Franchises and the E-2 Visa: Reading the FDD Like an Immigration Lawyer

Short answer. There is no franchise-specific E-2 rule. The word “franchise” does not appear anywhere in 9 FAM 402.9 or 22 C.F.R. § 41.51, so a franchised business is analyzed under exactly the same tests as any other. What the Franchise Disclosure Document gives you is evidence, and different Items carry different parts of the petition. Item 7 supports the proportionality denominator, Item 19 carries the marginality projection when it exists, and Item 11 can cut against you on develop-and-direct if you attach it without framing.

First, a negative you can rely on

Any page telling you the Foreign Affairs Manual has franchise rules is wrong. Search 9 FAM 402.9 for “franchise,” “franchisor,” or “franchisee” and you will find nothing. The same is true of the regulation.

Good news and bad. A franchise is not disfavored. But the franchisor’s brand does nothing for you at the consulate. Your petition has to prove what any other E-2 petition proves: capital at risk and irrevocably committed, a real and active enterprise, an investment substantial in proportion to the cost, a business that is not marginal, and your own development and direction of it. See The Nine E-2 Requirements.

What a franchise is, legally

Under the FTC Franchise Rule, 16 C.F.R. § 436.1(h), three elements have to be present: the right to operate a business identified with the franchisor’s trademark, or to sell goods or services associated with it; significant control or significant assistance from the franchisor over your method of operation; and a required payment as a condition of obtaining or commencing the franchise.

The disclosure clock, and why a visa deadline is no reason to compress it

Fourteen calendar days. Under § 436.2(a), the franchisor must give you the current disclosure document at least fourteen calendar days before you sign any binding agreement with, or make any payment to, the franchisor or an affiliate.

Seven calendar days for a revised agreement, under § 436.2(b), where the franchisor unilaterally and materially alters the basic franchise or related agreements. Changes arising from negotiations you initiated do not trigger it, which matters if you are negotiating terms through counsel.

Do not let a broker compress those periods because your visa timeline is tight. The clock is a federal requirement, and a rushed signature is exactly what produces the deal terms that break a petition.

Which Items carry which part of the petition

FDD Item	What it is	What it does for the E-2
5. Initial Fees	The initial franchise fee and the conditions under which it is refundable	Proves the amount and, critically, the non-refundability. A refundable fee is weak evidence of irrevocably committed capital
6. Other Fees	Royalties, ad fund, technology, renewal	These are operating costs, not investment. They belong in the marginality projection, not the proportionality numerator
7. Estimated Initial Investment	The franchisor’s tabular estimate of what it takes to open	The most-used exhibit, and the most misused. See below
11. Franchisor’s Assistance, Advertising, Computer Systems, Training	What the franchisor does for you	Double-edged. Supports “real and active,” and can be argued against develop and direct
12. Territory	Protected area, or the absence of one	Corroborates a real, sited enterprise and supports revenue projections
19. Financial Performance Representations	Unit economics, if the franchisor chooses to give any	The marginality workhorse when it exists. See below
20. Outlets and Franchisee Information	Openings, closures, terminations, transfers, and current and former franchisee contacts	Corroborates the five-year horizon. A high closure rate is an adjudication risk the officer can read as easily as you can
21. Financial Statements	Audited franchisor financials	Goes to the health of the system, not of your unit

Item 7 is not the denominator

This is the most common mistake in franchise E-2 filings.

Item 7 is the franchisor’s estimated initial investment, published as a range. The E-2 denominator for a new business is “the actual cost needed to establish such a business to the point of being operational,” proved by invoices, contracts, appraisals, and audits. Item 7 corroborates that figure. It does not substitute for it.

An officer comparing your claimed investment against an Item 7 range you never tracked with real invoices is an officer writing a request for evidence.

Item 19 is optional, and that is a real problem

The Franchise Rule permits a franchisor to make financial performance representations. It does not require them. A franchisor that declines has to say so in the FDD, in words to the effect that it makes no representations about future or past financial performance and does not authorize its representatives to make them.

