Do you want to earn a lot of money without having to work for someone else? Franchises and business opportunities may be just what you are looking for - - - or, maybe not. We all know we should investigate and research any purchase carefully before buying. But, most everyday people don’t know how to effectively read a disclosure statement, an audit report or an accountant’s financial statement. And, that’s OK as long as you follow the basic rules.
Rule 1: Before signing any agreement, have an attorney look at the contract, prospectus, disclosure statements and ledgers of the business.
Rule 2: According to the FTC, when someone (or a company) wants to sell you any franchise or business opportunity in the USA, they must provide you “a detailed disclosure document at least 10 business days before you pay any money or legally commit yourself to a purchase.”
Rule 3: Be suspicious of any company that doesn’t show you in writing how earnings claims were formulated. Be cautious of any offer that claims the purchase will guarantee your business to generate no less than a specific monetary amount.
Rule 4: Personally interview the current owners. Confirm through the Better Business Bureau or the Department of Business Regulation who they are and current addresses. Don’t depend on the contact list supplied by the seller. You want to identify and ignore any persons paid to give you a favorable opinion.
Rule 5: According to the FTC, “Sellers . . . must tell you in writing the number and percentage of owners who have done as well as they claim you will.” Ignore generalities like "join our $7 billion industry." You want to know how the particular business or franchise for sale is performing in relationship to local competitors and to competitors in the industry.
Most fraudulent business opportunities seem to be promoting display racks, medical billing, pay phones or vending machines. You can read more about these from the Federal Trade Commission and file a complaint with the FTC. For a review of how to generally recognize scams, read this article.