Beyond 8 Figures podcast interview: Using franchising to invest In local businesses with Kenny Rose, FranShares

Podcasts Transcription

A.J. Lawrence:

Hi, everyone. Thank you so much to listening the Beyond 8 Figures. This is AJ, the journeyman entrepreneur with another Beyond 8 Figure episode for you. On the show, we talk with top entrepreneurs about the realities of building an eight figure business, what success really means to them and hear from them about some of their winning strategies and tactics. Tune in to each episode to learn how to grow your business beyond 10 million and more importantly, create your own personal legacy.

A.J. Lawrence:

Hello, everyone. Welcome back. So what do you think about franchises? It’s not something I tend to think about, yet I know they make a ton of money when they run well and they make a lot of money for the companies that run them well. But you’ll see the news, Shaq having a gazillion subways or a gazillion… I don’t even know which ones, but I know he owns franchises everywhere. And the amount of money that a well run franchise can make is pretty impressive. It’s a part of the business world I don’t know much about. Well, today’s guest is an expert in this space and he’s developed something given his background, that’s going to allow folks like you and I to maybe take a little bit more interest and get involved without having to run our own franchise. Today’s guest has been a financial advisor, a franchise consultant, he’s written books, and been a bestselling offer, about buying your own franchise.

A.J. Lawrence:

I don’t know what the terminology. So this is how bad I am when it comes to franchises. He’s run and is running a franchise brokerage, helping people fund the right franchises for themselves. But his newest company is the one I’m really excited to learn about. It’s called FranShares. Hi Kenny. Thank you so much for coming on the show. I’m really excited to have you here today.

Kenny Rose:

Thank you. I’m really happy to be here.

A.J. Lawrence:

Yeah. And I was just telling the audience, you have such an amazing background for what you’re doing now at FranShares, it’s a whole area I just know nothing about, and you’re doing such innovative stuff with it. That is the fascinating part about talking with an entrepreneur. So really can’t wait to dive in. I think, I just wanted to share with everyone. I loved how we were chatting on the trends group from The Hustle on Facebook and then all of a sudden, “Oh, that’s cool. I liked your idea.” And then, all of a sudden, every time I turned around, it was like, you were in the alt.co, they did a whole breakdown of you. I’ve seen you in 5,000 other places, you guys, and now you have this wait list going on where you’re blowing up on your wait list.

Kenny Rose:

It means we’re doing something right. That’s good.

A.J. Lawrence:

[crosstalk 00:02:49] everywhere. Yes. That is good. Given all this and given what you’re building now, FranShares, where do you see yourself as an entrepreneur?

Kenny Rose:

It’s funny you say that because it’s a very transition phase right now, because I’d always tell people… They’re like, “Oh you’re doing great.” I’m like, “I’m not there yet. What do you mean?” And it started years ago when I was running my own brokerage. I’m like, “I’m building still.” And they’re like, “Yeah but you support yourself, all this.” And I’m like, “Yeah, but that’s not where I see it. This is just a beginning.” And then I started FranShares and got this venture capital funding. People are like, “Oh man, you must be so excited.” I’m like, “Why? I’m just getting started. I haven’t done anything yet. I just got some fuel to go do it.” And people have to remind me, it’s like, “No, that’s a huge accomplishment.” I’m like, “Okay. Yes, you’re right. But I’m still just getting started. This hasn’t launched yet. We’re about to launch.” And so that’s a really good question. And I feel like it’s something that… It’s like falling in love. You just know when you’re there, until then you keep living life.

A.J. Lawrence:

So you find yourself in the transition. Are there things you want to be able to do as an entrepreneur that you’re just beginning to see or? This is about your FranShares, it is really cool and I can’t wait to dive into it. But for yourself, are you seeing now that this is going on and you’re getting this taste? What are you seeing yourself as an entrepreneur going on? And yes, with FranShares, but then for yourself overall?

Kenny Rose:

Well, for one thing, I just love continuously building my skillset around me. That was one of reasons I went and started my own brokerage before I went and built FranShares. I was like, “I need to really learn how to run a business.” You can be an expert in your field, but that doesn’t mean you’re an expert in building a business. And so as I built my brokerage, it was like learning how to build a website, learning how to do marketing. You’re doing sales, accounting. You’re doing all these different parts of it. And it’s things that you don’t think about the time, but I was hoping it would turn into this, is that like, when you are ready to start the big one, you know what you’re doing. You know these different areas. So like… And I brought on my head of growth was my first hire.

