Today’s guest is Kenny Rose.
Kenny is a franchise expert with extensive experience working with hundreds of franchise brands across various industries. With a background in financial services and wealth management, he helps individuals invest in and optimize franchise ownership.
Show summary:
In the episode, Kenny Rose, founder of FranShares, discusses the concept of investing in franchises and how his platform connects investors with franchisees seeking capital. He explains why investors are looking for alternative avenues to diversify their portfolios and earn passive income. Kenny shares his background in financial services and how he transitioned into the franchise world. He talks about the challenges he faced in getting FranShares off the ground and the success they have achieved so far. Kenny also explains how FranShares functions, attracting investors through education and reaching out to platforms where people learn about investment opportunities.
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Intro [00:00:00]
The birth of FranShares [00:01:52]
Overcoming challenges and finding investors [00:04:11]
Connecting investors and franchisees [00:07:09]
The franchising model and long-term investments [00:10:23]
The concept of investing in individual locations [00:12:41]
The regulatory framework for FranShares [00:13:34]
FranShares [00:19:45]
Contact Information [00:20:01]
Closing [00:20:21]
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Connect with Kenny:
Linkedin: https://www.linkedin.com/in/kennyrose/
Twitter: https://twitter.com/kennymrose
Instagram: https://www.instagram.com/franshares/
Investing guide: https://20991829.fs1.hubspotusercontent-na1.net/hubfs/20991829/Franchise%20Investing%20Guide.pdf
Connect with Sam:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Facebook: https://www.facebook.com/HowtoscaleCRE/
LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/
Email me → sam@brickeninvestmentgroup.com
SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson
Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234
Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f
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Want to read the full show notes of the episode? Check it out below:
Kenny Rose ([00:00:00]) – And so then you have the same thing for investors where they are looking for investments that can diversify their portfolio. They’re not correlated to the stock market. They’re looking to earn passive income. And really like the main way you do this in the past is real estate. But, you know, I’m sure everyone’s fighting over deals right now and you get a lot of institutional capital that’s competing. And so you got to look for other avenues of where you get those passive income streams. And so that’s where investors have really been flocking to because they just see it as like, Oh, that makes sense and it fits my needs. Welcome to the How to Scale Commercial Real Estate show. Whether you are an active or passive investor, we’ll teach you how to scale your real estate investing business into something big.
Sam Wilson ([00:00:44]) – Kenny Rose has a background in financial services and wealth management, and he currently helps individuals invest in and optimize franchise ownership. Kenny, welcome to the show.
Kenny Rose ([00:00:54]) – Thanks for having me, Sam. Great to be here.
Kenny Rose ([00:00:56]) – Absolutely.
Sam Wilson ([00:00:57]) – The pleasure’s mine. Kenny There are three questions I ask every guest who comes on the show in 90s or less. Can you tell me where did you start? Where are you now and how did you get there?
Kenny Rose ([00:01:05]) – Perfect. So got my career started off in financial services over at Merrill Lynch. Found my way into the franchise world on the brokerage side, so I’d help people like a realtor, an investment advisor, find the right franchise to own and coach them through the research process. And we transitioned that into realizing most people don’t have 6 or 7 figures laying around to invest or they don’t have the time or the skill set. So we created Fran shares the first platform to let anyone invest in franchise ownership as part of their portfolio. And where we now, we had the largest launch for an alternative investing platform with over 18 million in investment subscriptions and got you can see here over 40,000 people on our waitlist for the next couple offerings coming up and really excited for making this the next big asset class one that should have existed a while ago.
Kenny Rose ([00:01:52]) – My opinion.
Sam Wilson ([00:01:53]) – Wow. Okay. I’ve got a million questions, you know, not the least of which is how do you have which we’ll get to this. I’ll probably save this for later, but I just want to make sure I highlight this. You have 40,000 people on a waitlist. That’s every investors kind of like mean dream. That’s. That’s in a good dream. Not a nightmare dream. That’s a good dream.
Kenny Rose ([00:02:12]) – Yeah. Yeah.
Sam Wilson ([00:02:13]) – So we’ll get to that. But, you know, I think I think the, um, like you said, turning this into, it’s like, it’s like what we’ve done in real estate all these years, right? We’ve done it with, you know, you sell these online platforms where you can buy a share of whatever it is office buildings, real estate, land, you know, industrial. ET cetera. But nobody’s done it in the franchise space. When did you know you were on to something? When you kind of. When you were telling me about that.
Sam Wilson ([00:02:39]) – When did you know you had an idea that you thought, man, this can really have legs?
