remanded L-1A Case: Restaurant

U.S. Department of Homeland Security 
20 Massachusetts Ave NW, Rm A3042 
Wash~ngton, DC 20529 
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PETITION: Petition for a Nonimrnigrant worker Pursuant to Section IOl(a)(15)(L) of the Immigration 
and Nationality Act, 8 U.S.C. $ 1101(a)(15)(L) 
ON BEHALF OF PETITIONER: 
INSTRUCTIONS: 
This is the decision of the Administrative-Appeals Office in your case. All documents have been returned to 
the office that originally.decided your case. Any further inquiry must be made to that office. 
a 
Administrative Appeals dffice 
. . 
SRC 03 199 53187 
Page 2 
DISCUSSION: The Director, Texas Service Center, denied the petition for a nonimmigrant visa. The matter 
is now before the Administrative Appeals Office (AAO) on appeal. The director's decision will be withdrawn 
and the petition will be remanded to the Service Center for entry of a new decision. 
The petitioner filed this nonimmigrant petition seeking to employ the beneficiary as an L-1A nonimmigrant 
intracompany transferee pursuant to section IOl(a)(lS)(L) of the Immigration and Nationality Act (the Act), 8 
U.S.C. 9 1 LOl(a)(lS)(L). The petitioner is a corporation organized in the State of Texas that is operating as a 
restaurant. The petitioner claims that it is the subsidiary of located in 
Lahore, Pakistan. The beneficiary was granted a one-year period of stay to be employed in a new office in the 
United States, and the petitioner now seeks to extend his stay. 
The director denied the petition concluding that the petitioner had not established a qualifying relationship 
between the United States and foreign entities. Specifically, the director discussed portions of the franchise 
agreement signed by the petitioning company, and stated "the prime franchise company 
I would actually be in control of the U.S. business, rather than the foreign entity exercising the 
U.S. operations." The director further stated, "the LlA manager/executive transferee classification was not 
created to establish self-employment, nor was it intended to create partnerships with U.S.-based franchises." 
On appeal, counsel asserts that any franchiser will exercise some control and direction over the franchisee and 
the franchised business, and that the specific terms raised by the director are common to all franchises. 
Counsel further asserts that the "objectionable" terms identified by the director in the franchise agreement do 
not substantially affect the qualifying parent-subsidiary relationship between the foreign and United States 
entities. Counsel submits a brief and a copy of Matter of Kung, 17 I&N Dec. 260 (Comm. 1978) in support of 
the appeal. 
To establish L-1 eligibility, the petitioner must meet the criteria outlined in section IOl(a)( lS)(L) of the Act. 
Specifically, within three years preceding the beneficiary's application for admission into the United States, a 
qualifying organization must have employed the beneficiary in a qualifying managerial or executive capacity, 
or in a specialized knowledge capacity, for one continuous year. In addition, the beneficiary must seek to 
enter the United States temporarily to continue rendering his or her services to the same employer or a 
subsidiary,or affiliate thereof in a managerial, executive, or specialized knowledge capacity. 
The regulation at 8 C.F.R. 3 214.2(1)(3) states that an individual petition filed on Form 1-129 shall be 
accompanied by: 
(i) Evidence that the petitioner and the organization which employed or will employ the 
alien are qualifying organizations as defined in paragraph (l)(l)(ii)(G) of this section. 
(ii) Evidence that the alien will be employed in an executive, managerial, or specialized 
knowledge capacity, including a detailed description of the services to be performed. 
SRC 03 199 53 187 
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(iii) Evidence that the alien has at least one continuous year of full time employment 
abroad with a qualifying organization withinythe three years -preceding the filing of 
the petition. 
(iv) Evidence that the alien's prior year of employment abroad was in a position that was 
managerial, executive or involved specialized knowledge and that the alien's prior 
education, training, and employment qualifies hider to perform the intended 
services in the United States; however, the work in the United States need not be the 
same work which the alien performed abroad. 
The regulation at 8 C.F.R. !$214,2(1)(14)(ii) also provides that a visa petition, which involved the opening of a 
new office, may be extended by filing a new Form 1-129, accompanied by the following: 
(A) Evidence that the United States and foreign entities are still qualifying organizations 
as defined in paragraph (I)(l)(ii)(G) of this section; 
(B) 
' 
Evidence that the United States entity has been doing business as defined in 
paragraph (I)(l)(ii)(H) of this section for the previous year; 
(C) A statement of the duties performed by the beneficiary for the previous year and the 
duties the beneficiary will perform under the extended petition; 
(Dl A statement describing the staffing of the new operation, including the number of 
employees and types of positions held accompanied by evidence of wages paid to 
employees when the beneficiary will be employed in a management or executive 
capacity; and 
(E) Evidence of the financial status of the United States operation. 
