AFTERNOON DC: Franchising a Restaurant as an EB-5 Investment or Real Estate: Which project lowers my risk?

The EB-5 Investor Visa Program, administered by the United States Citizenship and Immigration Services (USCIS), provides U.S. green cards and permanent residency to international investors and their immediate families (children up to age of 21) through a one-time minimum investment of $500,000 USD into a new business that creates at least ten full-time American jobs. USCIS approves and designates Regional Centers for this purpose.

When you understand the EB-5 Program’s requirements, the key points that any investor is concerned about is the “job creation” and whether their investment will be returned at the end of the 5 years’ span. This brings us to the big question: which is the best investment in such a case? We believe it is QSR (Quick Service Restaurants) Franchises.

Franchising is not a new term to the modern world, nor is its immense effect on a country’s economics. In 2016, there were 801,253 franchise establishments in the US, creating 9 million direct and 16.1 million indirect jobs.

So what is QSR’s role in this? “Huge”! Among all business format[1] franchisees 45.5% of jobs or 39% of all the direct jobs were contributed by the QSR businesses, making QSR the highest contributor; while also creating a $222.6 billion in output, and pumping up the GDP by $123.5 billion[2].

Although franchising has been a high contributor among the top economic sectors (refer to image below), there is no doubt that QSR has a major role to play. For every QSR franchise establishment, there is an average of at least 18 jobs (whilst jobs required for an EB-5 Program is minimum 10 jobs). This puts an investor into a very low risk zone.

Source: PWC report The Economic Impact of Franchised Businesses: Volume IV, 2016. (Note: All the data is for the United States Economy only)

Real Estate projects require huge chunks of capital, delaying deployment until a Regional Center has received the desired amount of capital for the proposed project. However, a franchise investment project allows immediate deployment of capital, hence a faster opportunity to create jobs. This way an investor maximizes lowering their risk compared to a Real Estate project.

Both QSR and Real Estate are good projects by themselves, but the requirements of EB-5 makes the difference when choosing a project that would lower the investors’ risk for EB-5 processing. While Real Estate projects have proven to be effective EB-5 investments, QSR franchises are superior in both job creation and speed. Through their ability to deploy capital quicker and create more jobs, QSR franchises, provide a sound and secure choice for investors interested in securing a US green card. 

[1] Business Format franchises sell the franchisor’s product or services, with the franchisor’s trademark, and operate the business according to a system provided by the franchisor. (The economic impact of Franchised Businesses Report Vol. 4 – PWC)

[2] PWC report The Economic Impact of Franchised Businesses: Volume IV, 2016

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