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Hypothetical example: Lucille is buying a franchise of a United States equipment-rental chain, funded by savings and the sale of her own machinery. Franchise purchases raise a specific question: a significant part of what she pays is a fee to the franchisor rather than an asset in her business. Whether those payments count toward the investment, and how the total cost of the enterprise is measured, decides whether the substantiality requirement is met. Hypothetical example: A Canadian owner of a musical-instrument repair business buys a United States franchise and wants to leave part of the purchase price in a personal savings account. The first review should decide which dollars are truly committed and which remain available. The franchise agreement, invoice, payment record, and account trail settle that line. A large personal balance may support financial planning, but it does not demonstrate capital placed into the enterprise.
Fees paid to the franchisor are generally part of the cost of establishing
The initial franchise fee, required training costs and mandated opening expenditures are ordinarily treated as part of what it costs to establish the enterprise, because they are payments the investor must make to bring the business into existence and they are not recoverable. The distinction that matters is between money irrevocably committed and money that remains within Lucille's control. Ongoing royalties payable out of future revenue are operating costs rather than invested capital and should not be presented as investment. The franchise agreement, the disclosure document and the payment records together show which payments have already been made and on what terms. Create a schedule that separates mandatory opening payments from future royalties and optional upgrades. The signed franchise documents decide which charges are required to establish the business. That distinction prevents the applicant from inflating committed capital with expenses that depend on later operations.
Count the whole cost of the enterprise, then show what has been committed
Substantiality compares what has been invested against the total cost of establishing this enterprise, which for a rental franchise includes the franchise fee, the equipment fleet, the premises, signage and fit-out, licences and insurance, initial staffing and working capital until the operation is self-supporting. Understating that total does not help, because a substantial proportion of a small number is easier to reach but a marginal business is harder to defend. Financed equipment is a common feature of rental businesses, and borrowing counts only where Lucille is personally liable and the debt is not secured by the assets of the enterprise itself. The practical decision is how to finance the launch without leaving the documented contribution too small for the actual business. Compare every necessary startup cost to the funds already exposed to loss. A cheaper launch plan may reduce the investment denominator, but it still must support a real, non-marginal enterprise.
Document the source and the disposal of the Canadian assets
Where the funds come from selling her own machinery, the chain should be complete: bills of sale identifying each item, the buyers' payments, deposits into her account, tax reporting of the disposition, and the transfers that carried the proceeds to the franchise and its suppliers. Savings need their own history, usually employment or business income supported by tax filings. Franchisors often require funds in place before granting the territory, which produces a period where money is committed but the business is not yet operating; that sequence is normal and should be explained with dates rather than left as an unexplained gap in the record. Preserve the sales documents before proceeds are spent, because later statements may not identify which asset produced each deposit. A dated source-and-use table lets Lucille see whether each transfer is explained. If a link is missing, retrieve it before the payment trail becomes harder to reconstruct.
What else is on your mind?
Is there one minimum investment that guarantees E-2 eligibility?Is holding money or owning an asset enough for E-2?Editorial source review: 2026-09-07. General preparation guidance, not an individual assessment.