Top Five Mistakes Made by Franchise Buyers

For many individuals, purchasing a franchise is the fulfillment of an entrepreneurial dream. But just buying into a particular franchise model does not guarantee success. In fact, buying into the wrong brand can turn your business ownership dream into a nightmare. To ensure you are getting into the right franchise, there are certain critical mistakes you should avoid.

Here are five of the top franchise buying mistakes made by aspiring owners:

Buying the Name, and Not the Business Model

A lot of entrepreneurs become franchisees after first being consumers of a particular product or service. For example, they love the food at a particular fast food restaurant, and they think “hey, we could open one of these in our town”. The challenge comes when they fail to examine the entire business model, and what type of work is involved with not only serving customers, but accounting, payroll, marketing, and all the other necessary tasks. They also fail to examine the time it is likely to take to turn a profit with this business model, and what type of profit they can reasonably expect.

Owning a Job, Rather than a Business

A critical part of understanding the business model is understanding how much income you can expect to make. There are some franchise businesses that have higher income potential; for example, in recent years, senior care and cleaning franchises have proven to be very lucrative. Others, such as fast food, tend to have smaller margins, and owning just one location might provide about the same income as your current job — along with the added stress of owning the business.

Not Having the Proper Financing in Place

Investing in a franchise involves more than just the franchise fee and cost to set up the location. You also need to have working capital for at least six months, and enough money to feed your family for six to nine months while you are waiting for the business to turn a profit. Another common challenge is the source of financing. For example, many opt for a home equity line of credit – this is particularly popular when home values are rising like they are now. But what happens if the business does not make it? With multiple loans on your house, you might find yourself over-leveraged and in danger of losing your home.

Looking for Immediate Passive Income

Setting up a franchise is hard work and there is no getting around that. Now over time, you may have a nice profit coming in and the ability to hire someone (that you can trust hopefully) to run your business on a day-to-day basis. But in the beginning, expect to put in long hours getting the business off the ground. Now, if this is a business you are passionate about, these can be long, enjoyable hours. But regardless, just know that there is no magic button that you can push to make your franchise successful. You need to put in the effort – especially in the beginning.

Honing in on One Particular Brand

It is great to partner with a franchise brand you like, but having an emotional attachment to a single brand can be a two-edged sword. Pursuing one brand can tend to cloud your judgment and cause you to only focus on the strengths without objectively examining the weaknesses. It is always a good idea to look at other options that are out there. There are, after all, literally thousands of available franchise brands across a wide range of industries. It never hurts to at least look at a few others that might be of interest to you. If, at the end of the day, you still end up settling on the brand you first looked at, you will at least do be making an informed decision with the knowledge of the other available options.

At Franchise City, we provide free, unlimited franchise consulting to help prospective entrepreneurs find the franchise business that best fits their passion, skills and budget. There is never a charge for our services, and franchisees never pay higher fees by going through a franchise broker. To learn more about how we can help you, fill out the contact form on the bottom of this page.

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What are the Best and Worst Franchises to Invest In?

These days, there are hundreds of franchise business models to choose from. And as franchise consultants, we strongly advocate choosing the franchise opportunity  that best fits your passion, skills, and budget. Becoming a franchise owner will require a major investment of time, talent, and treasure. You will be putting in long hours (especially during the startup phase) getting everything set up and guiding your new business to profitability. If you are not passionate about the business you start, it will be a difficult road to prosperity.

All that said, it is also important to find a franchise business model with a strong track record of success. If the company you work with does not have a successful track record, you are in for an uphill climb. No matter how enthusiastic you are, you must ensure you are part of a winning brand. Otherwise, you will have a very hard time making the business work.

Our friends over at FitSmallBusiness.com have compiled a list of the 50 best and 50 worst franchises over the past 16 years (from 2000 to 2016). The data is pulled from the Small Business Administration (SBA). SBA loans are a major source of financing for franchise startups, so it is useful to examine the SBA loan default rates of various franchise models to help determine which franchisees are making it, and which ones are going under.

