#79: Own Franchises Like Stocks
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In today's episode, we're welcoming back Kenny Rose. He's a renowned franchise expert in this field. He's featured in Forbes, ABC American Express, The Hustle, Market Watch, and other publications, his media reaches over 220 million people.
Founder of Semfia Franchise Brokerage and FranShares, Kenny Rose is the go-to source for franchise investing knowledge.
He's going to be talking today about his latest company Fran Shares. This allows you to passively invest in a portfolio of professionally managed franchises in minutes, with no fees.
In this episode, we’re discussing…
[3:25] He wants to make sure people get a different idea of what franchising is and how you can invest in it
[8:54] How does a franchise work professionally manage?
[10:15] How much does a franchise cost?
[10:22] They can grow organically, they have a lot of liquidity
[12:28] It allows people who come from lower-income areas to work their way up and become entrepreneurs
[13:55] How to pick a franchise in the middle of a pandemic and fear of the recession
[16:37] What does he see in the franchise world as far as the future, post-COVID?
[17:55] The benefits and franchise advantages instead of trying something on their own
[19:35] There’s a different way people invest in economies that thrive
[21:20] How to invest in local businesses/market and why they’re growing
Kenny’s Top Tip’s
“You don’t need to be an accredited investor to be able to invest in these really big investments. I think that if you’re trying to make a big change, you shouldn’t exclude people”
“COVID start eating up the economy and the stock market turned to a gamblers paradise, people just aren´t trusting of Wall Street”
“Fran Shares allows investing in a portfolio of professionally managed franchises, in a recession-resistant portfolio for as little as $500”
“Honestly, if you buy a MacBook, how many hands does that money change before it eventually affects the stock, it comes back to you? Let’s change the way people invest, I want to think from the investors point to view, not really the Wall Street point of view”
“As long as we’re changing investing, I kind of wanted to change entrepreneurship a bit, this is one of my biggest things I’ve gotten media exposure on. That’s really what I want, to be able to change the way people own business”
“People is working from home more often, the first we think is a pandemic resistant business, like Home Services, interior renovations, lawn care, senior care, especially at home. There are even things to the franchise in the trash industry”
“You rely on the franchisor for support as things change, like this is one, that is tested franchises, but this is what they’re there for, is that you invest in them because they are invested in your success”.
“If you have 1000 local owners and I send something out to them and say, hey your investment just made a post on Facebook, I think they would like to engage with that, is going to help them increase their return on investment”
“So, I think what you’re going to see here in the future, is not only a great investment, but you’re going to see the most profitable franchises to exist in every franchise system because they have so much more local support than any other franchise.”
Resources from Kenny
+ Read the transcript
Mike Stohler
What if you could be doing something smarter with your money that creates income, now. If you're wanting to get ahead financially, and enjoy greater freedom of choice, if you want a comfortable retirement, and you know you'll have more choices, if you can do more with your money. Now, if you've wondered who else is creating ways to make their money work for them, and you want actionable ideas, honest pros and cons, and deal flow. Welcome to the Richard geek podcast, and work here helping people find creative ways to build wealth and financial freedom. I'm Mike Stoller, and in this podcast, you'll hear from others who are already doing these things, and learn how you can too.
How's it going, everybody? Welcome back to the Richer geek podcast. Today's episode we're welcoming, welcoming back Kenny rose. If you remember Kenny Rose is the go to source for franchise investing, and investing knowledge. He's the renowned franchise expert in this field. He's featured in Forbes, ABC american express the hustle, Market Watch and other publications, his media reaches over 220 million people. He's going to be talking today about his latest company Fran shares. This allows you to passively invest in a portfolio professionally managed franchises in minutes, with no fees. Alright, welcome back to the richer geek, guess what we have Kenny rose back. And he has some new and exciting things to tell us. If you might remember. He's our franchise guy. He's the king of franchises. And we had a lot of great feedback on our other podcast episodes with Kenny and Kenny. It's it's glad to have you back. Thanks, Mike.
Kenny Rose
It's good to be back. I didn't, I didn't expect to get invited back again, let alone a third time. And this is even different. Normally. I'm talking Nicole. So it's even more different than I could have imagined.
