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last updated 26/09/2012

September 2009 - Bill Milnes provides a guide to immigration issues for franchisees and franchisors

Immigration to New Zealand is on the increase again, in one of those regular cycles when other parts of the world look less attractive and people realise just what a little paradise we have here. And for many immigrants, buying a franchise is a very attractive proposition. After all, a franchise has a brand, product, training and support that have been developed specifically for the New Zealand market. Surely, therefore, buying a franchise is a logical way of putting your energies and entrepreneurial skills to work in your new country?

Unfortunately, however, the benefits of franchising are not recognised by Immigration New Zealand (INZ) in relation to the category which has the greatest potential for the industry – the Long Term Business Visa (LTBV). It is a continuing source of frustration for many franchisors and would-be franchisees that franchises are treated no differently from any other business model for immigration purposes. Despite recent changes I cannot, sadly, offer any hope that INZ will ever recognise the specific benefits of franchising other than as appropriate components of a comprehensive business plan.

Despite this, franchising can and does work within the immigration context. Let’s look first at the big picture so we can understand why the immigration situation is as it is.

Purpose

The purpose of immigration policy is to improve the skill base of NZ, contribute to economic growth, reunite families and meet international obligations. All applicants must meet health and character criteria to minimise risk to our health system, security and our international reputation

These aims are developed through a number of categories but in this article I intend to only address those which I consider will be directly relevant to franchising. Theses are: Investors; LTBV; and Work Permits/Work to Residence/Working Holiday.

The Categories

Business categories (Investors and LTBV) have strict requirements on the source of funds and require that funds be transferred to NZ through the banking system. These can create considerable difficulties for applicants from countries with exchange controls, such as China and India.

A new Migrant Investor Policy was announced by the Minister for Immigration in July 2009. Under the new policy, investors will be able to apply for immigration under two tiers:

Category 1 Investors

This is the top priority category for high value investors investing $10 million in investment/s capable of providing a commercial rate of return for three years. The applicant is required to spend at least 73 days in New Zealand in each of years 2 and 3 but the policy has few other conditions and facilitates fast-track processing.

Category 2 Investors

A two stage, points-based category for those aged up to 65 investing a minimum of $1.5 million with a further $1million in assets which do not need to be repatriated to New Zealand. The applicant is required to have at least three years’ business experience. English language criteria apply (IELTS 3) and the applicant is required to spend 146 days in New Zealand in each of years 2, 3 and 4.

Long-term Business Visa (LTBV)

This is a somewhat complex 2-3 year ‘Temporary Entry’ category that provides for people interested in applying for residence later under the Entrepreneur Category. This will be the category of most interest to franchisors looking for franchisees from overseas.

The LTBV category requires:

- Sufficient funds for personal support for three years (at least $100,000 for a family), as well as sufficient capital to invest in the business. 

- A comprehensive business plan with a minimum of 25% ownership in the proposed business. 

- Business experience relevant to the business proposal. This is the aspect most likely to irritate franchisors, many of whom are happy to accept people without relevant experience as long as they are able to be trained.

The proposed business must be shown to be capable of contributing an economic benefit to New Zealand. This includes introducing new products and skills, contributing to exports and/or creating employment. Many smaller owner/operator or husband-and-wife type franchises will therefore not qualify.

The applicant must have excellent English skills, good character and health and no history of fraud or bankruptcy.

The Minister of Immigration has also announced a new Entrepreneur Plus category which will offer a faster path to residence for applicants who create at least three full-time jobs and invest $500,000 in their business. Details of this will be released in November 2009.

The issues for franchises

While franchising has many benefits for a new migrant, from an immigration perspective it is unlikely that a franchise promoted as a ‘self-employed’ or ‘lifestyle’ type of business would meet the economic benefit criteria for immigration purposes. We have discussed this issue in detail with Immigration New Zealand and, although they recognise many of the advantages of franchising they have also seen numbers of applications from people wanting to buy a small business which will employ only the migrant. This does not qualify because in their opinion it does not add to the country’s economic progress and introduces no new products or skills.

Consequently, if a franchisor is approached by a potential migrant wanting to purchase a franchise, it is important that they can show that the business is of economic benefit and that the migrant can meet the above requirements as well as the requirements of their own franchise. 

Other Categories

It is also possible for potential franchisees to apply under other categories, as described below. These require longer-term planning and involve introducing someone to your business as an employee with a view to possible franchisee status once residence or a LTBV has been granted.

Work Permits

With the exception of working holiday permits, this is an employer-focused category to address recognised occupational shortages when it can be shown that there are no suitable job applicants available. The requirements of work permit policy are strict and intended to prevent the use of overseas personnel at the cost of local employment. In short, the employer must prove that there is no one available locally who can fill the position (the labour market test).

Other specialist sub-categories of work visa/permit policy allow for the transfer and employment of senior personnel in a multi-national corporation, or those with highly skilled technical expertise. These allow for highly paid positions to be filled for 1, 2 or 3 year terms, with further permits being granted in some circumstances.

Work to Residence

This comprises a series of settlement focused policies intended to:

- ease current or endemic skill shortages.

- assist employers to offer long-term employment and, if appropriate, a route to residence to skilled overseas applicants.

- maximise the settlement prospects for skilled migrants.

The Work Permit and Work to Residence categories would probably be of most interest to those in the franchise sector where the product or service being franchised requires a high level of specialist skill or knowledge, or the introduction of new concepts into an area.

Working Holiday permits

These are open work permits which allow a person aged under 30 to work for any employer for up to 12 months. However, unless they have previous experience in your industry, it is unlikely that they would meet the labour market test to move through into a longer-term work permit. But if the position is regarded as ‘skilled’ and they are being paid a reasonable salary that is at least the market rate, they may qualify for residence without the labour market test.

Partnership

This is immigration speak for de facto relationships, not business partnerships. If a migrant is in a ‘genuine and stable relationship’ with a NZ citizen or resident, s/he is entitled to apply for an open work permit, and in due course, for residence.

A past history of partner sponsorship could disqualify an applicant or sponsor, but otherwise the required criteria are evidence of the stability of the relationship and good health and character.

Providing immigration advice

Immigration policy changes frequently and becomes more complex as government attempts to meet the often-conflicting societal issues and attitudes. Consequently, it has become even more necessary for businesses seeking to market to migrants or looking for skilled staff, or people considering immigration, to seek professional advice. 

Licensing of immigration advisers became mandatory in May 2009. As a result it is now illegal for anyone to provide immigration advice unless licensed or exempt. The penalties include fines of up to $100,000 and seven years’ jail. Franchisors need to be aware of this for fear of crossing the line in their own efforts to assist potential franchisees from overseas. For this reason, if they get a lot of enquiries from potential immigrants, it may suit them to have a relationship with an immigration advisor who understands their business and can:

- advise business people and potential migrants on the likely acceptability of a proposed business.

- review the background of an intending migrant and advise which categories, if any, would be the most suitable for the migrant.

- advise franchisors on the various policies and how to minimise risk, processing times and red-tape.

- ensure that all required material is provided with an application and that the documentation is of a quality which will contribute to the success of the application.

- liaise with the various authorities to ensure that applications are processed efficiently and professionally.

Migration is one of the most critical decisions a person can make, and the success or otherwise of the process will affect a family for generations. Handled properly, buying a franchise can not only make migration to New Zealand possible but can also ease the path into a successful business life here.

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