Kenny Rose:

And I’m like, “Yes. So X, Y, and Z is what I want to do, starting initiatives. And these are tools I think we could use for it.” And he’s like, “Why do you know all of this?” Because normally, CEOs, don’t always prioritize marketing, let alone know the things that you should do. And I’m like, “I’m a student of the craft.” So I like being a student of the craft in every area around the business. So as an entrepreneur, I want to continuously build that up. And it’s just like when I’m meeting people, I love asking about what they do. Not as judging who they are, but I like learning about different industries. I like being able… If someone says, they’re a nuclear engineer, it’s like, “Oh yeah, I’ve met four of those before.” And so then you start talking, they’re like, “Wow, how do you know about this?” And so I like learning.

A.J. Lawrence:

You’re curious. Yeah. I like that. And definitely being curious is an amazing power to sort of develop as an entrepreneur, that I think a lot of us get kind of blinkered, whatever the term is, just so focused on things that we forget to be curious about the whole broad picture. Now that you’ve transitioned from brokerage to FranShares, you’ve raised money. You’ve been building this. Do you see things changing though, of what you have to do as an entrepreneur?

Kenny Rose:

There’s definitely a lot of changes. Honestly, I kind of laugh to myself when you’re like, “Man, you’ve got such a great background and all these things that lead to FranShares.” I’m like, “Man, people used to just say you have a weird background.” And so it’s like, your life definitely changes because people then see what you’re at now and what you’re doing. And now that it’s like gaining a lot of momentum, people realize it more and I get tons of outreach. I’m like, “Man, I’ve been beat down doors for 10 years.” It’s a very big change that the shoe is on the other foot there. I doubt that answered your question because what was of the original question?

A.J. Lawrence:

No, but it’s cool. I was kind of saying did your role change, but I think you are coming up to a good point. Hindsight, it’s very easy to go, “Wow. Look, of course he did that,” but it does seem from the peanut gallery that there’s a logic to your madness to get there. But I understand for you, this was your life and all the complexities that kind of led to this.

Kenny Rose:

Yeah. Honestly, it was a change I saw coming down the road eventually. That’s why I got into franchising. I was advisor at Merrill Lynch. And I didn’t really care for the industry. And someone introduced me to franchising and right off the bat, I was like, “Wow, I don’t know that much about the industry. And I’m college educated.” You would think I should know more than… I thought it was fast food like everyone else. So that’s when I was like, “That’s a big opportunity.” And so I really dove into the franchise world. And for years, people are like, “I get it. But what are you doing?” And I’m like, “It’s going to make sense later. I promise you.”

A.J. Lawrence:

So how far back did you just think you were going to do something big in franchises or did you have this concept in mind?

Kenny Rose:

I had this rough concept in mind about six years ago. I heard about Fundrise and they had a Series A raise and they were pretty early still, but they were crushing it. They were the only ones doing it. They were trailblazing the space so I started learning all about them and the laws that made it happen. And I was just like, “I’m going to do this for franchising.” And that’s when I moved out of California and came to Chicago and started my brokerage. Because again, I want to build the skillset and the credibility to eventually build this business. And funny enough, I’ve been planning this for years. I want to say three years ago, maybe four, I started doing LinkedIn messages and connection requests people who had angel investor on their profile. And it was just like networking. I’m not good at it nor do I like hard selling.

Kenny Rose:

And so I was just reaching out and being like, “Hey, I saw you’re an angel investor in LA or San Diego.” The franchise world might come up down the road, it’s just a good resource to have. And so then a couple years later I’m reaching out and I had already raised a couple 100,000. And so I’m reaching out to these same people and it wasn’t me reaching out a cold nowhere. It was like, oh, we’ve been connected for a couple years. So that’s why I’m a relationship builder because you never know what could happen in the future. And that was just a really good use case of it.

A.J. Lawrence:

No, that is really cool. And I think that is… I like that you went through that and went into that thing because I remember looking at Fundrise and actually talking to, I have a miracle of how many good companies that I haven’t invested in that have gone on to do amazing things. And I have that Cedar, a couple of them and there’s like, yeah, maybe. And then all of a sudden it’s like, ugh.

Kenny Rose:

Hey, hindsight’s 2020, but not losing anything that’s priceless.

