Things to Do to Safeguard Your Business Against Franchise Fraud

franchsie opportunitues text on a laptop screen

So you want to start a business? If you have no experience running a startup, you might be considering a franchise purchase instead. While investing in a proven business model can be a good way to start a business, it also has its risks.

Many fraudsters are taking advantage of the rising popularity of franchising business opportunities. Some will try to rip you off with their flawless speech and “tried and tested” franchise system. How can you protect yourself against such fraud and increase your chances of being a successful franchisee?

Shop for franchising opportunities and franchisors

Let’s say that you are genuinely interested in a restaurant franchising opportunity. Know that not all franchisors offering a restaurant franchise are the same. It pays to do thorough research on all of your options. It would be best to talk to their past and current franchisees, assess their restaurant startup costs, and make sure that all the costs are already stated in their franchise disclosure agreement.

Verify all franchise documents

It is not enough that you try to review all the franchise documents by yourself. You may know a thing or two when it comes to franchise agreements, but are you sure that you’re not dealing with a fraudulent company? To avoid getting tricked into signing legal documents where you might be at a disadvantage, work with a franchise lawyer. They can help you verify all documents and check if there are any discrepancies.

Take your time to make a decision

Some franchisors will be persistent in selling you a franchise. This may not be a real indicator of whether a franchisor is a scam or not. But if they pressure you into buying their franchise asap, don’t succumb and take a breather. Since a considerable amount of money is at stake, you should be able to take your time to decide and not be pressured to seal the deal immediately.

Be ready to negotiate

Who says you have no right to negotiate? As long as your terms can benefit both you and your franchisor, you can snag a better deal than your franchisor will agree on. So when reading the franchise documents, don’t simply watch out for franchising red flags. There are business terms you can work out with your franchisor, such as the renewal rights, guaranties, the territory, and an aggressive opening schedule.

Be on guard for franchise scams

business partners shaking hands

There are many red flags to watch out for when buying a franchise. For instance, a franchisor with no trademark having only one physical outlet is a sure sign of fraud. Also, make sure to check if they have the license to sell a franchise and a corporate office and all the legal documents to operate.

Buying a franchise is a serious business. You will need to put out a considerable amount of money not just to buy the franchise itself but also to deal with your daily expenses and all the franchising costs. So make sure that your investment won’t go to waste. Go the extra mile when choosing a franchise and be ready to study, negotiate, and shop for franchising opportunities.

About Faye Gonzales 1658 Articles
Meet our chief explorer, Faye Gonzales. With over a decade of travel experience, Faye is not only a passionate globetrotter but also a loving mom who understands the unique needs of family travelers. Her insights into family-friendly destinations and travel tips make her a trusted guide for parents seeking memorable adventures with their children.