Kenny Rose ([00:02:42]) – Yeah, exactly. And so funny enough, you mentioned the real estate ones. It’s where I originally got the idea from. I actually been sitting on this one for 7 or 8 years. Back in 2014, Fundrise was the very first one to like be big in the fractional investing space for real estate. And they were raising a series A and I caught the news and I started diving into the business model. I’m like, How does this work? How is it possible? And all these things. And the more I dove in, the more I was like, This solves everything I’ve been looking for in franchises. So kind of reverse engineered it and applied it with my knowledge in the franchise industry to, you know, I used to call it a REIT for franchises, but realized outside of real estate investors, it was the financial advisor and talk. And I realized most people don’t know who to REIT is.
Kenny Rose ([00:03:26]) – So I had to kind of pluck that word out of my mouth.
Sam Wilson ([00:03:29]) – Right? Right. Absolutely. So you had you you had the idea for 7 or 8 years. When was the right time to do it?
Kenny Rose ([00:03:35]) – Uh, pandemic hit. Okay. I was because I built myself a pretty good brokerage and wanted to become really an expert in the franchise world. So I started off just writing answers on Quora and reaching out to journalists. Got featured in Forbes, ABC Business Insider reached over 300 million people. So I kind of like had franchise on the back shelf for a bit. Then the pandemic hit and I read pretty early on people were gambling on the stock market because sports were not. And I was like, Oh, investing doesn’t make sense anymore. Like, now’s the time. And so I literally shut down the other business and started getting franchises together.
Sam Wilson ([00:04:09]) – Was that hard to do?
Kenny Rose ([00:04:11]) – Oh, extremely. I mean, no one’s ever done this in the franchise space. And honestly, I call it the F word of business ownership.
Kenny Rose ([00:04:18]) – So, you know, when I was originally putting this together, well, first things first, I had to pitch a big law firm on doing all the legal work for me and basically said like, Hey, we’re going to get funded and we’ll pay you back. And they were top three biggest law firm in the country. They said, We believe you. There you go. And then I reached out to 400 venture capital groups and trying to get funding, I think had three conversations out of it. And it was like interesting talk later. So I was like, you know what? I’ll I’ll I’ll go straight to my market and prove my point. So I went and found angel investors and raised like 600,003 or 4 weeks and then went back to all the VCs. And when you’ve got money in hand, they’re always on board. And so, yeah, it took a lot of like education to get them, like to understand why franchising and again, get that F-word out of their head. But no, it’s been a great ride.
Sam Wilson ([00:05:12]) – Oh, my gosh. That’s I mean, that’s a lot of perseverance. Just just hear that if you’re listening to this 400 groups you contacted, 400 groups, had three conversations and zero investors. Yeah, right. That’s brutal.
Kenny Rose ([00:05:27]) – It didn’t feel great.
Sam Wilson ([00:05:30]) – I mean, was there ever like when you made your 100th call, was there ever just like, huh, like we’re zero for 100? Or was it just like, shoot me? And the next call might be it?
Kenny Rose ([00:05:39]) – Oh, no, it was never an option. My mind it was. This just makes sense. And like, you know, I was talking to a type of investor we follow in the middle ground of things where like your classic investor’s going to like, understand it but not have access to it and your venture investor is going to be like, well, this isn’t like of, you know, your typical software as a service 100 x or bus like most of them are just like, it’s just makes sense. Like it’s just a sensible business.
Kenny Rose ([00:06:04]) – And I’m like, Thank you. Would you write a check for it? Right. Yeah.
Sam Wilson ([00:06:08]) – I still need your money, by the way. Yeah. So? So I mean, we could spend, I think, the rest of this show really talking about your mindset, your commitment, and really how you figured you having what it takes and knowing what you have. It takes and persevering. I think that’s part of your story that don’t I just don’t want to overlook because you’ve done most people would give up, myself included, probably by the least, if not the hundred, the second hundred, the 200 column. I’d be like, okay, 200 calls and nobody wants this. I got to change my strategy. But you knew you were on to something. You went and you did it. Let’s talk about the business itself, because I know this is what you kind of came on the show, was to talk about not just the opportunity, but how it actually functions. So you have multiple needs in this.
Sam Wilson ([00:06:53]) – Obviously, you need investors to buy shares of franchises, but then you also need to have franchise owners, franchisees, franchisees that need funding. Yep. So tying all of those together I think would be an interesting part of what you do. How does all that work?
