My name is Charles Raether. I am an attorney in the greater Miami area. We do a lot of business immigration work, do a lot of work with visa franchise as well. And today’s discussion is gonna be focused on legal aspects of getting L-1, E-2 visas, in particular in the Coronavirus context, and what opportunities are available to people now that for those who have been kind of thinking about sitting on the fence whether to move forward with their plans or not. Hopefully this webinar will help you in clarifying those opportunities that exist. And in reality they do exist, there are good opportunities. Yes, there are some complications that have arisen as a result of Coronavirus and all the closures etc. But for those who are assertive and willing to take advantage and maybe take a few risks, I think there are some good opportunities here. Because of some of the technical difficulties Patrick will speak second, he was originally scheduled to go first. But we will start with myself. And we’ll save the best for last with Patrick. So hopefully it’ll all work out.
So as I said, we’re focused in the Miami area, our practice tends to…Well, our practice focuses on business immigration, we have a lot of clients from Russian speaking markets, but we work with clients all over South America, a lot of Turkish investors as well, European etc. So, that really has no bearing of where our clients are from, I think the most important thing is what we’re able to do for our clients and help them achieve their objectives. Now, this slide is kind of a general one, what are the benefits of a Green Card? First of all, I’m sure not everybody here on the phone today is even interested in getting a Green Card. So these are personal issues that are kind of decided by our clients, they need to decide for themselves, “Do I wanna get either permanent residency, or temporary residency in the U.S.” There can be tax consequences, there can be some other issues involved.
So our job is not really to try to convince clients, “Hey, you need to move to America, you need to get a Green Card.” But instead, our role is more to help them reach whatever goals they’ve set for them once they’ve set that. So, we’re gonna assume that everybody on the conference today is interested in at least temporary status in the U.S., otherwise I’m not sure why you would be on this call, although there could very well be some people on the call interested in just business opportunities without any kind of immigration or visa implications. And so, that’s certainly a contingent of people that we can address any questions that those people have. And actually, it’s a little bit easier to deal with those people because when you’re working in the immigration context, there are more considerations we have to take into account. There’s more considerations we have to take into account as to what type of business they may or may not buy, what structure of the business is required in order to maximize your likelihood of getting approval for your visa, for example an E-2 visa or an L-1 visa.
So if somebody is not looking at an immigration constantly looking at things from an immigration perspective, it certainly makes things easier for everybody involved, both for Patrick and his team as well as for us. This slide just sets forth some of the advantages of having residency in the U.S., for example, especially with education. I know with our clients over the course of my practice, and I’ve had my private practice over 10 years. Our clients’ children’s future is very important for them. And a large part of that future for them is education. And this slide demonstrates, you can save a lot of money if you send your kids to a State University and you’re a resident of that state. So if you’re, for example, a resident of California, you can see the significant savings there and as well as for University of Florida. I’m not sure why it says Miami there, that’s a typo, but University of Florida in Gainesville, an excellent University top 20 University and I have to tell you, it’s pretty darn cheap for residents of Florida.
So, that alone can sometimes cover the costs of doing the visa, the legal fees, etc, especially if you have multiple kids who are all planning on going to college. This chart sets out kind of the main categories for business related immigration to the U.S. This pretty much covers the main categories, except for items such as political asylum, family reunification. And that’s pretty much it, or marriage for example. So this sets out most of the options out. For today’s purposes we’re not gonna go into all these other options. And I’ll have to admit, I’m just not as tech savvy as I wish I were as some of my colleagues and my kids, for example, I wasn’t able to adjust this chart where it says EB-5, you’ll see there in the second column on the bottom for 500,000. That amount has changed over the last couple months to 900,000. So, apologies for my inability to make those corrections.
But again, we’re not gonna talk about EB-5 today, if anybody has questions about EB-5, we can certainly have a separate discussion later. Today’s focus is gonna be on the two upper left columns as you’ll see, L-1 and E-2, those types of visas. And then also I’ll talk a little bit about what to keep in mind in the Coronavirus crisis when you’re looking at businesses to build or to buy a business, for example, for an E-2 or an L-1 visa, what you need to keep in mind, what you have to look out for, what opportunities might have opened up over the last couple months because of Coronavirus, and maybe what additional, what would I say? Steps you need to take to make sure you’re making the right step in acquiring a business.
So we’ll start off with the E-2. I know Visa Franchise does a lot of work with E-2s. Again, assuming you would like to get a visa in the U.S. E-2s are really popular for a number of reasons. I’ll tell you right now they’re relatively easy to get. I don’t wanna say they’re easy overall. But compared to other visa categories, and especially compared to L-1s, they’re quite easy. In my practice of, you know, I’ve been a lawyer about 20 years, had my own firm about 10 years. In that 10-year period, we’ve had maybe two denials for an E-2. So, that’s a pretty good track record, I would say. Unfortunately, I can’t say that for L-1s. I would say I have another slide about this a little bit later. I would say for the L-1s, denial rates are looking probably 20% to 30%, I would say. So it’s a significant difference. So whenever our clients have a choice between E-2 and L-1, we almost always encourage going with the the E-2.
