FranShares 2025 Comprehensive
Review and Ranking

What is FranShares?

 

To avoid the financial conflicts-of-interests that are rampant on virtually every other review site, I DON'T accept any money from any outside sponsor or platform for ANYTHING (including but not limited to affiliate ads, advertising etc.). See code of ethics  for more.

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FranShares is a newer platform that offers equity investments in the difficult-to-access asset class of franchise businesses.

 

Franchises can produce steady income distribution, portfolio diversification and inflation hedging (and with significantly less risk than start up/venture-capital businesses). But traditionally they could only be accessed by very high net worth investors (who are also willing to put in a lot of time and effort)...or private equity firms.
 

Franshares is the first platform that offers all investors the ability to access this asset class (to my current knowledge). Note: some of their deals are limited to accredited investors only.

And they allow fractional ownership, so that the investment minimums are many times smaller than usual (as low as $10k versus potentially millions of dollars). They also offer a completely passive experience (so that the investor does not have to put in all the usual time and effort).

Many investors will like how FranShares focus on franchises which provide a profitability metric (such as EBITDA or net profits). And many will also like how they focus on recession resistant industries and avoid franchises with high buildout and inventory costs.

 

On the downside, there are (in my opinion) transparency issues. The pitch deck does not provide basic information required to understand the  terms/risk (and which are typically provided).  On at least one deal, the sponsor did not appear to put in significant skin in the game/co-investment (and there may even have been none). Also, accredited investors will not like the use of Regulation A+ and CF on some deals (which tend to have much higher expenses than accredited-only offerings).

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What's the latest feedback on FranShares?

 

FranShares is a new-comer to the Real Estate Crowdfunding Review. So it hasn't yet accumulated a large enough number of investors to provide meaningful survey results (which are used to gauge investor satisfaction and produce rating/ratings). Now that it's been reviewed, that will presumably change in the future. And FranShares investors will be surveyed the next time the site surveys are updated.

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How does FranShares work?

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Franchise investments can produce many desirable things like steady income distributions, portfolio diversification and inflation hedging.  And compared to startups/venture-capital, many franchises tend to have a much lower failure rate due to using a proven business model, and coming with extensive training and support (from the franchisor). Directly owned franchises also tend to avoid the daily fluctuations and volatility associated with public market business investments.
 

This asset class has traditionally been difficult to access and limited to high net worth individuals (who might put in $ millions to fund the entire businesses on their own and also supply the considerable time and talent required to run them) and/or private equity firms. 
 

FranShares allows an investor to  access the asset class with a much smaller/ fractional investment ($10,000) and a much less onerous, passive investment.

According to FranShares, there are currently more than 805,000 franchise locations in the U.S. across 4,000 brands and 295 industries. Collectively  their economic output was $815 million (in 2022).

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They say they also typically target long-term holds (10-15 years).

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​Franshares also appears to charge the sponsor money for each deal. As an example on one current deal they said they charge: "A $30,000 one-time listing fee, a $5,000 fee for each additional close following the first close, and a $1,250 monthly platform fee."​

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What are FranShares Pros and Cons?

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Franshares claims to offer widely diversified opportunities across a # of industries, geographies and business strategies. Business categories include: B2B, fitness, kids, hair care, pets, automotive, food, home services, waste management and more.

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They currently have three open deals which is fairly large for a newer site. 

Another big plus is their focus on franchises that disclose profitability metrics. Believe it or not, not all franchises disclose the necessary information to project profitability. So FranShares says they "focus on partnering with franchises that display a profitability metric, such as EBITDA or net profits, in their optional Financial Performance Representation (FPR), allowing our investors to better understand potential returns."
 

Additionally Franshare says they target recession and pandemic resistant industries. "We target essential, need-based industries known for resilience in diverse economic conditions, including past recessions or COVID lockdowns." Conservative investors will appreciate this.

Franshare also says that "to maximize ROI, we carefully avoid franchises with high buildout costs, large employee headcounts, and substantial inventory to maximize return potential."

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On the other hand, I was personally disappointed that a lot of the basic and critical information required for an investor to understand the terms and risk (and typically provided in a pitch deck) were not present. This includes the amount of co-investment (skin-in-the game), profit splits, details on debt, etc.  

There is a 300+ page contract of grueling legalese provided that does appear to provide at least some of this information. However, it's always difficult in this format to know if you're seeing everything associated with a topic (or if there's a footnote a paragraph in another section that you missed that changes everything). And, in my opinion, an investor should not have to endure such a marathon simply to determine if they are even minimally interested in the deal or not.

