EB5: Startup, Franchise, or Existing Business?
My brother and I started Visa Franchise back in 2015. My experience was in finance, I worked at JPMorgan, as well as a consultant at small private equity fund. And then my brother worked for the parent company of Burger King, which owns Popeyes and Tim Hortons.
So we thought I discovered the E2 visa because I was working at a regional center with actually Eb5, doing investments and hospitality and franchising, and I discovered the E2visa and jack and I thought that it was a good option for franchising made good sense for the E2 visa. And along the years, we’ve had a few Eb5 direct cases, but most of our practices have been on the E2, as that made the most sense for our clients.
However, now given the regional center program being cancelled, as well as investment going down to 500k, we’ve, we’ve basically restructured the offering we’ve already always had with the EB five, direct practice to really scale that up, and we have a great network of franchise ORS, with together with your attorney, immigration attorney and franchise slash corporate attorney need to be involved can be a good fit for your immigration investment objective.
So we advise over 400 plus clients from all over the world. We’ve never had a denial on the second attempt. But we have had a few clients that didn’t have a signed lease and just add a lever intent or wasn’t a substantial investment for the two they tried to invest like $70,000 denied first time reapply with a higher investment signed lease and they got a so pretty near perfect track record.
They should actually say, Yeah, 100% if there was a second attempt, our clients have created over 2000 jobs in the US, which is pretty impressive. And Bell two years ago, two and a half years ago, we came up with idea vetted biz, I kept getting asked what are the options, what franchises, you know what industry, we’re like, what’s put everything online. So we’ve been in that process for the last two years.
And I’ll go through the portal briefly. But there’s 1800 franchises, our analysts are doing an update based on the 2020 Franchise Disclosure Document on every publicly available franchise. So all the informations there, I can share examples, but pretty much every franchise, it’s probably availables, available on vetted biz. And we reviewed 1.1 million Small Business Administration loans, which is the vehicle that most Americans finance a franchise or business acquisition to see the default rate across different industries.
Pros and Cons Franchise
I won’t touch too much on the immigration aspects. But franchise initial ongoing support, you have a plan and you execute, so it’s not going to vary so much from the plan. The franchisor can help out with a lot of different business functions.
There’s negatives of costs associated with gaining the franchise rights, you pay that initial fee, there’s ongoing fees, restrictions imposed by the franchise or independent business, it’s great operational, oftentimes profit profitable, you have historic financials, however, there’s a lot of fraud. A lot of people aren’t declaring their earnings on their tax returns. And I’ve heard crazy cases where someone’s got buying a business there.
This is a real case, buying their business for the two visa 400k investment. The guy’s only declaring 50k in profit and $100,000 in cash. And there’s only two employees on the books and another 13 that are not on the books. Maybe this doesn’t happen as much in Santa Monica. But the reality is in South Florida, this is the operating norm for some people.
So when you’re buying an independent business, you need to have your accountant, your corporate attorney by your side to evaluate it and make sure that you’re not buying a liability. But you can find great opportunities. I mentioned that Harvard Business Review podcasts that are 20 minutes ago, takes one to two years. And it’s it’s gonna take a lot more time but you can find a great opportunity and start up startups awesome.
You can grow the business fast sell the business but you lose the visa. The business can crash fast and you start something else you lose the visa. So the business is mega successful, someone wants to buy you out for a crazy valuation, you lose the visa 20% of businesses with employees fail in the first year. And it’s 50% in the first five years. So also, you know startups during the crisis you could lay off during the pandemic you can lay off employees where a franchise that’s grown at a reasonable rate You’re not just going to fire all your employees, one one fell swoop, we’re a start up, it might make more sense.
Discover the type of investor you are
It’s really important identify what kind of investor you are. Have you already made it? Have you do you have significant assets? Do you make a lot of money abroad 200 300,000 plus, is your time very valuable.
