our big unlock is bringing this structure to bigger and bigger brands. You know, even companies like Burger King, they just had a billion dollar transaction buying out one of their largest franchisees and they want to
essentially remodel and then franshares these locations again, and their district managers and general managers will be the ones that become the franchisees. And so we become really that funding source of how you turn these people into owners. And so I’m excited for more of the industry to really lean into, we need experienced operators to become owners.
Michelle Kesil (09:53)
Yeah, absolutely.So how do investors get like, what do they gain from this? Do they just gain profit? How much work do they have to do? Like what is kind of their side of the bargain look like?
Kenny Rose (10:42)
Yes, so they’re passive investors. really, it’s like you’re just adding into your portfolio, but you get a combination of quarterly dividends as well as equity growth in the business. ⁓ What I do like to say is we always want to promote local investors first. So if there’s a project that’s like in your area, you’re going to get first dibs on it. ⁓ Because frankly, if you are there, not that I want you togo out behind the counter and help them flip burgers, but you get to be an advocate in the community for that business. ⁓ If you invest in a Burger King, you don’t go to McDonald’s anymore, and you’re gonna tell your friends to go there. really, there’s no work unless you live in one of the areas, and then it’s just support your local franshares.
Michelle Kesil (11:20)
Amazing, I love that. So is there like something that people need to have as sort of like requirements in order to be an investor or is it pretty straightforward?Kenny Rose (11:33)
You know, it’s pretty straightforward. Some offerings you are required to become, you have to be an accredited investor, but we’re opening that up for just everyday investors coming up really shortly here. And we have low minimums if they’re accredited only deals, the minimum is 10,000 for non-accredited investors, it will be just $500. And so, you know, I’d say the main thing you need is just curiosity. You know, most people aren’t familiar with investing in franshares. And so I don’t think it’s a thing like a lot of people treated crypto where it’s,putting some money out and wish for the best, I want people to understand their investments. So that requires time to read about the brand and the operator and opportunity and find if it’s a good fit for you. ⁓ people love to discover the process and learn about these operators and who they’re investing in. And so ⁓ you don’t need much but an open mind.
Michelle Kesil (12:21)
Yeah, absolutely. love that. So what are like your bigger goals for where this business can go?Kenny Rose (12:29)
Yeah, you know, I want franchising to become one of the biggest asset classes that people invest in. You know, it’s not just stocks in real estate. And when you’ll get alternative investing as a whole, most people just go straight to real estate. But you’ve got BlackRock going down to not just single family homes, but the dirt underneath them. And so really, we need more alternative investments that just make sense, but are also profitable. And I see franchising really fill in that void. And soYou know, I see it where on one side for investors, this is just a massive asset class that they’ve unlocked. But then on the franshares side, it’s we’re changing the career path of people there is that you can start your way in a kitchen, become an owner and become a multi unit owner. And so, you know, I want to help people build careers in the hospitality space or whichever franshares space it is and, uh, you know, allow them to really own as much as they’re willing to work for.
Michelle Kesil (13:21)
Yeah, amazing. Are like people mostly investing or in like things that they’re choosing or it’s kind of like based off of budget? Like how does that, you how do people start and choose?Kenny Rose (13:35)
⁓You know, everyone’s a little different, but I think people have different things they like and don’t like. So some people may not like food franshares, so they want to stay away from them. They may like them, but they say, I like Pizza Hut over Domino’s, and so I’d invest in that over any Domino’s. So ⁓ yeah, people are really building their own with different budgets, allocating in different ways. And that’s really the beauty of the platform is that there’s different opportunities there so you can
build it in your own thing. You know, I want lower risks. I’m going with these really experienced franchisees in Duncan or Hey, I want higher returns. So I’m to go with a newer brand that’s got a couple hundred locations, but with these really proven operators and yeah, so it’ll be different for everyone, but you know, excited for them to hop in and like explore this journey of franshares investing.
Michelle Kesil (14:23)
Yeah, absolutely. Such a unique opportunity.So when it comes to growing your business, building your relationships, what are some things that have made the biggest difference for you?
Kenny Rose (15:16)
Um, you know, franchising is just such a people driven thing. And so, you know, my experience, I got 10 years experience in franshares industry before all of this. And so it’s really great to like come at them in a new light and where I’m really solving a problem that I know they all have. And so, you know, it’s like, uh, leveraging personal relationships, but also understanding what it is that they are looking for as well as investors. So, um,Yeah, I’m all about people and I think it’s just important to really listen, understand and do your best to help or send them to someone that can.
