Obtaining an E-2 Visa by Purchasing a Franchise

Jun 23, 2020

One of the methods of obtaining an E-2 Visa is by purchasing a franchise. E-2VisaWorld provides an overview of the process.

Obtaining an E-2 Visa by Purchasing a Franchise

Obtaining an E-2 Visa by purchasing a franchise business is a great opportunity. It allows you to invest in a U.S.-based enterprise and get the E-2 Investor Visa for the United States, for yourself and your family.

The relationship between the owner of the franchise (known as “franchisor”) and the individual or company that runs one or more franchise units (known as “franchisee”) is set forth by a contract known as a franchise agreement. Under the franchise agreement, the franchisee is permitted to sell the products and services provided by the franchisor using its trademark, knowledge, and method of operation.

In return for these benefits and rights, the franchisee pays the franchisor an initial fee upon execution of the franchise agreement. Then they owe a periodic payment commonly referred to as a royalty, typically a percentage of the franchisee’s profits in a given period.

E-2VisaWorld can help you negotiate a franchise agreement wherein your interest will be adequately protected.

E-2 Visa Franchise Agreement

When considering buying a franchise as your E-2 Visa investment, you must understand the franchise agreement. Typically, the franchise agreement allows the franchisor to exert a significant amount of control over the franchisee’s business operations. The reason is that the franchisor needs to make sure that all of the aspects of the franchisee management meet the requirements and guidelines established by the company.

This makes a lot of sense: if you allow someone else to run a business under your name, you want to make sure that it is conducted properly. A struggling business may significantly impact the reputation of the franchiser’s company, its goodwill, and future business opportunities.

However, control by the franchisor over the franchisee also means a lesser degree of responsibility for the franchisee and the feeling of being supported as the case may require. Basically, you are not alone in conducting your business as the franchisor always has “your back.”

An E-2 Visa Franchise Purchase

When pursuing an E-2 Visa, purchasing a franchise is an excellent tool for starting a business even if you lack professional experience in a given industry. The franchisor will provide you with all the training and information necessary to run the business, as well as the products and services that you will sell.

The franchisor is also going to tell you what your store or office should look like by providing you with a layout, equipment, and furniture identical to those used by other franchisees in the same chain. Uniformity of appearance among the franchise units is crucial to preserving the reputation and strength of the franchiser’s mark.

Benefits of Purchasing a Franchise to Get an E-2 Visa

Setting up a franchise business under a popular and appealing trademark is probably one of the most lucrative options for a business owner in the United States. Instead of scaling a business on his own, an entrepreneur may choose to sell his concept, mark, and know-how to other people and make money. In the U.S., more than anywhere else in the world, you can find literally any kind of franchise. The U.S. market for consumers’ goods and services is so broad and filled with hungry customers that scaling up a business using a franchise structure seems natural for any successful business.

On the franchisee’s side, purchasing a franchise may be a great opportunity to start a business without knowing much about business in general and without the initial capital required to start a business from the ground up. When buying a franchise business, you will also access a formula that has already achieved success and obtained proven results. Purchasing a franchise takes a lot of uncertainties out of your business project.

Is Buying a Franchise a Valid Investment for Getting an E-2 Visa?

Buying a franchise is a great tool to invest in a U.S. business enterprise and qualify for an E-2 Visa. The E-2 Investor Visa is an entirely reliable way to move to the United States in less than three months by making a substantial investment in a U.S. business enterprise.

You may either decide to start your business from scratch or buy an existing business. In this case, you may consider buying a franchise, which will save you a lot of money compared to creating an entirely new one.

For an overview of the requirements and key features of the E-2 Visa for the United States, read our article E-2 Investment Requirements.

A list of countries whose citizens may be eligible for an E-2 Visa may be found here. If you are not a national of a country included in the E-2 Visa country list as maintained by the U.S. Department of State, don’t get discouraged. There are plenty of solutions that our E-2 Visa lawyers can explore with you. See, for instance, our article on how Russian and Chinese citizens may gain E-2 Visa status although these countries are not included in the E-2 Visa country list.

How the U.S. Consolute Reviews an E-2 Visa Application

Typically, the U.S. Consulate reviews an E-2 Visa application to evaluate whether the investment is substantial. This means whether the size of the investment is sufficient to start your project and make it successful and self-sustainable over time (so-called “proportionality test”).

In reviewing your E-2 Visa application, the U.S. Consulate will evaluate whether the “marginality” requirement is met. This assesses whether your enterprise will have a significant impact on the American economy by paying taxes and creating a wide range of business opportunities for other players, as opposed to securing a living exclusively for the E-2 Visa holder and his or her family.

When it comes to a franchise business, the evaluation of the investment and its capability of supporting a business project overtime is not supposed to be as rigorous as the evaluation for new business ventures. The mere fact that a particular franchise exists most likely means that the requested investment is proven to be sufficient for that specific project to start and flourish over the ensuing five years, at least.

Problems With Buying a Franchise for an E-2 Visa

There are several potential objections the Consulate may have about a franchise for an E-2 Visa. E-2VisaWorld can help you assess your business plan and how it may impact your chance of obtaining an E-2 Visa by purchasing a franchise.

E-2 Visa Degree of Investor Control

One of the reasons the Consulate may have an objection over approving an E-2 Visa for someone investing in a franchise is that the franchisor’s degree of control over the franchisee is too high. The E-2 Visa application must show that the investor owns at least 50% of the business or has otherwise control over the business. Acquiring at least 50% of a company or covering an influential position in the enterprise makes you the ultimate decision-maker.

However, when it comes to a franchise business, this specific requirement is not always easy to meet. This is due to the franchisor’s degree of control over the franchisee, as noted above. The examiner may not be entirely comfortable with this because it conflicts with your control over the company. Dealing with this kind of objection raised by the U.S. Consulate once the E-2 Visa application is pending is not the ideal scenario to find yourself in.

It is preferable to prevent this scenario from even happening in the first place. To this end, the E-2 Visa attorneys of E-2VisaWorld should review the franchise agreement well in advance to avoid this inconvenience to arise once the E-2 Visa application has been submitted.

E-2 Visa Contingencies in the Franchise Agreement

U.S. Consulates abroad accept E-2 Visa applications based on purchase agreements with funds placed in escrow contingent upon E-2 Visa approval. This is something that foreign applicants seeking to obtain an E-2 Visa should always secure. This way, if the E-2 Visa application is rejected, the buyer and E-2 Visa applicant will get their money back, and the deal will be off the table. Of course, it does not make any sense for E-2 Visa applicants to buy a business – including a franchise – if they cannot move to the United States to control the company.

From the franchiser standpoint, this contingency is not ideal because it makes the transaction uncertain. E-2 Visa applications supported by the purchase of a franchise business have the highest approval rates.

One of the requirements for a successful E-2 Visa application is that the investment in the U.S. business must be put “irrevocably at risk.” This means that funds invested in the company cannot be taken back should the venture fail. Therefore, from the perspective of a U.S. Consular office, the funds may not be considered “irrevocably at risk” because you may be able to get them back.

There are ways to prevent this from being a reason for the refusal of your E-2 Visa application. The most important one is creating an escrow agreement, which also involves the attorney. You can read more about this subject here.

E-2VisaWorld Can Help

Overall, obtaining an E-2 Visa through the purchase of a franchise business is a great idea that will allow you to save a lot of money. E-2VisaWorld has developed an extended network of brokers focusing on U.S. franchise opportunities, which may help identify which franchise offer is the best fit for you. Even better, you will not be charged with the broker’s commissions, as those are entirely covered by the franchisor.

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