It is truly an “Only in America” story.
An emigrant from Taiwan lands a job with the U.S. Immigration and Naturalization Service, retires after 25 years and starts a business facilitating EB-5 visas for Chinese investors interested in bringing Italian restaurants to Los Angeles.
That’s the story of John Tu, chief executive of Procal Investment & Management in El Monte. His company has signed an agreement with Chicago Franchise Systems Inc. to bring as many as 30 of its Al’s Italian Beef and Nancy’s Pizza concepts to Southern California. Procal expects to open the first of each concept in Los Angeles County in Alhambra in March. Its first Al’s Italian Beef opened in Chino last week.
Tu, who is in his 60s, bankrolled Procal with backing from family members. He is financing the franchise acquisitions with money from foreign investors, mostly from China, under the government’s EB-5 program. In that controversial program, foreign investors can get green cards to the United States so long as they invest in a business that creates 10 jobs here. The investment usually must be at least $1 million, but can be as low as $500,000 if the business is in a high-unemployment area.
Most of the investors will be passive, hiring Procal to operate the restaurants in exchange for a cut of revenue. Tu declined to say what percentage his take would be.
Dave Howey, chief executive of Chicago Franchise, said he was drawn to the idea of franchising to foreign investors to finance a longstanding plan to expand to the West Coast.
“John’s whole premise was bringing franchisees that already have the money,” Howey said. “Banks don’t want to put money into new businesses anymore. That all stopped in 2008.”
Tu said he chose Chicago Franchise’s concepts to manage because the company’s history, dating back to the 1930s, showed it was stable, which attracts EB-5 investors.
West Coast opportunity
Concepts such as Al’s have potential to do well in Southern California, said Darren Tristano, an analyst with Chicago market research company Technomic Inc.
He said Al’s restaurants generate higher-than-average check tallies and do not rely on expensive equipment, giving the chain a higher potential return.
“There’s some clear opportunities for Al’s in this market,” he said.
The Chicago Franchise concepts are appealing to Chinese investors because at $30,000 the buy-in is lower than popular fast-food chains, In addition, by employing about 12 people full time, they satisfy EB-5 job creation requirements. McDonald’s franchises, by contrast, can cost from $950,000 to more than $2 million.
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