When you choose a business in the franchise format to apply for the E-2 investor visa, you are choosing a safer and less hindered path, although this does not imply that it is the only way to access an E-2 visa. There are 3 business models for the E-2 visa.
When a person comes from a foreign country and wishes to invest in the US, they find themselves with a business culture and an economic scenario radically different from the one they were used to operating. The way of acquiring customers, the dealings with suppliers, the way in which a business is operated based on technology, are totally different in the United States.
In fact, our initial recommendation is always the same: the first business that gives them all the necessary knowledge on how to operate and that also gives them the status of legality with the E-2, should be a franchise. Then, once legally established, and already understanding how companies work in the US, we encourage our clients to diversify their operations and establish other business models, because even in diversity you also find economic security.
Benefits of Acquiring an E-2 Franchise
When you work with a franchise, it gives you a huge support system in all aspects of the business. This is why franchises are the best businesses for an E-2 Visa. Generally, a good franchise usually offers:
In addition, the franchisees who operate that franchise will also provide you with their help and knowledge gained over the years to make your daily operations less complicated. If you win, so do they, so there is a climate of friendship and family that is very nice among the franchisees.
All these components are key to being able to succeed in a business in the US when applied to an E-2, because it reduces the learning curve and with it the investment risk and increases the success rate in good franchises. But we emphasize that it is important that the franchise is suitable, because, as with everything, there are good franchises and bad franchises, and our job is to always guide them with the good franchises that help them get and keep their E-2 visa.
Why are franchises safer to apply for the E-2 visa?
Unlike other business models, franchises are safer for the foreign investor when it comes to applying for the E-2 investor visa, and this is because franchises are audited by the U.S. Federal Trade Commission, which allows our clients to have a much more predictable and clearer picture when choosing and operating a profitable business.
Because they are audited, franchises must generate a Franchise Disclosure Document (FDD) every year. The FDD is a circular document where franchises, after being examined, expose their annual financial figures, present whether or not they have lawsuits and bankruptcies, show their franchisee retention numbers, observe how many units opened in the year and how many closed, among several other issues.
Finally, the E-2 visa requires that the investment in the U.S. be active, that is, passive investments do not qualify for the visa. Franchise businesses are exactly that, they are a company where, depending on the way in which the partners have been structured, one, several, or all of them, must be actively and in person in the business exercising some type of leadership for it to function correctly. Likewise, for the approval of the E-2 visa it is required to be able to demonstrate that the business in which you are investing is real, and one of the simplest and most effective ways to demonstrate this is through the signed franchise acquisition contract, where it is proven that the foreign investor effectively placed his money in a U.S. company that has been operating throughout the U.S. territory for years.
What Franchises Are Good for the E-2 Visa?
Franchises that need employees (1-2 minimum) are good franchises for E-2.
This is one of the most important parameters for applying for an E-2 visa. Immigration officials usually take this component as one of the most important. When immigration entities are reviewing your visa application, they are analyzing whether the investor’s business stimulates the U.S. economy. That is why the business “should not be marginal”. What this means is that the business should give money to support the family and employees. Now, this doesn’t mean that employees all have to be hired from the start. There are strategies and ways to file your file without any employees or with fewer employees. Immigration officials understand that when a business is operating, it does not start with all employees. So good franchises for E-2 are going to need you to hire staff.
Contact us if you want to know more about how to hire your employees.
Franchises with strong financial figures are key to E-2 approval.
One of the most relevant issues when one is analyzing a franchise is to see and understand its articles 19 and 21 of the FDD. Article 19 will give us the financial figures of the franchisees that are operating and sometimes the numbers of the same operations affiliated with the franchisor that are operating.
Good franchises for the E-2 visa will have an extensive description of their financial statements in their Article 21. This FDD article is also important because it shows us the franchisor’s financial situation, that is, they will explain how much money they are receiving, where they are generating their income from, and what their biggest expenses are. For this reason, it is important to analyze it in detail. Sometimes good franchises can have negative numbers on their Article 21. When you see losses in their financial statements, do not dismiss them from the outset, because those losses may have a logical explanation, for example, the franchise seeks to lower its taxes or is making significant and aggressive investments, therefore, they may present a loss in its financial statements. Now, if there is no logical explanation, you must be careful.
