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Are franchises acceptable for 888 Business Permanent Visas?

Are franchises acceptable for 888 Business Permanent Visas?

Do you hold a Subclass 188 Business Innovation and Investment (Provisional) visa? Now that you have the provisional visa, are you unsure about what you have to do to increase your chance of getting the Subclass 888 Business Innovation and Investment (Permanent) visa? Are you wondering what type of business models are acceptable for 888 Business Permanent Visas? We are often asked whether a franchise is an appropriate business model. Here is a summary of the reasons why franchises can be an acceptable business model when holding a 188 visa and for 888 visa purposes.

888 visa Basic Requirements

The general criteria for a subclass 888 visa are as follow:

Hold the relevant visa, i.e., subclass 188 visa.
Your state nomination must be current.
For the 2 years before you apply for the subclass 888 visa, you must own and manage a business in Australia.
Have an annual business turnover of $300,000 in the 12 months immediately before the application was made.
You must show at least 2 of the following:

- assets of AUD200,000 net value in your main business (or 2 main businesses) in Australia
- personal and business assets in Australia of AUD600,000 net value
- equivalent of at least 2 full-time eligible employees in your main business

Complied with Australian law when operating the business.
Have functional English.
Must be in Australia for at least 1 in the 2 years immediately before you apply.
Not involved in unacceptable business activities.
Have a realistic commitment to continuing the business.
Meet health and character requirements.

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What is a Franchise?

A franchise is permission granted to a person or corporation allowing them to operate a business under certain conditions. A franchisee, as the owner of the business, must have a ‘direct and continuous management role’ to satisfy ‘main business’ visa requirements.

What is the “Main Business” requirement?

The ‘main business’ requirement is a condition of the 888 Business Permanent Visa that requires the primary applicant to have an ownership interest and be actively operating the main business. ‘Main business’ is defined as the following:

The applicant has an ownership interest in the business; and
The applicant maintains direct and continuous involvement in the day-to-day management of the business; and
The value of the applicant’s ownership interest meets annual turnover thresholds dependent on the type of business

Why are some franchises not suitable for the 888 Business Permanent Visa?

There may be some instances where the Department determines your franchise is not an acceptable ‘main business’. This is due to the requirement that the applicant must maintain ‘direct and continuous involvement’ in the management of the business. Many franchise agreements place requirements on the franchisee 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.

How is ‘direct and continuous’ management determined?

The delegates of the Department have discretion to refuse a visa application if they determine that the applicant fails some or all of the criteria. ‘Direct and continuous’ management is an important factor to be aware when assessing whether your franchise is a suitable business for the 888 Business Permanent Visa. When the Department assesses your application, the following may be considered:

whether the applicant has the authority to manage the business
whether the applicant is the sole director, proprietor, or manager of the business
whether the applicant has spent significant periods of time absent from the business location
whether there are any other individuals (other than the applicant’s spouse or de‑facto partner) who might have a management role in the business
whether the activities of the business are regular and ongoing

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Important

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Important

It is important to note that the mere fact that the franchisee may delegate some of their business activity, i.e. financial aspects, to the franchisor through purchasing management services should not by itself be grounds for assessing that the applicant does not have sufficient management control. The Department will assess the applicant’s overall degree of control and responsibility for the business as an owner.

It is important to note that the mere fact that the franchisee may delegate some of their business activity, i.e. financial aspects, to the franchisor through purchasing management services should not by itself be grounds for assessing that the applicant does not have sufficient management control. The Department will assess the applicant’s overall degree of control and responsibility for the business as an owner.