So, what does an E-2 entail? What you have to do, what the applicant has to do is either open a new company and develop that company, or what’s probably easier in most cases is buy an existing company. When you’re buying an existing company, the requirements are relatively low, both in terms of the value the company or the cost, what it’s engaged in, how many employees work there, it’s much easier for an E-2 than an L-2, I’ll talk about what an L-1 entails a little bit later. But the E-2 really requires basically, you’re buying an existing business, you’re gonna have to put in a minimal amount of money, here it’s indicated 80,000.
And we will send the presentation as well and any questions at the end as well. So, what are we looking at here for an E-2. Minimum investment amount $80,000. To be safe, lately, both ourselves and other attorneys have been recommending $100,000, this is because of some small changes that were made to the Foreign Affairs Manual, which technically is not a law. It’s not a statute. But the changes that were made in the manual lead us to believe that the State Department and the immigration service are changing their adjudicative priorities, and so we’re saying a minimum 80,000, ideally hundred thousand or more. So keep that in mind, depends on a lot of other factors too. If you’ve got otherwise a really strong case and it’s a really profitable business, and maybe have a lot of employees working there already, then a smaller investment amount is probably gonna be okay. But again, I would say, let’s base it off at 80,000 minimum investment amount. Almost any investment any company would qualify. Cafes, fast food establishments, educational-type companies.
Again, this is what I think Patrick will get into in his portion of the presentation. But you’re really flexible with number of employees, type of business. There’s no requirements as to your past experience in your home country. So, unlike the L-1, you don’t have to have experience as a manager, executive, you don’t have to have any business experience for that matter. Now, there is an interview, if you’re doing consular processing, which the majority of people do, that means you’re gonna go to the U.S. consulate in your home country to get the approval. And you’re gonna have to go there for an interview. The interview for an E-2 can sometimes be difficult, I wouldn’t say difficult. They’re generally quite short, but they ask oftentimes very precise questions, and they wanna get precise answers. And if they see you kind of hemming and hawing and you can’t give a straight answer, that can kind of throw up some red flags.
So, again, as I was saying, there’s not a lot of requirements for the E-2 business itself or even the investor, but you’ve got to provide convincing answers that you know your stuff, you know what you’re doing, and you can give a quick, good answer as to a question they might ask, like, “Why do you think your business is gonna be so profitable? Where did you get these profit and loss projections? And why do you think they’re valid?” And as long as you can give a good answer 30 second answer or even less, from my experience, it’s fine. One of the questions that came through, what if the applicant is in the U.S. on a B-1, B-2? You certainly can change your status from a B-1, B-2 to an E-2 as long as you’re here on a B-1, B-2 visa.
So if you’re here on an ESTA program, for, say, somebody, say, from Western Europe and some South American countries, if you don’t have a visa, then you cannot change your status to an E-2 in the U.S. But as long as you entered with a B-1, B-2, visa, then you can change your status here. Now, if you do that and get your E-2 in the U.S. without going through the consulate, you don’t have an interview. So, for some people, that’s actually maybe a plus. What’s the downside of changing your status in the U.S.? The downside is what, at least in my mind, is, if and when you leave the U.S., in order to come back, you’re gonna have to go to the embassy file all your papers again, as if you never had a visa, and get the E-2 visa.
So because the difference is, when you’re in the U.S., what you’re doing and when you’re changing from a B-1, B-2 to an E-2, what’s called you’re changing status. Status is totally different from a visa. Visa is what’s required to enter the U.S. once you get into the U.S., your visa could expire the next day after you entered, nobody cares. It doesn’t affect anything. The visa is kind of like the little the magic ticket that gets you into the U.S. once you get here, different rules apply, different procedures, etc.
So that’s why, if you change your status in the U.S., and then you leave, in order to get back you need to have the relevant visa. So you have go to the embassy, file all the papers again. And here’s the problem sometimes, I mean, it’s not a big problem, but it could be, is, if you got an approval from USCIS change your status, say you lived here a year on your E-2 wanted to go home for the holidays, you go back home and then you have to file for the E-2 visa, like I said, and there could be delays. I mean, the vast majority, from my experience, E-2s get processed pretty quickly. They’re not subject to delays as with other visas. So assume you don’t have any delays or anything like that, but they could deny the E-2 visa even though you had the approval back here in the U.S. for your status.
So, for me, if I were a client, I’d probably prefer to get the visa upfront because that way you know you’re good. If there’s any problems I’d prefer to know it upfront before maybe you’ve worked on your business a year you’ve been here a year the family’s been here, you go back for the holidays and then you have problems with the visas, that can be unpleasant to put it mildly, right? So that’s why I tend to think that generally getting the visa first is probably better than just changing your status in the U.S.
Now, the exception to that is probably where you’re gonna change your status in the U.S. and you’re not planning to go anywhere afterwards, you’re here, you don’t need to travel much, if at all, in that case, maybe, yeah, changing your status here is perfectly fine, and it doesn’t affect you at all one way or the other. So, these are considerations we take into account when we work with our clients and come up with the best strategy for them.
