ZPizza International Inc. has sold 10 franchises of its ZPizza Tap Room concept to 10 Iranian nationals pursuing U.S. residency under a federal visa program that provides green cards in exchange for investments that create jobs.
ZPizza at the end of last year had about $34 million in systemwide sales and 59 locations, 18 of them in OC and 53 of which are franchised. Most locations are takeout-and-delivery focused, though seven are new or converted “tap rooms”—a fast-casual concept the company launched last year that’s now the only franchise it sells.
The new restaurants are 2,000 square feet, two-thirds larger than the older concept, and include a wall of taps that can dispense beer and wine, all intended to capture more revenue than take-out pizza can.
A takeout pizza might cost $15, said ZPizza President Chris Bright, but at the new locations, “We can serve up to 30 craft beers. You’ll drop 40 to 50 dollars for that.”
Old locations have average unit volumes of $500,000. Bright said he couldn’t give hard numbers for the tap rooms because franchise regulations require a restaurant be open 12 months before it can serve as a financial model. The goal, though, is to push a tap room in the long run to $1 million.
“It’s a better brand,” Bright said.
The franchisees from Iran are seeking U.S. residency under the Employment-Based Immigration: Fifth Preference, or EB-5 Visa, program.
EB preferences one through four generally are based on the occupation of the visa applicant—college professors and researchers, advanced-degree professionals, skilled workers, and “special workers,” including religious workers, juveniles, and applicants who’ve worked for the U.S. government or military, among others, the U.S. Citizenship and Immigration Services website says.
The agency oversees U.S. immigration and administers EB Visa programs under the Department of Homeland Security. The EB-5 program is designed for job creation through foreign investment. Applicants, to qualify, must invest $1 million and create at least 10 jobs, or invest $500,000 in some high-unemployment or rural areas.
Recent publicity on EB-5 has focused on Chinese nationals buying real estate—particularly hotels—to get in line for the visas. Hotel buys can cost upwards of tens of millions of dollars and employ hundreds of new workers, with renovations—construction employment—creating even more jobs. Multiple investors can pursue EB-5 visas in one deal.
On Tap
ZPizza Vice President of Operations Amir Sabetian said the Iranian franchisees wanted something simpler and faster than some other EB-5 enterprises.
“Franchising is easy to understand” next to complex real estate deals, he said. “It’s one investor, one project.”
He said ZPizza got a call from Laguna Niguel consultancy Franchise Elites about visa-seeking entrepreneurs. That led Bright and Sabetian to Taher Kameli, a Chicago immigration attorney who, Sabetian said, has a web-based TV show aimed at Iranian viewers and holds seminars in Dubai marketing his legal services. His firm’s website says he’s worked on $100 million in EB-5 investments since 2009.
The franchisees made commitments of at least $500,000 each, and all 10 chose high-unemployment areas where the jobless rates are at least 150% of national unemployment.
A ZPizza costs $400,000 to $700,000 to open, excluding real estate, Bright said. The franchise fee is $30,000, and marketing and royalties come to 8% of revenue.
ZPizza tapped attorney Michael Cho at Palmieri, Tyler, Wiener, Wilhelm & Waldron LLP in Irvine to help it secure alcohol beverage control licenses for the new restaurants. The taps run on radio frequency identification equipment made by iPourIt Inc. in Lake Forest.
To Go
Bright and Sabetian started a company called ZBV LLC—the V is the Roman numeral five—to run locations.
Visas can take several years to process, and the recent prospect of travel restrictions on citizens of Iran and other countries could create additional hurdles for on-site management.
“We were willing to approve them as franchisees with the understanding we’d oversee operations,” Sabetian said.
Bright and Sabetian collect a flat annual fee of $25,000 to manage each location.
The first EB-5 hopeful’s tap room opened in January in East Sacramento. Six others—in La Jolla, Oceanside, San Marcos, Folsom, Roseville, and Tempe, Ariz.—are scheduled to open by July. The other three are planned for late 2018 in Fair Oaks, Elk Grove, and Moreno Valley.
