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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?
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