Franchise scams |
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.
Further information on the Franchising Code of Conduct can be found on the ACCC website or by calling 1300 302 502.
The Franchise Council of Australia also provides advice and training to intending franchisors and franchisees.
Last reviewed 29/11/2011 |
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