Employment creation as a Franchisor (Not franchisee)

Hi all,

I previously held a T1 graduate Entrepreneur visa and switched to T1E april 2018. (50k route). However my business was not doing well and we stopped trading earlier this year (not stroke off yet).

Earlier some friends of my approached me for the idea of introducing a franchise of resturants to the UK. I do like their ideas and I am excited about investing another 50k along with their capital to start a new business, which would essentially be the franchise right owner of this brand in the UK. And we have already reached preliminary agreement with 2 potential franchise owners to open resturants in the midlands. The structure would be joint ventures. In this case each resturant would be a seperate business entity, owned jointly by our new company and their franchise owner.

Now, to the point. Due to the nature of the business, I am not sure the company itself would hire 2 employees before april next year (considering I myself will be the Franchise development manager). But as long as we manage to open one resturant the resturant itself would hire a few people. I wonder if the employment created by the resturants (which I will have indirect ownership over) would count towards qualifying employment creation?

It seems HO's guidence only apply to franchise onwers (Franchisee) and is pretty vague to start with. And I quote:"A14. Businesses that are set up as franchises can be accepted for the award of points. You will
either be self-employed or employed, depending on how you decide to structure the franchise
business, and should provide the appropriate evidence." end of quote.

Sorry in advance that my English isn't perfect and I am trying to explain a particularly complex and highly hypothetical situation here.

Thank you!

To claim points for employment, you need to be a Director of the business that is creating the employment.

marcnath wrote: ↑

Mon Apr 29, 2019 8:45 pm

To claim points for employment, you need to be a Director of the business that is creating the employment.

Thank you!

This sounds reasonably easy a requirement for me to satisfy. I expect my franchise owners would be happy to see me as directors of their resturants. The trouble is, I wouldn't have direct share holding of those resturants (I own partially my company, which again own partially those returants). Would this create any problem?

I think it would be reasonable to argue that my investment and entrepreneurial endevor resulted in the jobs created, despite that my company does not directly employ those people. But I can't find any precedents or specific guidelines for someone in my situation.

Your proposed structure is not going to work as your investment company would only be a shareholder in the actual trading companies.

The legal entity that has to show job creation would be the investment company not the trading company

Frontier Mole wrote: ↑

Tue Apr 30, 2019 12:12 am

Your proposed structure is not going to work as your investment company would only be a shareholder in the actual trading companies.

The legal entity that has to show job creation would be the investment company not the trading company

Thank you,

I see. What if I also have small personal share holding in the entities that hire employees? For example 1-10k in each resturant?

stanwoozie wrote: ↑

Tue Apr 30, 2019 2:15 pm

Frontier Mole wrote: ↑

Tue Apr 30, 2019 12:12 am

Your proposed structure is not going to work as your investment company would only be a shareholder in the actual trading companies.

The legal entity that has to show job creation would be the investment company not the trading company

Thank you,

I see. What if I also have small personal share holding in the entities that hire employees? For example 1-10k in each resturant?

That would help.

The rules state:

The applicant has:

(a) established a new business or businesses that has or have created the equivalent of at least 2 new full time jobs for settled workers, or
(b) taken over or invested in an existing business or businesses and their services or investment have resulted in a net increase in the employment provided by the business or businesses for settled workers by creating the equivalent of at least 2 new full time jobs for settled workers.

In my personal opinion, you would meet (a) without any investment if you are one of the founding directors. And for (b) the amount of investment is not specified - it should be sufficient if you have "invested". The evidence for whether the investment resulted in net increase in employment is evidenced by employee documents before and after investment.

The challenge is that HO can always use genuineness, which is such an open criteria. If your overall business is genuine, refusal on the basis of technicality of structuring the business would be unfair. You should take proper legal advice and be prepared to argue it in these cases.

For the trading companies would you be a director and a shareholder? What percentage of the shares would you hold in the trading company as an individual as opposed to the investment company holdings.

marcnath wrote: ↑

Tue Apr 30, 2019 5:49 pm

stanwoozie wrote: ↑

Tue Apr 30, 2019 2:15 pm

Frontier Mole wrote: ↑

Tue Apr 30, 2019 12:12 am

Your proposed structure is not going to work as your investment company would only be a shareholder in the actual trading companies.

The legal entity that has to show job creation would be the investment company not the trading company

Thank you,

I see. What if I also have small personal share holding in the entities that hire employees? For example 1-10k in each resturant?