Mike Stohler
Yes, I as everyone can hear, I am not Nicole. Nicole is fantastically starting a new chapter in her life with a new tech job. And so I have a little more free time on my hand. So I'm now doing the podcast. So Kenny, you know, in the past we're talking about it's like you're not satisfied, you know, like franchises, and these are the best type of franchise these are the different things. You've taken it all to a new level. I know our listeners are going to be ecstatic to hear that, hey, I can still work and now I don't have to spend another 80 hours trying to build a franchise so you have a different take on how people can get involved in franchising. Talk to us about it.
Kenny Rose
Yeah, so as you know, I've been in the franchise brokerage side the last seven or eight years and, you know, educated 1000s of people actually I did the numbers on how many people I've reached media wise, after Forbes, ABC, you guys, number hit over 200 million people. So that was just when I was putting that together that absolutely blew my mind. And, you know, so like, I've been very big on educating people when it comes to franchising because, you know, franchising Howard's about 5% of the US economy yet most people don't know that much about it. They really think mostly about food when they hear that word. And so I wanted to, you know, a bit, make sure people I get a different idea of what franchising is how you can invest in it. And so when I started my other company, some FIA that the listeners have heard me talk about was mostly about semi absentee franchises. And I think, as I said, on the previous shows, there's no such thing as an absentee franchise. And so, you know, as I thought more and more about it, I said, you know, why not? And I thought about how FinTech has really come up in the last few years, how you invest in things that you really weren't able to do before. And you know, big thing that came up was in 2015. They had the JOBS Act come through the Obama administration. And this allowed you to crowdfund investments for equity. Because in the past, you think of things like Kickstarter, you got a item in return, but you couldn't get ownership from it. So the JOBS Act allowed you to, you know, now invest and get a piece of it. Now, there's many different parts within the JOBS Act, but one that's really important for this is called Regulation A plus and what this means is that you don't have to be An accredited investor to be able to invest in these really big investments. And so now you've because of this, you've seen things like fundrise diversity fund Qadri, where you're able to invest in fractions of these real estate portfolios really like a read, but available for everyone. And so I actually had the idea a few years ago of, hey, why can't I do that with franchises? And so as I kept doing my research and talking to lawyers, and making sure everything was, you know, buttoned up correctly, it's fine. 2020 was the year with so much in disarray, I realized that, you know, people are really turning the stock market to a gamblers paradise. And it's just, it was crazy. As you know, COVID start eating up the economy, and you start hearing about people, they can't gamble on sports, they're gambling on stocks. And to me, this reminds me of I used to be a financial advisor at Merrill Lynch. And this is like when Greece's economy was going through the tank, and everyone was like, oh, what's happening portfolios said, headlines, it's just crazy stuff that you don't have control over. And now it's kind of the same thing. Like, it's working out better for most people at this. But when it comes to your retirement, being in the hands of the gamblers, basically, this doesn't make any sense to me. And I think a lot of people just aren't as trusting of Wall Street, you know, that corporate fat cats basically, and go on these crazy excessive retreats and stuff. And that's just never who I've been, you know, I don't wear a tie to the office anymore. I'm very, very big on it's usually a jeans and a shirt. And so I thought about how do you bring this to the investment world. And so Mike, new company, Fran shares allows you to do just that, you're able to invest in a portfolio of professionally managed franchises, in a recession resistant portfolio for as little as $500. So the portfolios are gonna be locally based. So you're based in the Phoenix area, my hometown. And basically, you know, imagine where you get your hair cut, where you get your oil changed, where you go to the gym, all these things could be things that are part of your investment portfolio. So you think about like, honestly, let's think about if you buy a MacBook, how many hands does that money change before it eventually affects the stock, it comes back to you. And also, it's not like you're getting a ton of dividends all the time. So I wanted to kind of like, hey, let's change the way people invest. And so if you think about it, if it's all local businesses, for you, it's local people that you know, spending in the local area, and then it comes right back to the investors. And, you know, I really wanted to change the way the investment world works, as well as I want to make sure because I know people are gonna copy me on this down the road, but I wanted to make it as defensible as possible. And so I asked 1000s of people, what do you hate about investments? And by far, the number one thing that came up with fees, it's always fees. Why do I pay 1% 2% asset or management fee? It's crazy. Like, even if I lose money, they still get their cut. So I listened to that. And I said, you know, that's not fair. And so I thought, you know, how can I work around this? Like, what's the way to make an investment that's really for the people, like, I want to think from the investor's point of view, not really the Wall Street point of view. And so how we do this is that we actually go in on the investments with the crowdfunders. So the crowd invest about 80% of the total project costs franchise comes in for the other 20%. And so we actually split the income with you, as the franchises make money. So basically, we make money when you make money, I'd rather bet on myself than just start taking money just to exist, you know?
