franchising aspects Nov, 10 2009

Beware of frauds in franchising

Franchising is an outstanding model that allows both the parties (franchisor and franchisee) to take full advantage of it in establishing their businesses successfully. But hold on for a second, have you checked the authenticity of the franchise offered.

By Ramanjit Kaur
Feature Writer
Beware of frauds in franchising

The burgeoning franchise businesses have given ways to frauds to mint money by promoting their fake franchise companies. Fraud franchisors are trying to capitalise on the booming franchise industry by creating their mock brands and pushing through the novice franchisees through their glib talks and tall promises. These people lure the aspiring entrepreneurs to invest money in their franchise business by providing misleading information about the company. They commit the new entrepreneurs unlimited profits, leverages and potential earnings but deliver nothing. So, beware, and consider the following aspects before taking up a franchise.

Unrealistic profit – As an aspiring entrepreneur, you should gather sufficient information of the brand you are planning to take the franchise of. A thorough research should be done to know about the company, its brand value, number of franchisees and the prospects of the company. You can do this by talking to other franchisees of the same company, or other businessmen in the industry.

Guaranteed benefits – A franchising company offers to its franchisees many incentives in terms of a well recognised brand name, training module, guidance and support. A franchisor may offer every support and back-up to his franchisees to work successfully and profitably. However, fraud franchisors never guarantee success and enormous returns on your investment. The success and profit of the franchise unit largely depends on the franchisees’ communication and management skills. So, if a promoter offers you a guaranteed success and profits, then do evaluate his claim by talking to experienced businessmen of the same sector.

Money back guarantee – A successful franchisor would never offer you the money back guarantee. He would collect the franchise fees to provide his franchisees with the various aids and provisions (as discussed in the previous paragraph) to ensure success of the franchised unit. As an entrepreneur, you should understand the importance of franchise fees in a franchise system. And if a promoter is offering you money back guarantee, then do no trust him.

Nerve wrecking pressure – There might be a person who is constantly following you and trying to convince you to invest in his franchising business by offering enormous benefits. Do not invest your money in a franchise company without having complete information of it.

Here are some aspects that you must consider while talking to a franchisor. The fake franchise promotions can be easily traced through their uncanny and improbable offerings and demands. You should think twice before investing in a company that is offering you huge returns on your investments with little or no work from your side. These fraudulent promotions are usually done by new companies or those companies, who are planning to explore the franchise arena to expand their business. This does not mean that every new company is fake or doing fraudulent promotions. But you have to be very cautious while investing your hard earned money in a new company.

Do not get allured to such fake calls! Cross-examine the company and its existence; talk to as many experienced people as you can because this is the only way you can save yourself from being duped.

Related: Character playingz transfer of franchise

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