Some or all of the products featured here are from partners who compensate us. These partnerships may influence which topics or products we cover but do not influence our reviews. Money Armada is an independent publisher.
Investors have more choices available than ever before. From traditional choices like stocks to passive real estate crowdfunding, access to new investment classes keep expanding for the retail investor. The latest platform to expand this access further is FranShares, a platform which delivers crowdfunding access for franchises.
Shaquille O’Neal, a former NBA superstar, famously has compounded his wealth through investments in franchises from burger chains to car washes – now it’s the retail investors’ turn to access the same investment class through FranShares.
Read on to learn if FranShares is right for you, its key pros and cons, and what to consider before you invest.
What is FranShares?
FranShares is a platform which allows investors to passively invest in franchises across the United States. These franchise opportunities are evaluated by FranShares’ team according to rigorous due diligence standards.
FranShares was founded by Kenny Rose, a franchise broker and entrepreneur who has helped investors buy franchises to increase wealth. In addition to FranShares, he operates Semfia,”a franchise brokerage focused on income-producing and manager-run franchises.”
This platform’s offerings are available to both accredited and non-accredited investors.
How Does It Work?
FranShares handles the vetting of franchise brands to select brands which are ideal based on income yield, growth, leadership, and other factors. Once a brand is chosen, the platform creates portfolios of many franchise locations across industries to increase diversification.
Investors can then invest in the portfolios with as little as $500. FranShares will handle the management of these franchises, leaving investors to track their returns and income passively.
FranShares’ first portfolio is fee-less but future portfolios will have a management fee of 1.5% to reflect their efforts. Investors will earn passive income from the portfolios they invest in.
Investments in this platform should be long-term and investors should expect to hold for 5+ years but eventually FranShares will launch a secondary market for investors to off-load their shares if they so wish.
Who Can Invest?
FranShares portfolios are open to accredited and unaccredited investors. You can sign up for FranShares today to get started with franchise investing.
FranShares is appealing to investors who want franchise investing exposure, monthly dividends, or diversification away from traditional assets.
This platform is less appealing for investors who want fully-liquid investments, who have low risk tolerance, or who want a long track record of success from investment platforms.
Pros of FranShares
These are the top benefits of FranShares from diversification to passive income.
Asset diversification
One of the key benefits of FranShares is its investment diversification potential. With this platform, you can invest in successful platforms and access returns from smaller businesses.
Income and returns
By investing in this platform, you’ll earn passive income from franchises monthly. In addition, if a franchise is sold, you’ll earn returns from the sale if the valuation has increased. Once a secondary market is created by FranShares you’ll also be able to sell your shares for a return if the shares have increased in value.
Low investment minimum
You can get started with FranShares with as little as $500. This low investment minimum presents an intriguing opportunity to retail investors seeking diversification without breaking the bank.
Cons of FranShares
There are a few cons of FranShares you should be aware of before investing in FranShares.
Some opportunities only available to accredited investors
At this time, some FranShares investments are available to accredited investors. For these investments you’ll need to meet certain income or net worth qualifications to invest through this platform.
Short track record
As this platform is relatively new, its track record is not yet clear. As more deals are developed and FranShares mature, its trajectory and the security of its investments will become more obvious.
Low Liquidity
Investments through FranShares must be held for 5 or more years which means you won’t have the ability to cash in your investment if you need it in the short term. This will work out fine for long-term investors who want to diversify but short-term investors should reconsider FranShares.
How Much Can I Earn?
Investment returns will vary by portfolio and nothing is guaranteed with investing but FranShares predicts returns once a franchise is sold can be as high as 20%. Bear in mind this return would actualize after 5-10 years.
In addition to returns from a sale, FranShares will deliver income in the form of monthly dividends to investors. This dividend will be based on the amount of shares an individual investor holds.
Should You Invest in FranShares?
You should consider investing in this platform if you’d like exposure to franchise businesses without buying and managing one outright. It can also present alluring income flow from the monthly dividends.
As this platform is still waitlist-only, you should consider reading FranShares marketing materials and disclosures and learn more until the waitlist is opened. As with all alternative investing platforms like YieldStreet, you should consider your risk tolerance and ability to place your funds in an illiquid investment vehicle.
FranShares represents an exciting trend in crowdfunding and we’re excited to see their journey and open up franchise investing to average joes without Shaq levels of cash.