So, here is a basic overview of what’s required for the E-2. Now, the business plan, the first little circle there that you see, the business plan is really only required if you’re starting a new business. So, in cases where you’re acquiring a franchise, for example through visa franchise or some other medium, you really don’t need a business plan. Only in certain cases where a business has been operating do we recommend our clients to do the business plan.
So if you’re buying an existing business, boom, don’t even have to worry about the business plan. Other major requirement is you have to invest in an active commercial enterprise. So what does that mean? The main thing that that means is it has to be what’s called under U.S. tax law an active business, it can’t be a passive business. So, for example, you can’t take a couple hundred thousand dollars, invest it in Amazon and Apple stock and say, “Hey, here’s my business,” even if you’re making a lot of money, it’s not gonna count. It’s got to be active where the business is actively involved in creating products or offering services on a regular basis. So, that’s usually not a hard criteria to meet.
The other thing is demonstrating the source of your funds. That sometimes could be a challenge for our clients. So we’ve got to show that the funds that you’re investing are your funds. So it’s not your aunt’s money, it’s not your grandfather’s money. Now, if it’s your spouse’s money, that’s not a problem. Spousal money is considered commingled and joint ownership. So say for example your wife made a couple hundred thousand dollars in her business, but the actual investor is gonna be the husband, that’s not gonna be a problem. What does it mean to show that it’s a legitimate source of funds? We’ve got to provide tax returns and other documents to show that this is, sometimes you say like white money, right? This is money that isn’t black money. You know, taxes have been paid, it’s been declared in all relevant tax documents in your home country, etc.
Now, this money could be a gift, for example, it could be from the sale of real estate, that’s common, it could be savings, or maybe earnings from a business that you have over in your home country. So, any of these sources are possible, our goal, I mean, each case is a little different and unique. And so we just have to work with the client to come up with the exact paperwork that’s required. So I think that the biggest challenge in this is generally showing that all taxes have been paid, everything’s been declared and clean, and here’s the other thing too, though, and we have to also show the path of the money getting to the U.S. Depending on what country you’re in, sometimes there’s problems with foreign exchange currency, with foreign currency exchange and/or wiring foreign currency out of the country. So, sometimes that creates complications, but usually we’re able to resolve that for our clients.
And last major requirement is that you have to have controlling stake in the company. So you don’t have to own 100%, it’s enough to own even 50% as long as you have control. So theoretically you could have a 50/50 deal, and as long as we can show that you have control, that works. Now, the other thing that’s indicated there in the footnotes is that you need to have citizenship of a country that has a corresponding E-2 treaty with the U.S. So, unfortunately, on this version of the presentation, I don’t have that link, but we can send it to you later. But there’s a link with the state depart that has all the countries that have the corresponding E-2 treaty. Some of the big countries that don’t have an E-2 are Russia and China. And I’ll speak in a little bit about how we’re able to do E-2 visas for people from those countries.
Now, the thing I wanted to mention, though, about having possession of a controlling stake in the company, I wanted to mention here, there’s really two types of E-2 visas that you can get. The most common one is for investors, you buy a controlling stake in a company, you become the main owner, investor, boom, you go from there and you get your E-2. There is also another opportunity to get an E-2 for what’s called essential personnel. So, that would be somebody, they don’t have to necessarily invest any money. But they have the same citizenship as the person who has control and that person as an essential employee and we have to create arguments that why that person is essential. But usually it’s kind of a managerial post, or they have some kind of unique skills or something that they’re gonna use here in the U.S. and train maybe U.S. employees, and then theoretically go back to their home country afterwards.
So, where am I going with all this? So, theoretically, let’s say you have a business in your home country, you know, I don’t know, let’s say in Canada, and you’re the investor, you’re coming here, you do your E-2. But you have a really good employee back at your Canadian company who really has some good skills, unique skills, and you wanted to bring him or her to the U.S. for a while, that person, you could do an E-2 visa for that person, he or she would not have to invest any money, they would come as an employee, and you get a second employee or a person here and that’s often helpful for our clients when they have some trusted people they’ve worked with for a long time and they’d like to bring them here for a while to help launch their operations. One other, what do I wanna say? Hybrid type model of E-2, and I wish I had time to kind of do the slide on this, is, you could have two investors from two separate countries. But these are both countries that are E-2 treaty countries, they both have 50%, and they could both then get an E-2 visa based on their investments.
So, let’s say you’ve got an Italian investor, and a Canadian investor. And actually, we had a situation like this. So, we had both of these guys, the Italian and the Canadians take 50% ownership of the company, they’re obviously from totally two different countries, so Canada and Italy, but because they both have 50%, you can make the argument that each has control, at least for his or her respective 50% share, and you can structure it that way. So, keep it in mind if you’ve got any other partners, maybe you wanna bring it on a deal and from a country that has an E-2 treaty, we can make it happen for them, so both of you could come into the project.
