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The Problem
Imagine this: You start working at your local McDonalds at age 16. Over the next decade, you rise from Crew Member all the way up to General Manager.
You know this store inside and out, better than anyone.
You love McDonalds and you like being General Manager, but you have an entrepreneurial mindset and really want to take ownership of your work and your team. So, you look into becoming a Franchise Owner, the next level in the McDonalds employee hierarchy.
However, you find out that owning a McDonalds franchise costs anywhere between one to two million dollars. Like most people, you don’t have that kind of money lying around.
That’s right, franchise ownership is only available to high net worth individuals.
However, as FranShares founder Kenny Rose explained, “just because you have money doesn’t mean you know how to run a restaurant.”
This lack of access creates problems for entrepreneurs (who would love to be franchise owners but can’t afford it) and for the franchisors themselves who want more qualified operators.
This is where FranShares comes in.
FranShares provides a platform for people to invest in franchises so that the qualified and passionate entrepreneurs who want to be franchisees, can.
“We want people to start working all the way from the bottom and work their way up to manager because that's the person who should be the franchisee, the person who knows the business inside and out. Not someone who came off Wall Street because their check clears.”
FranShares separates where the people come from and where the capital comes from. They have three customers:
1. Franchisors (the original fast food restaurant, haircare brand, gym, etc.)
2. Operators who want to own their own franchise
3. Investors who have the capital and want to put it into alternative investments
** spoilers below **
What The Pitch investors said…
They liked:
Kenny knows his stuff!
Franchising is a trusted community, which Kenny is a part of. He worked as a franchise broker for a decade.
Alternative asset platforms have yielded VC returns in the past.
They didn’t like:
The $19M valuation seems frothy
The investor audience (which ranges from individuals to institutional investors) may be too broad
Quotable Moments
“People are what make franchises run. It's a business model in place, but you need the right entrepreneur to run it – not someone who's running away from the corporate world but someone who's getting real opportunity and has that real desire and passion to go build.” -Kenny Rose
“I think your valuation is a problem. I'll be really honest with you. So much of me wants to come in.” -Jillian Manus
“A good friend of mine tried to create this and couldn't, because he couldn't break into that community.” -Mac Conwell
“I keep talking to these fund managers who are like, 'I usually invest under this amount. But actually the best deal I've done, funny enough, was the one exception I made to my valuation cap!'“ - Josh Muccio
The Essentials
Company: FranShares
Year Founded: 2020
Industry: FinTech, Franchise, Financial Services
HQ: Chicago, IL
Founders: Kenny Rose
Employee Count: 5
Currently Raising: $4M seed round (with $2.475M already committed)
Funding Round Goals: grow out the team & investor acquisition
Valuation: $19M post-money
Business Model: FranShares takes 1-2% per year from investors and will soon launch a royalty model in which they take 1-2% from franchisees (can scale up to 5-7% as franchisee benefits increase)
Early Traction: launched last year with $18M in gross investment value & 42,000 sign-ups for upcoming offerings)
Burn: $85K/month
Runway: $800K
Comps
Who’s in?
The Pitch Fund: $100k
Now, it’s your turn.
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