Consider the franchises you are most familiar with — maybe it’s a local salon, nearby restaurant or home service business. They likely have easily recognizable names and branding that you can conjure without much effort. It’s no wonder that 70 of the top 100 franchises are U.S.-based.
As a business model, franchising is often synonymous with “local” and “regional” brands due to a whopping 80% of franchises that fall within this category. However, that doesn’t mean franchising does not attract aspiring entrepreneurs from around the world. In fact, there are two visa programs that offer paths to franchise ownership (and other small business ownership) and legal status in the United States: the E-2 visa and the EB-5 visa.
As a franchise consultant, I have worked with a number of foreign nationals who want to open a business in the U.S. while gaining legal status, so I took a dive into learning more about these visa options. I do not provide any kind of legal advice to candidates, and those interested in legal requirements for the E-2 and EB-5 visas should consult an attorney.
Let’s take a look at both of these visa options to get a birdseye understanding of what they mean, the initial baseline requirements for each and why they are relatively difficult to come by.
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E-2 classification
According to the U.S. Citizenship and Immigration Services, an E-2 Treaty Investor is a “nonimmigrant classification” that “allows a national of a treaty country to be admitted to the United States when investing a substantial amount of capital in a U.S. business.”
General qualifications for E-2 visas include, as mentioned, being a national of a country that has a standing treaty with the United States. In addition, an individual must invest (or be in the process of investing) a “substantial amount of capital in a bona fide enterprise in the United States” which includes the total cost of an “established enterprise” — such as a franchise — or the total cost of establishing a new enterprise. Lastly, the individual must show that they seek to enter the U.S. solely to develop this enterprise. E-2 visa holders are not able to perform any work outside of their approved E-2 interests.
It’s important to understand that this option is not a path to a Green Card or U.S. citizenship and requires an investment of time and money to qualify. This type of visa is considered to be employer-sponsored and individuals cannot apply for this visa while outside of the United States. Furthermore, the E-2 is approved in two-year increments (though applicants can reapply every two years indefinitely) and the classified individual is only able to live and work in the United States for as long as their business is operational.
Note: A treaty country is “a country with which the United States maintains a treaty of commerce and navigation, or with which the United States maintains a qualifying international agreement, or which has been deemed a qualifying country by legislation.” For a full list of treaty countries and a history of the dates each treaty was made, see this U.S. Department of State website.
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EB-5 classification
In the early 1990s, the United States developed the Immigrant Investor Program which created opportunities for foreign individuals to invest in U.S. based companies in order to stimulate the economy. Through this initiative, the EB-5 visa was created to allow foreigners, who are able to comply with the requirements, to become business owners in the United States.
Unlike the E-2 which is a “nonimmigrant classification” and is therefore not a path to American citizenship, the EB-5 Immigrant Investor Program is. Because of this, an EB-5 visa is not employer-sponsored, it is substantially more difficult to obtain and has several stringent requirements that few individuals can qualify for.
As the EB-5 section of the U.S. Citizenship and Immigration Services website indicates, individuals “are eligible to apply for lawful permanent residence (become a Green Card holder) if they” can first, “make the necessary investment in a commercial enterprise in the United States” which was updated in 2022 to be a minimum of $1.05 million; and second, if they “plan to create or preserve 10 permanent full-time jobs for qualified U.S. workers.” In essence, these two minimum qualifications include a large financial investment as well as job creation within your enterprise.
While there is no fixed cap for the number of EB-5 classifications that can be granted, the average annual number of visa holders is around 10,000.
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As you can imagine, these two visas are not particularly easy to qualify for as an average foreign investor. However, for those who are able to afford the capital investment, there are a few options for business ownership. One of these is franchising.
Why is franchise ownership a viable option? As a business model, franchising doesn’t only have a framework and blueprint for how to run a profitable business, but it also has the backing from a registered parent company. Therefore, a large portion of legwork and business start-up preparation has already been completed, not to mention the support system of other franchisees under the same brand.
Franchising can also be a way to start a business that is culturally aligned with demand trends for a foreign national who has not spent significant time in the country. It also can be a recognizable brand name and business model for officials who are approving the business for visa purposes.
While franchising is by no means the only option for E-2 and EB-5 visa holders, it’s an avenue worth considering for foreign nationals seeking ways to invest in a U.S. business and gain legal status.
