Foreign Franchiseesand the E-2 Visa

Katherine James-Bowers, Esq.

Maria J. Marley, Esq.

Matthew A. Roy

“Immigration Partners for the FBA”

November 10, 2011

Agenda

• Introduction to the Treaty Investor (E-2) Visa

• Requirements of the E-2 Visa

• Legal & Immigration Aspects

• Questions & Discussion

Introduction to the Treaty Investor (E-2) visa program

• Intended to promote economic ties between treaty countries, as well as positive economic impact in the U.S.

• Investors in U.S. businesses are granted a non-immigrant E-2 visa

• Spouses and dependent children also receive visa

• The investment and the business enterprise must satisfy several criteria

Introduction to the Treaty Investor (E-2) visa program

Overview of E-2 Visa Requirements

• Nationality

• Investment must be substantial

• Investment must be in a real, operating enterprise

• Investor must have control of the funds, and investment must be “at-risk”

• Investor must have controlling interest, and intend to develop and direct the enterprise

• Enterprise must be more than marginal

The requirements for the E-2 visa are NOT formulaic

• The requirements are extremely flexible:

– No minimum investment

– No minimum number of employees

– No limits on the size or type of business

– Great deal of flexibility on HOW the investment funds are deployed

• At the same time, the requirements can be very restrictive:

– No flexibility on the nationality of the business, investors, and employees

– No flexibility on the ownership % and the role of investors in the business

– Strict requirements re: the source of investment funds and the structure of the investment

The Requirements for the Initial Investment

• Source of investment funds

–Personal assets

–Gifts and loans (sometimes)

» Investor must be truly “at risk”

–Derived through legitimate means

• Funds must be “irrevocably committed”

• Investment must be Substantial

–Proportionally Substantial

–Sufficient to ensure success of business

–Sufficient to ensure investor's commitment

The Requirements for the Business Enterprise

• Must be a real and active enterprise (not a passive or speculative investment)

• For-profit ventures only

• Must be viable

• Must be more than marginal

–Personal income for the investor

–Jobs

–Economic impact

The Requirements for the Investor / Applicant

• Must have controlling ownership interest in the U.S. business (>50%)

• Must be in a position to develop and direct the enterprise

The Application and Business Plan

• A professional business plan must be included, to demonstrate that the business is viable and more than marginal

– Description of business

– Detailed description of the investment(s)

– Market analysis

– Sales projections

– Expense structure

– Projected Income Statements (5 years)

– Economic impact analysis

The Application and Business Plan (cont.)

• Financial records must be submitted to demonstrate the source of investment funds, and to substantiate the investment transactions

• Letters of support can be very helpful (e.g. from sellers of the business, local chamber of commerce, economic development agencies, potential customers, etc.)

Potential Challenges forFranchisee E-2 Visa applicants

• Franchise businesses that are not household names may be viewed skeptically by a Consular officer

• Starting a new business can be a harder case to make than buying a mature existing business

• Investments in franchise fees and other intangibles might be given less weight than investments in hard assets

• The features that make some small franchise businesses attractive to potential franchisees, could work against the substantiality and marginality requirements, e.g.

– Low up-front capital investment

– Home-based, little or no operating expenses

– No need for employees

Potential Advantages for Franchisee E-2 Visa applicants

• A new franchise can be presented as somewhere between a start-up and a mature business

– i.e. Should be a stronger application than an independent start-up business

• The franchise fees can be presented as a substantial, up-front investment in a key asset

– Small businesses, especially service businesses, often have a hard time coming up with things to invest in up-front

• The applicant's business plan can draw on the actual experience of other franchisees, and on the research, data, and analyses compiled by the franchisor:

– Sales and profit projections

– Employment and economic impact

– Letters of support from franchisor

Legal & Immigration Aspectsof the Treaty Investor (E-2) visa program (cont.)

E-2 Visa Application Process

• Application process is a one or two step process, depending on where the foreign national is located.

