06 Aug EB-5 Investment Opportunities: Spotlight on Restaurant Franchises
Welcome to e-Council Inc.’s new “Spotlight” series, where we feature successful EB-5 projects across different industries and business types.
Franchises may be an ideal option for foreign investors looking to participate actively in the EB-5 program. Franchise chains offer an established business model with a proven track record. Moreover, franchisors will often offer training and advertising support to new owners. Because the brands are well-known and established, investors may be more confident that the business will succeed. A proven track record associated with a particular brand will also make it easier for an EB-5 applicant to convince USCIS that the business will be viable and marketable. (For a longer discussion of the pros and cons of investing in a franchise, read this post.)
While franchises span many different industries—retail, automobile maintenance, daycare centers, spa services, and so forth—the restaurant industry is a good option for investors, as it’s one of the highest job-creating industries in the U.S economy and one of the most efficient producers of jobs per dollar invested. According to one investment firm with extensive experience in the industry, restaurant franchises create approximately 20 jobs per EB-5 investor, as compared to traditional real estate-focused EB-5 projects, which create 11 to 14 jobs per investor.[1]
Not surprisingly, EB-5 investments in the restaurant franchise industry are growing in size and interest. Over the last few years, restaurant companies have realized EB-5’s potential to fuel growth and expansion, particularly as competition for franchisees and capital heats up.[2]
As with other EB-5 investments, franchisors and franchisees alike can pursue the direct investment program whereby EB-5 investors invest directly in the franchise enterprise. If a Regional Center is not being utilized, only direct employment jobs will be included in determining whether the 10-job per investor test has been satisfied. If investing through a Regional Center, both direct and indirect job creation within the area will count toward the EB-5 requirement.[3]
Here are some examples of restaurant franchises that have attracted EB-5 investors with demonstrated success:
Voodoo BBQ: One successful example of an EB-5 project in this industry is Voodoo BBQ. The franchise group bringing Voodoo BBQ of New Orleans to South Florida attracted 10 investors through the EB-5 program—or a total of at least $5 million—to help finance four locations, including in the Pembroke Pines and Fort Lauderdale areas, both of which opened in 2013. Additionally, they’ve finished an offer with 10 more investors to fund four more locales, including Hollywood and Boca Raton.[4]
Miami Subs Grill: Another example is Florida-based Miami Subs Grill—a fast-casual restaurant that makes meals to order and uses “authentic” ingredients—that launched its drive to attract EB-5 investors and franchisees in 2013. With about 35 stores across Florida, the chain also has locations in Hawaii, Indiana, and South Carolina, Guyana, and one opening soon in Texas. The first location was itself founded by a Greek immigrant in 1988, in Key West, Florida. In 2012, international rapper/entrepreneur Pitbull announced his status as an equity partner in the franchise. Having him on board has significantly raised awareness of the brand internationally, especially in Latin America, which is a large market for potential EB-5 investors. The chain is also set to open a number of locations across the Middle East and Malaysia.[5]
Sonic Hamburgers: Sonic Hamburgers is a national franchise that was one of the first to jump into the EB-5 program in 2011, particularly in the South Florida region.
CKE Restaurants Inc.: CKE Restaurants Inc., parent to the Carl’s Jr. and Hardee’s brands, is also tapping EB-5 investors. CKE is a publicly listed company managing the Carl’s Junior and Hardee’s restaurants in U.S. and globally, with over 3,450 Hardee’s and Carl’s Jr restaurants on 4 continents, and over 1,300 restaurant in U.S. alone. In 2013, CKE showed 4 billion in revenue. Its EBITDAR (Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring or Rent Costs) is 21.6% (for Hardee’s Brand) and 23.6% (for Carl’s Jr brand). CKE has some of the best EBITDAR margins in the industry.[8]
LDV Hospitality: In 2013, multi-concept operator LDV Hospitality, based in New York, announced in 2013 the creation of an investment fund it plans to finance using capital from about 46 EB-5 investors. The company operates 19 restaurants among 11 brands—including the acclaimed Italian concept Scarpetta. LDV is planning to pool its EB-5 investments into a $23 million capital fund to grow some of its brands. It plans to add four more restaurants in New York and four in Miami, targeting three of its concepts that it has deemed scalable: the steakhouse American Cut, an Italian concept called Lugo Caffe, and a coffeehouse called Corso Coffee.[9]
e-Council Inc.’s attorneys, researchers, and other professionals specialize in providing due diligence services that will equip potential investors with the information needed to assess the viability and feasibility of opening a new restaurant franchise location, as well as the likelihood that the business will pass USCIS scrutiny. If the business passes muster, e-Council Inc. can create a Matter of Ho-compliant business plan and provide a wide range of complementary services designed to support the EB-5 application. Working with e-Council Inc. to complete all of your EB-5 documents minimizes the need for outside services from unrelated sources; all of our diverse service providers have been fully vetted and are immediately available.
To inquire about our wide range EB-5 services such as our best-in-class Matter of Ho-compliant business plans, please contact us at info@ecouncilinc.com.
e-Council Inc.com’s website, newsletter and other forms of communication contain general information about legal matters. The information is not legal advice, and should not be treated as such. You must not rely on the information on this website as an alternative to legal advice from your attorney or other professional legal services provider. If you have any specific questions about any legal matter you should consult your attorney or other professional legal services provider.
[1] http://www.lcrcapital.com/ourproduct/
[2] http://nrn.com/franchising/chains-attract-foreign-investors-eb-5-visa-program
[3] International Franchise Association, http://www.franchise.org/a-visa-program-for-the-franchise-industry-0
[4] http://articles.sun-sentinel.com/2013-04-12/business/fl-foreign-investors-restaurants-20130408_1_eb-5-foreign-investors-restaurant-chains; http://www.prweb.com/releases/2013/11/prweb11285687.htm
[5] http://miamisubs.com/locations; Sun-Sentinel, http://articles.sun-sentinel.com/2013-04-12/business/fl-foreign-investors-restaurants-20130408_1_eb-5-foreign-investors-restaurant-chains
[6] Sun-Sentinel, http://articles.sun-sentinel.com/2013-04-12/business/fl-foreign-investors-restaurants-20130408_1_eb-5-foreign-investors-restaurant-chains
[7] Nation’s Restaurant News, http://nrn.com/top-100/sonic-drive; Sun-Sentinel, http://articles.sun-sentinel.com/2013-04-12/business/fl-foreign-investors-restaurants-20130408_1_eb-5-foreign-investors-restaurant-chains
[8] http://www.capital-gcs.com/carl-s-junior-eb-5-program
[9] [9] Nation’s Restaurant News, http://nrn.com/franchising/chains-attract-foreign-investors-eb-5-visa-program?page=1