As a young man, I went to Taiwan to teach English for several months. Almost immediately, I was struck about how challenging it was to do the simplest of things such as walking down the street to browse some shops or buying some toothpaste. English was taught in schools, but very few people would speak it in the street and all the signs were in Chinese and so on. Sooner or later I learned a little Mandarin and became fascinated with Chinese culture, but still, the more I learned the less I understood.
Remembering this experience helps me to understand, in part, some of the challenges faced by overseas investors, particularly those who do not speak English very well or who are not familiar with how we do business. Of course, when it comes to investing in EB-5 projects we are talking about far more than buying a tube of toothpaste and that merely adds to the complexities they face.
There are many strong EB-5 investments out there, but there are arguably many EB-5 opportunities that are far less so. Add to this some of the program's high-profile failures (few as they may be) and one can see why some investors may be hesitant to trust some regional centers, even those that appear to be the 'real deal'.
The Direct Alternative
For the reasons stated above, we are seeing an upswing in interest among investors in investing in 'direct' EB-5 projects (projects outside of regional centers), commonly because there is a far more direct relationship between the investor and the business owner and the business in question is usually smaller and easier to grasp and assess. The other main reason is that EB-5 investors can also start their own qualifying businesses which they can control, thereby minimizing the risk (in the investor's opinion) of not achieving the required job creation or of failure of the project overall.
How then, does the foreign investor whose English may not be so good or who does not know our business customs get the best of all worlds? One way is to find the 'right' small or mid-sized business that is being run by a trustworthy individual. Another opportunity can come in the form of starting a franchise operation.
Why a Franchise?
Franchises work for EB-5 investors for several reasons:
Franchises have proven business models.
Franchise companies can help with top-notch market research.
Franchises (mostly) have very specific operational guides which take the mysetry out of day-to-day operations for the uninitiated.
Franchises can be put together with experienced and successful operators so that the EB-5 investor's involvement can be limited to setting policy, high-level strategy and management decision making, thereby making the day-to-day operation more of a turnkey situation.
The above list is one of the reasons that Strategic Element has developed a new offering helping EB-5 investors to find the right franchise and to get the operation up and running with experienced operators.
Navigating the waters of a new country and culture can be difficult indeed, however, depending on one's preferences and investment parameters, there are always different ways to carve out opportunity. Ultimately, the first step is to decide what kind of investment one is most comfortable with.
Phil Cohen is the founder and President of Strategic Element, a company that focuses on developing regional centers, EB-5 business plans and custom 'direct' EB-5 projects for its clients (www.strategicelementconsulting.com).