In the current economic climate, there is likely to be an increase in advertisements offering franchises for sale. People who have recently lost their job may be considering purchasing one as a way of ´buying´ themselves a job.
Only a minority of business opportunities available in the marketplace are scams. Provided you do sufficient research about a franchise opportunity, you should minimise your risk of being caught by a scam.
Before you enter into or commit to a franchise agreement, you should:
- seek independent legal and financial advice to identify the risks associated, and develop a risk management plan
- seek professional advice about your rights to intellectual property, leases, etc. in the event of franchisor insolvency
- talk to as many current and past franchisees as possible (their contact details must be included in a disclosure document).
There have been a number of franchise scams over recent years, such as:
- converting cars from petrol to gas by selling conversion franchises
- snack food franchises (Little Joe Snax)
- distributing imported disposable cameras (Midas Photographics)
- MGM Model Management and Talent Scouts.
The Franchise Council of Australia also provides advice and training to intending franchisors and franchisees.
Last reviewed 29/11/2011