So here’s a question about how could a person from China get on E-2 visa? We have a whole presentation just based on this, Grenadian passports and E-2 treaties, a very popular structure these days. And it’s gotten more popular for a number of reasons. One, it’s very popular among Chinese. And you might not believe it or not, but I’m willing to bet probably most. So, Grenada, for those who don’t know, Grenada is an island in the Caribbean. They have a citizenship by investment program, consists basically of two opportunities, you can either purchase some real estate, which costs a little bit more, but then you can always sell that real estate and recover your investment. Or you can make a one time donation to the government to get a Grenadian passport. A lot of Chinese are doing Grenada, why? Not because of the beautiful beaches or the beautiful country as it is, etc. It’s because Grenada is, I think, to my knowledge, the only Caribbean country that has an E-2 treaty and it’s a very favorable treaty as well. I mean, having a Grenadian passport is very favorable as well because it gets you visa-free travel to probably 140 some countries, maybe 150. But it allows you to then do the E-2.
So why is it popular among Chinese? Well, if you’re a Chinese citizen looking to do an EB-5 visa, your wait time is probably about 15 years, 15, one five. So, the wait is just unbearable for most people. So, what a lot of them are doing is they are doing the Grenadian passport, getting the E-2 visa, and as you notice here, the last point there, Grenadians are issued E-2 visas for up to five years. So, if you get it for that five year period, I mean, you’re good to go for at least five years, and after that point in time you can renew it. You can always renew E-2 visas, I didn’t mention this earlier, there’s no limit to how many E-2 visas you have. And the Grenadian passport option is also becoming more popular in light of the EB-5 increase in investment. So EB-5 for 20 some years was $500,000 until November of last year when it was increased to 900,000. So, as a result of that, the calculus that’s involved is such that, maybe doing a Grenadian passport is not so bad because it’s less expensive compared to an EB-5, because then when you take into the expenses with the E-2 it could be 150,000 plus the filing fees, another 50,000 maybe, then you got to do the E-2 and that’s about 100,000.
So you’re looking at 250,000, 300,000. So, back in the day when EB-5 was only 500,000, a lot of people just went with the EB-5, they got their green card. Now that the EB-5 is 900,000 Grenada’s looking a little bit more interesting. And so more and more people are doing this. So we’re gonna go into more detail again later. That’s maybe not today’s purpose as well. I’m just kind of looking at some of the questions, gonna be the one of the investors. So, Andre makes a very good question. I’m not sure if the questions are publicly visible, then he’s certainly has done his homework, but he says in Foreign Affairs Manual, “The company will be classified as the company of one country only.”
I don’t have the FAM in front of me we can pull out the FAM. But it’s not possible to have two…no it is possible to have two separate E-2 visas, we’ve done it. So, I don’t know exactly what the verbiage is in the FAM. But it’s doable. Again, I got to make the provision, as long as it’s 50/50. You can’t have 51/49 or any other structure of the ownership. So it’s got to be 50/50, that’s the only way that it works. So, we can certainly answer questions later, because I got to get going here as well. And we’ve got Patrick, I was gonna save the best for last with him. Talk a little bit about L-1s. L-1s are more challenging. They historically were maybe more popular. I mean, one reason why L-1s are a little bit more popular is because they’re open to everybody. There’s no limitations. You don’t have to have a treaty or anything. So, in that respect, it’s a little bit more popular.
The investment amount is flexible. We indicate here 50,000, I wouldn’t say that’s the maximum, well, put it like this. If you’re buying a company, you can’t count on that, there’s no way you’re gonna buy a company that’s large enough for an L-1. This amount was taken in the context of opening a new business, but I don’t think that’s the likely scenario we’re looking at for today’s participants. So we’re talking about mainly about buying a business. So, buying a business, there’s no minimum amount, but as we talk about it as I go through the presentation a little bit, to get the minimum amount of investments that you have to make for the L-1, you’re probably looking at, for an existing business, I mean, Patrick can go into this, but I’d say at least 200 to 250.
This 50,000, that’s just in the event of if you had a startup business, you’re starting from scratch, I would say that’s the minimum you’ve got to put into that business prior to you filing for your L-1 petition. So, that’s just to get things started up. That’s not your expenses over the course of the first year. That’s just startup expenses that you need to have. But here’s the flexibility, you have a little bit more flexibility with the L-1 than the E-2. E-2 kind of has, like you said in the FAM where I mentioned in the FAM, there’s some minimum amounts in there and ratios you got to work with.
L-1, there’s none of that. So sometimes that’s a good thing, sometimes it’s a bad thing. Flexibility is always good, we always welcome it, but the problem is, when you’re dealing with government bureaucrats, they tend to use that flexibility against our clients, because they have the ability to maybe make decisions and it’s hard to challenge those decisions because they might say, “Oh, you invested too much money.” And we’re like, “What do you mean?” “~They don’t need to invest any more money.” But anyway, I digress.
So, L-1s, L-1s are traditionally more popular because, like I said, they were open to everybody, and B, they were kind of an easy way to get to a Green Card. However, in light of the fact that there’s so many denials over the last couple of years with L-1s it’s just not an option that we’re openly advocating for our clients. The number of requirements you’ve got to do, you’ve got to set up an affiliated company in the U.S. So what that means is you have to have a company back in your home country where you have control and then you’re opening or buying a business here that you have control as well.