Kenny Rose ([00:07:09]) – Yeah, so really, like at the end of the day, we’re a marketplace. We’re connecting investors, looking for investments to franchisees seeking capital. Yeah, you know, franchisees. It’s very tough to raise capital later on, like when you’re going for your very first franchise or your first three, you do all at once. You get an SBA backbone. And then basically when you’re like, Hey, I’ve built this foundation, I want to scale to 5 or 10 bank looks at you like you bought a house and they’re like, Oh, we still have debt on these other properties. You know, like you got to pay that, you know, your debt ratio is too high. But like when you look at them as a franchisee, you’re like, you did the hardest part.
Kenny Rose ([00:07:47]) – Like you scaled franchises, like you’ve got that foundation now to go do more. And so like the bank process is long, it’s complicated, it’s expensive. And then typically this is where you see like private equity hopping in. But private equity doesn’t like to move unless they can invest at least 30 million bucks, but usually like 50 million plus. And so you leave out 99.5% of the market probably that are good franchisees looking to expand and just don’t have access to capital. And so then you have the same thing for investors where they are looking for investments that can diversify their portfolio. They’re not correlated to the stock market. They’re looking to earn passive income. And really like the main way you do this in the past is real estate. But, you know, I’m sure everyone’s fighting over deals right now and you get a lot of institutional capital that’s competing. And so you got to look for other avenues of where you get those passive income streams. And so that’s where investors have really been flocking to because they just see it as like, Oh, that makes sense.
Kenny Rose ([00:08:45]) – And it fits my needs, right?
Sam Wilson ([00:08:47]) – How do you find the franchisees? Yeah, how do you vet them before they go on the platform?
Kenny Rose ([00:08:54]) – Yeah. So it was really interesting like getting this started versus what we do in the future because getting started, because my background was in the brokerage space, people would ask me all the time like, Hey, do you have a resale available? And I’d say, like, honestly, if it hits my desk, you probably don’t want it. All right. Oh, why? Like, well, if you own a successful franchise when as soon as you want to sell it, you will have a friend, a family member, another franchisee. Someone’s going to want to buy that. A lot of people passed on it before it hits the open market, including the franchise owners. Usually going to say like, Hey, x franchisee in the area, would you like to buy this store, too? And so, you know, because of that, I knew no good deals would come straight into us.
Kenny Rose ([00:09:33]) – You have to be known for it in the space. So we went and built our own portfolio to start like new locations, partnering with some existing franchisees as well as like installing our own management. And then when it came to, you know, what happens after now we’ve had over 200 million in deal flow come our way because they hear about us more. You know, again, I knew this was a need in the market. So it’s a small world in franchising. So we’ve gotten everything from like your solo operator, three, five locations all the way to your ones that have hundreds. I think the largest we have is like 600 locations under their belt.
Sam Wilson ([00:10:08]) – So you’ve got somebody that has 600 locations and still has or still sees not that they don’t wouldn’t see value in it, but they are at a place even yet at 600 locations where they say, look, friend shares make sense for them in their scaling model.
Kenny Rose ([00:10:23]) – Yeah, because the thing is they’re still typically looking at private equity for those type of investments or they’ve worked with a lot of family offices.
Kenny Rose ([00:10:30]) – And you know, a lot of those operators that are thinking more long term, we make more sense to them because we like to be long term investors. It’s not really the private equity 3 to 5 years in flip model. It’s no, we’re going to partner with you and be with you long term because we have a trading platform. So investors will be able to, you know, liquidate in and out if they need to. We don’t suggest it because, again, franchising is a long term investment. You’re not going to make as much. But the other thing, too, is that like some of them already caught on to some of this long term appeal for our model is that it’s not just the ability to bring capital to franchises, but it’s to bring that like network effect to it. You know, like you’re in Memphis when we have franchises that are out there, we’re going to prioritize investors in Memphis, because if there’s somewhere in your area that you own a piece of, that’s where you can get your oil changed or go work out or go eat, you’re going to go there.
Kenny Rose ([00:11:20]) – Instead, know if we open a Bojangles there, you’re never going to KFC instead because you invested in that Bojangles and you’re going to tell all of your friends to go there too. So it’s kind of like the Reddit versus Wall Street effect, but on the local level.
Sam Wilson ([00:11:32]) – I love that. I love that. Yeah, you’re absolutely right. You’re absolutely right. I will go to the places that I have investments in. Yeah. Much more frequently than I would otherwise. That’s a that’s a good point. Love that. I love that. How does how does the mechanics of it work? Okay, so you invest. Do I invest in a particular store? Am I investing in just the fund as a whole? What is that? What does that look like?
