Apr 24, 2024 · 40m · the-pitch
$4M at Stake! Will This Franchise Business Opportunity Transform Alternative Asset Investing?
Kenny Rose · 17m spoken Josh Muccio · 7m spoken Jillian Manus · 3m spoken Mac Conwell · 2m spoken Beck Bamberger · 1m spoken Lisa Muccio · 16s spoken
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Kenny Rose pitches FranShares, a fintech marketplace democratizing fractional franchise ownership for retail investors and operators, navigating intense valuation pushback before securing an investment from The Pitch Fund.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Josh holds 23.6% of the talking time here. How this is scored →
Josh as informed peer 3.8 Guest teaching 5.8 Guest disagreement 2.2 Josh pushing back 2.8
speaking balance: gold is Josh, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 26:30 Diligence confrontation over fund-of-funds definition
Jillian bluntly insists FranShares is essentially a fund-to-fund venture model, directly disputing Kenny's definition of his business as an investment platform.
Hardest push from Josh ▶ 10:36 Investor skepticism over $19M seed valuationJillian directly challenges Kenny by calling his $19M valuation frothy, forcing him to defend the pricing with alternative platform metrics.
Biggest teaching moment ▶ 7:15 Educating investors on FTC franchise disclosure rulesKenny explains how federal franchise disclosure documents provide standardized line-item financial transparency that makes franchise vetting superior to opaque assets like crypto.
Josh holds their own ▶ 26:45 Clarifying marketplace mechanics during diligence drill-downKenny clarifies the platform mechanics against Jillian's assertion, pointing out that FranShares facilitates customer investment rather than investing company capital into individual stores.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Josh as informed peer | Guest teaching | Guest disagreement | Josh pushing back | Why |
|---|---|---|---|---|---|---|
| Franchise Terminology Primer for Prospective Investors | 1 | 7 | 1 | 0 | Josh gives a brief intro definition, after which Kenny delivers his opening pitch with extensive industry data about franchise markets, $800B domestic revenue, and the structural wealth barrier for operators. | |
| Examining the Three-Sided Marketplace and Merit-Based Ownership | 3 | 6 | 2 | 2 | Mac and Beck probe how FranShares manages a three-sided marketplace. Kenny explains why franchisors eagerly supply access to remove net-worth friction and enable merit-based franchise ownership. | |
| Investor Vetting Process and Proven Operational Case Studies | 4 | 7 | 2 | 3 | Mac repeatedly drills into the platform's vetting mechanisms. Kenny demonstrates deep expertise by breaking down FTC disclosures and walking through a concrete case study with Teriyaki Madness franchisees. | |
| Revenue Mechanics and Valuation Pushback from Investors | 5 | 6 | 4 | 6 | Jillian strongly questions the $19M post-money valuation as frothy. Kenny defends his pricing with comparable marketplace valuation multiples from Masterworks and wine platforms. | |
| Capital Allocation Plans and Kenny Rose's Entrepreneurial Journey | 3 | 5 | 1 | 1 | Beck and Jillian ask about use of funds and Kenny's background. Kenny recounts his personal entrepreneurial upbringing and his realization that capital limitations block talented operators. | |
| High-Margin Franchise Sectors, Target Returns, and Retail Democratization | 3 | 7 | 2 | 2 | Jillian and Beck ask about target returns and growth categories. Kenny breaks down high-margin non-food service franchises, target 20% IRRs, and local investor virality. | |
| Market Moat, Network Dynamics, and Founder Advantage | 4 | 5 | 3 | 5 | Jillian presses on competition and valuation resistance before both Mac and Jillian commit $100K checks. Kenny articulates his insider network moat in the close-knit franchise ecosystem. | |
| Investor Post-Pitch Debrief and Valuation Exceptions | 4 | 4 | 2 | 4 | In the debrief, the investors discuss valuation exceptions, but in the post-interview Josh questions the validity of Mac reneging on his commitment after claiming an off-thesis carve-out. | |
| Rigorous Due Diligence Calls with Jillian Manus and Eventual Pass | 5 | 8 | 7 | 8 | In recorded diligence audio, Jillian aggressively challenges the fund-to-fund structure and platform monetization. Kenny pushes back, insisting FranShares is a marketplace platform rather than a fund manager. | |
| Round Momentum, Syndicate Support, and Chicago Ventures Leadership | 3 | 5 | 1 | 2 | Josh and Kenny discuss syndicate interest and securing Chicago Ventures as the lead investor after finding common ground in franchise operational experience. | |
| The Pitch Fund Commits $100K to FranShares | 6 | 5 | 1 | 1 | Josh and Lisa praise Kenny's resilience under intense diligence pressure and formally commit a $100,000 investment from The Pitch Fund. | |
| Kenny Rose's Outlook on Promising Franchise Opportunities | 4 | 4 | 0 | 0 | Lisa and Josh ask Kenny about his favourite franchise sectors, and Josh concludes with a thesis recap on backing proven domain experts despite valuation premiums. |
Statements from this episode (32)
Rose: US franchise industry generates over $800B annually
“You've heard of franchising. It does over eight hundred billion dollars domestically every year.”
Rose: FranShares is the first fractional investment marketplace for franchises
“Franchairs is the first investment marketplace where people can invest in franchises.”