The issue in the present proceeding is whether the beneficiary's foreign employer and the U.S. entity are 
qualifying organizations as required in the regulation at 8 C.F.R. 8 214.2(1)(3)(i). 
The pertinent regulations at 8 C.F.R. $214.2(1)(l)(ii) define the term "qualifying organization'' and related 
terms as follows: 
(G) Qualtfiing organization means a United States or foreign firm, corporation, or other 
legal entity which: 
(1) Meets exactly one of the qualifying relationships specified in the definitions of 
a parent, branch, affiliate or subsidiary specified in paragraph (l)(l)(ii) of this 
section: 
SRC0319953187 . 
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(2) Is or will be doing business (engaging in international trade is not required) as 
an employer in the United States and in at least one other country directly or 
through a parent, branch, affiliate or subsidiary for the duration of the alien's 
stay in the United States as an inuacompany transferee; and, 
(3) Otherwise'meets the requirements of section 101(a)(15)(L) of the Act. 
(I) Parent means a firm, corporation, or other legal entity which has subsidiaries. 
(I) Branch 'means an operating division or office of the same organization housed in a 
different location. 
(K) Subsidiary means a firm, corporation, or other legal entity of which a parent owns, 
directly or,indirectly; more than half of the entity and controls the entity; or owns, 
directly or indirectly, half of the entity and controls the entity; or owns, directly or 
indirectly, 50 percent of a 50-50 joint venture and has equal control and veto power over 
the entity; or owns, directly or indirectly, less than half of the entity, but in fact controls 
the entity. 
(L) Aflfiaze means 
1) One of two subsidiaries both of which are owned and conrrolled by the same 
parent or individual, or 
(2) One of two legal entities owned and controlled by 'the same group of 
individuals, each individual owning and controlling approximately the same 
share or proportion of each entity. 
On the Form 1-129 Petition submitted on July 14, 2003, the petitioner indicated that the United States 
company is a wholly-owried subsidiary of the foreign entity. As evidence of ownership, the petitioner 
submitted its articles of incorporation indicating that the sole initial shareholder of the company would be the 
foreign entity, and a copy of the front and back of its stock certificate number one, indicating that 100.000 
shares of common stock with no par value were issued to the foreign entity on November 26,2001. The back 
of the stock certificates indicates that the shares have not been transferred. The articles of incorporation and 
the stock certificate both indicate that the petitioner is authorized to issue 100,000 shares of stock. The anicles 
of incorporation further indicate that the corporation will commence business upon receipt of consideration 
valued at $1,000.00. The petitioner's financial statement indicates that its common stock is valued at 
s 1.000.00. T 
withh 
d a copy of its corporate by-laws, a copy of its franchise agreement 
opies of two lease agreements, for an office and for its restaurant. and 
doc ~ty. 
SRC 03 199 53 187 
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On October 24,2003, the director issued a request for additional evidence requesting in part that the petitioner 
"clarify the relationships of all companies involved in this petition" and "demonstrate control and ownership 
of all subsidiaries, branches or affiliates that may be involved." Specifically, the director asked the petitioner 
to respond to the following: 
I Is the U.S. business tied directly to the parent business in practices and policies? 
Does the foreign company own businesses from which patterns of business for the 
U.S. company are derived? Does the parent company determine how the United 
States business is conducted? 
2. Who is in control of th dicate a qualifying relationship 
between the U.S. enterprise and the foreign operation. Is [the foreign entity1 in 
  ah ore, Pakistan directly related to the deli franchise in Houston? 
In a response dated January 4,2004, the petitioner stated that the U.S. company is a wholly owned subsidiary 
of the foreign entity and 'as such we have to comply with all the guidelines set forth by the parent company 
in Pakistan." The petitioner further stated the U.S. company is expected to follow guidelines of the parent 
company and to "report all significant developments, dealings and results, to the parent company 
periodically." With respect to the franchise agreement, counsel stated: 
The scope o to setting product related standhds and training. The 
run the business as it deems fit. The U.S. firm continue[s) 
to exercise authority with respect to hiring, firing. promotions, financials and overall manner 
of running the operations. The U.S. company exercise[s] this autt~ority in line with the 
established policies of the parent company of Pakistan. The U.S. firm' reports all 
developments to the parent company 'of Pakistan and seeks their input from. any strategic 
issue. While the parent company of Pakistan. is not related to the 
However the parent company still enjoys ultimate decision making through the U.S. 