Here are the top 10 from each list:

Top 10 Best Franchises Based on SBA Loan Default Rates

  • Straight Shot Express Delivery: 0% Loan Default Rate
  • Farmer Boys: 4.35% Loan Default Rate
  • InstyPrints: 6.25% Loan Default Rate
  • Comfort Keepers: 6.25% Loan Default Rate
  • Zeppe’s Pizzeria: 8.7% Loan Default Rate
  • Buffalo Wild Wings: 8.89% Loan Default Rate
  • Jet’s Pizza: 9.09% Loan Default Rate
  • Visiting Angels: 9.52% Loan Default Rate
  • Complete Nutrition: 9.68% Loan Default Rate
  • Great American Cookies: 10.53% Loan Default Rate

Of the top 50 performing franchises on the SBA default list, more than 75% had paid their loans in full between 2000 and 2016, indicating strong potential for revenue generation and profitability.

Top 10 Worst Franchises Based on SBA Loan Default Rates

  • Wings-N-Things: 88.89% Loan Default Rate
  • Noble Roman Pizza: 88% Loan Default Rate
  • Image Sun Tanning: 83.33% Loan Default Rate
  • 24Seven Vending: 81.08% Loan Default Rate
  • La Paletera: 76.47% Loan Default Rate
  • Orangetheory Fitness: 76.47% Loan Default Rate
  • Juice Zone: 75% Loan Default Rate
  • Wireless Toyz: 72.50% Loan Default Rate
  • Play N Trade: 72% Loan Default Rate
  • Executive Tans: 72% Loan Default Rate

All franchises on the 50 worst list had loan default rates exceeding 50%, and 7 of those on the top 10 list had failure rates that exceeded 75%. You can view the entire list and accompanying article here.

Some thoughts regarding this data:

The Franchise Brand is More Important than the Industry

On both the best and the worst lists, there are lots of food franchises. Of course, food covers a wide range of brands and models, and some will obviously perform better than others. But one thing about food franchises sticks out to me — there is a wings franchise in the top 10 on both lists. Buffalo Wild Wings comes in 6th on the top 10 list, and Wings-N-Things is #1 on the worst list.

Both companies serve wings, so what makes the difference? The difference is the franchise brand itself; the marketing methods, brand reputation, and support offered to franchisees. These factors all need to be taken into account before you invest your hard-earned money partnering with a franchise brand.

Senior Care is a Major Growth Industry

For several years, I have been very high on the senior care industry. With 10,000 Americans turning 65 each day and the Baby Boomers entering full retirement, senior care franchises are going to be a hot business for at least the next few decades. The SBA default data helps confirm this view. You will notice that in the top 10 alone, there are two senior care franchises: Comfort Keepers (#4) and Visiting Angels (#8). Overall, there are three in the top 50, with Home Instead Senior Care coming in at #32. By contrast, not one senior care company shows up on the top 50 worst list.

If we drill even deeper, we will find that all three of these franchises provide non-medical care to seniors; meaning they provide meals, companionship, grocery shopping, light housekeeping, etc. There are other senior care franchise models that provide health care administered by licensed nurses. This model is a bit more difficult because the owner needs some knowledge of medical care, and the in-home caregivers must be nursing professionals.

So from this data, we can conclude that in-home senior care is a strong business model for those who have a passion to serve the elderly population in their community and want to make a good living doing it. That said, you still need to be careful to choose a brand with a strong track record of success.

Cleaning Franchises are a Good Option

Though there were none in the top 10, Merry Maids (#17) and Molly Maids (#25) showed up in the top 50 best franchises. And like senior care, no cleaning franchise ended up in the 50 worst list. Cleaning has another thing in common with senior care; low overhead. Both franchises can be operated out of a small office (or even a virtual office) as the services are performed at the location of the client.

Pizza is Still a Favorite, but be Careful

Two pizza franchises are in the top 10 best franchises; Zeppe’s at #5 and Jet’s Pizza at #7. Some better known names such as Little Caesar’s and Papa Murphy’s also make the top 50 list. On the flip side, there are some pizza franchises on the bottom 50 list as well. Most notably, Noble Roman Pizza is rated the second worst franchise with a default rate of 88%. What is clear from this data is pizza is still a favorite food among American consumers. However, the startup costs are high (in the low to mid six figures at least), and competition is heavy. For this reason, choosing the right brand and location is extremely important.

Think Twice about Tanning and Golf

Two industries that had plenty of representation in the bottom 50 were tanning and golf. Two tanning franchises showed up in the top 10 worst (Image Sun Tanning at #3 and Executive Tans at #10). There were also three golf franchises in the bottom 50 (now defunct Pro Golf of America #19, Golf Etc. at #36, and Golf U.S.A. at #40). No golf companies show up in the 50 best, and only one tanning franchise makes the list (Tanworld at #22).