Kenny Rose ([00:11:57]) – So again, there’s the difference between short term and long term. You know, short term, I know that most people don’t have any exposure to franchise ownership. So we like to do diversified portfolios, diversified ideally by industry and by brand, by geography.
Kenny Rose ([00:12:10]) – So it’s kind of like a mutual fund of franchises. You know, in the future we’ll be doing brand specific ones so you can invest in like, Hey, we’re going to do all these F45 fitness and I’d like to fund a bunch of those ones and be diversified. And then eventually you’ll have things like industry verticals, the Health and Wellness Fund, and eventually I want it to be you can invest in the individual locations like my dream when I know we’ve done it is you’re going to walk into a Jimmy John’s and scan a QR code and be able to buy a piece of it.
Sam Wilson ([00:12:41]) – That’s cool. That would be. That would be awesome. And and what a what a great way. I mean, this we’re seeing this actually happened. Oh, gosh. Had somebody come on the show here maybe two months ago and we’re seeing it happen in the apartment space. Yeah, the family space where it’s like the tenants are then offered an opportunity to buy a share of the apartment complex that they live in.
Sam Wilson ([00:13:01]) – Yep. And it’s and, and even if it comes out of rent every month but it’s, I forget what the name of the platform is, I have to go back to my own podcast and review the, the, the guest that came on. But it’s pretty cool. Yeah. I mean, how neat would that be to be checking in at Jimmy John’s and be like, okay, yeah, love the gargantuan. So you know I’ll spend 12 bucks on a gargantuan and oh hey can buy a share this for whatever 100 bucks. Sure why not It’s.
Kenny Rose ([00:13:24]) – It’s making your own money back. It’s like the cash back but ownership style, right?
Sam Wilson ([00:13:28]) – Oh, that’s cool. What regulation does this go under? Is this under crowdfunding? Is this like what? How does this work? Yeah.
Kenny Rose ([00:13:34]) – So regulation, crowdfunding, we also do regulation A plus. So it depends on what type of investors we’re working with, whether we’re doing accredited only accredited, non accredited and a few other things. But yeah, it all falls under the Jobs Act, which is Jumpstart Our Businesses Act, which includes the regulation, crowdfunding and a few others.
Sam Wilson ([00:13:53]) – Got it. Okay, cool. So let’s see what we’ve covered so far. You’ve told me a little bit about how the fund functions, about how we can buy shares inside of I guess I call it the fun. Am I using the wrong word there?
Kenny Rose ([00:14:04]) – Yeah, technically, portfolio portfolio.
Sam Wilson ([00:14:06]) – Okay. How the portfolio functions because you guys and let’s let’s go back to this then. I’m sorry. This is a pretty fun conversation for me, so I’m probably jumping all over the place. But you said you went out initially and launched your own stores because then you wanted to to bring those into the portfolio for them people to buy shares of. What was that process like? How many did you launch? How long did that take? What were the weapons that you launched?
Kenny Rose ([00:14:29]) – So still in the process of it. But, you know, it was funny originally, like we were working with a like a restaurant management company for one part of it that was in the food side. And it turned out there’s this huge demand from franchisees already to do exactly what I was talking about.
Kenny Rose ([00:14:45]) – And so you’ve got people who are operators that have done so well in their own franchise endeavors on the management side before, and then basically pooled all their money together, went all in on a location, amazing operators. But then you get stuck in this like, well, now I’ve got the foundation, like, how do I go get the money for the rest? And so there was a line of franchisees looking to partner with us on that brand. And then, you know, outside of that, we did one in the in the waste management space because it’s just a ton of white space for it. And, you know, I knew the model really well. They’d expanded faster than any franchise I’d ever seen. And also I knew how it was managed and that it’s typically a very low employee headcount. And, you know, a lot of franchisees, they don’t really invest in the proper management. It’s like, Oh, who can I get for the smaller amount? We prefer to invest in foundation.
Kenny Rose ([00:15:34]) – You know, it’s like for franchise itself, I don’t find the cheapest employees, I find the best. And so we did the same thing for like putting management teams in place where they are overly qualified, if anything, and can just build out a really great team. And then we could start rolling up more and more locations in the future.
Sam Wilson ([00:15:49]) – That’s cool, man. I love it. You’ve got your hands in active business. You’ve got your hands in the franchising side of business. Now you’ve got your hands in owning fractional shares of franchises, which is really, really cool. But yet you’ve also had to build an entire platform that attracts 40,000 people to it that wanted to get on a wait list. That’s a job in and of itself. How did you.