So again, if you’ve never had a business or you didn’t have a controlling stake in a business back in your home country, you can’t do an L-1, you theoretically could do it if you worked at a company overseas, and that company then buys or opens a new business in the U.S., but that generally tends to be pretty rare. So, because of time restrictions here, I’m not gonna maybe go into L-1s as much as I would like. And I’m gonna skip over, as part of the presentation we also mentioned here EB-1C. So EB-1C is also relevant in the context of buying an existing business, buying an existing franchise, and maybe Patrick will go into this as well. This just means you’re buying a larger company than you would for an L1.
So sometimes it works out, it just depends on the size of the company. And I’ll mention here briefly here whether we’ve got what the requirements are for the Green Card. So, an EB-1C is the Green Card based on acquiring an existing business. You can also purchase an existing business and get an L-1. Again, the difference is the magnitude or the size of the business. So, to get the Green Card off the bat, it’s got to be a larger company, has to have staff of at least eight employees with two levels of subordination, has to have net income I’d say of about 60,000. And you have to have this affiliation.
So, I would say this EB-1C option is basically an L-1 on steroids. So it’s a way…And you can do it, you can combine the two, we have a lot of clients, sometimes they’ll buy a business, they’ll file the L-1, L-1s generally get processed much faster. And then they also simultaneously file the EB-1C for the Green Card. The EB-1C will take longer, as you see, probably 9 to 12 months, but they can stay here on the L-1 all during that time while the Green Card is getting processed. Once the Green Card gets approved, then, boom, they can just change their status and go from there.
So, in a few minutes here that I have to wrap up my presentation. Here are some of the things you got to look out for during business crisis. I think there’s a lot of opportunities right now. The American economy is kind of contracting, some small businesses are gonna have some problems. And so, from an investor’s perspective or a buyer’s perspective, a lot of opportunities are opening up right now and I think Patrick’s gonna go into them. The only thing is you just got to be a little bit more careful than when things are going very well with the economy, there could be some unpaid liabilities, tax obligations, etc, that you need to look into carefully before you buy any existing business.
Here are some of the challenges that people can face right now. A lot of our clients, we can open companies remotely, that’s not a problem, dealing with the banks is a little bit of a problem. If there’s no flights going in and out of the U.S. or from your country to the U.S., opening the banks can be a problem. We sometimes work with some banks that allow remote opening of accounts, but it’s getting more and more difficult lately. So, that can be an issue. Also with the government closure of offices, that’s slowing things down. So if you’ve got to get the licenses when you’re buying a new business, occupancy licenses, that can be a problem. USCIS, the immigration agency, they’ve closed their offices for in-person meetings until early June. That really doesn’t affect any filings like E-2, L-1s that you’re gonna file. However, they have suspended premium processing.
So for L-1 and E-2s, you could always pay a little bit extra, about $1,500 and get your petition reviewed within 15 days. Great option. Most of our clients always did it. Unfortunately, with Coronavirus, they’ve suspended that, and we don’t know when they’re gonna start it up again. So, under standard processing, L-1s and E-2s can probably take four to six months, possibly even longer. So, that’s the downside of things here. So, I think that’s, you know, I skipped some of the slides. We don’t have time for that right now. And I think Patrick is probably gonna send out the presentation later, we can always follow up at some point with the questions for everybody else. So, on that, I will hand things over to.
My name’s Patrick Findaro. I’m the co-founder and business development director here at Visa Franchise. Today, I’m gonna walk through a little bit about who we are, different opportunities for being an entrepreneur in the US, as well as everyone’s asking what’s going on with COVID-19, what are the better business opportunities? So we’ll review some characteristics first in terms of COVID-resilient businesses and then different industries as well as we really don’t think that every type of business is gonna recover the same way. So from like a macro level, you probably have heard a lot of economists comment on different recoveries of the economy in terms of a U, V Nike swoosh. I think it’s gonna be an industry by industry basis and we can go through that today as well.
So first, who’s Visa Franchise? We’re based here in Miami, Florida with offices with full time staff in China and Mexico as well as Turkey. Since we started the firm back in 2015, we haven’t really strayed too far from our core focus and what we were founded on, which is identifying and analyzing businesses eligible. Can you hear me now? I just got a comment. Let’s see. Okay. So we haven’t strayed much from our focus on helping entrepreneurs find businesses that qualify for the E-2 visa. However, this past seven days we’ve gotten two EB-1C approvals, as Charles mentioned, it’s like an L-1 on steroids.
One of them was the client invested $500,000, 10 plus employees. The other client invest over $600,000 with 40 plus employees across multiple education centers. So we focus on businesses for the E-2, although we are able to work across your needs.
A little bit about our track record. Over the last five years, we’ve helped over 300 clients from 58 different countries. A lot of our clients are dual nationals where they hold multiple citizenships. 5% of our businesses pass our vetted process. We reviewed over 1,600 businesses to date and these businesses have yielded over 2,000 jobs created. American jobs.