A.J. Lawrence:

There is always that, but no, it is really fascinating that you’ve had this and you saw that. Normally, I would really want to kind of get a little bit deeper into you as an entrepreneur, but I am also, and I think the audience will be fascinated about what you’re doing with FranShares and what makes this so unique because you did bring up Fundrise and the cool stuff they’re doing. So if you could maybe share a bit and let’s talk about some of the cool things that are going on with this.

Kenny Rose:

Yeah. I appreciate it. So what FranShares is, it’s a new way to invest in something that you’ve always known about. Everyone’s familiar with franchises. You typically think about them in fast food, but frankly it’s everywhere. It’s the companies that wash your windows, that fix your cars, that cut your hair. Every essential service is usually a franchise. You just might not even know it. So what FranShares does, allows you to invest in a portfolio of these franchises that produce these everyday services. And when you invest into a fund, you can get diversified across different geographies and different industries and different brands. And they’re all supported by the franchise model and they have this track record of what their other locations have done.

Kenny Rose:

Franchising itself is regulated by the Federal Trade Commission. So you’ve got that along with SEC regulation for investing. And so to me, it’s a great way to really understand your investment and have some predictability with it. And so FranShares is a great way to earn passive income, but also diversify your portfolio hedge against inflation. And in uneasy times when you’re not sure about how the stock market’s going to react or who’s going to tweet what about crypto, it’s maybe just the guy who cuts hair down the street, is a safer investment. So that’s what FranShares does, let’s you invest into everyday franchises. And it’s for everyone for as little as $500 or as much as 500,000.

A.J. Lawrence:

As long as you can get on the wait list, flipping behind you right there, I’ve been watching it. The numbers are just clicking away there. That’s really cool as an investor, but what I found… And yes, it’s something I do want to invest. So I’m going to get way behind on that list afterwards. But there’s some interesting things that are even of the type of people you’re investing in. But before we get into that or some of the special types of investments you’re looking to go, who are the typical people that the investors are funding? And I know you’re starting with a broad fund and then you’re going to get really micro specific over time, but who are the types of people?

Kenny Rose:

Yeah. So this is actually different than most people think because when you look at franchisees, there’s really two main groups. There’s successful ones and not successful ones. And so there’s a problem with both of these. The successful ones they’ve got the money, you got a bunch of stores. You’re like, “Hey, the bank’s going to fund me.” Eventually, there’s the super mega franchisees that have hundreds of locations and we’ll be doing plenty of stuff with them here soon. They’ve already been reaching out to us, but… And then on the other side, you’ve got the not successful franchisees. And then you have to figure out what are they doing wrong? How do we fix this? Then you got to hope they actually do fix it. And then even if all that goes right at the end of the day, you’re diluting an owner in their own business.

Kenny Rose:

So instead what we do, we actually are the franchisee ourselves. So we operate this a lot, like a REIT, a real estate investment trust. And so the REIT, they hire property management companies to run the day to day stuff. Well, in franchising, those exist for that too. They’re franchise management companies. So we think about a private equity owns tons of large franchisees, same thing with celebrities and athletes like Shaq owns hundreds of locations. Shaq does very little, he cuts the ribbons. He’s great at that, but he has a team in place. And so we do that same thing. And so when we establish these teams, you actually get better operators than if you’re investing in these one-offs because that’s a lot of… So you have to do on one person’s shoulders. Normally it’s people scale up over years to eventually have, they got growing pains like, “Oh, I need an HR person.

Kenny Rose:

Oh, now I need an accounting person.” Well, if you come in with the right team already in place and spread that across the different locations, so you can justify the cause, you’re starting with a more solid foundation. Because honestly, the franchisees are the make or break. So instead of trying to see, “Hey, does this person transition from a Fortune 500 to this franchise,” bring in an existing team or build your own team of people who come from the franchises. And so you just start with a much better foundation there. So that’s what we do in a growth fund like the one that we’re about to launch.

Kenny Rose:

But then in the future, we’ll have ones that are income funds. We’ve already had some, you wouldn’t believe the names that I’ve reached out already for largest franchisees and many big name systems that are like, “Hey, we’re looking to do 50 more locations or acquire this guy for 60 of his locations.” And that’s when they want to start dealing with private equity and we operate a lot like that. We’re public investment, but we operate like a private equity going into franchising. And frankly we’re a lot easier to deal with.

A.J. Lawrence:

Okay. Then that makes a lot of sense then of what I found really interesting. Yes, I am completely interested in as an investor to dive in and kind of go under the hood and learn more about what this could mean for me as investor. But the thing that really stuck out to me most was then this program you guys are going to develop. And now I see some of the logic of how that would happen. Could you kind of talk about the identification of employees of these franchises and what you’re hoping to do down the road?