Tanning and golf are two industries that are often mentioned when people talk about “following their passions.” The challenge with these industries, however, is their seasonal natures — at least in many regions of the country. For example, golf season in the northern U.S. lasts only 4-6 months. Tanning, on the other hand, is hardly in demand at all in the southern U.S., and only popular in the north during the winter months. These factors must be looked at carefully before getting into this industry.

What’s Your Next Move?

We hope you found our thoughts on the 50 best and 50 worst franchises helpful. While it is always important to choose a franchise model in an industry that best suits your passion, skills and budget, this data shows that you must also pick a franchise that is in a viable industry and one that has demonstrated the ability to succeed in that industry.

At Franchise City, we work with over 600 of the top franchise brands across a wide range of industries. Through a proven multi-step process, we help match aspiring entrepreneurs to the right franchise brand. Our services are unlimited and completely free, and there are never any additional fees if you end up purchasing a franchise through our services. For more information, please contact us by filling out the form at the bottom of this page.

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What Does It Take to Open a Boston Market Franchise?

Boston Market is one of those brands that has been around forever (well, since 1985) and has had its share of ups and downs. In the early 90s, they expanded far too quickly and filed for bankruptcy. McDonalds purchased them, but then sold them off (along with Chipotle and a few other brands they had purchased) when their long and unstoppable collapse began in the late 00s. Since 2007, Boston Market has been quietly run by Sun Capital Partners, a massive equity firm that also owns a number of other famous brands including ShopKo, Bonmarché, and Lexington.

Their recent story? In 2010, they made a subtle but important change from “Kinda like KFC” to “Sorta like Red Robin.” Plastic silverware, disposable plates, and buffet-style service went out (in most stores; some retain the buffet style), and real dishes, metal forks and knives, and a revised menu with a focus on more sides and sauces came into play. (This didn’t keep The Onion from skewering those branches that retained the buffet style of services, however.)

Then, in 2014, the first new Boston Market in four years opened its doors, followed by two more that year, then 10 in 2015. The next target in line? Military bases — the perfect venue for their quick-but-home-y style of meal.

What About The Financials?

Sun Capital Partners is notorious for not releasing financial information about its companies, and Boston Market is no exception. We do know that the company is focused on increasing its Average Unit Volumes — meaning, it’s deliberately trying to drive up the profitability of the stores it currently owns. Since 2010, the AVU of a Boston Market branch has gone from $1 million to $1.3 million, driving it into the top 15 quick-service restaurants in terms of APU. That’s about on par with White Castle, Burger King, Taco Bell, and Jack in the Box.

The CEO (George Michel) claims the target is $1.5m per branch. That would nudge it into the top 10, keeping company with Wendy’s, Zaxby’s, Bojangles’, and Steak N Shake.

That is all the information we have, however, because Sun Capital Partners did not file the necessary financial paperwork for franchises last year — or any year since McDonalds first purchased them. They are growing slowly according to an internal plan developed by their CEO in conjunction with Sun Capital.

Should You Wait?

Michel did hint (and the company’s website does currently say) that the company “may” be developing a franchise program “in the future.” But if you’re looking for a franchise, the chances are excellent that  you’re square in the middle of a window of opportunity that — just because of random changing life circumstances — won’t be open for long. Don’t miss your chance to become a successful franchisee because you were waiting for the One True Franchise to become available — talk to a franchise broker (like us!) about what realistic options could get you started today. Before your window closes and the opportunity is gone for good.

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Claiming Your Own In-N-Out Burger Franchise

How cool would it be to be the master of your own Secret Menu? Owning an In-N-Out Burger is a red-blooded American’s dream come true. Can you imagine owning your own slice of the dream created by the youngest female billionaire in the U.S., 30-year-old owner Lynsi Torres? Thousands of people can taste it — inquiries into In-N-Out Franchises rain down on Google at the rate of over a hundred per day. In-N-Out is so popular that there’s even been a man arrested for selling fake In-N-Out franchise licenses!

What’s So Awesome About In-N-Out Burger?

Just about everything — they’re basically the Trader Joe’s of burger joints.