I also suspect many investors will not put up with this and simply move on to another deal. So I would like to see FranShares improve and change this for the future.
 

Also, after digging through this ordeal of a document on one deal, I believe I understand the waterfall.  And if so, the price appeared to be excessive (at least to me). See more in the "What does a FranShares deal look like" below.

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I also was not able to find any mention of sponsor skin-in-the-game / co-investment on the below deal. So this could mean that the sponsor does not put in a substantial co-investment (and perhaps they even don't put in any). If so, this would likely be a major show-stopper for conservative investors.

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Another downside (for accredited investors) is that they sometimes using Regulation A+ and CF (which tend to have much higher expenses than accredited-only offerings).

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FranShares Quick Pro & Con Summary

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• Advantages: Allows investments in the difficult-to-access asset type of franchise businesses (which can be a reliable source of income distributions, provide portfolio diversification and hedge against inflation), low $10,000 minimum (versus $ millions direct) and completely passive (versus lots of work direct), 3 open deals which is fairly large for a newer site, focus on franchises that provide profitability metrics and are recession resistant, avoids franchises with high buildout costs, large employee headcounts and substantial inventory.
   

• Disadvantages: Pitch deck does not provide basic information required to understand the terms/risk ( and which are typically provided), sponsor may not put in significant skin in the game/co-investment in all deals, accredited investors will not like the use of Regulation A+ and CF on some deals (which tend to have much higher expenses than accredited-only offerings).
   

• Accolades: none

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Is Investing In FranShares Legal?

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FranShares is generally available to all investors (with some deals only available to accredited investors). When investors sign up they are requested to verify their identity via Securitize.io.

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What does a FranShares deal look like?

Here is my step-by-step due-diligence on a random FranShare investment. So it may or may not be a typical investment.

I'm not an attorney, accountant nor your financial advisor. So always consult your own financial professionals before making any financial decisions. This is just my personal opinion and could contain errors, so use at your own risk.

Every investor has a different risk tolerance, comes from a different financial situation and has different financial goals. So an investment that looks great to one investor will look terrible to another (and vice versa). And by the same token, there is also many ways to due-diligence (and no one "right" or "wrong" way"). This is my method, and others will do it differently. Also I'm a very conservative investor, so something that's I feel is too risky could be a perfect fit for someone else who is coming from a different place.

This investment is the Everbowl Texas Franchise Fund (which is to "develop 24 Everbowl franchise locations throughout Texas").

Asset class
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​My first step is to make sure that the asset class and strategy even make sense for my portfolio. (If you don't know how to do this, you can see how I do this in The Conservative Investor's Guide to Due Diligence). Let's say it makes sense for my portfolio and jump in.

 

Sponsor
 

My next step is making sure that the sponsor has at least one full business cycle of experience managing funds in this asset class and with little to no investor money lost. That's because I don't want them learning expensive lessons with my dime.

 

The pitch deck says that the sponsor is Justin Sloan who is the CEO of Sloan Capital.

 

1. No information is given on his track record of managing 3rd party money investing in franchises (nor even AUM of funds in this asset class). In general, I find this is usually a "tell"/sign of a green sponsor.

2. The website for Sloan Capital is this: https://www.sloan-capital.com/texas and doesn't show many of the things that experienced sponsors typically show  (like AUM, track record, etc).
    

So I strongly suspect the sponsor does not meet my minimum requirements. And if so, then that makes this deal an easy "no" for me. On the other hand, a different investor who is not as concerned about cycle risk and sponsor risk, will be fine with less experience. 

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Skin in the game

 

As a conservative investor I typically want to see 5 - 10% co-investment by the sponsor to offset the fact that the promote structure incentivizes a sponsor to push the risk envelope. (I will accept less if they are a new sponsor: as long as it is a lot of money to them). I measure the  co-investment by dividing skin in the game by the total equity. 
 

It's also important that the co-investment be in cash and on same terms as the investor. If not, the deterrent effect is not as strong.

Also, some sponsors “cheat” and give the appearance of more skin in the game than they actually have. So I want to know if any of it is actually a GP stakes investment.

Normally the co-investment is specified in the pitch deck which makes it easy to see and analyze. That's not the case here. And you have to weed through a 300+ page dense, legal document to try to find answers to things like this.  In my opinion basic information required to understand the terms and risk provided in the deck (and I hope FranShares changes this in the future).

