Spotting fake franchise opportunities

Richard Holden, head of franchising at Lloyds Banking Group, sheds light on how budding franchisees can avoid scams and invest in a genuine business opportunity

Spotting fake franchise opportunities

The economic recovery is creating new jobs across the UK and the government is reporting a gradual fall in unemployment. Despite this, wage increases are for many still lagging behind inflation and figures show more people are now choosing to be their own boss and start up a new business. Many budding entrepreneurs up and down the country are looking to achieve their dreams by turning their new business ideas into money-making opportunities and generating numerous business opportunities for aspiring owners to buy into.

But how can you spot a legitimate business opportunity from a scam? Unfortunately, many websites and classified ads promote what amount to business scams alongside genuine business and franchise opportunities. This makes it tricky for the investor to simply identify a true opportunity with an epidemic of scams looking to take advantage of the aspirations of would-be entrepreneurs. It is not always easy to spot a scam, so to minimise the risk of falling prey to these rogue traders it is absolutely essential to undertake thorough research before embarking on any new business opportunity.

There is truth in the old saying ‘if it seems too good to be true, it probably is’. Some of the most frequent, rarely proven, claims which should be treated with caution are:

● Huge profits, no competition, low level”investment

●”Work no more than 20 hours per week and”earn £50k + per year

●”Run your own business, no experience”needed, money back guaranteed

●”Earn great profits and do it all from home”with total flexibility

●”No fees, absolute best products available”anywhere

●”The ability to earn a substantial income”working from home

These promised returns rarely materialise and investors can get stuck holding worthless stock they are unable to sell. The fact is that there are no shortcuts to wealth – the only people likely to make money in these situations are the fraudsters.

Aspiring business owners need to apply lots of common sense when researching potential business opportunities. A good place to start your search is with fully proven franchise brands that are based on years of experience and a tried and tested business model. There is a reason why well-established franchises are successful – franchising is ultimately the duplication of a proven business model with initial training and ongoing support delivered by the franchisor.

In addition to a track record of success, a well-established franchise can also provide the investor with a known brand name, national account contracts and better supplier terms. The advantage of training and support should not be overlooked by budding investors either. Having someone that can share their many years of experience operating a similar business and prevent you from making costly mistakes is a real and significant benefit for any franchise owner.

To help would-be business owners navigate what is often a tricky path in the early days of “researching new opportunities, these handy guidelines may help:

● If it looks too good to be true, it probably is

● Beware of promises of guaranteed or very large returns

● Look out for being sold goods or services with little or doubtful value

● Beware of offers to teach you ‘secret’ or ‘exclusive’ techniques for building wealth

● Avoid advertisers who state ‘this is not a pyramid scheme’ or ‘this is totally legal’

● Never be pressured into making decisionsabout the investment

● Always investigate schemes carefully before you agree to invest

● Avoid fad industries that won’t be around in a few years’ time

● Ensure that you actually visit the head office business premises before you commit

● Always speak to existing investors and thoroughly check all testimonials and references

● Seek independent legal, financial or other professional advice before parting with money”

Richard Holden
Richard Holden