Where a substantive Item 19 exists, you have franchisor-substantiated unit economics, which is far stronger support for a five-year marginality projection than a self-serving pro forma. You are also entitled under § 436.9(d) to request the franchisor’s written substantiation for it, and that substantiation makes excellent supporting evidence.

Where Item 19 is blank, you build the projection from other sources: Item 7 ranges, Item 20 outlet and closure data, comparable-market analysis, and interviews with existing franchisees whose contact details Item 20 requires the franchisor to disclose.

Where franchise law and immigration law collide

If an earnings claim is not in Item 19, it does not go in your business plan.

Under § 436.9(c), a franchise seller may not disseminate a financial performance representation unless the franchisor has a reasonable basis and written substantiation at the time it is made and the representation appears in Item 19. Under § 436.9(a), no claim may contradict the required disclosures. And under § 436.9(h), a franchisor cannot make you waive reliance on the disclosure document.

So when a broker tells you verbally what “a typical unit earns” for a system whose Item 19 is blank, that statement is very likely a Franchise Rule violation by the seller. It is also radioactive as immigration evidence. Building a marginality projection on it puts an unsubstantiated third-party earnings claim in front of a consular officer, in a document you signed.

I have seen the request for evidence that results. A client’s business plan projected $410,000 in year-three revenue, a figure his broker had given him over coffee and which appeared nowhere in the FDD. The officer asked for the source. There was no source. Rebuilding the projection from Item 20 closure data and three franchisee interviews took six weeks and produced a lower number that held up.

That collision is why the franchise review and the petition should be done by the same office.

Where you have to register, and where you do not

Texas is not a franchise registration state. It regulates through the Business Opportunity Act, Tex. Bus. & Com. Code ch. 51, and franchises are exempt under § 51.003(b)(8) if the franchisor materially complies with the FTC Rule and files a short notice with the Secretary of State before offering or selling. No state agency reviews or registers the FDD, and there is no pre-sale approval.

Illinois is a registration state. Under the Illinois Franchise Disclosure Act of 1987, 815 ILCS 705/10, a franchisor may not sell or offer a franchise in Illinois to an Illinois-domiciled franchisee, or where the offer is made or accepted in Illinois and the business will be located there, unless it has registered with the Administrator. Registration becomes effective on the twenty-first day after filing absent a denial, and franchisors must file annually, no later than one business day before expiration, which falls 120 days after the franchisor’s fiscal year end.

Confirm the franchisor’s registration status in the state where you will operate. A franchisor that cannot lawfully sell to you in Illinois is not a timing problem you can negotiate around.

What is new

The FTC’s inflation-adjusted exemption thresholds rose on July 12, 2024: the minimum payment exemption to $735, the large franchise investment exemption to $1,469,600, and the large franchisee exemption to $7,348,000. The same day, the FTC issued a policy statement on franchisor contract provisions and staff guidance stating that franchisors cannot lawfully impose and collect fees that were not previously disclosed.

And on March 18, 2026, the FTC secured a stipulated order against Xponential Fitness with $17 million in consumer redress, which the agency described as the most redress in its history for an alleged Franchise Rule violation. The allegations included misrepresenting how long studios took to open, failing to disclose material litigation and bankruptcy involving executives, and misreporting information about franchisees whose studios had ceased operating.

Every one of those categories is something an E-2 applicant would have relied on in a business plan.

One thing nobody can tell you

No government agency publishes data on how many E-2 visas involve franchise investments. The State Department reports E-2 issuances only by nationality and post, and no franchise regulator tracks purchaser immigration status. Any specific figure you encounter on this point is an estimate, not a statistic.

Send us the FDD before the fourteen days run. We read it for the franchise terms and for what the petition will need from it. Those are two different reviews, and most buyers get them from two different offices, or from none. Call or text 512.761.8479.

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