We educate our clients about Articles 19 and 21 of the FDD. We give general guides and tools on how to analyze these important parts.
Franchises that work with foreign investors are good franchises for an E-2 Visa.
It is important to emphasize that not all franchises work with foreign investors. The most common reasons are because they have had bad experiences with some foreign franchisees, because they are unaware of the process, and/or sometimes because the immigration process delays the time for the franchisee to operate their territory.
Because we have good relationships with franchises, we have sometimes been able to change the franchise’s mind and get them to accept foreign candidates. Many times we have been contacted by clients because no franchise took them seriously or did not answer their messages. When they work with us that situation changes drastically, since franchisees know that we know how to work with foreigners skillfully and we have a fluid process that disqualifies bad candidates for a franchise. That is why it is important to be advised by a consultancy that has experience with foreign clients. It follows that the best franchise for an E-2 visa will be the one that accepts you into its own franchise system.
Franchises with little or no litigation and bankruptcies are important to have access to a good franchise and an E-2 visa.
The beautiful thing about franchising in the USA is that if a franchise has had a legal or financial problem, it will be detailed in its FDD. This information is specifically found in articles 3 and 4, which will detail the existence or not of any litigation or bankruptcy that the franchisor and franchisee have had. Therefore, good franchises for E-2 will have either very little or no litigation and/or bankruptcy. Now, everything is relative, because if a franchise has 30 years of operation and only 2 lawsuits that were 20 years ago, I wouldn’t take it so seriously. But, if a franchise has 2 litigations and/or bankruptcies in the last year and they have been operating as a franchise for 2 years, this is a red flag.
Established allowances (more than 25-50 units) will give more security to both you and the immigration officer reviewing your E-2 visa file.
A good franchise for the E-2 Visa is going to be a franchise that is well established and already has a minimum of 25 – 50 franchisees operating. This is because the model has been proven and they can validate how the current owners have fared. Also, there are benefits to joining a small franchise of 25 – 50 franchisees operating. The reason is that usually the best territories are available, there is more flexibility in how to operate, there is usually much more union between franchisees because they are smaller. The other relevant component is that the franchisor will spend more time with you. In some industries, the name of the franchise is important, especially the food and gym industries. But in most industries, the name doesn’t matter as much.
Franchises with a location/office/warehouse are the best franchises for E-2 approval.
One of the reasons we recommend is that the franchise or business has a retail location, office, or warehouse and this is because the officers take into account lease contracts and other large contracts such as the purchase and sale of the franchise. These contracts are usually one of the key documents for E-2 visa approval. There are some franchises that their business model does not recommend that you have a premises or office. We know strategies that can help you with this type of franchise, however we recommend franchises that already include having to operate from an office or retail space.
Franchises that have at least an average investment of about $120,000 USD are solid franchises for an E-2 case.
We recommend franchises that have an initial investment of $120k – $150k USD. Now, this is not a magic number. Since we have some clients who invest just under $120k USD and are approved, although it should be noted that the emigration process will be a little riskier. It is important to analyze and have a good immigration lawyer who knows how to present this type of case.
The case will be extremely risky when the franchise has a total investment of $30k – $60k USD already with all expenses, both the franchise fee and all the costs associated with operating the business. There the risk is exponential and the probability of approval is very low.
So if you are looking for a good franchise for the E-2 visa, you should look for franchises that have a total investment of $120k – $150k USD.
Which Industries Are Best for an E-2 Visa?
All of these industries are franchised in the United States, and they still have all of the previously mentioned components that make franchising good for E-2. All of these businesses have employees, you’ll need some sort of business location, and they have good numbers (the good franchises in these categories). All of these categories have subcategories and branch out even further.
In the United States, every business can be good as long as there is planning, leadership, and enough capital injection to sustain a successful launch. The important thing is to know where those opportunities are in the markets. One of the ways to find these areas of opportunity is through market research and analysis. We use software and databases that allow us to understand the most significant areas of opportunity and help us conduct demographic studies in specific areas. An example would be this demographic study we did of a franchise territory that our client was prospecting. Creating comparative studies can help us identify the best industries if you want to apply for an E-2 visa.