Kenny Rose ([00:16:15]) – Have a great team? You know, we all work really hard together on the where we’re delivering our message, how we deliver it. And honestly, we like to go to where people are learning, you know, even just like here, people are learning about different opportunities.
Kenny Rose ([00:16:27]) – I’m never like a hard sell type person. It’s like, Hey, if you’re looking to get educated, get educated. And so think just that education first approach instead of sales approach really gets people interested. They’re like, Oh, I’ve heard about franchising my whole life, but I actually don’t know anything about how to own one. I’ve never heard about this way to do it. So yeah, go like. Podcasts, newsletters. We again, we’re looking for where people are getting educated. And yeah, again, the markets really said that they like it and hence they’ve been signing up and coming along, which has been again dream come true. And I’m excited. I’m gonna have to get a bigger counter over here.
Sam Wilson ([00:17:04]) – Absolutely, man. Absolutely. That’s really, really cool. I love that go to where people are getting educated. And I think one of the things I’ve said this for gosh, probably most of my business career, I see tremendous value. This is just a commentary free commentary. You can you can delete it if you want, but in franchising it makes so much sense.
Sam Wilson ([00:17:24]) – I’ve built several companies ground up and the amount of effort that goes into just that early startup of just getting all the way through procedures, manuals, processes, what we buy, where we buy it, who our suppliers are, when do they deliver, how we pay, what I mean, it’s just like it just the list, the start up, the startup cognitive bandwidth is required to do. That is.
Kenny Rose ([00:17:47]) – Hard. Yeah. And you can’t be good at all things. A lot of people. Hey, I’ve got a great business idea. That’s part of it. Now you got to go build a business around it. And that’s what I love about franchising is it helps you skip that first 5 or 10 years of figuring it out.
Sam Wilson ([00:18:02]) – Figuring it out. And not only not only that, but it also you skip that 5 or 10 years of just making some really stupid mistakes.
Kenny Rose ([00:18:10]) – Yeah.
Sam Wilson ([00:18:11]) – I mean, think that’s the cool thing about franchising is it allows you to you have a scalable model already at your fingertips.
Sam Wilson ([00:18:18]) – Yeah. Because for most of us it’s like, okay, well we’re going to try to build this and then we got to build it such that we can replicate it.
Kenny Rose ([00:18:25]) – Yeah. And honestly, it’s funny because if you can get your mind passed the F word, like you can build huge businesses here. Like if you look up the Flynn Restaurant group think they do 4 billion in sales annually and it’s like bunch of Applebee’s and some other brands in there and it’s like you can scale it huge. You just need to follow the process. And I mean, it’s not easy by any means, obviously, but there’s a lot of opportunity there. People just overlook it.
Sam Wilson ([00:18:50]) – They do. They do. Yeah. And it’s not it’s yeah, it’s not an f word in my book. I think it’s, I think it’s a really, really cool thing and I’ve never. I’ve never bought into a franchise particular, but but it’s certainly something I’ve always looked at and admired and said, Man, that’s that makes a heck of a lot of sense.
Sam Wilson ([00:19:06]) – So love really what you’re doing in the space, when you look at this and you look at the platform you built. Are there other. Industries that you look at that you say, Hey, I can white label what we’ve done. Maybe it’s your own in-house white label and kind of scale this into other things outside of franchising so you don’t have to tell me, but I’m just wondering where the where the entrepreneur’s mind wanders.
Kenny Rose ([00:19:28]) – You know, there are so many verticals within franchising that I’m not in a rush to go anywhere else. There’s a lot of parts of this industry we can transform, and frankly, it’s an industry that touches every other category you could imagine. So don’t need to go anywhere else. I’m happy here.
Sam Wilson ([00:19:45]) – That’s awesome. Kenny, I certainly appreciate it. Thank you for taking the time to come on the show today and talk about friend shares. As you well know, probably already you’ve built something really, really cool. Looking forward to see seeing where this goes. If our listeners want to get in touch with you or learn more about Fran shares, what is the best way to do that?
Kenny Rose ([00:20:01]) – You can check out our website at Franchisors or add me on LinkedIn.
Kenny Rose ([00:20:05]) – I’m always a big networker. They’re easy to find me.
Sam Wilson ([00:20:08]) – Fantastic. And that’s Fran shares Fran shares and that’s Fran shares. Is that right? Yep. Perfect Fran shares. Com make sure we include that there in the show notes. Kenny thank you again for coming on today. I do appreciate.
Kenny Rose ([00:20:19]) – It. Thanks so much for having me Sam.
Sam Wilson ([00:20:21]) – Hey thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
