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The warning signs of franchise fraud

By Samantha Garner | March 16, 2013

small_business_sales_proposalIn theĀ Ask a GoForth Expert section of our website, an entrepreneur wisely wanted to know about the warning signs of franchise fraud. Sometimes, a franchise opportunity can seem too good to be true. Franchises have a high rate of success compared with other types of small businesses, but that doesn’t mean you can buy into any franchise and wait for your riches to roll in.

Scam franchisors can pressure their franchisees into signing gag orders, promise a proven business model or proprietary technology that doesn’t exist, promise training that never materializes, even force franchisees to spend money on so-called improvements.

Our GoForth Expert Samir Dandekar offered these tips to avoid franchise scams:

Firstly, you can choose to work only with a franchisor who is a member of the Canadian Franchise Association.

Secondly, you can be wary of the following franchise scam warning signs:

  • Over-dressed sales person trying to pitch a fast sale
  • Insistence on cash transactions only
  • Exaggerated earnings
  • Failure to provide disclosure

As always, do your research. Be thorough, double-check everything, and seek the advice of trusted colleagues or professional advisors. And listen to your instincts! Buying into a franchise can be a proven and relatively secure pathway to entrepreneurship, but it’s an investment in your future that shouldn’t be taken lightly.

For more Ask a GoForth Expert questions and answers about franchising, visit us here.

 

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