In expanding a network of franchises, a key limiting factor is the availability of capital for prospective franchisees to purchase franchise rights and finance other startup expenses. An increasing number of deals are being funded from abroad, by prospective immigrants using the immigrant investor, or EB-5, visa program. While EB-5 funding has become common and popular in large hotel and other real estate deals in the past three years, its utility in franchise funding has been less well-known, and has great potential. EB-5 funding has been used to fund franchises of various popular chains such as Five Guys Burgers and Fries, Sonic and VooDoo BBQ.
The EB-5 visa program, enacted in 1990, is a U.S. immigration program that allows foreign investors who invest either $500,000 or $1 million in a new commercial enterprise in the United States, which creates at least 10 full-time, permanent jobs for U.S. workers, to qualify for lawful permanent resident status in the United States (i.e., a green card). As a point of interest, it should be noted that the vast majority of EB-5 projects currently being marketed to investors are at the $500,000 level, and $1 million investments may face a competitive disadvantage.
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