So that would be more of a lifestyle investor where they’re prioritize working less hours in the business, initial investment Eb5 509 100. Okay, longevity of the business is the most important factor as well as the exit opportunity to sell the business once they get the permanent green card, strategic and financial investor 500k to a million plus. Yes, the VC eligibility is important, but a major focus is on return on investment. And then aims to build the business up multiple locations potentially acquire competition, willing to work 40 50 60 hours a week. And location for these investors is important, but it’s often secondary to strong earnings and strong growth potential. So those are important factors to consider.
Some other items financials of the business 60% of franchise ORS disclose their financials in the Franchise Disclosure Document. Business longevity is really important. I want to see franchises that have been around at least five years, ideally 20 plus years, ways to reduce upfront investment. Important for a lot of our clients, we’re gonna have to work closely with Bernie on the immigration side there to make sure it’s compliant for the EB 5, franchise or support.
How to manage a Direct EB-5 business
How are they helping you build a business? Can they hire a manager could you have an operational support contract with the franchisor for two to three years, while your Eb 5 visa is adjudicating? These are all things that are really important to consider when looking at franchises, location, ta but you know, you have professionals to sort that out Florida’s relatively easy, or at least it was last time we asked her to the TA letters, we would get them back in 24 hours, job numbers 10 plus full times you really need to have a healthy cushion.
So 1213 where it makes operate operational sense to have those jobs so not a good fit for Eb 5 Business Services. Seasonal services like tax services, barber shops, California might be a little different because a lot of nail salons and barber shops now have who you are as an actual employee, but Texas Florida so generally contractors, so beauty is not a great fit, cleaning, not a great fit.
However fast food tends to have a good amount of employment. Healthcare for me, it’s it’s the best in terms of the number of jobs per capital deployed, you’re going to have a lot of employees for homecare and and those type of businesses, education, childcare has a lot of employees. Real Estate, it can’t be passive property management could work. Not gonna have as many jobs as healthcare education.
But it can work because you can have a bunch of cleaners for example, if you’re doing a real estate, property management, but you’re gonna have to have 50 6080 plus Vacation Rentals under management to justify 10 plus jobs.
And packet We’ve had a few clients invest in pet hotels and pet ownership in the US has skyrocketed during the pandemic. So those are five industries to consider.
Again, vetted biz, we always hear about the big names. Oh, I want Patrick I want to invest in some way. Okay, do you know you know, subway is not that great of a franchise. They haven’t done so well over the past the past years. And you can see pretty much for 1800 franchises, we have the data of failure openings. So subway maybe for Eb 5 if they allowed it but I think you already have to have a US Green Card already.
Nearly 20% of subways fail in the last three years. You have 1000 closing every year. big brands like chick fil a won’t work. They the investment amounts $5,000. And then chick fil a corporate does the rest. Large franchises like Burger King or my brother work you usually have to open up 10. So if you have 5 million, and generally us restaurant experience, we can look at these big brands.
We had a client that had 5 million and we looked at all the big brands. So we’re very flexible in our approach. Out of 10 investors, eight of them invest in different franchises. It’s important to look at the industry as a whole. So our our approach bottom up and top down. So from the industry side for food for if there’s eight food restaurants, I got loans or the owners got loans to operate a food restaurant, one failed and wasn’t able to pay the loan back. And this is from 44,000 non franchise businesses, franchises for food did a little better, nine to one.
But I don’t love those odds if you’re investing a good amount of your net worth in a business as well as your green card. So food, there are some great options available. And you have to look at the business in terms of how the industry is on Yes, but also how the individual franchisees performed over the last five to 10 years to see how how successful the business has been.
Healthcare on the other hand, it’s nearly double, basically double the success. Us people in small businesses we see are making money in more complicated things like health care, or things that people hate to do, like junk removal, there’s a very profitable business that just is your removing junk. And so you can see the the failure rate is actually a little higher for franchises for healthcare. But if you look at the best 10% it’s going to be better than a non non franchise, healthcare businesses, retail products and services depending on the opportunity, there’s a lot of jobs. However, it’s not, it’s not as secure as some of the other industries.