Kenny Rose:

So I’ve seen over the years, one of the biggest problems in franchising, is the turnover of staff. And that’s usually going to be the biggest problem with any franchise. And so you think about it from a corporation standpoint, how do you reduce employee turnover? And there’s multitude of ways, but some of the big ones that I definitely plan to get going is, for one, stock options. The people who work these things, they have no incentive, there’s no ladder. Why would I keep working here when I can go get another job for nearly the same money elsewhere? So with us, we want to do a couple different things. For one is that I want them to be able to just like you earn equity into a tech company, you’ve got a one year cliff, four year vest, well, why can’t we do the same with minimum wage?

Kenny Rose:

It might not be as high as someone who’s coming in in a startup. But I think they should earn into the fund that they are working as a part of, and also to the company itself. I want to give franchise equity to these people and have them be incentivized to grow with us and knock this out of the park. And so that’s going to keep people around longer because they’re being treated better than they have been before. I think that a lot of franchisees do it backwards. They’re like, “Where can I cut costs to increase my profitability?” I see it as, where do I spend on the best employees who are going to increase my profit and reduce my headaches? When you start slashing paychecks, people walk out the door. When you start increasing them, people stick around.

Kenny Rose:

And so in a short sided point of view, it’s like, “Oh, well I’m saving money by the hour.” Well, I want to make more money by the year. And that’s having the best staff in place. That’s how you build any company. People don’t think about this on a franchise level. But in addition, besides that, I wanted to think about how I build the squad for people to scale over time. And this whole thing actually came up right before I was talking… Actually before I even got the company formed, I believe, Juneteenth was coming around. And this is after protests have been happening and it’s a really big thing. And the first time, many people are really not acknowledging Juneteenth. And so I called my friend Carleton, we talk about racial issues all the time. He’s a guy who worked his way up from nothing and got a full ride to a major Ivy League university.

Kenny Rose:

And so we start chatting and I was like, “Hey I posted the Black Square, but to me, that’s not actually inciting change.” You’re posting an angry story or I view it like, that’s not doing anything. That’s going to fade in 24 hours. That’s what people we’re doing. I’m like, “What are your words disappear in a day?” And that means nothing to me. It’s like when companies do the gay pride logo during gay pride month.

Kenny Rose:

I’m like, “Great, you changed your colors, what’d you actually do though.” I think that’s a very short sighted thing. So I asked them, “I posted the square, but how do I make real change?” And he said, “Invest a hundred dollars in a Black owned bank.” And I was like, “Oh, that’s actually a great idea. That’s actually contributing.” And so I just started rolling with this more and more. And I was like, how can you benefit people who are in minimum wage positions. Who are normally minorities and underserved and can’t create generational wealth? So I started thinking about the franchise world and how this has been done. And it comes down to the story of Chick-fil-A actually. A.J., do you know how much a Chick-fil-A costs?

A.J. Lawrence:

It’s funny because I did see… So before I saw the reference to this, no, I did not.

Kenny Rose:

Okay. I appreciate you not cheating.

A.J. Lawrence:

[crosstalk 00:18:09] in a recent review of you.

Kenny Rose:

Yeah, did you read that story in the Hustle about it?

A.J. Lawrence:

No, I didn’t see the one in the Hustle. I saw the one in alt.co.

Kenny Rose:

Oh, okay. That also might have been… A lot of these were based on me normally. In the Hustle I saw that they… Yeah, that’s one of my big things of how I really got into the thought leadership of all this was. I started writing on Quora. I was a solo preneur, running my own brokerage. I was like, “Let’s go write on Quora.” It’s sneakily one of the most used websites in the world, they have 300 million active monthly users. And so I just started answering questions on there. And my one about how much Chick-fil-A cost took off, they ended up sending it to over 40 million people in their daily digest. And eventually I read in the Hustle, not long after that, they were doing a story on it. They were looking for some sources. And so I reach out and I’m like, “Hey, by the way, I wrote a Quora answer about this that was pretty popular and would love to chat with you about it.”

