FranShares is the next big fractional investment platform. They allow accredited investors to buy into a portfolio of franchises and make money as their value increases. Franchises have long been a tactic of the wealthy to generate consistent and high passive income. Jimmy Buffet has become one of the wealthiest musicians in history because of his extensive use of franchising. Franshares promises a well diversified portfolio of high quality and recession resilient franchise locations. Their strategy is highly data driven and the focus is on industries with consistent sales and that operate as a hedge agains inflation. Specifically, they choose to invest in the fitness industry as well as in hair and child care. These industries continue to profit even when the economy goes under and they offer an easy way to match increases in inflation with profit. Additionally, the franchise market generates huge ammounts economic output. There is almost $800 billion generated in the US alone.
How you make money
Investors on Franshares make money in two ways. The first is through the increase in franchise value over time. As the franchise ages they usually make more in profit, the land they are situated on becomes more valuable, and the worth of the real estate that the franchise operates in can also increase. In addition to the raw value of the franchise, an investor on Franshares makes money from distributions. Profits from operations of the business are distributed 12-18 months after a “ramp-up”. Some of the industries such as hair and child care make an average net profit of over $100k per year which then trickles back to investors as distributions.
How Franshares makes money
Franshares makes money from a 1.5% management fee as well as a variable performance fee. They use the management fee to pay for the basic running costs and the performance fee as a bonus to incentivize fund performance.
Is it safe?
Franshares is currently launching its first investment portfolio. They have 32k people on their waitlist and they're offering shares for as low as $500. Initially, their investment portfolio will have no management fees associated with it. The Franshares core team has experience in consumer base growth, hedge funds, and the CEO even wrote his own book on franchising.