Choosing the right business structure can make or break an E-2 investor visa application — and the decision between a franchise and an independent business carries legal, financial, and operational consequences.
Understanding the E-2 Visa: Core requirements to keep top of mind
Before comparing business models, it helps to recap the key features of the E-2 Treaty Investor visa. The visa is available to a national of a treaty country who has invested, or is actively investing, a substantial amount of capital in a legitimate, operating U.S. enterprise and who will be coming to the United States to develop and direct that enterprise. The investment must be at risk, the enterprise must not be marginal (it must generate more than minimal living for the investor), and the investor must have control of the funds and business operations.
Authoritative guidance is available from the U.S. Citizenship and Immigration Services (USCIS) and the U.S. Department of State:
Franchise vs. Independent Business: A quick overview
A franchise is a license-based model where the investor buys rights to operate under an established brand using a proven system, training, and ongoing support. An independent business is any company the investor creates or acquires outside of a franchising system — from a neighborhood café to a technology startup.
Both paths can meet E-2 requirements, but they present different strengths and challenges when demonstrating substantial investment, non-marginality, and the investor’s role in developing and directing the enterprise.
Why a franchise can be attractive for an E-2 application
Many investors choose franchises because they offer predictability and structure — two features that can simplify parts of the E-2 analysis.
- Proven business model: Franchises often have historical performance metrics, unit-level profit-and-loss data, and standardized operating procedures that help show viability and ability to create jobs.
- Comprehensive documentation: The Franchise Disclosure Document (FDD) and franchisor financials provide clear documentation of fees, typical start-up costs, training programs, and default unit economics — useful evidence for consular officers or USCIS.
- Faster path to operations: Training and vendor networks can accelerate hiring, opening, and revenue generation, helping the investor demonstrate the enterprise won’t be merely marginal.
- Lower operational learning curve: For investors new to U.S. business practices, franchising reduces operational risk and can facilitate credible business plans and cash flow projections.
For general guidance on franchise disclosures and rules, the Federal Trade Commission provides a helpful overview: FTC: The Franchise Rule.
Why an independent business can be the better fit
An independent business often gives the investor greater control and flexibility — qualities that are meaningful for E-2 compliance and long‑term strategy.
- Full operational control: The investor can structure the business, contracts, and policies to ensure they are clearly in the position to develop and direct the enterprise, an important E-2 requirement.
- Custom scalability: Independent ventures can be tailored to market gaps, niche opportunities, or innovative products/services that may scale faster than a local franchise format.
- Potentially lower ongoing fees: Without royalties and mandatory supply agreements, an independent business may preserve more cash flow for hiring and growth.
- Stronger exit flexibility: Selling or restructuring an independent business can be less constrained than exiting a franchise agreement, which often requires franchisor consent.
Specific E-2 considerations when evaluating a franchise
Buying into a franchise is not automatically E-2-friendly; certain franchise features may help or hinder the visa case.
- Ownership and control: The investor must demonstrate they have sufficient managerial control. If the franchisor imposes rigid rules that effectively leave decision-making to the franchisor, the investor should document retained managerial authority (hiring/firing, financial control, local operations).
- Franchise fees and royalties: Upfront fees, ongoing royalties, and marketing assessments count toward the investment but also reduce operating cash flow — which affects non-marginality. A careful cash-flow model should show the business can support operations and job creation after paying these obligations.
- Territorial protections and duration: A secure territory can strengthen the business plan. The FDD and franchise agreement terms (renewal rights, transferability, default clauses) should be reviewed to ensure the investor’s investment is sufficiently protected.
- Buying an existing franchise vs. opening a new unit: Purchasing a proven, operating franchise location with established revenue and employees often makes it easier to demonstrate non-marginality than launching a brand-new outlet.
Specific E-2 considerations when evaluating an independent business
An independent venture requires robust documentation and a thoughtful presentation of how it meets E-2 criteria.
- Business plan rigor: A detailed business plan with market analysis, sales projections, staffing schedules, and break-even forecasts is vital. The plan should connect the investment amount to realistic growth and job creation.
- Funds at risk & source of funds: Evidence that funds are committed and at economic risk (purchase agreements, wire transfers, vendor invoices) is crucial. Clear documentation of the legal source of investment funds (bank statements, sale of asset documentation) is also required.
- Demonstrating non-marginality: Especially for startups, the investor must convincingly show the business will generate more than minimal income. Detailed hiring plans and multi-year financial projections help establish that the business will employ U.S. workers and grow.
- Industry choice and scalability: Some industries (e.g., tech services) may scale rapidly but have different hiring profiles; the investor should tailor the business plan to show realistic employment and revenue paths consistent with E-2 expectations.
