For foreigners to start a new business in a foreign country and purchase of a franchise seems to be a very good idea. Franchises offer a strong brand, a clear proven concept and also target a market.
But does the purchase of a franchise qualify the Applicant to apply for a Business Visa?
The answer in short is yes. However, it depends really on the franchise and on the scalability of the investment.
In the following I wish to give an overview under which circumstances potential franchisees stand a very good chance to obtain a Business Visa for South Africa.
But let us first look at the General Requirements of a Business Visa in terms of section 15 of the Immigration act of South Africa.
Any foreigner who wishes to apply for Business Visa basically has to meet three requirements:
The first one is the investment of R5 million originating from abroad, so outside South Africa, and being invested into the book value of the new venture. Secondly 60% of the employees must be South African citizens or permanent resident holders. And lastly, the business needs to be recommended by the Department of trade and industry (DTI).
Franchises often do not cost R5 million, therefore the capital requirement could be a problem. The employee requirement, in particular for franchises in the food sector, but also in some other sectors, create actually quite a lot of employment.
The DTI recommendation assesses the chances based on the following considerations:
They do acknowledge that franchises create a lot of employment as well as potential substantial employment. However, the DTI sees the purchase of only one franchise as a single standing franchise quite critical. Often the capital requirement of R5 million is not met and if the foreigner does not plan to at least open an additional franchise, they will not look very favorable at this venture.
Should the applicant have acquired the master franchise rights, however, the position of the DTI changes. The master franchise obviously is only the starting point and often requires the set up of a concept store or even a couple of concept shops. Subsequently, the master franchise will then sell the franchises to locals and therefore indirectly create substantial investment as well as a lot of employment.
Therefore it can be summarised that the purchase of a single franchise will not qualify for the DTI recommendation but the purchase of a master franchise will.
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by Andreas Krensel