That would help.

The rules state:

The applicant has:

(a) established a new business or businesses that has or have created the equivalent of at least 2 new full time jobs for settled workers, or
(b) taken over or invested in an existing business or businesses and their services or investment have resulted in a net increase in the employment provided by the business or businesses for settled workers by creating the equivalent of at least 2 new full time jobs for settled workers.

In my personal opinion, you would meet (a) without any investment if you are one of the founding directors. And for (b) the amount of investment is not specified - it should be sufficient if you have "invested". The evidence for whether the investment resulted in net increase in employment is evidenced by employee documents before and after investment.

The challenge is that HO can always use genuineness, which is such an open criteria. If your overall business is genuine, refusal on the basis of technicality of structuring the business would be unfair. You should take proper legal advice and be prepared to argue it in these cases.

Thank you!

The investment company aswell as resturants would be set up as new companies from the ground up.

Yes the genuineness test can be of a little concerning--considering my personal share holding of each resturant would be only 10k out of 150k.

But I would assume that if I eastablish evidences that I also have indirect ownership through the investment company, plus as the franchise development manager I played vital roles in the marketing and logistics of the whole project there is a very good case of genuine entrepreneurship to be argued? And this is indeed the case, the reason why would split my capital into the investment company instead of just run a resturant.

What would you suggest, should I consult a solicitor right now (before I embark on this new venture) or should I just go for it and worry about immigration later?

Thank you again!

Frontier Mole wrote: ↑

Wed May 01, 2019 12:20 am

For the trading companies would you be a director and a shareholder? What percentage of the shares would you hold in the trading company as an individual as opposed to the investment company holdings.

Hi,

From purely business perspective it actually makes more sense if the trading companies are only jointly owned by franchise owners and the investment company.

But it shouldn't be difficult for me to convince my prospective franchisees to let me hold some shares personally and be a director.

My personal shareholding would most likely be 10k out of 150k for each resturant, amount to 6.66%. This is quite small, would this potentially raise any issue?

Thank you

stanwoozie wrote: ↑

Wed May 01, 2019 2:07 pm

Frontier Mole wrote: ↑

Wed May 01, 2019 12:20 am

For the trading companies would you be a director and a shareholder? What percentage of the shares would you hold in the trading company as an individual as opposed to the investment company holdings.

Hi,

From purely business perspective it actually makes more sense if the trading companies are only jointly owned by franchise owners and the investment company.

But it shouldn't be difficult for me to convince my prospective franchisees to let me hold some shares personally and be a director.

My personal shareholding would most likely be 10k out of 150k for each resturant, amount to 6.66%. This is quite small, would this potentially raise any issue?

Thank you

It would be best to consult a professional.

I am personally aware of a case where an even smaller shareholding was sufficient for claiming jobs. No documentation on shareholding was even submitted or requested.

But it was a while back and I notice there has been a subtle change in the rules from "(b) taken over or joined " to "(b) taken over or invested "

Joined previously just required you to be a Director.

marcnath wrote: ↑

Wed May 01, 2019 2:38 pm

stanwoozie wrote: ↑

Wed May 01, 2019 2:07 pm

Frontier Mole wrote: ↑

Wed May 01, 2019 12:20 am

For the trading companies would you be a director and a shareholder? What percentage of the shares would you hold in the trading company as an individual as opposed to the investment company holdings.

Hi,

From purely business perspective it actually makes more sense if the trading companies are only jointly owned by franchise owners and the investment company.

But it shouldn't be difficult for me to convince my prospective franchisees to let me hold some shares personally and be a director.

My personal shareholding would most likely be 10k out of 150k for each resturant, amount to 6.66%. This is quite small, would this potentially raise any issue?

Thank you

It would be best to consult a professional.

I am personally aware of a case where an even smaller shareholding was sufficient for claiming jobs. No documentation on shareholding was even submitted or requested.

But it was a while back and I notice there has been a subtle change in the rules from "(b) taken over or joined " to "(b) taken over or invested "

Joined previously just required you to be a Director.

Hi,

I think you cannot in fact be a director of a company you haven't invested in while you are on T1E. At least when I applied (This time last year).

It stipulates that you can work as self-employed of businesses you own. The stress is on the ownership.

Yes I think I will do a culsary consultation with an online solicitor perhaps, while I continue negotiations with my business partners.

Thank you!