What Are The Benefits Of Investing In A Franchise?

Written by: Jack Findaro
Last Updated by Facundo Bermúdez : May 26, 2022
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Foreword

Our focus at Visa Franchise is to help individuals find the franchise business investment that most closely aligns with their investment, business, and lifestyle goals. In particular, we work closely with many foreign nationals that are moving to the U.S. through a franchise investment that qualifies them for an EB-5, L-1, or E-2 investor visa.

While most of our clients have been to the U.S. many times and maybe quite familiar with the U.S., they quickly learn that visiting the U.S. as a tourist or student is much different than successfully investing, opening, and operating a business. For this reason, Visa Franchise helps our clients with finding their ideal franchise business with demonstrated experience in owning and operating businesses within the U.S.

The U.S. is the World’s Most Competitive Business Environment

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One of the U.S. economy’s biggest advantages, when compared to the economies of other countries, is the ease of doing business. Necessary steps to launching any business such as creating a company entity and opening a bank account can be completed in as little as 24 hours. Additionally, tax and labor laws generally favor business owners significantly more so than compared to other countries with tax and labor laws.

These factors, in addition to various others such as a highly educated workforce and overall entrepreneurial culture, make for a robust and competitive business climate that incentivizes individuals to open businesses in the U.S. While these characteristics are positive for the economy overall, it increases the level of competition that a business owner faces.

Visa Franchise strongly advises against individuals looking to open their own independent, non-franchise business to obtain an EB-5, L-1, or E-2 investor visa. Instead, the vast majority of our clients elect to invest in a franchise investment for their investor visa as they understand the overall support a strong franchise partner offers helps decrease the risk of their business failing in such a competitive business environment.

Benefits of the Franchise Business Model

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Simply put, a franchise is the practice of the right to use a firm’s business model and brand for a prescribed period. There are a host of benefits that come with a franchise business that an independent, non-franchise business does not have. Included amongst those benefits are an already established business model in the U.S., brand recognition, franchisee community, and all the support that a franchisor offers to their franchisees.

While it is never possible to guarantee a business investment will succeed, all of the factors listed above help decrease the risk of the business failing. We will explore in detail the various benefit characteristics of franchise businesses. In the case of unfamiliarity with franchise terminology, this glossary can help.

Established Franchise Business Model

One of the principal reasons individuals decide to invest and open a franchise business instead of attempting to open their own independent business is the ability to invest in a concept and business model that has already been proven in the U.S. market. The fact that the business model has already been proven helps to decrease the risk of the business failing. For our foreign national clients that are looking to move to the U.S. through an EB-5, L-1, or E-2 franchise investment, what is especially important is that the business model has been proven within the U.S. market. It is well known that every country around the world is different due to the varying laws and regulations.

U.S.-based franchises know how to navigate the local permitting and labor market. Additionally, a business or franchise that might work very well in either Brazil, Turkey, or Mexico, might not work well at all in the U.S. or another market as every country’s business environment is different. Furthermore, consumers have different tastes and customs depending on the market. A franchise that is already established within the U.S. can help its franchisees with attracting and keep U.S. consumers and clients. This knowledge of the U.S. market helps to decrease the risk of a business failing due to a lack of knowledge of U.S. regulations, consumers, and their tastes.

Established Franchisee Network

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Another significant advantage to investing in franchise business as opposed to an independent business is the ability to utilize the network of franchisees. Many franchises help facilitate communications between all of the franchisees within their franchise system. The franchisees then communicate with each other directly to pick each other’s brains and share ideas about what is working and not working for them in their cities or markets.

The collective knowledge helps grow the sales of the whole franchise system. In particular, the sharing of marketing strategies and product offerings can help franchisees quickly grow their sales. By comparison, independent business owners can only rely on themselves for improving their marketing and sales or hire expensive consulting firms to provide support.

Additionally, before investing in a franchise a potential franchisee can meet or speak with many existing franchisees before making their decision as to whether or not to invest. Normally the franchisees are quite open in sharing their experience within the franchise, including both the good and bad aspects. This helps a potential franchise business investor obtain a very intimate understanding of the franchise business, including how their day-to-day schedule will look like, before needing to commit to the franchise. Independent businesses in particular do not have this advantage, so an investor starting an independent business cannot know for certain how much time and energy they will need to spend on growing and building the business.

As an investor, it helps to know exactly how much time and money will need to be spent working in the business before committing to business investment. For this reason, we at Visa Franchise developed a framework to help our clients figure out what type of business would best suit them before they begin speaking to any franchisors or franchisees.

Brand Recognition

Any business benefits from having local customers and clients already be aware of its offerings. Franchises typically have this distinct advantage wherever they open, even if it is in a new territory. When the local market already knows about the product or service offering, it becomes much easier for a new owner to quickly gain sales or clients as long as the franchise has a good reputation.