In terms of small business options, we like franchises because it’s a proven path. You have the initial and ongoing support of the franchise were especially important for people that it might be their first time engaging in business in the US. There’s some cons associated with the cost associated with gaining the rights of the franchise and ongoing royalties.
Existing business is a good thing. It’s already operational. You have inherent customer base, historic financial figures. Many of our clients right now are taking advantage of the crisis. Well, they’ll do a hybrid approach where it’s an existing franchise or they get a franchise and then working with the franchisor or they get then go buy contracts or they buy out of business. So combining the best of both worlds where it could be real estate property management, where you’re buying contracts of a property management company that might be going out of business or having issues, commercial cleaning, landscaping, etc.
So we’ve seen quite a lot of that. And then obviously you could start a new business. If the business goes bad, you lose your visa. If the business goes absurdly well and someone buys your business, you lose the visa as well. So many of our clients have done that on the side, but it’s definitely a possibility for those seeking these different visa options that Charles mentioned earlier on the webinar.
Well, a few of the characteristics that we look at, especially in this environment is analyzing the profitability of the business. The unit economics, revenue, gross profit, net income, etc., we wanna see periodic revenue. So to see that they’re making money every month or every week, ideally from similar clients. High margin business, management team, industry and brand growth as well as strong liquidity and they have a proper cash. If it’s an existing business, it’s gonna be analyzed differently than if it’s a new franchise that you would be opening up.
And a few of the characteristics across the different COVID businesses that we wanna see, I’ll just go quickly through these and then we can go over some deeper points and some of the sort of figures we’ve seen in past crisis, but efficient budget, secure payments where they’re getting that constant stream of revenue and then leverage in the market that maybe they can expand as some of the weak your competitors are falling out.
So here are a few industries with compelling business cases right now. We’ve seen, especially in the food space, a lot of delivery and takeout. We think that coffee, especially as large metropolitan areas go back to work probably over the summer that commuters are still gonna want their coffee and they’re gonna wanna regress to that habit that they’ve had in the past.
On the pet care side, there are definitely some interesting segments in that space that we expect we’ll read down, maybe not as fast as other industries. Beauty, hairdressers, barbershops, you know, I gotta have to get a haircut as soon as I can and when it’s safe to see my barber, a case in point. Cleaning, commercial cleaning services, maintenance, repairs, these are things that you’re gonna have to have on an ongoing basis regardless and maybe even more so given the current circumstances.
Rural estate, property management, the vacation rental sector is definitely been a harder hit than long term residential. Commercial, we’ll wait to see. That could have some serious issues. Most of our clients still manage homeowner associations, which are pretty stable source of revenue as well as long term residential. Business services, insurance tax services, they haven’t been hit so hard. They’re migrating to their employees working remote. But they get those periodic revenues from existing clients that they have as well as everyone’s wants to know from their accountant and tax preparer how to mitigate their tax implications.
Education, childcare should bounce back. Definitely has been hit hard as with school reinforcement, but we do expect those industries to bounce back strong. And then healthcare urgent care, there are opportunities there that we see booming, especially as many doctor’s offices are closed and the only other options going into an emergency.
One opportunity that we’ve spent a lot of time evaluating over the past year is a ghost kitchen. So we work with multiple franchisees that operate in the ghost kitchen space, which is in some countries in the UK for example, they call it dark kitchen. And essentially, it’s a large industrial space with multiple kitchens that you can have multiple restaurants operating out of for takeout and delivery. And some brands have really leveraged as low costs and shared costs structure to continue having revenue as well as net income flowing down to the bottom line.
One of our analysts looked at the small business administration’s loan details from last 30 years. This is an ongoing project for us and we isolated out the defaults from 2008 and 2009. The interesting thing is these defaults reflect twice. They’re not a default for the average two-year period, the same 30 year period. Will this economic crisis via as bad as 2008, 2009? I’m not sure, but I’m sure that defaults for the year or two years around the coronavirus are definitely gonna be higher than the average period that we see. That being said, let’s look at some of the winners and losers during the last economic crisis.
As you might imagine, some industries have been hit a lot harder than others during 2008, 2009. So real estate related franchise, especially in the hospitality space, hotels, had a really high default rate. The 20% of loan defaults over the past 30 years occurred during 2008 and 2009 for the real estate segment. As for food and beverage, it was a little over 15%. However, the majority of businesses defaulting were in the ice cream space. So think of things that are not essential and more of a luxury to go out. Ice cream, nail salons, some of these non-essential and more luxury-type businesses are gonna be hit hard with this current environment.
And then this is borrowed from an economist that was talking more about the manufacturing rebound. And we do feel that a few different industries will have a similar V-curve including cleaning and maintenance, healthcare services, children’s programs, education programs as well as business services.
And then in terms of the next best scenario, we see food and beverage, health and beauty and real estate. And that being said, within those sub segments, there are gonna be ones that are more like a U-curve and ones that are more like an L and are going to have a really long recovery
The Nike Swoosh. So we’re seeing a lot of industries that have been hit really hard and it’s gonna take a while for them to really get back to where they were in 2019, pre-coronavirus. And they will recover quite a bit, but they won’t over the next say three quarters, but they’re not gonna get to that elevated level for at least a year.