, company. 
[The petitioner] of Texas has entered in to a franchise arrangement with- 
. This franchise arrangement provides sales and marketing support to {the 
petitioner] in running the deli business. 
However. [the petitioner] still enjoys all key management decision making authority. Since 
[the petitioner] is a wholly owned subsidiaryof the [foreign entity] in it 
stands to reason that the [foreign entity] has the ultimate say in the running of the business by 
[the petitioner]. 
In addition, the petitioner re-submitted copies of its anicles of incorporation and stock certificate. 
SRC 03 199 53 187 
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In a decision dated March 22, 2004, the director concluded that the petitioner had failed to establish a 
qualifying relationship between the beneficiary's foreign employer and the U.S. entity. The director noted 
that the requisite factors for a qualifying relationship are ownership and control, and stated that, because the 
petitioner entered a franchise agreement, the beneficiary's foreign employer and claimed parent company 
cannot control the United States company. The director cites certain provisions from the franchise agreement, 
including terms related to the existence of a franchise Operation Manual, payment of royalty fees to the 
franchiser, rules regarding leasing of property, and other details regarding expectations and restrictions. The 
director notes that the franchiser has "control of the restaurant businesses that are operated under its 
jurisdiction," and that by signing such agreement the petitioner agreed "to conduct business by proven 
operational standards governed by the large franchise entity." The director concluded that the franchise 
company, Murphy's Deli, would actually be in control of the U.S. business, rather than the foreign entity 
exercising control over the U.S. operations. 
In an appeal filed April 21, 2004, counsel contends that the director applied an inappropriate standard of 
"control" in her decision, and asserts "if these criteria were applied to every L-1A petition involving a 
franchise, none would qualify since these standards are common to all franchises." Counsel states that the 
franchise agreement clearly states that the franchisee is an '"Independent Contractor' and that there is no 
agent, representative, subsidiary, joint venture, partner, employee or servant relationship." Counsel concludes 
that the parent company has sufficient control over the U.S. corporation's current business activity to satisfy 
the regulatory qualifying relationship requirement. Counsel cites Matrer of Kung, 17 I&N Dec. 260 (Comm. 
1978), a case in which a beneficiary seeking classification as a nonimmigrant treaty investor under section 
lOl(a)( lS)(E)(ii) of the Act, 8 U.S.C. 5 I 10 l(a)(l S)(E)(ii) had purchased a restaurant under a franchise 
agreement. In that case, the Commissioner determined that the limiting requirements inherent in the 
agreement were overcome by nonlimiting requirements which were sufficient to establish that the owner 
actually controlled the business. 
On review, both the director and counsel incorrectly focused on the petitioner's ope'ration of a franchise rather 
than on the necessary qualifying relationship between the beneficiary's foreign employer and the U.S. 
petitioner. See 8 C.F.R. 4 214.2(1)(3)(i) (requiring that the petitioner and the organization which employed 
the beneficiary are qualifying organizations). Evidence of the petitioner's stock ownership is critical to 
determining whether a qualifying relationship exists. In this case, the director focused solely on the effect of 
the petitioner's franchise agreement on control of the United States entity. However, the decision does not 
indicate that she considered the claimed parent-subsidiary relationship between the foreign entity and the 
petitioner or other factors necessary to establish a qualifying relationship, such as whether the foreign entity 
continued to do business pursuant to 8 C.F.R. 214.2(1)(2)(G)(ii). Accordingly, the director's decision will be 
' withdrawn and the petition will be remanded to the director for entry of a new decision. 
The regulations and case law confirm that the key factors for establishing a qualifying relationship between 
the U.S. and foreign entities are "ownership" and "control." Matter ofsiemens Medical Systems, Inc. 19 I&N 
Dec. 362 (BIA 1986); Matter of Hughes, 18 I&N Dec. 289 (Comm. 1982); see also Matter of Church 
Scientology International, 19 I&N Dec.' 593 (BIA 1988) (in immigrant visa proceedings). In the context of 
this visa petition, ownership refers to the direct and indirect legal right of possession of the assets of an entity 
with full power and authority to control; control means the direct or indirect legal right and authority to direct 
SRC 03 199 53187' 
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the establishment, management, and-operations of an entity. Maffer of Church Scientology Inrernational, 19 
I&N Dec, at 595. 