Kenny Rose:

And then they ended up reaching out to me and I hop on a call with Zach Crockett, the writer. And he’s just like, “This is crazy. I actually had your answer open in another tab. You’re the person I wanted to talk to.” I was like, “Oh perfect.” So all that story from The Hustle is based on what I said. It’s like the reason a Chick-fil-A only costs $10,000, is that Chick-fil-A also identified this problem. And they saw that the people who come from the corporate world who then go and run a franchise, yeah they’re savvy business people, but that’s different than running, especially a food franchise. There’s plenty of franchise they can transition to that they will do great in, but food is especially a tough area too. So they said the people who run these the best are the ones who started from minimum wage and worked their way up.

Kenny Rose:

So that’s why you have to work in a Chick-fil-A first. And usually people who start at minimum wage, $10,000 is much to them as it is to a million dollars to someone like you. And so they still have significant buy-in to them and it keeps them incentivized and motivated, but also they’re the people who get in a shot they never would’ve had a chance in their wildest dreams for. And so they work for it. Maybe you ever seen PR about how happy and nice their franchisees are. They were given an opportunity that no one else did. And so I want to do that same thing here and really spread this out to the other brands within our ecosystem, because it’s both doing something good for everyone, as well as reducing employee turnover as well as increasing returns for our investors. I think it’s just a cyclical thing that venture people see as a no brainer.

A.J. Lawrence:

Yeah. I love it. I’ve been in the digital space since the early ’90s and I always joke, I was a paper millionaire until sort of the dot.com bomb in the early knots. And I literally, after 911 went and spent a few years in microfinance and I worked up in East Harlem doing unbanked, undocumented and helping some micro lending programs try and set up up there. And it was incredible seeing just how much value some of the small local businesses that weren’t even close to the value of some of the franchises you’re talking about, were generating in the community. And then I found out I was going to be a parent. So yeah, I kind of went back.

Kenny Rose:

If there ever was a reason, that’s good.

A.J. Lawrence:

Yeah. Kind of the small things in life. Oh, I have to pay for things because microfinance is… Working not for profit is a great thing and you feel really good, but you don’t have much money. But back there it was just that impact. And since then I’ve been on the board of different community development funds and all this. So I love this type of program because it does tie two things together. You’re not just saying, “Oh, hey, we’re just going to make a donation,” and hope things go well. You’re developing businesses in communities that need that type of support, that will bring ongoing impact. A dollar spent in a community, all owned business is 10 times a dollar spent in a distant, whatever the terminology is. I’m massacring everything today, is only a buck 50 back into the community.

Kenny Rose:

Oh, wow.

A.J. Lawrence:

And I think people are going to start to see this more and more, especially as we’re going to be rolling out more community funds in the future. So I’m based in Chicago, we’ll have Chicago a fund. So where I actually go to get my haircut, get my oil changed, go work out, I want to own those things. I want to contribute to my own businesses. And I think as that becomes a greater thing in the community, but from FranShares, I think people… Franchising often has a bad rep because people just think of it as like, “Oh they go straight to Ronald McDonald.” And I’m just like… And it’s such a bigger world than that. And I’m excited to show it to people and like bring it out of the shadows because people have been making money there in a long time. And it hasn’t really been disrupted in a lot of ways.

A.J. Lawrence:

No. And I think as someone who got very as I jokingly always say, my biggest investment thing was, after I sold my agency, back in 12 and 13, I bought a ton of Bitcoin and promptly forgot. And didn’t forget my password, thank God my pass codes. And all that I promptly forgot I had spent tens of thousands of dollars on it back then and kind of just… I had this 20 year like, “Oh yeah, this is going to be cool for my kids.” It was cyber punk stuff. It was like, “Oh yeah, 2050, this is going to be cool.” And then all of a sudden it was like, “Oh wait.” Because I would’ve sold the first time I hit a thousand bucks. So I was just really lucky that I kind of remembered in 17 when I did, but this is so different as an investment because this is like you’re investing in the main street where people are still going to spend money.

A.J. Lawrence:

If you guys are hit, if franchises in general are hit significantly beyond just a general economic cycle, everyone it has to be something truly major for it to really displace. But it is such a great diversification and what’s nice is you don’t have to be truly involved other than this support of the company. So yeah, I love this. You said like your first hire was ahead of growth and you’ve been doing it. But now that you’re looking to kind of take that transition to running the franchises, how are you building this capability? Are you pulling in people who have already done this? Like you said, there are management firms for franchises and stuff like that.