• Involves Department of State, and USCIS and Customs and Border Patrol (both under DHS; own rules and regulations).

Legal & Immigration Aspectsof the Treaty Investor (E-2) visa program (cont.)

Foreign National Outside the U.S. (1 step)

• Apply at U.S. Consulate

• Application: Form, fee, and Supporting Documentation to prove the eligibility requirements

• Separate applications for each applicant

Consular Interview:

• Consular Officer examines application for accuracy

• Focus facts about the substantiality/viability of the business

• Ties to home country

• Approval grants visa stamp in passport for 5 years

• Issues: inadmissibility issues, security checks

Legal & Immigration Aspectsof the Treaty Investor (E-2) visa program (cont.)

Foreign National in the U.S. (2 step)

• If in valid status, FN may be eligible to apply for E-2 status (change of status)

• 1st step - Application processed at an USCIS service center (notan Embassy or Consulate overseas)

• Adjudication time is usually 2-3 months

• If successful, E-2 status is granted, but not a visa in their passport

• 2nd step – If FN desires to travel outside the U.S., must obtain a visa abroad at a US Embassy or Consulate

Legal & Immigration Aspectsof the Treaty Investor (E-2) visa program (cont.)

Extension of Stay

• Abroad - Visas renewed for up to 5 years

• Domestically - E-2 status extended 2 years at a time

• E-2 renewal/extension application focuses on:

– Growth and development of the business

– Achievement of the business plan

– Demonstration of economic benefits

• Number of extensions can be unlimited, as long as business is viable, more than marginal, and other eligibility requirements are met

Legal & Immigration Aspectsof the Treaty Investor (E-2) visa program

General Considerations

• E-2 visa carries non-immigrant intent

• E-2 Visa not a channel to obtain a green card

• E-2 visas can be extended indefinitely

• E-2 visas holder can only work for the intended E-2 business

• Spouses and children obtain E-2 visa status as well; spouses may work, not children

Legal & Immigration Aspectsof the Treaty Investor (E-2) visa program (cont.)

Attorney Representation

• Pre-Application

• Prepare the application/packet

• Prepare applicant/FN for consular interview

• Representation until FN is admitted into the U.S.

• Legal fees generally flat fee; fees varied depending on case, complexities, number of applicants

The following workflow is a simplified version of the process that a franchise broker/consultant might follow with a

foreign franchisee candidate. It is designed to illustrate how brokers can coordinate with the immigration attorneys and

E-2 business plan consultant.

This presentation is intended to be a conversation starter, and suggestions are welcome.

Coordinating with the E-2 immigration team:Scenario - Franchisee Candidate in the U.K.

First Meeting:Candidate & Broker complete Initial Qualifying Form.

Second meeting: Review “New Client Packet”, “Funding Checklist” & complete “Fact Finder”

Immigration attorney and broker discuss candidate’s qualifications.

Broker asks if candidate is working with an immigration attorney.

Attorney meets with candidate, reviews “General Immigration Questionnaire”

Franchise Broker/Consult

ant

Immigration Attorney

Broker coordinates introduction with Immigration attorney (Maria and/or Kathy).

Broker presents concepts. Candidate selects franchise(s) to evaluate.

Broker introduces candidate to business plan consultant (Matt)

Franchise Broker/Consult

ant

Immigration Attorney

Business Plan Consultant

Matt provides E-2 perspective on competing franchise options.

Broker & candidate meet with selected zor(s). Candidate completes due diligence, attends “Discovery Day”

Candidate engages Matt to develop business plan and E-2 materials

Franchise atty. works with candidate.Funds transferred to escrow. Franchise agreement is signed, funds distributed.

Business plan and supporting E-2 materials developed, coordinated w/immigration atty.

Candidate engages immigration attorney directly.Attorney develops visa application strategy and submission

package; prepares candidate for consular interview (if applicable)

Broker introduces Matt to franchisor, to gather info for business plan

Coordinating with the E-2 immigration team:Scenario - Franchisee Candidate in the U.K.

Questions and Discussion