  • In-N-Out believes in sharing their success with their employees, having set a corporate standard minimum wage of $10.50 and a standard manager’s salary just reaching the six-figure mark. In a market that generally considers labor a cost to be cut rather than an asset to be nurtured, this has proven an advantage: they have the lowest turnover in the industry and their dramatically lower training and managerial costs reflect that.
  • They also believe that quality control starts at the most fundamental level, which is why In-N-Out has its own stable of butchers that carve and then grind the beef that goes into every one of their patties.
  • The infamous “secret menu” is a reflection of In-N-Out’s commitment to listening to their customer: every single item on that secret menu started as a customer favorite that became popular enough to go nationwide…shh!
  • Slow but unstoppable growth is the business plan: In-N-Out Burger refuses to open a burger joint unless it’s in a community that can definitely support it and is within 500 miles of one of their commissaries (the places where their buns and patties are expertly crafted) AND it already has a proven management team ready to break away from their current locations and go start the new location. In a world driven by next quarter’s profits at all costs, In-N-Out has maintained the same growth philosophy that they had back in the 60’s — which may be why you haven’t heard of them until fairly recently!

But That Doesn’t Sound Like a Business Plan for Franchisees

…sorry. It’s not — In-N-Out Burger has never and purportedly will never franchise out their brand. They believe too firmly in quality control and in sticking to their growth plan. But don’t let that get you down — In-N-Out may be out of bounds, but there are still dozens of similar, incredibly strong burger brands out there that would love to have you.

How do we know? That’s our job! We’re brokers — professionals in the art of matching an erstwhile franchisee with the franchise that can make their ambitions a reality. If you love In-N-Out Burger but you need something more than a job as a branch manager, fill out our contact form at the bottom of this page. We’ll give you a number of businesses that match the core philosophies, product line, and ambiance of In-N-Out, but will give you the opportunity to be the owner.

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Want to Become a Chipotle Franchisee?

Who wouldn’t want to be the owner of a branch of one of the most wildly successful new everyman eateries in decades? Chipotle has almost everything going for it — huge growth rate, great media coverage, and an excellent reputation as a restaurant that combines healthy food, ‘green’ business, and good prices. Even the downsides of owning a Chipotle aren’t really all that down. But what are they?

Chipotle By The Numbers

Unfortunately, Chipotle’s didn’t release any financial information regarding franchise costs for 2014 (keep reading to learn why). But they did release some pretty startling and impressive numbers in general. Let’s take a look at some highlights from their 2014 Annual Report:

  • 1,755 Chipotle restaurants are currently operational in the US, with another 17 operating in Canada and Europe.
  • The average startup cost for all Chipotles that have opened in the U.S. to date (as of the report) was $843,000.
  • The money made by a typical Chipotle goes toward:
    • 30% Food, Beverage, and Packaging Costs
    • 20% Labor Costs
    • 7% Administrative Costs
    • 5% Occupancy Costs
    • 2% Depreciation and Amortization
    • 1% Losses
    • 10% Other Costs
    • 25% Gross Profit

What Were Those Downsides Again?

25% profits is a pretty huge attraction in an industry where margins are often in the single digits. So what are the downsides? According to Chipotle itself, the challenges that is faces in the near future — at least, the ones relevant to the scope of an individual store — are as follows:

  • The time-to-profitability is meaningfully longer for a typical Chipotle branch than it is for many of their competitors — 24 months or longer (industry standard hovers around 8 months).
  • The market is starting to get saturated; it’s becoming difficult to find a truly attractive place to put a new Chipotle.
  • Profitability is largely dependent on Corporate’s ability to predict and preemptively respond to changes in the food supply. It’s difficult to maintain the high degree of “food integrity” that Chipotle does!
  • Secondarily, profitability is somewhat dependent on keeping labor costs low. This means that the growing minimum-wage movement, should it be realized, may significantly cut into profits (though this is unproven.)

All things considered, most big chains suffers from the second and last issues — those are essentially to be expected no matter what franchise you open unless you pick an unproven up-and-comer rather than an established name. The third item is practically Chipotle’s main selling point (besides the guacamole), so it’s not so much a ‘downside’ as ‘the reason you’d want to do this in the first place.’

But You Can’t.

Sorry — Chipotle isn’t, and has absolutely no plans to, develop a franchise model. They want to maintain complete control over their company (and with numbers like that, who can blame them?) Fortunately, while Chipotle isn’t available to franchise, there are hundreds of other food-industry franchises — many of which have the same commitment to high-quality, healthy food at decent prices — that you can get into.