Kenny Rose:

So, we’re actually doing both approaches with this first fund. So we already have one, that’s a franchise management company. They already run over 10% of that franchise’s total location. So they know it inside and out and they handle everything. And basically they went through and cleared out the Smashburger operating team and created their own management company. And so these guys absolutely crush it. And they then on the other side, it’s in the waste management space, which as an industry. People also didn’t know this franchise and they’re going to kick themselves for not knowing that after they see what we were doing. And for a business like that, this is what… On the brokerage side I’ve helped people with for years is, what are these service businesses that don’t require the super high upfront costs or a ton of employees or inventory, or even a storefront? With something like this, it requires two to four employees per location.

Kenny Rose:

It’s one or two sales people and one or two drivers. And so when you’re looking at building out an infrastructure, that’s a much easier company to do it for. So when people see how it works, they’ll be like, “Oh yeah, you could find a nationwide sales manager or something like that.” And especially because the other franchisees in that system most often do not spend on these things. They’re like… And this is a common error in franchising, is they’re going to market and they’re like, “Well, why would I pay this guy 80,000 and I can find a guy who’ll do it for 50?” Because they’re thinking out of their personal pocket.

Kenny Rose:

And they’re like, “Oh, I can save 30,000. That’ll be great for my kid going to college later.” Versus they don’t see it as, “Well, if I spend 30 more grand, that guy I got for that is going to help me make 50 more.” And so that’s what we want to do, is over hire to build the right foundation, because that is the most critical error people do when starting a franchise, is cutting corners when they absolutely should not. You follow systems for a reason.

A.J. Lawrence:

No, I like that because I think looking at waste management, the capital investment and once again, I don’t know, franchise or the parent company or if it’s leveraged and all that, but being able to bring, spread those costs across a broader world. Yeah. All right. All right. Yeah. Just take my damn money.

Kenny Rose:

Hey, tell the SCC to hurry up, we’re getting there.

A.J. Lawrence:

Yeah. You got to go through that dance. I’m investing a few companies that are trying to do different variations of this and it is like, “Okay.” We’re talking to SCC, they’re super smart people, but slow, but I’m not doing it. Because I would’ve just hanged myself out of any consideration for saying that, but that’s me. That’s not Kenny that is amazing.

Kenny Rose:

Hey, trust me. I’m on their side because especially when new asset classes are coming out, it’s like, how do you trust and verify these things? So I see the SCC as my best friend in that case, but also it worries me how few people actually research their investments. You hear about all these different scams, especially crypto and NFTs and stuff. And it’s like, that’s kind of what SCC is for, is to make sure you don’t get robbed. Everyone says, “Oh, they’re crushing things,” until you get robbed. And then it’s like, “Oh,” that’s what they’re for. So, SCC I appreciate you.

A.J. Lawrence:

Good. What do you think helped you? Because you talked that you had this method to your madness. So you had this vision going for quite a while, but what do you think helped you the most in your entrepreneurial journey to get here?

Kenny Rose:

I’d say a couple things for one, I was fortunate enough to watch my dad be an entrepreneur. I watched him build amazing big businesses and lose it all and build up again and lose it all. And so we’ve been through the bad stuff. I’ve lived in horrible places, the living room was my room. There was time we call it these days where you got two fingers because we used plastic wear till it was down to two prongs. And then I watched my dad go from like and raising two kids and basically we lived in a one or two bedroom place like a retirement home basically. And then he went from there to built a solar company that was the number one in San Diego. And I think number eight in the country or the state. He was doing 20 or 30 million a year in sales.

Kenny Rose:

And so you see that and you’re like, the mind is a powerful tool, I can go do that. And also he kind of raise me of things aren’t given in my family. You go earn them and so as I went to go start my own business I went through very lean years too. And it’s just like, you have to go through failure and learning and just honestly bad times to appreciate it enough and learn the grit. And also just because people want to start a business and just think you make money right away. It’s like, no, it’s building a business for a reason. You don’t build a house and it’s like, “Oh I opened up the concrete bag and look the foundation is there.” It’s like, no, you’ve got to put everything into it and lay it out and pat it down. There’s a lot of steps to it and you need to be patient and learn. And so I watched patience and I learned patience. And so I applied it to building this up.

A.J. Lawrence:

Very, very cool. Now someone who’s going through it themselves. And yeah, we jokingly said earlier overnight success is really tons of time put in the grinder for years and years, doing the work to get to where that success happens, but let’s not even get to success, but someone who actually has built something and they’re all of a sudden making money and usually it’s this half a million to low seven figure business where it’s like, you can kind of do it by force of will. If you’re lucky and you have a lot of will, you can do it. But then things start changing because you have something, your day to day existence may be better off, but the complexity in keeping this going to ensure that it’s going long term increases almost through the roof. So you have this huge angst going through this multiple times with businesses. What advice would you give to someone there?