Mike Stohler Yeah, yeah, that's, Wow, that's a lot to absorb. And it raises so many questions. So you know, let's start out with professionally managed franchises. Okay. So, how, how does it work? How do you get the franchises?
Kenny Rose so it's all about vertical integration. So one of the problems that you have when it comes to crowdfunding real estate, is typically they don't actually own the real estate themselves, they're more acting as brokers. And so that's why companies like fundrise, charge you that one or 2%, and then money on top of there. So we do vertically integrated by we are working with the investors to crowdfund the money, we're dispersing the money into franchises that we are going to own and operate with you. So we assembled the management teams, and you know, a big part of this, I wanted to make this go as operationally smoothly as possible. And, you know, I've been on here talking about semi absentee franchises for I guess, years now. And I thought of it from that it's like, hey, let's you have the same things that I know and I've been helping people select for years. I want to be able to help them do that in this portfolio. And then we can assemble these management teams to oversee managers so they're not so much owner operator franchises where we need to have someone with the absolutely insane experience but someone that you know, has managed type of location like this before and on top of this I started going down this rabbit hole a bit, I thought, hey, as long as we're changing investing, I kind of wanted to change entrepreneurship a bit. And, you know, actually, this is one of my biggest things I've gotten media exposure on, but I'm not sure if you've seen this one. Do you know how much a chick fil a franchise costs?
Mike Stohler
million bucks? $10,000. That's it.
Kenny Rose That's it. And here's why. So chick fil a, you know, they're a overnight success that's decades in the making. And so because they've been able to grow organically, they have, you know, a lot of liquidity that they can reinvest in themselves. And they said, hey, how do we have the best locations? Well, we have people that work their way up and become managers. So instead of people basically coming off of sea level positions, and transferring that skill set to the restaurant industry, they said, Why don't we finance all this build out stuff and get the guys who've worked their way up from the inside and make them the franchisees? And so this way, chick fil a gets so much media exposure? Oh, yeah. Yeah, you always see their owners like, Oh, this owner went out and helped them, you know, set a prayer for him. And they do all these things are just so over the top, because these are things that would generally be unavailable to them, you know, you've started a minimum wage job, work their butt off and work their way up to where they're the owner. And so I answered this on a Korra. It's one of the Yeah, yeah. So they get like, 300 million people a month on that website. And so I answered this on there that's been sent out to like 80 million people alone. And actually, if anyone reads the hustle, the online newsletter, they actually did a whole Sunday story about this. And I was, I saw, they're looking for a source on and I reached out to the writer Zach Kroc, and I said, Hey, you know what, I actually have written some stuff on this before, and we got a call. He's like, it's crazy. When you reached out to me, I had your core answer open in another tab, you're like the person I needed to talk. I was like, Oh, perfect. But so I really took this, you know, the way that they did this, and I said, hey, it's so effective, how do I bring this to the greater franchise world. And so that's what I want to see in the future is that as we own these franchises, we can have people who come in for as minimum wage employees, and instead of just Hey, a jobs a job gives them, you know, a way to work their way up, and, you know, allows people who come from lower income areas or minorities to work their way up and become entrepreneurs. And so that's really what I want to be able to do is change the way people invest and change the way people own businesses.
Mike Stohler
Yeah, I think Dutch Brothers might do something similar. Yeah, I looked at buying a Dutch Brothers. Because I thought it was the next thing and and they're like, I can't The only people that can be owners, or you have to work so many months, or years within the franchise.
Kenny Rose
And I'm not gonna be a breeze to just own even when you do that with, with chick fil a, for example, they have applications they get, I think they approve like 70 or 80 out of 60 or 70,000 applications a year or so it's harder to become a chick fil a z than it is to get into Harvard.
Mike Stohler
It's amazing. I've never seen such long drive thru lines. You know, they have that. And it seems like every time it's like, you know, I'm not going to get political, but every time a politician says, you know, we hate chick fil a are we hate, you know, whatever, that it's, they break sales numbers. Yeah. It works the opposite way, you know?
