Requirement #3: Substantial Investment

You need to show that your investment in the startup or acquisition of a business is sufficient to operate that business in a profitable manner.

The U.S. government wants to see a business plan detailing how profitable the business will be over the next five years. For example, it is up to the consulate officer to decide if a $60,000 investment in a failing restaurant for sale is sufficient to meet the substantial investment requirement.

Most likely it will require an additional investment of $50,000+ in working capital, furniture, etc. to make the business success more viable. Business viability is more difficult for startup applications, especially in industries unfamiliar to the consulate officer.

Franchise Investments System

Fortunately for franchise investments and businesses for sale, there are historical financials from other franchisees or the actual business to support your case. Detailing how much it costs other franchisees to open and operate the business is provided in Item 7 of the franchise disclosure document.

Following the blueprint of the franchise system has always proven enough for our clients to meet the substantial investment requirement.  

However, issues arise when you do not invest in the items required to successfully operate a franchise or when there is too much financing (or lending) for a business acquisition.

Cost Types Amount (USD) When Due To Whom Payment is to Be Made
Low High
Franchise Fee 30,000 35,000 Upon signing FA Franchisor
Architectural Plan Review 0 1,000 On request of our PDP Franchisor
Architect Fees 5,653 15,792 Before Opening Our preferred architect or your local architect
Permits & License Fee 291 3,930 Before Opening Contractors or government
Leasehold Improvements 32,632 179,268 Before Opening Contractors
Equipment 33,533 76,660 Before Opening Designated Vendor
Furniture 0 11,827 Before Opening Designated Vendor
Millwork 18,270 46,726 Before Opening Vendors
Smallwares 3,920 5,728 Before Opening Designated Vendor
Exterior Signage 5,313 13,807 Before Opening Vendors
Menu Board, Graphics and Interior 1,634 11,240 Before Opening Vendors
Technology Systems 1,050 1,865 Before Opening Franchisor
Grand Opening Marketing 5,000 5,000 On or Before Vendors
Uniforms, Menu, Materials, Office Supplies 3,757 3,757 Before Opening Vendors
Travel & Living Expenses While Training 0 2,500 During Training Transportation, motels & restaurants
Opening Inventory 5,442 5,442 Before Opening Designated Vendor
Insurance 2,229 3,750 Before Opening Insurer
Additional Funds (3 months) 15,000 30,000 As incurred Landlord, utilities, suppliers, etc
Total 163,724 453,292