Proving “substantial” investment and non-marginality: practical evidence
The regulations do not set a fixed dollar amount for a substantial investment. Instead, the investment is evaluated relative to the nature of the business. Practical evidence that helps satisfy adjudicators includes:
- Purchase agreements, escrow receipts, and closing statements showing acquisition costs.
- Bank statements and wire transfers showing funds moved to the U.S. and committed to the enterprise.
- Invoices, signed vendor contracts, lease agreements, and equipment receipts demonstrating money put at risk.
- Detailed business plans with multi-year financial projections and hiring schedules to show the enterprise isn’t merely marginal.
- For franchises, the FDD, franchise agreement, and unit-level historical financials can strengthen the case.
Existing operations with verified revenue and payroll records make it easier to prove non-marginality; startups can succeed with a well-supported plan and early signs of expenditure and contracts.
Due diligence checklist: questions every investor should ask
Whether the investor leans toward a franchise or an independent business, thorough due diligence protects the E-2 case and the capital invested. Key questions include:
- Who will own the U.S. entity and does ownership structure satisfy treaty nationality/control requirements? (Confirm with counsel.)
- How much of the investment is required upfront, and what costs are recurring (royalties, marketing fees, supply contracts)?
- What contractual restrictions exist that could impede the investor’s ability to develop and direct the business?
- How soon will the business hire U.S. employees, and what are realistic salary and hiring timelines?
- If buying an existing business, can the investor obtain verifiable financials, tax returns, payroll records, and an asset list?
- What is the exit strategy and how would a sale or transfer affect E-2 status?
Practical decision framework: matching goals to the right model
Choosing between a franchise and an independent business often comes down to the investor’s priorities and risk tolerance. Here are scenarios to consider:
- Lower operational risk + quicker path to revenue: A franchise with proven unit economics and strong franchisor support may be a better fit.
- Maximum control + potential for higher upside: An independent business allows design of governance and financial structures aligned with E-2 requirements and long-term exit plans.
- Need to prove non-marginality quickly: Buying an existing, profitable operation (franchise or independent) typically strengthens an E-2 application more than a brand-new startup.
- Limited initial capital: Select a business plan proportional to investment size and ability to hire; small investments must still plausibly show the enterprise will produce more than minimal living for the investor.
Legal and financial advisors who understand both franchising and immigration law can help structure ownership and contractual arrangements that support an E-2 petition.
Documentation and presentation tips for a strong E-2 petition
How the investor packages the application matters as much as the underlying facts. Practical tips include:
- Use a clear, realistic business plan: Show timelines, milestones, hiring schedules, and contingency plans.
- Organize documents logically: Group purchase agreements, evidence of funds, contracts, and proof of expenditures into labeled exhibit sets.
- Show operational steps already taken: Training completed, vendor agreements signed, permits or licenses applied for, or lease signed help prove the investment is active and at risk.
- Quantify job creation: Even projected hires should be tied to the business model with concrete salary ranges and roles.
- Address potential consular concerns: Anticipate questions about control, management structures, and how royalties or franchisor obligations will not render the investor passive.
Common pitfalls and how to avoid them
Investors frequently stumble on a few repeat issues.
- Passive investment: Holding stock without active managerial involvement will likely be denied. The investor must show evidence they will develop and direct the business.
- Insufficient documentation of funds at risk: Funds sitting idle in a bank account with no contractual commitment are weaker than funds paid to suppliers, escrow, or vendors.
- Underestimating operating costs: High franchise royalties or supplier mandates can erode revenues and make a business appear marginal; realistic cash-flow modeling is essential.
- Ownership/control misalignment: Complex ownership structures that obscure who controls the enterprise can create doubt. Structure ownership to clearly reflect the treaty investor’s controlling interest.
Which model best matches the investor’s appetite for control, speed to market, and risk tolerance? That question — combined with a careful legal review of ownership, franchisor contracts, and a rigorous business plan — will steer the decision.
If the investor wants personalized guidance, they should consider asking: What level of ownership and managerial control is required for my specific franchise? Would buying an existing location make an E-2 approval more likely than starting a new one? How should the ownership entity be structured to reflect treaty nationality? A qualified E-2 attorney can answer these and help assemble the strongest possible petition.
Choosing between franchise and independent models is a strategic decision that combines immigration law, commercial due diligence, and long-term business planning — and the right choice often depends on the investor’s goals, capital, and tolerance for operational constraints. What trade-offs matter most to the investor: predictability or control, speed or flexibility? Thoughtful answers to those questions will point the way forward.
Please Note: This blog is intended solely for informational purposes and should not be regarded as legal advice. As always, it is advisable to consult with an experienced immigration attorney for personalized guidance based on your specific circumstances.