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How to check if a franchise opportunity is scam or legit?

Customer Question
How can you tell if...
How can you tell if a franchise opportunity is legitimate or a scam?
Submitted: 5 years ago.Category: Business Law
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1/1/2013
Business Lawyer: Dwayne B., Attorney replied 5 years ago
Dwayne B.
Dwayne B., Attorney
Category: Business Law
Satisfied Customers: 34,305
Experience: Practicing for over 20 years and helped a number of businesses with litigation.
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Can you provide a few facts to put this into context?
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Customer reply replied 5 years ago

We are considering 2 franchise offers from the website Franchise Direct. One is called Community eStores. It involves helping non-profit organizations fundraise. This requires a buy-in of $8K. The other is Background Screeners of America which provides background checks for business. This one requires a buy-in of $20K. I have not had much success with Google searches. I just want to know how to tell if this is a scam or a real opportunity.

Business Lawyer: Dwayne B., Attorney replied 5 years ago

There are no sure-fire ways to know whether it is legit or not if the companies are relatively small. There are a lot of danger signs to watch for. If they don't have a physical address then it is probably not legit. Also, if they are selling a "franchise" that is easily duplicated just by virtue of paying them a fee then it is suspect.

You can also check with both the BBB and RipoffReport.com you can get a lot of information there. Unfortunately, many scam sites sell a few things, make their money, and then change names so it's hard to check on them.

Be careful of the companies on Franchise Direct. I have seen reports which indicate people are being ripped off by companies on their site. I don't know if that was just bad luck, they don't have a screening process, etc. but there are some issues.

I ran some searches on those particular companies and didn't see anything in particular. However, the issue that I see is there are no protected territories, etc. and so you could be competing against a lot of people doing the same thing soon.

Please ask any follow up questions in this thread. Please use the Reply button to ask additional questions or to provide answers to my questions.

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Customer reply replied 5 years ago

Thank you very much for your excellent advice. Have a great New Year!

Business Lawyer: Dwayne B., Attorney replied 5 years ago

Best wishes to you! Let me know how it turns out.

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Dwayne B.
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