While recent media outlets have focused on several high profile projects being marketed today that are using EB-5 capital as a source of funding, little has been said about EB-5 issuers who are having great success with much smaller projects. The use of EB-5 capital for franchise operations has been a well-kept secret – until now.

Franchising has always been a popular way to expand a successful business that has a well-established brand. Hundreds of companies across the country lend their name to franchisees, such as SUBWAY, Taco Bell, Meineke Car Care Centers, and even Liberty Tax Service. These initiatives are well suited to EB-5 because of the high job count relative to the amount of capital required to get the franchise up and running. Many franchises can be deployed for less than $1MM-$2MM, and depending on the type of business, may employ a considerable number of people. Assuming that the franchise costs $2 million and the issuer contemplates 25% of the total capital coming from EB-5 funding, the franchise would only need to source one EB-5 investor and create 10 new jobs to satisfy EB-5 requirements. For most franchises, this can easily be accomplished.

The overall investment of using EB-5 funds is smaller. For franchises, this advantage means more jobs can be counted towards the job creation requirements. This approach appeals to more and more potential investors, as we are seeing this segment of the EB-5 market grow.

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