[co-author: Irena Juras]
The global recession has been challenging for most of us. However, one of the silver linings of the global recession is that certain franchisors are focusing on immigrants as franchisees. If you have the funds, and you meet a franchisor's criteria, you may be able to invest your way to legal permanent status (a "green card") for you and your family.
In franchising, "franchisors" give "franchisees" the right to use the franchisor's brand name (such as Pizza Hut®, Holiday Inn® and Subway®) and their systems, in exchange for the payment of franchise fees and royalties. Franchisees are not on their own in terms of developing their brand names, their concept and their systems. The franchise system has already developed the brand name recognition to get customers in the door and has developed and refined the concept and the systems to please customers once they're in the door.
Due to the scarcity of capital from traditional sources, such as banks, investment accounts and retirement funds, the traditional market for new franchisees has been unavailable. As a result, sales of new franchises have generally been down significantly. In 2011, United States immigration policies were modified to facilitate and expedite processing of EB-5 Investor Visa Program[i] applications for immigrants investing capital and creating jobs in the United States. Strategic franchisors have realized that the immigrant community is an untapped entrepreneurial, highly-qualified talent pool and are trying to attract immigrants and making their policies and operations more friendly to immigrants.
Establishing a new business in the United States is difficult for any entrepreneur, regardless of citizenship. Buying into a franchise system, with a proven concept, an established brand name, operational procedures and marketing practices, smooths the way and increases an entrepreneur's likelihood of business success. As Ray Kroc, the visionary behind the McDonald's franchise system, said, franchising allows you to be in business for yourself, not by yourself. For immigrants, who may lack familiarity with United States business and marketing practices in an unfamiliar country and may face cultural and language barriers, buying into a franchise system enhances their likelihood of business success. An established training program, a written operations manual, leasing assistance, franchisor consultation and support and the opportunity to obtain advice and support from other franchisees (including other immigrants) are valuable resources, particularly to immigrants.
In order to qualify for legal permanent status, the franchisee has to invest in a new commercial enterprise. A new commercial enterprise includes a company formed after November 29, 1990. An investor no longer has to "establish" the commercial enterprise; he must only "invest" in a new commercial enterprise. A commercial enterprise in existence prior to November 29, 1990 will be considered new if: (a) it has been restructured or reorganized so that a new commercial enterprise results or (b) it has been expanded so that a substantial change in the net worth or number of employees has occurred. Substantial change means a 40% increase in either the net worth or the number of employees. The 40% change can be reached by counting all the capital contributed by other investors.
The key downside of being a franchisee is the lack of independence - the inability to decide how to run your business and how to spend your money. Some franchisees abhor the requirements of the system, while others welcome the direction. And, of course, there is no guarantee that a franchised business will be successful or more successful than an independently-established business. It is important to do your homework to investigate the franchise system in which you are considering investing, its management team, its historical performance and its products and services. It is also important to make sure that a particular franchise system is a good fit for your skills and interests and is consistent with the capital investment and job-creation requirements of the EB-5 Investor Visa Program.
Investing in an immigrant-friendly franchise system may be your ticket to business success and the American dream.
Irena Juras is the founder and managing member of the Juras Law Firm, PLC. Irena focuses her practice on Immigration Law, International Law and Bankruptcy Law. Her cross-cultural, multilingual background and legal training and experience make her uniquely qualified to represent U.S. and foreign clients in immigration matters and cross-border transactions.
[i] The EB-5 Investor Visa Program enables an immigrant and his family to come to, and remain in, the United States if he or she invests $1,000,000 ($500,000 in rural areas and areas with high unemployment) in a new business and creates 10 full-time jobs for United States citizens or legal residents (excluding the immigrant and his family). Through 2012, up to 65,000 jobs and an estimated $3.1 billion of investments had been made in through EB-5 Investor Visa Program.
The E-2 Investor Visa Program also enables an immigrant and his family from over 80 treaty countries (such as Canada, the Czech Republic, France, Germany, Israel, Japan, Romania, Australia, U.K. and Senegal) to come to, and work in, the United States for one to five years (depending on the treaty country) if he or she invests a substantial amount in a business that he or she will develop and direct and that will generate significant income or have a significant impact in the United States. However, an E-2 Investor Visa must be renewed every one to five years (depending on the treaty country) and the criteria are more subjective than they are in the EB-5 Investor Visa Program.