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I could not find  any mention of co-investment in the contract. Maybe it's there and I missed it (and someone interested in this deal will want to dig into it further). Either way: Anything less than 5% is an easy dealbreaker for me. 

On the other hand, a more aggressive investor generally wants to incentivize the sponsor to push projected returns as high as possible. And when they do, they will prefer the alignment that comes from lower levels of skin in the game than I can personally tolerate (and so will have a different opinion on this).

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Debt

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To minimize the chances of default and losing 100% of the investment I like to see conservative use of debt. I also want to see them eliminate refinance risk by locking in long-term debt (and often like to see fixed rates to eliminate rate risk).

Normally the debt is specified in the pitch deck (along with a full proforma) which makes it easy to see and analyze. That's not the case here (and there seems to be only a very crude proforma). In my opinion, this is insufficient transparency and I would like to see FranShare improve this.

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I also could not find any mention of debt in the contract (nor even a "real" proforma. Maybe it's there and I missed it (and someone interested in this deal will want to dig into it further and make sure they can live with the terms). 

Management Fees/waterfall

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Normally the management fees and waterfall are specified in the pitch deck (along with a full proforma) which makes it easy to see and analyze. That's not the case here. In my opinion, this is insufficient transparency and I would like to see FranShare improve this.

After digging through their 300+ page contract ordeal, I believe the following describes the management fee:

 

• 8% management fee off of gross sales (minus discounts, loyalty points, and third-party fees).

In comparison the typical private equity deal charges a 1%-2% management fee (on subscription amount/equity).

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But without a real-proforma there is no way to translate this deal's fee into % of equity (which is more standard and comparable). So it would be nice if FranShare estimated the management fee based on equity.
 

I also believe this is the profit waterfall:
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• Distribution cash from operations:

  1. No preferred return paid to investor.

  2. No return of capital paid to the investor.

  3. The investor gets 40% or profits and the Manager (presumably FranShares) gets 60%.
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• Cash for a capital transaction / sale:

  1. No preferred return paid to investor.

  2. The investor receives 100% of their contribution back (i.e. return of capital).

  3. Then it's split 40% investor/60% sponsor.

 
In comparison the typical private equity deal, pays investors an 8% preferred return and then a 80% investor/20% sponsor split.

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If accurate, then in my opinion this deal appears to be extraordinarily more expensive. And if that's right, then I'm not personally willing to pay a sponsor this.

The other danger with overcompensating a sponsor is that it financially incentivizes them to push the risk envelope. And as a conservative investor, this is the opposite of what I want.

On the other hand, an aggressive investor is primarily focused on high projected returns. And in the current market, the only way to do this is usually through pushing the risk envelope. So such an investor is usually aligned with this kind of compensation scheme (and many will have invested in a number of these types of deals).

 

Had the investment all my initial checks, I would have dived in further to check out the sponsor, the property itself, the projections, etc. To learn how I do those things, check out The Conservative Investors Guide to Due Diligence.

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Where can I discuss other FranShares deals?

You can do this with thousands of other investors in the private investor club. While the club is free, membership is restricted to investors who have no business connections to sponsors or platforms. Also, all members must agree to keep all club info confidential by signing a nondisclosure agreement. Click here to join or get more info.

 

Who are FranShares Competitors?

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Here are the reviews and rankings for other sites (which also provide equity investments...most of which are real-estate related but some involve business investments).

 

• CrowdStreet

• 1031 Crowdfunding

• Real Crowd

• ArborCrowd

• Carlton Crowdfund

• Share States

• Roofstock

• Roofstock One

• SBRE Funds

• First Real Fund

• Realty Shares

• Equity Multiple

• Realty Mogul

• C.K. Mack

• Lending Home

• Holdfolio

• CityVest

• Prodigy Network

• Instalend

• Cadre

• All other sites (ranked and reviewed)
   

How do I invest in equity and/or debt?

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Looking to learn more about real-estate investing?

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• What are the 4 investment strategies? (Part 1: core and core+)

  • What are the 4 investment strategies? (Part 2: value-added and opportunistic)

• Should I invest in residential or commercial real estate? (Part 1: residential)

  • Should I invest in residential or commercial real estate? (Part 2: commerical)

• What is the difference between equity and debt?

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Related:

How to pick? Check out our step-by-step guide.
 

• The quick guide to picking conservative real-estate deals
   

• Top 25+ accredited investor sites (ranked and reviewed)