Wondering what those other franchises might be? At Franchise City, we work with over 600 franchise brands across a wide range of industries, including many in the fast food space. Through a proven multi-step process, we are able to match prospects with the franchise business that best suits your passion, skills and budget. Our service is completely free, and there are never any additional charges or hidden fees to acquire a franchise through us. For additional information, fill out the form at the bottom of this page.

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Opening a Panda Express Franchise

Panda_Express_logo.svgPanda Express is a wildly successful chain of restaurants, easily the most dominant chain of Chinese-food restaurants in the U.S. The brand is so big, they were in serious discussions about purchasing P.F. Changs. They’ve been around longer than you remember, too — they were actually one of the first major chains to use the computer-based POS system (that is now ubiquitous in quick-service restaurants worldwide) way back in 1983.

Startup Costs

According to their 2014 financial disclosures, the average Panda Express startup costs break down as follows:

  • License Fee: Unknown (see below.)
  • Lease (first 3 months): Varies widely; as little as $12k for a small food court location or as much as $425k for a larger walk-in branch.
  • Leasehold Improvements: Varies widely again; as little as $80k for a small space that requires no locally-regulated improvements or a much as $500k for a massive (2,500 sqft.) space that requires complex or elaborate improvements such as a specialized exhaust system.
  • Furniture/Fixtures/Equipment/Supplies: $90k to $210k, based on expected daily volume, but even moreso on the financing terms you’re able to negotiate.
  • Initial Inventory: $2,200 to $3,600 based on expected daily volume.
  • Computers: $14,000 to $18,000 depending on financing terms.
  • Insurance (annually): $21,000 to $65,000 depending on local regulations and the likelihood of specific natural disasters.
  • Initial Training Expenses: $13k to $30k, depending on how far you and your management have to travel to get to the initial training program.
  • Architecture and Construction Costs: $32k to $85k depending on size of structure and local price variations.
  • Taxes: $4.5k to 10k for sales tax deposits, depending on expected daily volume.
  • Licenses and Permits: $1.5k to $30k depending on local ordinances.
  • Telephone/Internet/Fax and Related Expenses: $.5k to $1k.
  • Necessary Capital: Used to support the business until it starts to turn a profit — $60k to $120k depending on expected daily volume and recurring costs.

TOTAL: $380k – $1.6 million

Profitability

According to the owners — Peggy and Andrew Cherng — the profit margin of a typical Panda Express is a little lower than industry leaders, clocking in around 10%. (Compare to 25% at Chipotle for example). This is, according to the Cherngs, because Panda focuses so much on creating great food and offering its employees strong opportunities for personal growth. The owners are satisfied with their profit margin, and don’t plan on doing anything to meaningfully move it anytime soon.

Qualifications Required of a Franchisee

There’s only one qualification Panda Express asks of a franchisee — that you become an employee. Yep, Panda Express doesn’t offer franchises. They almost went public in the’90s, but are glad they decided against it and intend to continue with no franchises for the foreseeable future.

Alternatives

If you’re interested in running a Panda Express franchise, don’t let that news get you down — there are dozens of Chinese food franchises and several hundreds of food franchises out there for you to choose from. Get in touch with a skilled franchise broker who can help match you with the franchisor that best fits your passion, skills and budget.

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Top Franchise Opportunities for 2016

There are a lot of ways to measure the value of a franchise opportunity. The most obvious is profitability, but there are many other factors to consider as well. Depending on your situation, you might be more interested in accessibility (e.g. how can you start a business duplicating a proven franchise model with a minimum buy-in and qualifications?) or solopreneurship. But today, we’re going to focus on the factor that probably should matter the most aspiring entrepreneurs, because it’s the factor that will keep you going through the inevitable ups and downs of business ownership: franchisee satisfaction. Because if you’re not satisfied running your business, why do it at all, right?

Categories, Not Specifics

Before we get started, a quick note: we’re discussing categories (industries) of franchise opportunity, not specific franchises. Why? Because focusing on a specific franchiser as though they are the only factor in franchisee satisfaction is doing them a disservice. Satisfaction is often more about the facts of the marketplace than the facts of the franchiser. Besides, it is relatively easy to avoid a specific “poor” franchiser — just Google them before you buy in, and if you see a 4-to-1 ratio of poor reviews, move on to another franchiser.

Categories/industries, however, are much more important, because if you choose the wrong industry in relation to your passion, skills and budget, you are far less likely to succeed, no matter which particular brand you choose to work with.

