Avoiding a Franchise Business Opportunity Scam

A Home Business Article Contributed by Elizabeth Fox-Wise

There are Many Legitimate Franchise Business Opportunities - but Be Sure the Opportunity is Not a Scam

If you are looking to purchase a franchise business opportunity, your choices were never more plentiful! Franchise business opportunity offerings are growing in record numbers, with new franchise parent companies entering the market daily. Good research of a franchise business opportunity is a must before making a purchasing decision.

The fact that there is such a large number of franchise business opportunities on the market, has created a murky, over full, marketplace where it is easy for scammers to lurk waiting to sell the unsuspecting entrepreneur a franchise business opportunity scam.

Each year, thousands of entrepreneurs become victims of fraudulent franchise business opportunity promoters. And this is despite the fact that many of those people were thorough in their research; meeting with the promoters, checking references and verifying the franchise parent business' legal status before they paid for their franchise business opportunity. The Federal Trade Commission (FTC) says that fraudulent business opportunities consistently rank in the top 10 categories in their database of consumer fraud complaints.

Ways to Spot a Scam Franchise Business Opportunity

Scam artists are usually very good at what they do and do not leave a lot of obvious flaws for the potential victim to spot. They will cover all bases, such as getting phony references and falsifying documents. Despite their best efforts at deception; however, there are some things that savvy franchise business opportunity seekers can watch for.

Many fraudulent franchise business opportunity promoters use the classified sections of newspapers and magazines to advertise their "opportunities". Many of these scam offers will also appear in your inbox as spam email or be seen in various Internet ads.

Other red light warnings of a fraud business opportunity include claims of above average pay in a shorter than average period of time, and claims about ideal work conditions - such as "set your own hours, " "be your own boss". The business opportunity may sell for several hundred dollars all the way up to tens of thousands. The average cost of the scam opportunity is around $5, 000.

The Franchise Business Opportunity Rule

The FTC Franchise Rule is intended to protect potential franchise business owners from abuses by fraudulent franchise business opportunity promoters. This FTC Rule requires promoters of franchise business opportunities, that sell their opportunity for $500 or more, to provide prospective buyers with certain information. Part of this information is statistics to support any claims being made by the franchise opportunity promoter. Income claims must be supported by the number and percentage of previous opportunity purchasers who achieved that level of earnings.

To further protect the potential franchise business opportunity owner from deception, the FTC Rule also requires that franchise promoters must provide a franchise disclosure document that includes basic information about the promoter's parent company. This information must include whether the franchise company has faced any lawsuits from opportunity purchasers or lawsuits alleging fraud. Additionally, the franchise promoter must give potential business opportunity purchasers the names, addresses and phone numbers of at least 10 previous purchasers who live closest to the potential buyer.

Since the FTC ensures your right to get all of this information, be sure that you do get it and investigate it before paying money for a franchise business opportunity.