Overseas Investors Brew Growth At Ann Arbor-based Bearclaw

Overseas investors brew growth at Ann Arbor-based Bearclaw

By Jaclyn Trop
The Detroit News, March 23, 2010

When she needed investors to help grow her Bearclaw Coffee Co. franchise, Debi Scroggins looked to the Middle East.

The founder of the Ann Arbor-based coffee company has recruited nearly a dozen Iranians – with more to follow – to open mobile coffee carts in the United States at $180,000 a pop.

'These are candidates who are cash-ready,' Scroggins said. 'I've had so many candidates (in the United States) who have $30,000 to put down and cannot get financing because they lost their home equity and they lost their 401(k) and, oh, by the way, their credit has nicks in it.'

The E-2 visa Scroggins' investors must obtain allows them to enter and live in the United States by making a substantial investment in a business they will control. The temporary visas, which must be renewed every other year, are available to all U.S. 'treaty nations.'

Though U.S. economic sanctions against Iran prevent the nation from doing business here, the E-2 visa allows individual investors to flex their entrepreneurial muscles on U.S. soil – and improve diplomatic relations between the two countries. Bearclaw's program 'sends a positive message' to Iranians, said Fay Beydoun, executive director of the American Arab Chamber of Commerce in Dearborn. 'There may be disagreements on politics, but when it comes to getting down to business, there are opportunities to invest in the U.S.'

Foreign investors have increasingly been looking to Asia and other burgeoning economies. But the E-2 visa remains popular with individual investors looking to locate here, especially in immigration hotspots such as Texas, Florida, California and Illinois.

For small-scale franchises like Bearclaw that offer training and support, E-2 visas can attract eager entrepreneurs who will create jobs, bolster the franchise and boost local economies.

The E-2 visa program 'made the difference between growth and stagnation for us,' Scroggins said. 'You have to look at ways to grow your business in 2010 and (ask), 'How can I bring jobs here?' '

The money enabled Bearclaw to move its headquarters from Chelsea to larger digs in Ann Arbor and to control its distribution channels, pricing and vendors.

'We need to think small because it's small businesses that create more jobs,' said Scott Cooper, an immigration attorney with Fragomen, Del Rey, Bernsen & Loewy in Troy.

The number of E-2 visas granted held steady in the 1990s and rose sharply at the beginning of the decade before peaking at 40,657 in 2007, according to the State Department. The number fell to 34,637 last year because many foreign nationals with cash to spend are choosing countries with less stringent regulations and U.S. consulates are slower to approve applications, he said.

The amount of money required to obtain the visa depends on the industry, said Taher Kameli, Bearclaw's immigration attorney in Chicago. Though $180,000 may comprise a substantial amount for a mobile coffee unit, a hotel investment could entail millions of dollars, he said. It is not clear how many other U.S. businesses are recruiting franchisees with the E-2 visa.

Bearclaw began advertising its investment opportunities in a TV commercial in Dubai last year and quickly attracted interest.

Scroggins visited Dubai last month to meet with potential investors, train new franchisees and make contacts in the U.S. consulate.

The franchise owners will open mobile shops in Florida, Virginia, California, Illinois, Maryland and Texas. Most speak English and have studied business, but many will hire managers to run daily operations. None could be reached for comment.

Scroggins is quick to point out that the investors will be creating jobs, not taking them away. Each shop will hire at least four full-time employees who will earn between $15 and $20 an hour, including tips, she said.

The E-2 visa could be a viable way to attract investment to the United States when foreign nationals with extra money are looking to growing markets in China, India and Southeast Asia, said David Littmann, senior economist of the Mackinac Center for Public Policy.

U.S. Bureau of Economic Analysis data show foreign investment in the United States was nearly halved last year, falling to $148 billion in 2009 from $316 billion the prior year. Wealthy global investors started turning away from the U.S. due to unemployment rates, inflationary stagnation and frozen credit markets when the national recession began three years ago, he added.

Foreign investment created 5.5 million U.S. jobs in 2008, with 195,000 in Michigan, said Lisa Hanna, spokeswoman for the Organization for International Investment in Washington, D.C. 'We're talking about $364 billion in paychecks,' Hanna said. 'We want people to come and invest here.'