Posted on Blog April 24, 2015
The EB-5 Program, established by Congress in 1990, provides foreign nationals the opportunity to obtain permanent residency in the United States if they (i) invest capital, (ii) in a new commercial enterprise, (iii) that creates jobs. Without getting into the particulars of the EB-5 Program, the requirements of the program can often be satisfied by investing in a franchise. However, a foreign national looking to take advantage of the EB-5 Program by investing in a franchise must exercise caution when selecting a franchise. Aside from selecting a franchise that meets the qualifications of the EB-5 Program, a foreign national looking to take advantage of the EB-5 Program should be aware of certain provisions that are commonplace in franchise agreements. For example, almost all franchise agreements require franchisees to develop and start operating the franchise within a year or less of signing the franchise agreement. Failing to comply with development deadlines is often deemed a material breach of the franchise agreement that provides a franchisor with the opportunity to terminate the franchise agreement and retain the non-refundable initial franchise fee. An EB-5 Program investor who invests in a franchise must be cognizant of the development deadlines and time-sensitive provisions, because certain requirements of the EB-5 Program can impact the ability to comply with these requirements. As such, an EB-5 Program investor who is looking to invest in a franchise should review the franchise agreement with a franchise attorney and negotiate special conditions to the development deadlines and other time-sensitive provisions that are commonplace in a franchise agreement.