EB5 Investors Magazine Volume 1 Issue 1 | Page 32

Franchise & EB-5 Steve Qi 32 by Steve Qi 1. Introduction The phenomenal increase in the past five years of EB-5 applications, in particular those through Regional Centers, has eclipsed the number of applications for almost two decades since EB-5’s inception in 1990. Much of that increase can be attributed to the rapid economic growth and the resulting wealth in China and unprecedented rise in Regional Centers. As investors become more wary of the inherent ailments of the Regional Center Program (in particular of the fraudulent claims by some Regional Centers as manifested by the recent lawsuit by SEC against a Chicago project), the regular EB-5 Program has once again become the focal point for some savvy investors and would-be immigrants. An interesting, as well as inevitable trend, in the regular EB-5 Program is that franchise has become an increasingly popular vehicle among investors/immigrants. This article tries to address this trend. “An interesting, as well as inevitable trend, in the regular EB-5 Program is that franchise has become an increasingly popular vehicle among investors and immigrants.” 2. What is “Franchise”? Legal definition of a franchise: According to California Business and Professions Code, section 20001, a “franchise” means a contract or agreement, either expressed or implied, whether oral or written, between two or more persons by which: (a) A franchisee is granted the right to engage in the business of offering, selling or distributing goods or services under a marketing plan or system prescribed in substantial part by a franchisor. (b) The operation of the franchisee’s business pursuant to that plan or system is substantially associated with the franchisor’s trademark, service mark, trade name, logotype, advertising, or other commercial symbol, designating the franchisor or its affiliate. (c) The franchisee is required to pay, directly or indirectly, a franchise fee. E B 5 I n v e s to r s M ag a z i n e