And The Winners Are…

We started with the Franchisee Satisfaction Awards, which show off the top 200 franchises with the most satisfied franchisees (as determined by a survey of more than 25,000 franchise owners). We then cross-referenced it against the Bond Directory of Franchisors to get an approximation of what percentage of franchise owners in each industry reported themselves as “satisfied.” Here are the industries that produced the most satisfied franchisees in 2014-15 — and thus, the ones you can expect will be the most likely to be successful in 2016.

  • Home Services: Far and away the most satisfied group of franchisees are those working in the Home Services industry. This industry is largely solopreneurs and family or other very small, tight-knit groups. They spend their days going to people’s homes and providing services that are most often related to handyman work, painting, flooring, and installing appliances (e.g. point-of-use water heaters, and ductless heating systems). Buy-ins tend to be low, ranging from $30k to $110k and averaging around $70k.
  • Senior Care: The second highest rated industry (in terms of satisfaction) is elder care; e.g. franchisees that care for the elderly, mostly in their own homes managing Home Health Care workers of various types. There are also many options for sales both retail and otherwise, selling products that empower and enable the elderly to care for themselves. Generally speaking, the franchisees in this industry tend to not perform much care personally; they are the brains that hire, train, organize, and enable hired workers to do the care. Buy-ins range from $65k to around $130k, with the average appearing around $87k.
  • Food & Beverage: This category is a little broad, so we’ll narrow it down a little and say “Food & Beverage franchises that involve opening a storefront and running it,” because that’s where almost every satisfied franchisee in the broader group lies. This group tends to set themselves up as supervisors, hiring managers who in turn hire line workers; they spend their days examining their branch(es) from a bird’s-eye perspective and working out ways to succeed within the typically slim margins of the food service industry. Buy-ins range from $45k to just over $1 million — but the average is around $250k.

There you have them — the top 3 industries for franchise opportunities in 2016. Get into one of these industries because you are passionate about the industry; stay there because if you love the work when you get in, chances are you will be quite satisfied with your business for the long-term.

If you need additional guidance regarding these and other top franchise categories for 2016 and beyond, we encourage you to take advantage of our free, unlimited franchise consulting. Through a proven multi-step process, we help place aspiring entrepreneurs into the franchise business that best suits their passion, skills and budget. There is never a charge for our services, and your franchise fee is exactly the same whether you work with us or go directly to each individual brand. For further information, fill out the contact form at the bottom of this page.

 

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Does an E2 Visa Lead to a Green Card?

The E2 investor visa is a program for investors originating from E treaty countries to own and operate their own business in the USA. The E2 visa offers several advantages, including:

  • Relatively Low Investment Amount: E2 visas can typically be approved with an investment of only $100,000 USD.
  • Faster Processing Times: The processing time for an E2 visa is typically one to three months, depending on the country you are applying from.
  • Ability to Bring Family: Upon approval, visa holders can bring their spouse and children under age 21 to live with them in the USA.
  • Work Permit for Spouse: The spouse of an E2 visa holder automatically receives work authorization upon approval. This gives couples the potential for an additional income stream after settling in the United States.
  • Flexibility for Children Attending School: Children of E2 visa holders (under age 21) can attend the school of their choice, and in some states, they even qualify for in-state college tuition.
  • Unlimited Renewals: E2 visas are valid for a period of two to five years (depending on your country of origin) and can be renewed indefinitely as long as the business you have invested in is still viable.

Though the E2 visa offers many advantages for foreign investors, it is not a direct path to permanent residency (green card) status. There are, however, several indirect paths visa holders can take to obtain a green card, here are some of the most common:

Family-Based Petitions

If an E2 holder has family members living in the United States, it may be possible to apply for adjustment of status to permanent residency under a family-based petition. Waiting times for family-based immigration petitions vary widely depending on your sponsoring family member’s status (permanent resident or citizen), your relationship with your family member and your country of origin. Spouses, children and parents of U.S. citizens are in the highest preference categories, while brothers and sisters (over age 21) of U.S. citizens are in the lowest categories. Processing times for the highest preference categories may only be several months to a couple years, while processing times in the lowest preference categories could be up to 20 years or longer.

Employment-Based Petitions

For the E2 visa holder, outside employment is generally not an option. The E2 investor can only do work directly related to the business he/she invested in. However, because spouses can work anywhere they want, the spouse of an E2 holder could be sponsored for permanent residency by a U.S. employer. Employment visas are complex and take several months or longer to process. However, a U.S. company is far more likely to sponsor a foreign national if he/she is already working for them and proven their worth. This makes employment-based petitions a popular potential path from E2 visa to green card holder.

