The benefit of separate LLCs for each property with the formation costs, franchise tax costs, and accounting and tax prep costs of a single LLC.

Once in the office, I pay a good chunk off the top of the remaining 2.5% to C21 for franchise and marketing fees. 

One thing that can save you money in the long run is establishing a Delaware Statutory Trust (DST), which can offer you a unique twist on the liability benefits of the LLC and infinite scaling but does not hit you with the annual $800 franchise tax in CA.In your situation I would recommending sitting down with an experience attorney and CPA to get their advice on your situation and future goals.

However, A yearly Franchise Tax return needs to be filed indicating no franchise tax is due 

You may want to consider that as an alternative retirement investment vehicle, it has number of advantages over an IRA LLC:Custodian is not required (eliminate all custodian fees)Get checkbook control without the need for an LLC (trust is used as a vehicle to hold 401k plan assets), you have full control over the plan assets as trusteeAvoid expensive CA Franchise tax of $800/yrExempt from UBIT on leveraged real estate Ability to take a personal loan from your 401k, any time, for any reasonContribution limits are 10X higher than an IRA (up to $61,000 for 2018)Tax-free investing using Roth sub-accountAbility to correct a prohibited transaction and moreRegarding your questions about getting a non-recourse loan: this is an asset-based loan so the age of an entity is irrelevant.

  Hi All,   I was just wondering if any of you guys/gals have any experience in exchanging a 1031 rental property into a business (let's say a franchise).

For the most part, and if you have a branded property (think Marriott, Hilton, etc), you'll have 7-8% paid to the franchise. 

My other thought is buy the franchise and then use those profits to purchase real estate. 

@Evan DerheimKeep in mind you will need to register the LLC in CA which has an annual minimum franchise tax if $800 plus WA state as a foreign LLC.

The Howey test is used for franchise agreements, partnership interests, pension plans, and bank instruments...mostly.The form of the agreement and what parties call it is irrelevant, courts and regulators will look at the substance of the contract.For notes, the Supreme Court created the "family resemblance test" under Reves.