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.
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|
|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|
|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|
|Additional Funds (3 months)||15,000||30,000||As incurred||Landlord, utilities, suppliers, etc|