And then there are certain industries that we see that they’re gonna have an more of an L type curve. So depending on the fitness center, if you’re a fitness area center that has regularly 50, 60 people in a small room and very close contact, I think that’s gonna be a very hard hit and it’s gonna take many months to recover to the previous levels as well as retail products and services. With the emergence of Amazon and more people getting used to ordering products on Amazon, this segment might never recover to what the pre-COVID-19 levels were.
In summary, a little bit about us in terms of how we support the clients. We’re with you every step of the way. We work alongside your advisors, whether it be attorneys, accountants, and our role is really on just identifying and analyzing the business opportunities, principally franchises, that best meet your immigration as well as an investment goals.
Charles: So Patrick, do you have any [inaudible 00:00:03] like for now, or I guess it’s a little bit early to say what sectors or business areas are maybe most promising, but have you seen any trends?
Patrick: Immediate ones would be food services that are really focused on takeout and delivery and the ones that were quick to adapt and reallocate their marketing budgets. And sometimes, they’ve taken in-house some of the delivery features as well as some of the stable ones that month over month have the same clients and are deemed essential work like landscaping that they’ve been operating throughout this crisis.
A few questions, do you have sports franchises, not fitness? I’m not really sure in terms of what sports franchises. We can work with any franchise that’s established. There’s well over 2,000 franchises. We’ve looked at 1,600, but for each client, they engage our services and we’ll do a customized search for them. Okay. Is there an age limit to request it? So maybe I’ll turn it back to Charles to answer some of the visa-related questions.
Charles: As for age limitations, there’s so legally, I guess a person has to be 18 years old because if they’re under 18, they can’t enter in… They cannot enter into any binding legal contracts, right? So somebody under 18 is not of majority age, so they can’t sign any contracts that would be legally binding etc, etc. Having said that, that’s the legal answer. The practical answer is I think you’d probably have a problem if you had like a 19-year -old or 18-year-old walking into the embassy for an E2 interview just because they would really question that person’s ability to properly manage the business, etc.
So I’m just trying to think off the top of my head. The youngest we’ve had, I would say the person would probably have to be like mid-20s or something. Again, there’s no legal restriction. This is purely subjective, you know, intuition that an immigration officer because part of the consideration is that person has to convince the officer that he or she is able to manage and grow the business. And if it’s just a 20-year-old, you know, kid, if you wanna call them that, I could see where there would be some questions.
You might be able to get by with a younger person if you did change the status here in the US because as I mentioned, there are no interviews that are done here. So I think that issue of age could come up, but if for some reason, maybe that person has a really good, maybe you’ve got a 20-year-old wonder kid and he or she is, you know, a great, you know, software programmer and he’s already done a couple of ventures by age 20, then you might, you know, maybe be able to make a good argument for that.
For the E2, here’s a question for E2. What options are there other than EB5 that leads to the green card? Good question. So you’ve done your homework, I think, or else you looked at my slides well. Honestly, there’s no direct options to go from an E2 to a green card except through EB5. That’s the only direct option. So there are other options or possibilities, but they just, how do I put it? They don’t hinge on the presence of having that E2. So for example, you could come with the E2, start with doing that and then let’s say you got a job offer from somebody else, some company they saw how great you are and they say, Hey, we’ll give you a grab offer, we’ll sponsor you for a green card, but that’s gonna take probably a year and a half. So they start the process, you stay in your E2 status all that time, and then when the green card gets approved from your, or for your future employer, then you can change your status. So that would work. But again, that’s not contingent on you having that E2 each visa.
So if we’re looking at anything like, okay, I get the E2 and how does that E2 get me a little bit closer to a green card, the only real option is an EB-5. And again, I did go into that in my presentation, but what that means is you’d start like, you know, you buy a franchise with Patrick and you’d invest say 200,000. You’d have to increase that total investment amount to 900,000. So reinvest earnings, maybe expand, maybe open some other shops, buy some more franchises through that and expand your total investment to 900,000 and create 10 new jobs. So in that case, you could do that.
You have kind of to be staying in the same state for this kid to get the… about the education question there. To qualify for the reduced tuition, you would have to be a resident of that state. So generally, residency for children is determined by where the parents reside. So you would qualify for the reduced tuition in that state where you physically reside. The business could be in a different state. So to answer your question, you know, you could have a business in Georgia, you live in Florida. So for purposes of education, you would, you know, qualify for reduced education in Florida.
The E2 spouse permit. Yes, a spouse receives employment authorization. So the spouse can work anywhere here she would like. So the investor is tied to the business itself, he or she can’t work anywhere else, but the spouse is free to work anywhere at all. Tuition fees, what level of education? We’re talking just about higher education here. So this only applies to a university or what’s it called? Community colleges, stuff like that. Now, your children who are under 18, who are just in regular school or high school, you know, once they’re an E2 status, they can go to any public school just like any other resident.