EB5 Immigrant Visa

For E2 investors that want a green card and have the financial capability to invest $500,000 to $1 million in a U.S.-based enterprise, the EB5 investor visa can be the ideal companion to the E2. The EB5 is a more complex program with annual caps and processing times of up to two years or longer. The strategy for high net worth investors that want to come to the U.S. right away but want to eventually gain permanent residence is to start out with an E2 visa, then after settling in the U.S., apply and begin the process for the EB5. Coordinating these two visa programs can be a bit tricky, however, so it is recommended that you consult an experienced immigration lawyer.

How Can I Ensure Approval of My E2 Visa?

There are several requirements that must be met to be eligible for the E2 investor visa. For starters, the investment must be “substantial”, meaning in the $100,000 USD range. In addition, you must prove that you obtained funding for your investment legally. You may finance a portion of your investment and/or obtain the money from family or friends, but you must demonstrate that these sources are legitimate. Other requirements include a minimum of 50% ownership in the business, a detailed five year business plan, and investment in an enterprise that is not considered “marginal”. Examples of marginal businesses may include multi-level marketing schemes and other home-based marketing ventures.

One of the best ways to ensure your business will meet the requirements of the USCIS is to invest in an established U.S. franchise. Franchise business opportunities are ideal for the E2 visa because the companies are known to the officer reviewing your case, they provide the detailed business plan you need, and they also provide unmatched training and support to put you in the best possible position to succeed. There are literally hundreds of franchise brands across a wide range of industries for foreign investors to choose from. To find the right E2 franchise business to fit your passion, skills and budget, it best to work with a franchise broker.

At Franchise City, we have access to over 600 of the top U.S. franchise brands. Through a proven multi-step program, we work hand in hand with foreign investors to find the ideal franchise for their needs. Our unlimited consulting services are 100% free of charge, and we provide the counsel and support you need to make a truly informed decision.

 

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What are the Best Franchises for an E2 Visa?

The E2 visa is a great way for foreign nationals to live and work in the United States (without any family or employment connections) by owning and operating their own business. To be eligible, you must meet certain requirements, one of which is that the investment must be in a real business; that is, not an enterprise that would be considered marginal, such as a multi-level marketing company. To meet this requirement, a growing number of E2 visa candidates are investing in U.S.-based franchises. But which type of franchise is best for a foreign national to invest in?

Before discussing specific industries to start a franchise business in, it is important to understand the rest of the requirements to be approved for an E2 visa. In addition to investing in a real enterprise, foreign nationals must also do the following:

  • Invest a substantial amount in their E2 visa business; the USCIS has no specific definition of “substantial”, but to be safe, it is best to plan on investing somewhere between $100,000 and $150,000 USD at a minimum.

  • Own at least 50% of the business you are investing in.

  • Show that you obtained your funding for the franchise legally.

  • Be directly involved in the operation of your business.

  • Your new business must create a minimum of two new jobs for U.S. workers.

Because of these requirements, there are certain types of franchises that are successful business models, but would never qualify for an E2 visa. Examples include home-based sales franchises, vending franchises, and generally any franchise opportunity with a required investment of under $100,000. Also, you will need to own a business that requires a minimum of two employees to operate – this would also preclude home businesses and one-man operations.

Though there are some franchise business opportunities E2 investors cannot take advantage of, there are still hundreds across a wide range of industries that can qualify. When deciding which is the right type of franchise to invest in with your E2 visa, it is best to start by thinking about which industries best fit your skills and passion.

For example, if you have experience managing a McDonalds, you may be a great fit for a restaurant or fast food franchise. On the other hand, if you have a background in nursing or the health care field in general, a senior care franchise might be a better fit. Maid and cleaning franchises, children’s services, pet care, health and fitness, and automotive are also growing industries that could provide great business models for the right E2 visa candidate.

Aside from finding a franchise opportunity in an industry you know and are passionate about, it is important to work with a well-established brand in that industry. Remember, you are making a very large investment, and moving yourself and your family to a new country. With so much on the line, it is best to be sure you are dealing with a company that offers the training and support to ensure you are well-positioned to be successful.