Kenny Rose
Yeah.
Mike Stohler
But yeah, that's it. So I would think like, if I was looking at investing with you, and knowing some things about especially with COVID. And the small businesses, which I when I think of franchises, I think of a bunch of small businesses, individual businesses, unless you're, you have the strength to own 20 of them, or 50 of them, but then, you know, you could break it down and why I own 50 small businesses, if you do it properly, and they're all in the different last season and whatnot. My fear with looking at what grown, you know, with with what this virus did to small businesses, how are you picking franchises? What are you doing, out of the fear of the recessions in the pandemic? To try to like with our listeners that they want to invest with you How can you eliminate their fear of owning pieces of small businesses?
Kenny Rose
Yeah, so it's Two tier approach. The first is what are pandemic resistant businesses. So these are things like Home Services, especially with people who are working from home more often, they need to make sure the home is as good of shape as possible. Whether that is, you know, interior renovations, lawn care, senior care, especially at home. There's even things to franchises in the trash industry, you want to talk recession, resistance, trash is always going to be trash, people are not going to throw away less. And so looking at industries like this, we're going to be able to start building really a foundation that is pandemic resistant. And then especially as you know, the vaccines coming out now. And we're able to start rolling out. I hate to say this, but with it's kind of great timing for to launch something like this. Because there are I mean, real estate is a lot cheaper than it used to be, because it's such tough conditions right now. So especially when you're looking at build up times, that can take six months to a year, you know, in six months to a year, everyone's going to be vaccinated, hopefully, and you'll be able to go from there. And, you know, as I've said before, I like to do things that are more service based businesses. So, you know, especially a lot of gyms and a lot of the industries have learned how to work with a pandemic, now, after all of this. And so I think it's important to take these take those into consideration of that as we start to recover, we're also prepared for something like this happens again. And so that that's really where I'm looking forward to this is that the timing is just perfect for this. And, you know, again, this is what I've spent years doing is helping brambles select the right franchises that are recession resistant.
Mike Stohler
What are you seeing is going to be a lot of people always ask me, what's the post COVID Hotel going to look like? What is the are you seeing any rustling in the wind with? We need to make those type of franchises different? Post COVID, what are you seeing in the franchise world as far as the future?
Kenny Rose
Well, especially in the in the fitness area, that's an area where people were definitely, you know, not able to go for the longest time. And so you see, they're structuring things very differently from how you book, your appointments, how you enter, how the machines are cleaned. And so a lot of it's really being higher maintenance, and making sure that people are safe by putting these new systems into place. That's what this is all about new systems in place. And we're comparing the average mom and pop to a franchise. And one of the main things, they specialize our systems in place. And so when you're talking about, hey, how do we develop these systems? How do we implement them? And how do we make sure that they're being followed? That's what's franchising has been doing for decades and decades. So I think that you're gonna see just new systems in place, but just being perfectly executed by, you know, good franchise wars.
Mike Stohler
And, you know, I agree with that with. And that's why people do franchises, instead of trying to do something on their own, is you have all these years of experience from the franchise, that's doing all the RND and all the research on how to make it cleaner, better, safer, putting the touchless you know, even like, cashless type of things in place, so that you don't have to think about it. And so one of the questions is, is that, and what are the other benefits of why should I do a franchise like this? Because I don't want to pay the 7%. You know, and then just doing it on my own?
Kenny Rose
Yeah, well, honestly, this, this is a perfect example of what that 7% is for. Because you rely on the franchisor for support as things change, like this is one that is tested franchises, as much as you can possibly imagine. But this is what they're there for is that you invest in them because they are invested in your success, they want you to do as well as possible. And so so it's really important to make sure that my timer went off from the lights. So yeah, that's what we're making sure of is that people are going to be able to follow these new systems and plays in the franchise, ORS are gonna really be implementing the right changes for you.
Mike Stohler Now, it's very interesting that you're one of the first ones to come on and say, Hey, you don't have to be accredited. We can take it you know, because a lot of people are like, Oh, I don't know, it's like, you know, so what was your decision based on with this model, to not accept just only accredited investors is it to open it up?
