GF: From an investor’s perspective, how does the FranShares model work?
KR: FranShares takes the power of fractional ownership and applies it to franchise investment. FranShares invests in locally operated franchise locations alongside our pool of investors. We build out locations and staff them with a team of expert franchise managers. FranShares operates the locations and distributes the resulting recurring franchise profits to each investor.
GF: What led you to the idea of democratizing franchising?
KR: I used to be in finance as a financial advisor at Merrill Lynch but hated how much headlines dictate your net worth. I was introduced to the world of franchising on the brokerage side where I was exposed to hundreds of different brands, industries, and ownership structures.
My career in franchising started off with one of the largest franchise brokerages but I eventually went on to found my own brokerage focused on semi-absentee ownership. Throughout my years I would constantly hear two things. First, why most people couldn’t own a franchise due to lack of money, time, or skillset. Second, could they just invest $10,000, $50,000, or $100,000 if I could pair them up with other investors or operators?
Franchising isn’t available to most investors, accredited or not. You can only hear about a problem so many times before you do something about it. During quarantine early on in the COVID-19 outbreak, I read an article that people were gambling on the stock market because sports weren’t on… I don’t think there’s a bigger sign than that to go out there and democratize franchising.
GF: What do you see being the main challenges for this model, and why don’t you think anybody has approached it before?
KR: For people who don’t come from franchising, they typically only think about fast food franchises but these are the most operationally intensive with the thinnest margins so you need many locations to get the return on investment to where an average investor would be happy.
For those that come from within the franchise industry, generally they’re happy where they are because they’re enjoying the consistency that franchising offers and may not be on the lookout for changing trends in finance and tech. They also generally are more familiar with only one franchise brand or industry and don’t see the bigger picture of the franchise industry spanning over 4,000 brands in 100-plus industries.
I happen to come from the right experience, with the right knowledge, at the right time.
GF: Do you think FranShares will be a gateway for investors to eventually open and operate their own franchise locations?
KR: In one word, absolutely. In many words, we plan to make franchising as desirable to the public as the startup world is today. Everyone is looking to be their own boss, make good income, have consistency while also being in control of their destiny. Franchising accomplishes all this and more but there’s been a negative stigma to the ‘f-word’ in the past.
We want to be a resource to those who are ready to leave the corporate grind and pair them with investors. We also want to create the ladder for entry-level employees, especially minorities and veterans, who get stuck in entry-level positions but have no way to move up.
Just like Chick-Fil-A does a hybrid franchisee/ operator model, we want to bring this to more brands within our holdings to create generational wealth.