But a lot of jobs, real estate, real estates 21 to one, two to three times as successful as food, and for the franchise, side 26 to one. So 26 businesses open and take government loans to operate their business and one films, I like those odds a lot better than food at nine to one for franchise concepts. So again, Real Estate’s complicated for Eb 5, not ideal for Eb 5. But from an investment side operating the business, there are great opportunities, and we’ve had 30 plus clients for the E to do real estate property management. And if you right now, we’re looking to transition into Eb 5, to see if it makes sense with their current investment or the one that they’re in the process of investing in.
So a couple of things to keep in mind. We can move fast, we have about 22 Visa clients a month, but we can get it we when we’re at capacity, we’re at capacity. So we have a limit in terms of the number of clients that we’re taking in. We keep it right now at 10 per month. So if you’re interested in it, we’re only working with people that have already consulted and or engaged in immigration attorney.
If you already engage in immigration attorney, we’re happy to give you a slight discount to our fee, because it’s gonna make the process a lot smoother. And don’t ask me about visa questions. I want to focus just on the franchise and the business. And let the the franchise legal and the immigration legal for the attorneys. But it’s a basically a 10 step process, where we’re with you every step of the way. And it can be as little as eight weeks. A big variable is going to be conversations with franchisees and working with the attorneys on documenting from an investment side, the franchise agreement as well as filing the I 526. petition. Bernie emphasize due diligence, we’re the same way. So you got to have your your team of advisors with you, including the corporate slash franchise attorney, and then you got to talk to at least five franchisees understand their financials ask for p&l, how they’ve been doing the last few years, how did they do, they’re in the pandemic.
Sample businesses to invest
A lot of the franchise ORS, we work with that adapted quickly, even did better in 2020, and 2019. Those that weren’t able to adapt quickly. were hit really hard from this last pandemic. So that’s a general process of how we work. A couple of businesses in the healthcare space we’ve had two clients and bass on with success on the spectrum, which is applied behavior analysis for children with autism. So this is a very job intensive business where essentially it’s one child, one therapist that’s full time. And if you do a lot of pre marketing beforehand with one of these centers, you could potentially have already 20 Kids signed up by the time you You open up and then you have to get to work hiring those therapists.
So a big part is recruit recruiting and hiring the the analysts, supervising the workers reviewing the overall financials and marketing. And this is the type of job these centers, you could work 20 to 30 hours a week, and have a full time manager that that’s managing the staff. I like this industry is very hot. This is the only franchise in the space doing this. Most of it’s done by mom and pop and some private equity funds, there can be substantial exit opportunities if you get the business up to 1,000,002 million dollars plus, and many states now are paying for these programs, which can be anywhere from 5000 to $10,000 per kid per month.
So we like this business, we just have to work with Bernie to structured appropriately for Eb 5, because you’re gonna spend the money in the first year most likely year and a half to get to that 500k with the staff. But initially you have the franchise fee 35k you have different fees here, basically for operating the business for the first four months 30k leasehold improvements making the space better. So that can get you to say 400k 450. And then you’re gonna have additional working capital needed to pay those 1520 plus therapists. Historic financials, you can see steadily goes up, they dipped down a little bit during the pandemic. And this is for two of them the average on two of their locations, but above a million and it’s a pretty healthy profit profit margin.
Not necessarily for SOS, but this industry is 15 to 25% when the owners involved in the business, so that’s an example. It could potentially work for Eb 5we’d have to work with with Bernie and see it, we’re in the process of adapting different businesses that we’ve already had clients invest with for the two side, or in the process of investing. There’s roughly 50 franchises that our clients have already invested in and maybe 10 to 20 are good fits for the EB 5.
Another one would be a homecare solution option where they have an option that you can basically have a an agreement with them to pay 1500 to 2500 depending on the performance of the franchise that you own 100% of you own. 100% of both these businesses want to emphasize that and with with this it’s a good bridge if you’re not able to live right away in the United States, where they can run the business for you on a day to day basis while you’re doing the back office work, financial strategy etc. And having regular calls with the franchisor to review people issues, finances etc.
So those are two options. That could work for the EB 5 as I mentioned, very customized and we can do the process in 90 days or less. From the time we have our initial contact from the time you make the investment in the in the franchise and file for basically ready to file for the I 526.