Rose: Franchise investing outperforms the stock market and hedges inflation
“Investing in franchises provides outsized returns compared to the stock market, while providing passive income, a hedge against inflation, and diversification from market volatility.”
Rose: FranShares had largest alt-investing launch with $18M in investments
“We launched last year and had the largest launch ever for an alternative investing platform with over eighteen million in investments, and we have 42,000 signups for our upcoming offerings.”
Rose: FranShares has $2.475M committed of its $4M seed round
“We're raising a four million seed round, of which we already have 2.475 already committed and wired over.”
Rose: Employee turnover is the biggest problem in franchising
“You know, the biggest problem in franchising is employee turnover, and it makes sense because there's no upward mobility and there's no benefits.”
Rose: McDonald's prohibits outside investors for new franchise locations
“Because even McDonald's, their biggest barrier to growth for new franchisees, they have to already be wealthy. Then they have to be wealthy and want to run a McDonald's. And McDonald's does not allow outside investors.”
Rose: FranShares-backed franchise hit profitability in month two
“We funded their second location. It hit profitability in the second month, which is pretty unheard of in franchising, and they just won franchisee of the year in that system.”
Rose: More brands are franchised than there are NASDAQ stocks
“There are more brands franchised than there are stocks on the NASDAQ.”
Rose: FranShares charges 1-2% annual investor fee and franchisee royalty
“It's one or two percent every year on the investor, and then for the franchisees, you know, we didn't want to take five or 10% of the raise up front. We find that would hinder their ability to grow. So instead, just like the franchisors, we do a royalty model.…”
Rose: FranShares raises preferred equity round at $19M post-money valuation
“It's a priced round with preferred equity at a nineteen million post-money valuation. And it's being led by Chicago Ventures.”
Rose: Masterworks valued at 4x gross investment volume; FranShares seeks 1x
“Masterworks went for four times their gross investment volume, and we're looking for a little over one.”
Rose: FranShares Is in Talks With Franklin Templeton and Fifth Third
“We've already been talking to groups like Franklin Templeton, Fifth Thirds Bank, First Trust, because they want to offer their clients new alternative investments, because right now they're all going into real estate.”
Rose: Service franchises yield higher margins than food by avoiding inventory
“Service businesses are where I see the most opportunity. You know, things like, again, the haircare and automotive space, where you're not having to constantly get inventory, you are, ah, you know, doing a markup for a service, and the profit margins are a lot…”
Rose: FranShares invested in a waste management franchise with 70% margins
“Like, we're in a waste management franchise, and you know, it's got 70% profit margin.”
Rose: FranShares targets 20% IRR split between income and equity growth
“Our targets are, like, we're trying to go for around the 20% plus IRR. That's about a split, almost halfway between income, which is paid quarterly, and then equity growth.”
Rose: FranShares is in regional expansion talks with Bojangles
“We've been talking to Bojangles for a while. They got almost a thousand locations, but they're stuck in the Southeast primarily.”
Rose: Local retail investors drive organic grand opening traffic
“The hardest thing is getting market awareness. You got to spend a lot on marketing, but if you prioritize those local investors first, they're there for the grand openings. They're bringing people to the grand opening.”
Rose: Kenny Rose is the youngest franchise broker by decades
“Investment bankers make too much to make a leap, and brokers, I'm the youngest in the industry by 20 or 30 years.”
Rose: The franchise industry will not welcome founders from outside
“Because frankly, if they're not, franchise industry won't welcome them.”
Rose: Franchising's most widely used CRM is over 20 years old
“It's like the oldest CRM, or sorry, the most widely used CRM in franchising, it, I'm not going to trash it up here, but it's, Not great. It's over 20 years old.”
Mac Conwell commits $100K to FranShares at a $19M valuation
“So a nine, a 19 post
It's not the end of the world.
It's below 25.
Still in range.
I'm in for a hundred.”
Beck Bamberger passes on FranShares citing high valuation
“I'm out, and too expensive, and just not my space enough.”
Manus: Jillian Manus avoids investing at valuations above $15M
“You know, nothing above 15 is kind of my thing.”
Jillian Manus commits $100K to FranShares
“Ok, I love fintech too, but I love franchises, and I have no idea why.
Me, my last life.
So I'm in for a hundred.”
Conwell: RareBreed Ventures reserves 10% of fund for off-thesis investments
“Well, 10% of the fund is for off-thesis investment, so if it's too high, I'll put it in the off-thesis bucket.”
Kenny Rose: Mac Conwell passed on FranShares post-show over valuation
“You know, what happened was we have done a call
and he said, basically, you know, rounds too expensive.
We're not going to be able to get that ownership stake that we try and target.
So it's not going to be a fit.”
Manus: FranShares operates as a fund-of-funds, not a marketplace
“Actually, Kenny, it is a fun to fund because if you, because you're taking a management fee from what I understand from the deck. So you're managing our money and investing it into franchises that qualify, which is exactly what a venture capitalist does.”
Rose: Jillian Manus passed on FranShares after the show over valuation
“And at the end, she said she was out because of the valuation.”
Rose: Franchising employs over 9 million people across 800,000 locations
“And you know, it's a massive part of the economy employs almost over nine million people. It's over 800,000 locations.”