Are franchises acceptable for 888 Business Permanent Visas?

Franchises and direct management role

A franchisee, as the owner of the business, must have a ‘direct and continuous management role’ to satisfy ‘main business’ visa requirements.

A copy of the franchise agreement is required to assess the level of management autonomy and involvement of the franchisee. It is necessary for an applicant to have autonomous involvement in managing a main business.

The degree of control

Many franchise agreements place requirements on the franchisee to in respect of products, prices, shop décor, advertising, financial reporting and staff training. These franchise requirements will to a greater or lesser extent restrict the autonomy of the franchisee to freely manage the business. The onus is on an applicant to demonstrate that they maintain substantial involvement in the management of the business despite the requirements imposed on their operations through the franchise agreement.

Refer to: Direct and continuous management involvement.

The key factor to consider is associated with the degree of control over the business.

Most franchise agreements require the franchisee to:

• hold certain products
• maintain certain levels of stock
• sell at set prices
• open at certain hours
• decorate the shop in a certain manner and
• contribute to advertising funds

in circumstances where the franchisee to has, for example, little or no input. Officers should not confuse these conditions of franchise with management discretion – for example with regards to employees:

• the hiring and firing of staff
• the number of staff employed
• how staff are selected
• giving performance feedback to staff
• organising staff rosters and
• providing training or selecting staff to attend training provided by the franchisor in accordance with the agreement.

Financial control

The financial aspects of control are very important. As an owner, the applicant should have a sufficient degree of control over their financial affairs.

Some franchisors provide accounting packages or offer management services. These are acceptable elements of a franchise provided it is the applicant (as the owner) who is, for example, signing the cheques and making decisions about income and expenditure, financing and taxation.

The mere fact that they may delegate some of this to the franchisor through purchasing management services should not by itself be grounds for assessing that the applicant does not have sufficient management control. Officers must assess the applicant’s overall degree of control and responsibility for the business as an owner.

Franchises and assets

When a franchise business is purchased the franchisee is often required to purchase rights to trade using identifiable intangible assets such as brand names, logos, trademarks, designs and distinctive colour schemes. These intangible assets are sometimes incorrectly referred to as goodwill (for which refer to: Goodwill).

Intangible assets, such as the right to trade using branding or logos, may be included in calculating the net value of assets of a business if:

• it is probable that the expected future benefits that are attributable to the asset will flow to the entity
• the cost of the asset can be measured reliably and
• the value is recorded as an asset in the financial statements of the business.