Review websites such as Yelp that have search engine optimization also help to greatly enhance a franchise business’s visibility. Independent, non-franchise businesses typically start with zero brand recognition whenever they open in a market as by definition the brand is new. In addition to having instant brand recognition, depending on the business model a franchise might already have relationships with large corporate customers and organizations. A new franchisee is typically able to tap into these relationships that have already been established by the franchisor or by franchisees in other markets.

Ability to Grow and Scale the Business

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Most franchises like nothing more than to have their franchisees be as successful as possible and continue to grow their sales alongside the brand. Franchises by their model are meant to be easily scalable. This means that over time, as a franchisee gains success through higher sales in their market, they are normally able to expand into nearby markets with relative ease due to the development guidelines that a franchisor has created. This is especially attractive for entrepreneurs that want to be able to establish and grow a business in such a way that they can eventually spend less time on the business and instead manage the business through a manager or managers. This enables the owner to have more free time to focus on other investments or areas of their life.

Support of the Franchisor

Without a doubt, the support that a franchisor provides can prove invaluable to the success of the franchisee’s business. A franchise with supportive management helps its franchisees with almost everything one could think of, including site selection, lease negotiation, development, training, marketing, hiring, and all sorts of operational support once the business opens.

Foreign nationals that are moving to the U.S. through a franchise investment need all the support that a franchisor provides. Because the process can be complicated for an individual that is unfamiliar with U.S. regulations. Especially as they pertain to permitting, lease contracts, and labor law. For these reasons, we at Visa Franchise actively look for franchisees that provide strong support both before and after the franchisee opens their location. Below we outline in detail significant areas where a franchise helps its franchisees.

Location, Location, Location

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The location can be one of the most important factors in determining the success or failure of the business. Every franchise has its process for site selection. But many adhere to general principles when looking for suitable locations for their franchisees.

Sophisticated franchises, working alongside commercial realtors, identify locations in areas where the business has an increased chance to succeed. They typically look for key demographic indicators such as population density. Also, median household income, and the median age of the population to identify target areas for a location. Once the areas have been identified, many franchises will also look at the proximity of complementary businesses as well as local competitors to find the best available locations.

Once identified, a franchisee will be able to see firsthand the different locations, prices per square foot. And other aspects of the properties before deciding which location is their preference. Not every franchise is dependent on finding an ideal location to succeed. However, some industries such as restaurants or concepts reliant on high foot traffic see substantial sales increases when they are located in an easily accessible and highly visible location.

Signing the Lease

Once they define the right location, the next step is to negotiate and sign the lease.


The franchisor’s expertise, knowledge, and experience can be incredibly useful in helping to negotiate a lease. Also, create more favorable terms for the franchisee.



One of the goals of the negotiation is to agree on a monthly rental amount. This amount should not be too high for the business. When a fixed cost, such as rent, is too high for sales, it hinders the success of the business.

Sometimes, the franchisor may even negotiate a period during development where the franchisee does not have to pay rent. This is rent abatement. He may also receive money from the landlord to help develop the premises. We call this tenant improvement. This is a great option because it saves the franchisee a considerable amount of money. Sometimes, the franchisor is even willing to guarantee the lease. Which can significantly reduce the rental deposit required from the foreign investor. For foreign nationals with no credit history or assets in the United States, having a franchise with an established track record can be the difference between the landlord accepting or rejecting the franchisee’s lease offer.

In addition, having a signed lease is of particular importance for individuals and families applying for an E-2 investor visa. A franchise that has a business model focused on business-to-business does not have to worry about this step.

Site Development

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Once a lease is signed, the next step is to develop the location.

The franchisee must then hire contractors and architects to complete the development phase. Next, the business can finally open. Franchisors assist in this process. They make available their network of contractors and architects who have worked with them or other franchisees in the past. These contractors and architects are already familiar with the requirements of the brand. By relying on them, the franchisee saves time and money. These third parties have a strong incentive to do a good job for the franchisee. Because they know they will continue to receive more referrals from the franchise for working quickly and efficiently.

In addition, franchises usually have a development checklist for milestones and permits that must be obtained during the development process. So that, the development of the location can be completed as soon as possible. This allows the owner to begin generating revenue from their franchise unit.

Hiring of Employees

Attracting and hiring the right employees is crucial to the success of many types of businesses.

Franchisors know better than anyone what to look for in potential employees that a franchisee will need to hire. Many franchisors either actively help in the hiring process. Especially when a franchisee gets started or provides thorough guidelines for what a franchisee should look for in their employees.

For foreign nationals who might be unfamiliar with the U.S. labor market or with the interview process in general, this support is vital. The support helps them find and hire the right employees for their business.

Training

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Training is one of the biggest differentiators between investing in a franchise and opening an independent business. After opening the independent business, the owner-operator must learn everything on his own. However, a franchise business offers comprehensive training to its franchisees. So, they have all of the information and tools at their disposal to operate a successful business. Typically, this training takes course over multiple weeks before the franchise even opens.