So what happens if I do a franchise and the E2 is rejected? Well, I can answer part of that. And I think Patrick can mention it too because Patrick’s had some interesting scenarios on that. Yes, that is the degree of risks that you’re involved in, that you’ve gotta commit those funds at 100,000 or more prior. You’ve gotta commit them or actually spend them prior to filing for the petition. And if you do get denied, yes, you might have a business then you’ve gotta deal with. But I think, Patrick, if you wanna discuss, I mean, there are scenarios that are possible whereby you could get your money back.
Patrick: Sure. So it really just depends on the opportunity. If you’re investing in like a real estate property management franchise, it’s a lot easier to allocate a lot of the funds to be subject to the E2 visa approval where maybe you put a 10%, 20% deposit. And if you’re rejected after the second attempt, you get all the money back besides 10% or 20%, that would have been nonrefundable for the franchise. And then if the business is going to be a new restaurant that you’re opening, those are too many commitments. You gotta sign a lease with the landlord. You’re gonna pay the architect, you’re gonna have too many parties and a lot of the best options in terms of real estate, the landlords aren’t gonna wanna have a four-month, six-month window where you can back out of the contract essentially. So it’s really case by case and we’ll push to have as much contingent on the E2 visa as possible. But that generally will limit the opportunities for our clients.
Charles: One other question here I guess somebody said, can a spouse lead to the green card with…it’s scrolling too much. So the spouse can lead the green card. Will the spouse… So, if the spouse again finds some other opportunity that would allow for a green card. So for example, we’ve done this too before, say maybe the main investor files for an E2 because it’s relatively small investment, gets them here quickly and then they filed the spouse files for an EB-5 for example. Totally different project. That’s a possibility. But again, you know, the E2 is not helping them move towards the EB-5 where it’s just a totally separate project they’re doing there. Otherwise, yes, the spouse could file for a green card. Probably the most likely way of doing that is by, what would you say, if he or she were able to find an employer who would sponsor her through employment for the green card. So you guys would have your E2 you’d be here, maybe the spouse gets hired by a company and that company wants to sponsor him or her for a green card. Yeah, that certainly works.
There was an earlier question somebody said the difference between an E2 and an EB1C. So the E2, again, that’s a temporary visa. The length of the visa depends on what country you’re from. But it’s not intended to be permanent. It’s not permanent residency. You basically have all the rights as a legal resident except the fact that you’re kind of limited in time that you can stay here and you’re also tied to that company. So if you’re an E2 investor, you can only work for that E2 company.
EB1C as Patrick mentioned with that scenario he had, EB1C is when you get a green card. You buy a company that’s large enough and it meets some other requirements. So the requirements are different for an EB1 and an E2. But if you get approval with EB1C, you get a green card. So that means, you know, you could sell the business after awhile, it doesn’t affect your status, you could go work somewhere else, doesn’t affect your status, etc.
Patrick mentioned two escrows on an E2. Is explicitly supplier for the inventory? So this is a question from Andre, is except we have an escrow with a supplier for the inventory is the same two escrows on an E2 petition. I’m trying to think of the scenario where you do that. The short answer is, yes. Yeah, you could do it. I think you could do two escrows. I mean, there’s no, I don’t think I’ve ever done it like that, but I think you could have two escrows. The main thing from immigration’s perspective when they’re looking at these escrows is, you know, that it’s written clearly in the escrow, that if there isn’t approval, the investor’s not getting this money back. I mean it’s going for those purposes that were mentioned, for purchasing the franchise license agreement, purchasing supplies, etc. So you probably theoretically could have multiple escrow agreements as long as it’s clearly written in there that as long as the visa gets approved, that money is not going back to the investor.
Okay. Good question. About the recently signed executive order of Trump. Yeah, good point. I forgot to mention it at the outset. Good news for everybody. I would say on today’s call because it really does not affect anyone who is applying for a non-immigrant visa. So if you’re applying for an E2, L1, you know, maybe H1B, but we’re not talking about that today. The new executive order does not affect those.
Now, there’s other practical questions, you know, the embassies are all closed, so you couldn’t even go there if you wanted. But for non-immigrant visa, it doesn’t affect. The only people that it would affect for today’s purposes of today’s discussion is EB1C. So if you remember what Patrick mentioned and what we discussed, if you apply for a green card on the basis of buying a large enough company, then that would affect you under Trump’s order.
But as things stand right now, it’s not gonna affect people either because the order is only in effect for 60 days. It’s gonna take much longer for you to get an approval for an EB1C for that green card. Right now, the processing times are taking 9 to 12 months now. Okay. Worst case scenario, this executive order gets extended and extended, extended, you know, down the road for another year. Okay. At that point, theoretically, then it might be able to affect things. But as of today and how the order is written right now, the practical effect is only that it’s gonna affect, I would say, people immigrating through family reunification.
Patrick: Charles, I think that was an awesome last question to wrap up our webinar. And I’ve put up on your contact information for the attendees that are still on the line and just wanted to thank everyone for joining today’s webinar.
Charles: All right. Thanks so much, Patrick. Thank you, everybody.
Patrick: Thanks a lot.
Charles: Thank you.