Are business migrants the new hope for Australian franchising?

With many Australian franchise systems commenting on a lack of suitable franchise applicants domestically, and the economy still growing despite the impact of the Global Financial Crisis overseas, business migrants are attracted to Australia and buying franchises to meet their visa requirements.

Migrants from around the world are increasingly attracted to franchising as a way of qualifying for an Australian business visa and are prepared to turn their lives upside down to settle Down Under.

At the same time, steady growth and a lack of Australian franchisees mean that business migrants are helping maintain the sector’s strong 14% annual growth rate (Source: Franchising Australia Survey) despite the fierce competition among systems for new franchisees.

State governments are also acknowledging that franchising is an attractive proposition for business migrants compared to the purchase of stand-alone businesses, and are keen to attract business migrants and their contribution to the state economy.

However the overall number of migrants coming to Australia on business visas is low, accounting for less than 20% of visa applications. Of these, approximately half are buying franchises, but migrants entering the country under other categories of visa could also be buying franchises after their arrival.

Statistics about the uptake of franchises by business migrants are sketchy, but anecdotally the trend continues to rise in parallel with the overall growth of franchising in Australia.

While Asia remains a large source of migration, England is the number one source of new Australians, and Australia is England’s preferred migration destination.

Irrespective of where they come from, all business migrants to Australia must meet the same selection criteria. While the Federal Government’s Department of Immigration and Citizenship remains the final decision-maker and issuer of migration visas, state governments have recognized that migration can provide economic benefits to state economies and compete to attract migrants.

Whereas business migrants are required to invest a minimum $500,000 or more in an Australian business under federal requirements, this threshold is effectively halved under sponsored visa programs offered by the state governments, with the proviso that the applicant must settle and operate a business in the sponsoring state.

The state sponsorship of business visas is ideally suited to prospective franchisees particularly of retail systems whose entry costs typically start at $250,000, and which provide the required investment level for the visa criteria.

But meeting the investment level is just one of many criteria required to satisfy state authorities to recommend to the Department of Immigration and Citizenship that an applicant should be accepted for a business visa.

For people considering a franchise, the prior approval of the franchisor is essential to gaining state sponsorship. For these applicants, they must first identify a franchise system of interest, then undertake the franchisor’s selection and approval process (which usually involves identifying a location and developing a business plan) before submitting their visa application to the state authorities.

The business plan forms part of the state-sponsored visa application, and must include market research, a competitor analysis and financial projections (shown in Australian dollars), as well as the number of jobs to be created by the business and details of the applicant’s skills and business experience.

(Under the business migration visa, applicants are expected to have previously operated a business in their home country, or at least worked have held senior management or executive positions).

This business plan, plus a supporting letter from the franchisor and the formal application documents must then be submitted, and where possible, applicants are encouraged to attend an interview with state migration officials to support their application.

The approval of state-sponsored visas is handled through the Department of State Development (or equivalent) in each state. Applicants must verify that they intend to settle and operate their business in the sponsoring state, and although the location in the state must be specified, it is not a determining factor.

While it is not compulsory to attend the interview with state migration officials, it can help facilitate the approval process and result in a recommendation to the Department of Immigration and Citizenship for a business visa.

In most cases, the recommendation is accepted, but can be declined if the applicant intends to only be a passive investor in the business and not take an active role in its operation.

High levels of English language skills are not a strong requirement for state-sponsored visas, and in conjunction with the lower investment threshold, potentially allow entry to applicants who would not otherwise qualify for a visa from the Federal Government.

However, not all franchise systems are suitable for consideration by business migrant candidates. The minimum investment requirement of $250,000 excludes many service franchise concepts, as well as the requirement for the business to be a net employer.

Still, business migrants maintain their interest in Australia and look to franchising as one way of establishing a new life for themselves here.

Ten business migration tips for franchisors:

1. Have a procedure in place for handling domestic franchise enquiries from outside Australia. Now that most franchisors have information about their franchises online, they can expect to receive franchise enquiries from anywhere in the world. Be responsive and professional in dealing with questions you might not otherwise get from Australian-based prospects.

2. Recommend that potential franchisees deal with a migration agent registered with the Migration Agents Registration Authority (MARA). Don’t provide visa or migration advice yourself. See www.immi.gov.au for more information about immigration guidelines and migration agents, as well as the Department of State Development (or equivalent) website in the franchisee’s destination state for details of state-sponsored visas.

3. Be prepared to say no, even if the candidate is a good fit for your business. Some prospects who might make suitable franchisees could require higher levels of field support than your system is able to provide. It is better to say no up-front until your field support levels are higher.

4. For candidates who meet your selection criteria, be prepared to provide a written offer of a franchise (subject to visa approval) which can be used for their visa application. If contacted by state or federal immigration officials, answer all questions promptly and thoroughly.

5. Allow for longer planning timeframes when dealing with business migrant candidates as their migration applications may take some time to process.

6. Bear in mind that over time, business migrant franchisees can provide you with an insight into your franchise’s suitability for export into their home country, and can be a valuable future resource as your business expands internationally.

7. Develop your own awareness and respect of the cultural and religious norms of the countries of origin of your migrant franchisees. Train your staff accordingly to avoid the potential for embarrassment and conflict.

8. Do not develop non-English promotional materials. This will act as an early filter to determine English language proficiency. If successful candidates from a LOTE (Language Other Than English) background are appointed, be prepared to make a translator available during training to ensure that detailed concepts and questions are handled correctly.

9. Comply with the Code. As long as someone is buying a franchise in Australia, the Franchising Code of Conduct still applies regardless of where they come from. Ensure all documentation is provided in accordance with the Code, and strongly encourage applicants to seek independent legal, accounting and business advice.

10. Be prepared for referrals. If you grant a franchise to a business migrant, it is possible that their friends, family or colleagues from their home country may also enquire about a franchise with you. Ensure that your existing migrant franchisee is aware that referrals are welcome, but in itself is not enough to grant a franchise as each applicant must be treated on their own merits.

Jason Gehrke is a director of the Franchise Advisory Centre and has been involved in franchising for 18 years at franchisee, franchisor and advisor level. He provides consulting services to both franchisors and franchisees, and conducts franchise education programs throughout Australia. He has been awarded for his franchise achievements, and publishes Franchise News & Events, Australia’s only fortnightly electronic news bulletin on franchising issues.