As general evidence of a petitioner's claimed qualifying relationship, stock certificates alone are not sufficient 
evidence to determine whether a stockholder maintains ownership and control of a corporate entity. The 
corporate stock certificate lehger. stock certificate registry, corporate bylaws, and the minutes of relevant 
annual shareholder meetings must also be examined to determine the total number of shares issued, the exact 
number issued to the shareholder, and the subsequent percentage ownership and its effect on corporate 
control. Additionally, a petitioning company must disclose all agreements relating to the voting of shares, the 
distribution of profit, the management and direction of the subsidiary. and any other factor affecting actual 
control of the entity. See Matter ofsiemens Medical Systems, Inc., 19 l&N Dec. at 364-365. Without full 
disclosure of all relevant documents, CIS is unable to determine the elements of ownership and control. 
In general, a "franchise" is a cooperative business operation based on a contractual agreement in which the 
franchisee undertakes to conduct a business or to sell a product or service in accordance with methods and 
procedures prescribed by the franchiser, and, in return, the franchiser undertakes to assist the franchisee 
through advertising, promotion, and other advisory services. A franchise agreement, like a license, typically 
requires that the franchisee comply with the franchiser's restrictions, without actual ownership and control of 
the franchised operation. See Matter of Schick, 13 I&N Dec. 647 (Reg. Comm. 1970) (finding that no 
qualifying relationship exists where the association between two companies was based on a license and 
royalty agreement that was subject to termination since the relationship was "purely contractual"). An 
association between a foreign and U.S. entity based on a contractual franchise agreement is usually 
insufficient to establish a qualifying relationship. Id. See also, 9 FAM 41.54 N7.1-5; 0.1. 214.2(1)(4)(iii)(D) 
(noting that associations between companies based on factors such as ownership of a small amount of stock in 
another company, or licensing or franchising agreements, do not create affiliate relationships between the 
entities for L-l purposes). 
By'itself, the fact that a petition involves a franchise will not automatically disqualify the petitioner under 
section IOl(a)(15)(L) of the Act. When reviewing a petition that involves a franchise, the director must 
carefully examine the reco~d to determine how the franchise agreement affects the claimed qualifying 
relationship. As discussed, if a foreign company enters into a franchise, license, or contractual relationship 
with a U.S. company, that contractual relationship can be terminated and will not establish a qualifying 
relationship between the two entities. See Matter of Schick. 13 I&N Ilec. at 649. However, if a foreign 
company claims to be related to a U.S. company through common ownership and control, and that U.S. 
company is doing business as a franchisee, the director must examine whether the U.S. and foreign entities 
possess a qualifying relationship through common ownership and management under section lOi(a)(IS)(L) of 
the Act. 
Nonetheless, it is critical in all cases that the petitioner fully disclose the terms of any franchise agreement, 
especially as the agreement relates to the transfer of ownership, voting of shares, distribution of profit, 
management and direction of the franchisee, or any other factor affecting actual control of the entity. Cf. 
Marter of Siemens Medical Sysrems, Inc., 19 I&N Dec. at 364-65. In the present matter, the petitioner 
provided a copy of the franchise agreement with the initial petition. The director found the terms of the 
SRC 03 199 53187 . . 
Page 8 
agreement to be so restrictive that she determined the foreign entity could not exercise control over the United 
States petitioner. 
Case law provides that control may be "de jure" by reason of ownership of 5 1 percent of outstanding stocks of 
the other entity or it my be "de factow by reason of con~ol of voting shares through partial ownership and 
possession of proxy votes. Matter of Hughes, 18 1&N Dec. 289 (Corn. 1982). In this case, the petitioner 
claims that the foreign entity owns 100 percent of its outstanding stocks and submits evidence in support of 
this claim. If the claimed relationship exists, the foreign entity in this case is therefore assumed to have "de 
jure" control over the petitioner and the petitioner's burden has been met with respect to establishing 
ownership and control. Accordingly, the director's request for an explanation as to how the petitioner is "tied 
directly to the parent business in practices and poIiciesW or how "the parent company determinefsl how the 
United States business is conducted was not appropriate. 