Michelle Kesil (15:49)
Yeah, absolutely. Those relationship building skills are so crucial in this space.What are some maybe common hesitations that investors have when it comes to investing in something new like a franshares and like how would you you know overcome those?
Kenny Rose (16:10)
Yeah, I mean, the first and foremost is they’re just not experienced in franchising. Like they know what they know of franchise, but they don’t have experience in what investing one is like, what they should be looking for. It’s just a totally new asset class. And, you know, for that, I always say like when you first sign up on franshares, you actually get a investor guide. And so, you know, I want to educate people and get them very comfortable and understanding of it. SoYou know, it’s read through the investor guide, listen to podcasts like this that we’re on to understand ⁓ fully, like go through materials on offerings that are there. So you get more and more well versed in it. And yeah, I mean, there’s no shortage of education out there. And so that’s always the biggest thing is just learning about it because I never want anyone to go into anything blind. And so it’s understanding the asset class and the operators behind the specific ones.
Michelle Kesil (17:02)
Yeah, absolutely, that’s important. Are there any common downfalls that people experience with this?Kenny Rose (17:09)
⁓ Well, in franchising, there’s no such thing as like a automatic get rich business. Some people think you buy a McDonald’s and money falls out the roof, but it’s the brand, the operator and the opportunity. And so we try and vet really heavily on all three ahead of time because like you could have this really incredible operator who’s been super successful in a bunch of different brands, but then he joined this upstart franchise that’s got five locations and no idea what they’re doing. On the other side, you could havethe McDonald’s and Burger Kings of the world, but you hand the keys over to someone who came from a corporate IT position and has no idea how to run a location or work with employees like that. And so, you know, it’s important to find the right brands and the right operators, which is where we vet for before they come on the platform. But that’s definitely where you see failures in franchising is when the wrong people get involved.
Michelle Kesil (18:01)
Yeah, do you have any like stories and examples from people that did this and ended up, you know, successful or something exciting happened?Kenny Rose (18:10)
⁓Yes, so one of our first deals on the platform, they were a husband wife team and they were store launchers for Buffalo Wild Wings. They worked for corporate helping stores like get them open and they launched like 150 locations between the two of them and then wanted to go out and become owners themselves, but they were working for corporate. They didn’t have the millions of dollars typically required.
So first they actually scrounged all their money together and took over a failing location and then doubled the sales in the first month and really were proven that they know how to operate it. So we came in, brought investors to them who were going to fund their next location. And I was trying under promise over deliver when it comes to what we offer. so they said, Hey, average location does I think for that brand, was 1.25 million.
And I said, it’s going to take four years to get to that average location because it takes time to ramp up the store. But they ended up beating it in the first year. And so it was just like early great testament to when you put the real owner operators that are experienced in the ownership seat, they are going to take you for a ride. And so it’s really good to ⁓ see those, you know, really unfold there.
Michelle Kesil (19:21)
Yeah, amazing. I love that. I think that’s so powerful to give people that experience and that taste of what can happen for them. yeah, where like what kind of ⁓ support do you guys offer for those investors that join? Like is there any sort of ongoing education or learning that they need for this platform?Kenny Rose (19:43)
Yeah, so we’re constantly doing webinars on different subjects. We just had a great one on taxation because it’s another benefit of franshares investing is all the tax benefits involved. ⁓ But, we keep them up to date on offerings that they’re invested in new offerings coming on. ⁓ And, ⁓ you know, basically, we’re always there if they have any questions for anything. So we always want to make sure they are educated and prepared for when the next opportunity comes and that they’re confident in what they’re already a part of.Michelle Kesil (20:10)
Amazing. That’s so powerful that you guys have that extra support. yeah, absolutely. So yeah, before we wrap up here, if people are interested and they want to learn more, connect with you, reach out. Where can people do that? Where can people find you?Kenny Rose (20:16)
Yeah, thank you.Yeah, so for franshares, you can go to franshares.com just like shares of franchises, franshares But I always encourage people to connect with me personally on and you know, mention that you heard us on the show here. ⁓ LinkedIn, first name Kenny, last name Rose like the flower.
Michelle Kesil (20:46)
Amazing. Well, I really appreciate your time, your story, and your perspective. Thank you so much for being here.Kenny Rose (20:54)
Yeah, thanks for having me, Michelle. Really appreciate it.Michelle Kesil (20:56)
Of course, and for those tuning into the show, if you got value from this, make sure you’ve subscribed. We’ve got more conversations with operators just like Kenny, who are building real businesses, and we’ll see you all on our next episode.
