How to Avoid a Franchise Scam
Don't be rushed...
If you are thinking about buying a franchise, there are many opportunities in a variety of industries that you may find suitable. However, there are so many franchise opportunities now that many franchise opportunity scams are surfacing as well. You will have to be wary of these scams while searching for your perfect franchise opportunity, and take precautions so as not to fall prey to them. The most important thing to keep in mind is to avoid things that are too good to be true.
If a franchise opportunity presents itself and the franchisor is promising that you will make a lot of money in a short time with little effort, this is very unlikely to be true. The franchisor will go back on their promises and leave you out whatever money you have given to them. If you are going to buy a franchise you have to be prepared to work hard if you want to be successful. You are not going to be able to go into business for yourself and make money if you are expecting to expend little effort. As for the amount of time in which you will see returns, that can vary from franchise to franchise.
Another thing to avoid is franchise opportunities which are advertised in infomercials on TV. A good franchisor will not advertise this way, and an infomercial for any product, franchise or otherwise, should raise doubts for us if we have ever bought anything “As Seen on TV.” You should also look out for franchisors who are trying to rush you into making a decision with things like limited time offers. They are trying to trick you into something that you will regret if you do not take your time deciding on their franchise opportunity.
There are certain things you can do to research the company you are thinking about buying a franchise from beforehand to avoid getting caught up in scams that may not be as obvious as those seen in an infomercial. Find out if there have been any lawsuits filed against the company. You can also talk to current franchisees to find out if the franchisor is up to no good or if they do all that they promise to do. You should also check with the better business bureau to find out if they have any unresolved complaints. In general, find out as much as you possibly can about the company. Keep in mind that they could have changed their name if they are a scam business.
Finally, make sure that the contract is everything it is supposed to be. If they promise that you will make a certain amount of money, you need to get it in writing in the contract, otherwise, you have no guarantee that they will follow through on that promise. Also, it is strongly recommended that you get a lawyer to read through the contract before you sign anything, no matter how confident you are in your ability to understand it and the reputability of the company.
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Reader Comments
I think the most important thing you can do as a perspective franchisee is to get a lawyer to look over the FDD and Franchise Agreement to ensure you the franchise opportunity is actually an ‘opportunity’. I also love that you said you must get everything in writing. I personally am involved with the fitness franchise world and there are so many false promises in the franchise world. If it’s not in writing…. Don’t believe it.
great post most of the scam are at buy so In order to buy the right business or franchise.
Think very carefully before you and when you find a business you like Do research
See if it is rejected © do investigation.
In the end buy it on paper or legally do all the paper work
Do you due dillagence before buying a franchise. There are some pretty bade franchise agreements out there and I have even seen some pretty bad franchise documents from some very well known franchises around the country.
Stay away from Pirtek. Google Pirtek Scott..or Pirtek Bankruptcy or search Blue Mau Mau or Franchise Perfection websites for the truth about Pirtek. The USA Pirtek is nothing like the Australian system. The owners of Pirtek USA have lied, cheated and taken enough..they need to be stopped. The franchisees suffer, the employees suffer and the fat man at the top just takes the money. Its a bad deal no matter what they say.
Bob Purvin’s book is a must read. FRANCHISE FRAUD!!!!!
In a Blue MauMau posting, Bob tries to explain what he meant by fraud:
Purvin explained it was a much bigger problem which he addressed in a book he wrote, The Franchise Fraud, which was republished recently. He told them that it wasn’t so much about the people that were out selling fraudulent deals, but that the franchising industry had painted a rosy picture about franchising. He said they tell you that when you buy a franchise you are reducing your odds for failure and dramatically increasing your odds of success, because everybody knows when you buy a franchise you buy a proven commodity. He said, “That’s false. Most franchises are much weaker than they appear to be. The blue chip list of franchise opportunities is a very short list.“
He goes on to state that any legal protection is an illusion:
He also said that people believe that they are protected by a fabric of laws that would prevent them from being defrauded. “That also is false.” The point of his book was to wake up the buying masses that when they buy a franchise they have to be very careful and treat that purchase every bit as cautiously as the guy in the corner who says, do you want to buy my Rolex watch. Unfortunately, hundreds of thousands have been bitten by the franchise bug and can’t believe that they weren’t buying into a sure thing, Purvin said.
Sound advice from a real pro.
1. Most franchise systems are unproven.
2. The blue chip franchises are very few.
3. There is no legal protection.
4. Treat buying a franchise like you would buying a “genuine” Rolex on the street.
5. Hundreds of thousands have been burned.
Read the book.
> We are small respected retail company our headquartered in the AUSTRALIA. The main field of our business is bringing makers/ owners and buyers of hair products together, Including the search of clients and matching the most impossible wishes and offers.
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> Hairhouse Warehouse. is a sound investment at only $500k – $600k we predict you will average $15k per week gross turn over return on your initial investment.
> Once the franchise agreements are signed, you’ll be engauged in a training period of one month. During this time frame, you’ll receive all the necessary instructions and training from your supervisor. This will be at your cost at $2000 per week.
Hairhouse Warehouse treats its franchisees like family. The Head Office Road Support Team make monthly visits to all stores, providing business advice in areas such as leasing disputes, staffing issues, and legal and financial matters.Failure to comply with the advise will result in a breach in the franchise agreement and we will take possesion of your store. We will then sell your store and keep the profit.
As a franchisee you will be required to pay Fees. All Franchisees contribute 3% + gst of gross weekly turnover to the Marketing Fund and an Administration Fee, which is 6% + gst of gross weekly turnover and +10% of purchase price of your goods and stock and + you will need to fund your own local marketing expenses and + monthly software fee and + airfares and accommodation to attend franchise meetings and + legal fees at $450 per hour and + accounting fees at $280 per hour and + store rental at approx $90 000 per year.Failure to comply will result in a breach in the franchise agreement and we will take possesion of your store. We will then sell your store and keep the profit.
> If you are interested in this offer or would like to learn more, please forward your updated contact information to: janz@hairhousewarehouse.com.au
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This warning is to all who are thinking about buying into the uk Sensaslim weight loss spray DON’T. Be warned $6,000,000 has been scammed off Australians the product is fake and so are the promises of advertising, the so called people involved and is currently under investigation with the ACCC.
I have been scamed by a company name Pet Corner International. This company is even listed on this website. Do not buy into this company. Bad product and bac company.
Is there any leagal action I can do to try to get my money back? I am also looking for any other distributors of Pet Corner International. Please contact me.
If you need to contact regarding Pet Corner International me my email address is aschwegie@yahoo.com