Kenny Rose:

So as they’re in that, I’m doing it but I need to keep it stage?

A.J. Lawrence:

Yeah. I’m selling left, right and center da da da or I’m coding left, right and center da da da. And then all of a sudden it’s like, oh, if you want to keep going, you’re not going to be able to keep doing that.

Kenny Rose:

So it’s funny. There’s two very different ways I view it. It’s like you need to be a combination of reckless and pessimistic. And watching my dad grow that solar business from nothing, you start off hanging door hangers. And one of the days someone opened the door and saw it and they worked for Fox News and they were like, “Oh, let’s bring him on the morning show and start talking to him.” And it’s kind of a gimmick thing. They want him to start paying for it. But he got so many calls. He’s like, “Well I need to really invest in marketing.” And so he went nuts. He would spend hundreds and hundreds of thousands of dollars on marketing. He was a sponsor for the San Diego Chargers, the pod raise one of the biggest San Diego Tribune sponsors.

Kenny Rose:

And so other people would say, this is your nut job, stop spending so much money. But he saw it as, people can’t buy from me if they don’t know about me and it worked. And so it was just, as long as you have the right value prop, it’s that sometimes you need to be careless or reckless to go get your message out there. But it’s a double edged way because you have to know that it’s the right thing. It has to be right. But then on the other side you got to be pessimistic as well. We received almost a million and a half in funding, but I still fight everyone on price. I don’t care how much money we have, is that when you start getting reckless and things that are maintaining or growing besides marketing, it’s that you don’t let anyone take you for a ride. Don’t believe everything you hear. People tend to be more a wandering eye, the bigger they get. It’s like, no, they’re usually trying to get you. Find out what their angle is and find out what’s going on here.

A.J. Lawrence:

I like that because yeah, it definitely is a situation where too much, too little. I always say it’s like Goldilocks. You have to have both sides. Yeah. You have to be able to go far for it because there’s no way you think it’s going to work except you know what’s going to work. Yeah. You have to go for it.

Kenny Rose:

And people will call you crazy and give you looks and say, “What’s going here.” I remember when I started my brokerage I’d been working in a tech sales role when I first moved to Chicago, it was a horrible company. I didn’t even include it on my LinkedIn anymore because I did not like the way they did business. But I remember I quit and the next week, my roommate who had also worked there, he’s going off to work and he just looks at me and he is like, “Are you eating ramen?” I just said proudly, “Yeah, of course.” He’s like, “Why?” I’m like, “Well, I quit my job. And I just started a business. I don’t know how long it’s going to be till I start producing.” So you got to be willing to sacrifice because I don’t think people think of that. They’re just like, “Oh, it’s going to come later.” It’s like, well yes, you have to believe that but you also have to be realistic.

A.J. Lawrence:

My ramen was peanut butter and jellies.

Kenny Rose:

Ramen is cheaper, I could tell you. I’ve ran the math.

A.J. Lawrence:

Yeah. I think it’s somewhat generational because ramen kind of came in more as I was late teenager university.

Kenny Rose:

Oh man. Yeah. You buy in bulk, you get that down to 15, 20 cents a pack. It’s tough to beat that. It may have shaved a couple years off my life, but I’ll enjoy them later.

A.J. Lawrence:

Actually. I love them raw, when they were deep frying them before they started to air baking them. When they [inaudible 00:34:11] deep frier.

Kenny Rose:

That’s funny. That’s not the first time I’ve heard that.

A.J. Lawrence:

Cuisine entrepreneurism. I love that. You’ve had this incredible vision, obviously, as I’ve been watching the clicker behind you. You have an electricity that you are pushing forward here. You are defining a lot of what people will call success in an entrepreneur, but how do you go about looking at what success is for you and how you want to create success over the long term for yourself? Not for the company, but for yourself.

Kenny Rose:

To be honest, I love building. So success is building what I envision and get to create. It’s funny, I’m quoting the departed but I think he was quoting something else, but Jack Nicholson says I’m an artist. It’s like artists like to draw. I like to build, I like to come up with ideas and think, I have a hand in most of the creative and all the social stuff. People are like, “Man, you’re so Steve, he’s hilarious.” I’m like, “That’s just me. I’m just spitballing here.” And so I like doing that stuff. So success to me is building and having fun. And I think you said I got a whole box full of ideas and notebooks full of them. I can’t wait to build.