At Franchise City, we provide access to free, unlimited franchise consulting for E2 visa candidates. With nearly 600 franchise brands to choose from, we are most often able to place investors in the ideal business based on their passion, skills and budget. For further information on how we can help fulfill your dream of business ownership in the U.S., fill out the contact form at the bottom of this page.

 

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E2 Visa vs. EB5 Visa: The Advantages and Disadvantages of Each Program

For foreign nationals that want to invest in a business enterprise and live in the United States, there are two viable options; the E2 visa and the EB5 investor visa. Both programs have advantages and drawbacks, and they can also be used in combination to take advantage of the benefits of each with the right set of circumstances.

Here is a look at the advantages and disadvantages of the E2 and EB5 visa programs.

The E2 Visa Program

The E2 is a non-immigrant visa offered for investors who want to own a business in the United States and reside there with a spouse and children under age 21 while operating the business. To qualify, foreign nationals must make a substantial investment into a business that is not considered a marginal enterprise. In addition, you must obtain a minimum of 50% ownership in the business.

While there is no set amount the USCIS considers “substantial”, experience dictates that the investment should be in the neighborhood of $100,000 to $150,000 USD. Also, the investment must be in a “real” business, meaning a legitimate business model that will create a minimum of two jobs for American workers. This must be backed up by a solid business plan, and the source of your funding should be verified by a CPA to show it was all obtained legally.

Here are some of the benefits of the E2 visa program:

  • The investment amount is much smaller than with the EB5 program. One can realistically move and live in the USA with an investment in the low six figures;

  • Processing is relatively fast compared with other types of visas – average processing time for an E2 visa is 1-2 months;

  • E2 investors can bring their spouse and children under age 21 with them to the U.S.;

  • The visa holder’s spouse automatically receives a work permit and children may attend the school of their choice. In fact, many U.S. states offer in-state college tuition rates for children of E2 visa holders;

  • For nationals from most E treaty countries, visas are valid for two to five years with unlimited renewals as long as the business is still viable. In addition, visa holders can leave the U.S. for extended periods of time and re-enter the country while the visa is valid.

Here are some of the drawbacks of the E2 visa program:

  • The E2 visa does not provide a direct path to permanent residency or citizenship;

  • When the visa holder’s children reach age 21, they must find another way to legally remain in the U.S. or return to their country of origin;

  • If the business is struggling at the time you apply for a renewal, there is a chance your renewal application may be denied;

  • If the E2 investor closes or sells the business, they must find another way to legally remain in the country or return home.

The E2 visa program is great for foreign investors that want to buy into a smaller business and live and work in the United States. The important thing is to find a business that has a strong chance of visa approval and, just as importantly, a strong chance of long-term success. An increasing number of investors are looking at franchise business opportunities, because they give investors the opportunity to partner with a proven brand that has a vested interest in making sure they succeed.

The EB5 Visa Program

The EB5 visa is for investors who have a larger sum to invest and want an opportunity to gain legal permanent residence (LPR) status in America. To qualify, foreign nationals must invest either $500,000 or $1 million, depending on the location of the business, and create a minimum of 10 new jobs for U.S. workers.

Here are some of the benefits of the EB5 visa program:

  • Investors and their spouse and children become LPR green card holders, enjoying all the advantages of permanent residency;

  • As a green card holder, there is no need to apply for visa renewal every two to five years;

  • The investor does not need to own 50% of the business and/or manage the business to qualify.

Here are some of the drawbacks of the EB5 visa program:

  • The required investment amount of $500,000 to $1 million is up to 10 times higher than with the E2 visa;

  • Processing time for EB5 visa approval is typically 12 to 24 months;

  • S. LPRs are required to declare their worldwide income and assets when they file their taxes.

Like the E2, the EB5 visa is often used to invest in a franchise in the United States. However, because of the higher investment amount and requirement to create at least 10 American jobs, EB5 investors often make multi-unit purchases.

For foreign investors that want to come to the U.S. quicker but also eventually gain permanent residency, it is possible to utilize both programs. For example, an investor could purchase a single franchise for $200,000 through the E2 program and move to the U.S. Then once living in the country, they could apply for the EB5 program with the intention of purchasing additional franchise units to fulfill the $500,000 or $1 million and 10 job requirements.

It is important to keep in mind that requirements for the E2 and EB5 programs are not identical, and coordinating the two programs can be tricky. For investors planning to go this route, it is best to work with an experienced immigration attorney.

 

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