My phone is literally ringing off the hook – more than once every week. The calls are from people who invested in bad franchise deals seeking escape from the franchise agreements they signed and recovery of their lost investment – always in excess of $ 400,000 in cash and obligations on leases and SBA loans – aggregating around $ 1,000,000 on the average.
There are good franchise investments out there, but they are extremely difficult to sort out from the scams. The scam franchises use the same advert and marketing language as the investment worthy deals. The scams say the same things about their deals that the investment worthy deals say – proven system..buying power..expert start up assistance..higher probability of success compared to independent start up..lower start up costs..less working capital required than independent start ups.. etc….
The salesmanship appears to be responsible and respectable. They belong to the same industry associations as the real proposals. They have obtained positive ratings from Entrepreneur and other popular industry sources – all of which are available for reasons other than merit.
The scams are targeting people who are coming out of large downsizing companies and cleaning out every financial resource they have accumulated throughout their lives.
You cannot, no matter what you have done for a living up to now, sort out the good from the bad. The presentations are that effective and you have never vetted a small business investment as the prospective owner operator in your entire life. You are dead meat if you go to discovery day at any franchise sales process before you have done killer due diligence with an expert on doing killer due diligence on franchise investments. A general business lawyer with little franchise industry experience is useless for this work. A franchise lawyer who does not focus on pre investment franchise due diligence is also useless.
You can save yourself from the most critical risks associated with investing in a franchise by going on any search engine and search using the words Franchise Lawyer. Call the lawyers on the first two pages of the search results and ask two questions. Do you focus on due diligence of franchise investment opportunities? Do you vet the business issues as well as the legal issues? If the answer to both those questions is not a resounding YES, keep looking. You can’t beat the system on your own. The risks are enormous and the after signing remedies are awful and mostly unavailable due to extreme cost and the fact that you will have lost what you need to fund recovery litigation/arbitration anyway.
You don’t have to do this to yourself. Nuff said?