Once the investor opens his franchise business, he can receive strong ongoing operational support. Support is provided by both the franchisor and franchisee partners. The training usually covers both the franchise owner as well as the employees that they will hire. Franchise business investors appreciate knowing that they are not in the business all by themselves.

Lower Costs Through Vendor Relationships

A very tangible benefit of investing in a franchise is the cost savings to the franchisee. Especially from the prices negotiated by the franchisor on behalf of the entire franchise system. The overall cost savings are covered in detail in this article. Typically, a franchise can gain lower prices from vendors and equipment suppliers. Because due to the negotiating power that comes with a large franchise system.

Franchisees pass on the savings when the franchise structure is appropriate. Because they would buy directly from the vendors. These savings can even offset the royalty fees and the franchise fee that a franchisee pays to the franchisor. The savings that a franchisee receives allows the investor to keep more money. 

Marketing Support

marketing

Marketing is key to promoting and selling the products and services that a business offers. With the ever-changing marketing landscape, it helps to have a franchisor and a franchisee system. They work together to constantly innovate different marketing initiatives. This ensures the efficient use of marketing funds. The shift of marketing advertising dollars to online platforms, such as Facebook or Google, has created the need for a deeper understanding of how to properly market on these platforms.

Additionally, a deep understanding of search engine optimization (SEO) has become vital. Especially for companies looking to have a strong online presence. Franchise systems serve to take advantage of online platforms due to their economies of scale. What benefits one franchisee in terms of online relevance can end up helping the whole system of franchisees. Many franchisors invest in SEO experts to help their franchisees be as relevant as possible on online platforms. The strength and marketing presence of a franchise system guarantees more sales for franchisees.

Ongoing Support

The CEO of one of the first franchises Visa Franchise worked with has a telling phrase he likes to use:


In franchising, you work for yourself, not by yourself.



This phrase captures the essence and beauty of what franchising is all about. It enables an individual or family to be their boss and run their own business. While at the same time receiving all the benefits of the franchisor and franchisee support network.

Franchisors help their franchisees to grow and achieve the greatest possible success in their market.

The franchisor gains from the increased visibility and footprint of the brand and increased royalties resulting from increased sales. Therefore, a well-managed franchise provides every tool and opportunity to their franchisees so that they can maximize their potential. From our experience at Visa Franchise working with many different franchises and joint venture opportunities, we have seen that emerging franchise concepts tend to offer the most support as they have more time and incentive to ensure that the few franchisees succeed as well as possible.

Many franchisors offer 24/7 support to be there for their franchisees whenever they need them. Especially as the franchisee is getting their business off the ground. Smart franchisees take advantage of this support to rapidly increase their sales and achieve profitability as soon as possible. This support is nonexistent for an independent business. For a foreign national moving to the U.S. via an EB-5, L-1, or E-2 visa business investment, this support can mean the difference between success and failure of the business.

Lower Risk of Franchise Business Failure

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All of the factors we have explored in detail help to lower the risk of the investment failing. Each of the areas we identified as important to the business’s success. When an investor decides to bet on a proven business model in the United States, it reduces the risk of commercial failure.

All of the support that a franchise provides in each area of the business, from development to post-opening, shows a franchise investor that he is not by himself in the investment. The support ends up saving many individuals time and money. So that they can open their business much more quickly for less amount of capital. This is a principal reason the franchise industry in the U.S. continues to steadily grow year after year.

Summary

It is important to note that not every franchise is equal. The majority of franchises in the U.S. do not reach the criteria that we at Visa Franchise look for in the investments that we present to our clients. Our goal at Visa Franchise is to put the investor in a strong position to invest in a successful business.

We actively look for franchisees that offer a strong, differentiated product or service. As well as have a management team that is looking to grow alongside with and help their franchisees. At Visa Franchise work with our clients to find the best investments that fit the unique profile that will qualify them for an EB-5, L-1, or E-2 investor visa. We are constantly conducting research and speaking with franchisees to find the best opportunities in the market.

Note: Visa Franchise Does Not Make Any Financial Performance Representations Other Than Provided By Franchisors. It Is Always  Advised To Consult  With A Licensed Immigration Attorney Regarding Immigration Manners.
(1) E-2 Treaty Investor Visa Allows A National Of A “Treaty Country” – A Country With Which The U.S. Maintains A Treaty Of Commerce And Navigation – To Reside In The U.S. When Investing A Substantial Amount Of Capital In A U.S. Business (Generally >$150,000)
(2) EB-5 Visa Requires At Least A $500,000 Investment In A U.S. Business That Creates At Least Ten (10) Jobs For U.S. Citizens Or Green Card Holders In The First Two (2) Years. Investors May Either Start Their Businesses As Active Investors Or Invest In Designated Regional Centers As Passive Investors

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