Kenny Rose:

So eventually my idea of success is, I want extra hands and people to build with and basically be able to be like, “All right, I’ve been saving this one, take this and go build.” They can have the wine and share of the company, but I want to have my hand in helping build it and other people execute. And it’s fun for me. I’ve always enjoyed that. And so to me, it’s being able to do that and travel. That’s how I view success. It’s not a dollar amount. It’s a lifestyle.

A.J. Lawrence:

Yeah. It’s kind of creating that. Getting this was a lot of fun. So from the audience, besides obviously getting on the wait list, what should the audience do if they want to learn more about what you’re doing?

Kenny Rose:

Number one thing, yes, go the website, but we actually have a white paper you can download. It also comes too, if you do join the wait list, it’s on the initial email. You don’t even get a referral link on that first email. We’re big on education first. And so first thing you get is that white paper, go read the white paper. I actually have still been doing user interviews. So people would sign up and it’s like, “Hey, would you like to chat one on one with the CEO for 15 minutes?” I’m learning from everyone on the wait list. And part of that I’d asked, I’m like, “Have you read the white paper yet?” It’s amazing how many don’t and I’m like, “Hey, you can’t make a good investment if you don’t learn about it.”

Kenny Rose:

And so that’s the biggest thing, is go learn about it, educate yourself. We’re going to be releasing another one soon because I want people to really know all about both the franchise world as well as how FranShares works ahead of releasing the first fund. And then after that, you like what you hear, use your referral link when that comes a couple of emails later and just tell people about it. Honestly, we don’t charge fees because we co-invest. And so a big part of that is believing in that people are going to tell each other about it, grow just like you saw Reddit versus Wall Street. It’s FranShares in the world. Let’s go for it.

A.J. Lawrence:

Very cool. Well, everyone we’ll make sure we’ll have links to everything down below in the show notes and definitely in the socials, but Kenny, this has been so cool. Thank you for coming.

Kenny Rose:

Glad to be here. Thanks for inviting me.

A.J. Lawrence:

That was really, really interesting. I think in talking with Kenny, we really got into some of the concepts of what it means to be an entrepreneur without even saying we were talking about that because he’s done so much by diving into the franchise space and truly living it to bring something new out of this. I love that he had such a strong vision. So often we see cool things going on in another industry and we’re just like, “Wow, that’s cool.” I know I’ve seen tons of cool companies, but to have that strength of conviction to go, “Huh, that’s really cool,” when he saw a Fundrise six plus years ago, that’s when the company… I actually had talks with them to invest in and I did not so ugh. But he had such conviction that it wasn’t even just that they were going to be successful because they have, but that he creates something out of that concept and using the franchise world to do so is just… I see.

A.J. Lawrence:

And his ability to keep that dream moving as a broker, running his brokerage and starting franchises here, that’s a high level of complexity, but really it is this conviction. And this is something that when we get these visions of what’s possible, when we have these ideas that this is something that is worthwhile, we have to realize it is worth it to keep pushing when everything pushes back against us. But as he then pointed out, when it comes to being in transition, when all of a sudden things get beyond just what you can do by force of will, when it is this kind of growing concept and things get more complex, you have to start expanding. We’ve had other guests talk about expanding their vision, really pushing into their belief. But Kenny gave a great thing about being wildly optimistic and incredibly pessimistic and a little paraphrasing there.

A.J. Lawrence:

But the idea that when you see the opportunity, when you’re in that transition to push further and deeper and more into it, as he referenced his father with all the marketing expense early on in this thing where he had been broke. So recently into this, all of a sudden he was pushing and pushing and expanding into this growth. And yes, it did work out as he said, but that is an incredibly hard choice to make in the face of reason.

A.J. Lawrence:

But what was nice was this flip side, this pessimism of realizing your resources are finite and realizing you have to be so careful about how you use them and who you use them with, that balancing point. All right. Have a wonderful day. Thank you for listening. Goodbye. This episode of Beyond 8 Figures is over, but your journey as an entrepreneur continues. So if we can help you with anything, please just let us know. And if you like this episode, please share it with someone who might learn from it. Until next time, keep growing and find the joy in your journey. This is AJ, and I’ll be to talking to you soon. Bye. Bye.