This article is based on the video featured above, originally recorded for Visa Franchise Youtube Channel.
You have Patrick Findaro here, co-founder at Visa Franchise. We get a lot of inquiries and we’re getting more and more inquiries from high net worth individuals, people that have $5 million net worth, $10 million net worth. They have business interests sometimes around the world, sometimes just in their home country, and they’re looking to move to the United States with their family. And working with their immigration attorney, they’ve identified the E-2 visa as the best path, but they’re looking for a business that they’re not going to have to be so involved in the day-to-day operations. And if they’re going to own an ice cream shop, they don’t want to be the one that’s scooping up ice cream because they can make a lot more money managing their business, potentially remote, that has 100 employees in their home country, and going back and forth.
Beware of fraudsters
If you’re looking to invest in a business for your E-2 visa where you’re less involved from a day-to-day perspective, you have to have your guard up, because not only do you have to select the right business model, but you also have to find the right operator for your business. The business model is one thing and that’s a lot easier because there’s a lot of data on how the industry’s doing. If you’re doing the franchise route, how that actual franchise is doing. Finding and selecting the operator is harder, especially in the current environment we are, but it’s not impossible. Just be aware, there’s a lot of fraudsters out there that are luring E-2 visa candidates, foreign nationals to invest in business opportunities to earn tons of money in passive income, which are not real basically, and have a very low likelihood of success.
Sometimes it’s right-out fraud, other times it’s just a very highly speculative business opportunity. And sadly, what we’ve seen, a lot of times the fraudsters or those that are trying to oversell a business opportunity and not talk about the risk are the same nationality of their investor as they have the common culture, the common language, and they feel more comfortable with someone that’s offering a business opportunity that doesn’t properly disclose the risk.
Questions to Ask Franchisees
We’ve done plenty of videos on “passive franchise license opportunities” that specifically target for nationals, we’ll include links to those. But it’s super important for you first when you’re looking at the business model to look at the failure rate over the last year, the last three years, the four sale rates. So, in the case of franchises, how many franchises are selling their franchise in a year-over-year, average unit volume, also called AUV, owner compensation? When talking to franchisees, ask them, how long did it take to open? How long did it take to break even? Then how long did it take to start making 5k?
And maybe your ambitions are making more than $5,000, but generally, $5,000 is where investors can kind of calm down a little bit and that the business has hit its stride, as well as meeting some of the requirements of the E-2 visa. Also on the E-2 visa topic, ask how many previous E-2 visas have been approved, and if you can talk to some of the E-2 visa investors that have already invested, already making money from the business, and already have their visa. And if there’s other E-2 visa investors that aren’t making money from the business, you want to talk to them too.
The Operator
Now, this operator, the operator, you can find yourself, you can hire through different job websites, LinkedIn, Indeed. There’s all different types of job websites. If you’re going to franchise option, there’s franchisors that can provide additional support and find and train that day-to-day manager. But it’s really important when you’re talking to the operator you select together with, if you go the franchise route, what the task are for you as the E-2 visa investor, what you’re going to be responsible for.
What will you be responsible for?
Is it the finances, the strategy?
Are you going to be opening up more locations, and you’re looking at additional sites?
And then what’s the day-to-day operator focused on?
How is the information shared?
Do you both have access to the same bank account?
Is it just you having access to your own corporate bank account?
Do you run the payroll every two weeks? What are the key systems, the QuickBook for accounting?
What are the key systems so you can properly monitor your investment?
And what's the cadence for having that investor management meeting with your day-to-day operator?
Is it weekly, biweekly, monthly, quarterly?
Definitely should be more than quarterly, monthly, biweekly, could even be weekly depending on your management style, as well as the business opportunity. And you’ve got to talk to your immigration attorney to see how involved you need to be in the business to receive that E-2 visa, as well as maintain your E-2 visa status.
It’s important though to ask why is the operator choosing to grow with you and not start their own business and they own 100% of their own business? Especially debt is pretty cheap if they’re an American citizen or green card holder, they’re getting an SBA loan, 6.5% over 10 years.
Questions to Ask the Operator
It’s key to ask when you’re talking to that operator, talking to that franchisor, why are they growing their system in this way and why aren’t they just operating their own locations? And why are they helping you operate your E-2 visa business?
Also, there’s a few third-party companies. We regularly engage with one that checks litigation, prior bankruptcy of the operator. The nice thing with their franchise is they legally have to disclose that in the FDD. However, depending on the business opportunity that you look at, if you choose not to go to the franchise route, definitely pay the $1,000, $1,500 to do a really thorough background check on who your day-to-day operator is going to be. And especially if he’s taken a minority stake in the business, you gotta make sure that this guy is clean before you decide to partner with this investor and change your American dream to be an American nightmare.
Background check
Talk to other investors who have worked with that business opportunity, worked with that operator franchisor in the past. Generally, the franchisor is key to be involved and can help recruit a new day-to-day operator should the initial one that you have quits. It’s important again to work with your immigration attorney to make sure you meet the E-2 visa qualifications, and especially the requirement to manage and direct your business interest in the United States, that business that you’re applying for the E-2 visa on. This cannot be a passive business, you have to have involvement in the business. It’s not like buying a property that you’re going to rent out, and you’re just going to buy one property to run out in Orlando, or you’re buying a stock on the New York Stock Exchange. This has to be a real business, and you have to have involvement in the business to meet the E-2 visa eligibility requirements.
Conclusion
I hope you found this video informational. If there are other topics you’d like us to touch on in terms of working with a day-to-day operator, E-2 visa, EB-5 visa, small businesses, we’ll create another video or we’ll bring in an expert such as an immigration attorney to review that topic.