Kenny Rose
So there's a couple different reasons. First off is I truly believe that there's a way to change the way people invest in economies thrive. And really, for centuries now, you've invested onto Wall Street, and it's made epicenters of these markets. But instead, what of your investments were going into the local communities and you were putting your investments there, more taxes are being paid there, you're really investing in that local economy to thrive. So that's one big reason for it. Another is that I think that if you're trying to make a big change, you shouldn't exclude people. And so I want to open up to as many people as possible. And then finally, it's a it's a long term benefit, that's going to make the portfolio's themselves stronger. So I call it the share effect, you know, for France shares, but also because we're sharing in these different things. So, in this in this aspect, it's the sharing of marketing, because one of the main reasons that company companies franchise that they want local boots on the ground to be, you know, the local person there that's going to tell everyone about their business, and you know, Hey, come on in, I've got the great shop. Now imagine instead of one owner, you have 1000, owners, 2000 owners, 3000 owners in your market. And so, you know, anytime that someone says, Hey, I was thinking about getting a haircut, my barber messed up, like where'd you send them? Hey, you know what you need to go to Supercuts or diesel barber shop, Oh, I got a ding in my car go to Maiko, you're going to tell them to go to companies that you own. And on top of that, from like a social media standpoint, you know, the franchisors support all these franchisees to, you know, hey, here's the right things to say, here's how you post them. But at the same time, a lot of times, it's Hey, customers might support it, the owners are gonna promote it, some of their friends and family. But if I've got a couple 1000 local owners, and I, you know, send something out to them and say, Hey, your investment just made a post on Facebook, I think they would like to engage with that, because a quick like, is going to help them increase their return on investment. So I think what you're going to see here in the future, is not only a great investment, but you're going to see the most profitable franchises to exist in every franchise system, because they have so much more local support than any other franchise.
Mike Stohler Well That's a very good point. And, and exciting, because that's really what people need. Now, what communities need is that local support, you know, I'm seeing in our market I'm seeing I'm sure, throughout the nation, we're seeing it that just support local businesses, especially during times like this. So your potential investors and investors, how are they getting paid? What is what's the they invest in the fund is their preferred return? Is there a yearly? What was it?
Kenny Rose
I can't I can't say too much about that, because we're working on sec registration. So you know, yeah, last thing you want to stop before, that's why the waitlist right now? Yeah, it's going to be a share of the income that the franchises produce. Yeah, as well as equity in the business. So we're hoping that we'll be able to sell the franchises in a five to 10 year timeframe. So in addition to the recurring revenue from the franchises, you'll get that payout at the end from when we sell these extra businesses and then start new funds for
Mike Stohler
Wow, that's, it's fantastic. It's, it's kind of mind blowing that you've taken the congratulations. Thank you that you're, you're like, I can take something that I've done very well. And I can just kind of blow it up. You know, it's, it's fantastic. So, in closing, I know everyone's gonna want to go to your site, how can people find you connect with you get to know you?
Kenny Rose
Yeah, so there's two main ways. First off, go to the website, Fran shares.com. And we actually have the waitlist going right now. In just a few weeks, we've gotten hundreds and hundreds and hundreds of people on this waitlist. And for an offer for Richard geek listeners, because I love this podcast. It's my third time on here. Every single person who joins the waitlist from the richer geek, they are guaranteed to be invested in this fund and when they're ready for it. So even if we get that waitlist out to 50,000 millions the listeners that sign up from this are getting on there. Yeah, and then secondly, connect me on LinkedIn. I love post posting on there talking with people. I'm always very easy to engage on there. So yeah, just find Kenny rose on LinkedIn. And that was the two main ways to find me.
Mike Stohler
Fantastic. And friend shares f ra n. Sh ar e. Yes. Perfect. Fran shares ever Woody. Check it out. You're guaranteed to be on and you're guaranteed to have a great time getting to know Kenny rose. Thank you again, Kenny. I appreciate all that you've done and We hope you your success is plentiful and that you have a happy holiday. Thank you. Take care
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ABOUT KENNY ROSE
Founder of Semfia Franchise Brokerage and FranShares, Kenny Rose is the go to source for franchise investing knowledge. He is a renowned franchise expert in the field; featured in Forbes, ABC, American Express, TheHustle, Marketwatch and other publications with a career media reach of over 220 million people. His latest company FranShares allows you to passively invest in a portfolio of professionally-managed franchises in minutes, with no fees.