Upon review of the franchise agreernent,.the AAO concurs with counsel that there is nothing in the provisions 
of the agreement that would negate an otherwise valid claimed parent-subsidiary relationship between the 
foreign and U.S. companies. The provisions cited in the director's decision are neither unusual for this type of 
agreement nor unduly restrictive. As noted above, by itself, the fact that a petition involves a franchise will 
not automatically disqualify the petitioner under section 101(a)(15)(L) of the Act. 
In the present matter, the critical een the beneficiary's overseas employer, Burki 
International and the er does business in the United 
Stares through a franc e claimed relationship between 
Burki International a not the franchise agreement. In 
order to determine w mine the number of shares of 
stock issued by the petitioner, the ownership of that stock, and the resulting percentage ownership of the U.S. 
petitioner. 
Upon review,-there is insufficient evidence for the AAO to conclude that the foreign entity and U.S. entity 
had a qualifying relationship at the time the petition was filed. However, the record contains no clear 
evidence of ineligibility, and it appears the noted deficiencies could be cured if the petitioner is allotted an 
opportunity to submit additional evidence. As noted above, stock certificates alone are not sufficient evidence 
to determine whether a stockholder maintains ownership and control of a corporate entity. The petitioner has 
submitted its stock certificate, articles of incorporation, corporate-by-laws, and the minutes of the 
organizational meeting of its board of directors, dated November 27, 2001. These documents suggest that the 
foreign entity is in fact the sole shareholder of the petitioner. However, page 3a of the petitioner's 
organizational meeting minutes includes the board's resolution regarding stock issuance in exchange for real 
property. Although the meeting minutes have been signed by the board's directors, this portion of the minutes 
has not been completed. Accordingly, this document does not identify to whom the stock was issued or 
identify the type or amount of consideration provided in exchange. This document also refers to a written 
offer from the purchaser, and states that such offer is annexed to the minutes of the meeting. The petitioner 
did not submit an annexure. 
SRC 03 199 53187 
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In order to resolve this omission and to clearly establish the claimed relationship between the two entities, the 
petition will be remanded to the director to request, at a minimurn, the missing annexure from the minutes of 
this meeling. documentation of monies, property, or other consideration furnished to the U.S. entity in 
exchange for stock ownership, and the petitioner's stock transfer ledger, to confirm that no change in 
ownership has occurred. Additional supporting evidence could include stock purchase agreements, minutes 
of any other relevant shareholder meetings, or other legal documents governing the acquisition of the 
ownership interest. In order to establish that the United States and foreign entities are qualifying 
organizations, the petitioner must also establish that the foreign entity continues to do business. See 8 C.F.R. 
§ 214.2(1)(2)(G)(ii). Although the petitioner submitted evidence to document the foreign entity's business 
operations, most of the documentation submitted is from 2001 or earlier. Since the petitioner was not notified 
of this deficiency, it shall be given an opportunity to provide the requir* evidence of the foreign entity's 
ongoing business operations on remand. 
Beyond the decision of the director, the record as presently constituted does not estabIish that the petitioner 
and beneficiary are eligible for an extension of the initial one-year "new office" validity period. The 
regulation at 8 C.F.R. 214.2(1)(14)(ii) provides strict evidentiary requirements that the petitioner must 
satisfy prior to the approval of this extension petition. The evidence submitted with the initial petition was 
insufficient to establish that the petitioner and beneficiary satisfied all of the evidentiary requirements. 
However, as the director's request for additional evidence focused primarily on the franchise agreement, the 
petitioner shall be given an opportunity on remand to submit the required evidence. Specifically, the record 
does not contain evidence that the United States entity has been doing business for the previous year as 
defined in 8 C.F.R. $ 214.2(1)(l)(ii)(H). The petitioner submitted a one-page financial statement for the 
month of December 2002, The petitioner is required to establish through evidence that it has been doing 
business since July 2002, when the beneficiary's initial petition was approved. In addition, the petitioner has 
not submitted sufficient evidence to establish that the beneficiary will serve in a primarily managerial or 
executive capacity under the extended petition. or sufficient evidence of the financial status of the United 
States operation. Again, the petitioner shall be given an opportunity to submit the required evidence on 
remand. 
In visa petition proceedings, the burden of proving eligibility for the benefit sought remains entirely with the 
petitioner. Section 291 of the Act, 8 U.S.C. 1361. In this matter, the petitioner has overcome the specific 
objection of the director. However, additional evidence is required in order to establish eligibility for the 
benefit sought. Accordingly. the petition is remanded to the director for further review consistent with the 
above discussion and entry of a new decision. 
ORDER: The petition is remanded to the Texas Service Center.