Professional Services Franchises for E-2 Visa
Professional services franchises are common businesses for foreign investors, as they are not very difficult to set up and in general are not usually as high an investment. The average of setting up one of these businesses with an office is approximately $100,000 – 150,000 USD. Which fall into the “good range” for an E-2 visa. Usually these businesses operate out of an office which is good for the investor visa, as it requires a lease agreement. Additionally, these businesses can start with 1 or 2 employees, which is ideal for an investor visa. These businesses have good profitability and relatively lower costs than other businesses. There are even professional services franchises that are tuned for Hispanics in the United States. The two most common for Hispanics are tax deductibles and insurance franchises.
The range of professional services is quite wide. Here are some examples that you could fit into the category of professional services franchises for E-2 visa.
Business Transfers for E-2 Visa
Buying an existing or ongoing business is another way to apply for an E-2 visa. It can be considered a less risky type of investment compared to starting a business from scratch.
Benefits of Acquiring an Existing Business for an E-2 Visa
Why are transfers not so safe to apply for the E-2 visa?
When you apply for an E-2 visa, you must be extremely careful in the investment you make, because that investment is what will provide you with your legal status, that is, it will be what will allow you to live legally in the United States.
What usually happens with this type of business transfer is that they do not always have audited and reliable data. It is a common practice that, in business transfers, the former owners do not provide all the complete information, or do so by omitting certain details. And the important point here is that there is no state or country agency that audits and verifies the authenticity of the information, and this is key for someone who deposits their money in a business that they do not know, in a foreign country and different from their own, because if the company does not work properly and presents losses in a consistent and considerable way, the E-2 visa may be at risk and so may the stay in the United States.
Unlike in the United States, franchises are monitored by the FTC (Federal Trade Commission), which is a government entity that governs and regulates franchises.
On the other hand, the new owner is not offered a support system so that he can train, know the market, understand the customers or negotiate with suppliers and that is an important point to take into account when one is investing in a country that he does not know well.
What we have also seen happen a lot in some E-2 visa business transfers is that the employees and/or customers are loyal to the existing owner. Which can be a risk that one takes when acquiring an E-2 visa business.
Another important component is that usually, if the transfer is “very accessible” it is because the business is doing poorly as well, if the business is very good the figures will rise quite high. Which makes it inaccessible. There are people who can turn these situations around and turn a bad business into a good one, but there are people who turn a very good business into a very bad one. That’s why E-2 visa transfers can be a bit riskier.
Another thing to be careful about in an E-2 visa transfer is that the business does not have pending litigation, large debts, and/or problems with large suppliers or customers. Many times not even a financial or bank statement can prove this fact. Likewise, since there is no one to regulate this, you can be surprised by some of these problems even years or months after the acquisition of a business since sometimes these problems are only known to the owner. Many times owners do not disclose this type of data to sell their business at a good price.
Business from 0 for E-2 Visa
Starting a business from scratch represents a huge challenge for a foreign investor, although it can also bring great benefits.
Benefits of opening a business from scratch in the U.S. USA
As a boss and owner, in your business you have a wide margin of maneuver to choose which days to operate, at what time and format, you can manage your own agenda, give the company the name you want, you can determine how the marketing will work, the packaging of the product, how it will be distributed, etc. To summarize, owners will act in the market based on what they determine is best to run and grow their business.
Why are businesses from scratch not so safe to apply for the E-2 visa?
In order for the new owners of the business to have their entire business structure and strategy oiled, in order to receive profits, they will have to go through a learning curve that will involve the loss of two fundamental resources, time and money. This scenario is riskier if we consider that they are investing in a foreign country where they do not know the market.
Of course, as the months go by, entrepreneurs will learn from their mistakes and will probably be able to maximize their profits.
The problem is when people have no margin for error due to lack of time, money or immigration issues, because if the business does not work, the E-2 investment visa cannot be renewed and the stay in the US is at risk.
What are the benefits of processing an E-2 visa with a business from 0?
The benefit of starting a business from scratch with an E-2 is that you don’t have any franchise fees that you have to pay. Here you depend on yourself, since you have no accompaniment or guidance on what the best path is. Many entrepreneurs and investors like this path, since there is no one to tell you no or that it is right or wrong. The satisfaction of innovating your own brand is something also valued by entrepreneurs. Although sometimes market penetration can be a little more difficult. Another benefit of applying for an E-2 visa with a business from 0 is that you can start with low fixed costs since you have to build everything from 0. This isn’t necessarily a bad thing since you can scale your business little by little.
