Franchise Fraud: Wake Up and Smell the Fine Print
Franchising—in which a firm lets independent businesspeople market and distribute goods or services in its name—certainly has its benefits. It lets the franchisor expand its market while spreading risk around, and small investors can capitalize on a proven business model. But neophyte businesspeople may not be in the best position to judge that model before committing their life savings. According to Texas franchise lawyer Richard Solomon, fraud has ... Full Story »
Posted by Derek Hawkins
Had there been an adequate federal regulatory body or if the victims had had the foresight to have an independent accountant or lawyer review and evaluate the business and the agreement, much of this could have been averted. In any given year I will do a few such evaluations, and with few exceptions, the model previewed by the offeree has little if any relation to reality. Some are still good once the pie in the sky is taken out, but some don't even need an indepth evaluation to show that the numbers can't add up. Relying only on the prospectus and sales people to evaluated the product is like having the seller give you an appraisal on property he is going to sell you. If he is honest and truthful you're lucky, but if it was so damned good, why is he trying to unload it?