How to safeguard your investment from fake franchise fraud…?

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How to safeguard your investment from fake
franchise fraud?
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• Franchise fraud is nothing but a misleading
  transaction used to attract potential franchisees
  into purchasing a false business model and
  stealing their initial investment.
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• India is the second-largest franchise market
  globally
• Around 1.5 lakh franchisees and 4,600 franchisers
  operating in the country.
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• Franchising is a remarkable model that permits
  both the parties (franchisor and franchisee) to
  take full advantage of it in establishing their
  businesses successfully. Franchising offers a
  chance to be associated with an established brand
  and just like any business venture, buying a
  franchise takes a serious amount of
  consideration.
• As a possible future franchisee, it is quite
  exciting knowing youre only a few steps away
  from owning your business. Expect to encounter
  some challenges, but if there is one thing you
  want to be very careful about, that is falling
  prey to franchise frauds.
• A franchise system is only as strong as its
  brand, and that brand rests to a great extent on
  how well the different franchisees in the
  framework perform. If the franchisor allows
  anyone in the system who has money and does not
  have selection criteria, then your investment
  will probably be at risk.

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• When you first contact the company, ask them
  about the process they use in selecting
  franchisees. If you get the sense that they don't
  select franchisees but are in the business of
  selling franchises, that's your first indication
  the franchise is risky.
• Here are some aspects that you must consider
  while buying a franchisee.
• Dig deeper to know the real truth
• Even before you get to the point of contacting a
  franchisor, you can get a sense of whether their
  opportunity is for real. Go online and research
  news stories about the company and the industry.
  Visit their Web site and get information about
  their consumer offering as well as their
  franchise offering.
• Compare the company to its competition-both
  franchised and non-franchised. Locate some of
  their stores and speak to existing franchisees.
  Then, when you're satisfied, contact the company.
• Check the financial condition of the company.
• Your investment will probably be significant.
  Franchisees will be required to pay an initial
  franchise fee when buying a franchise from the
  franchisor. In some franchises, between debt and
  equity, your investment may exceed seven figures.
  Every new franchisor needs to have financial
  resources to meet their commitments. So you need
  to find answers about questions such as
• 1-Will you have more skin in the game than the
  franchisor does?
• 2-Do they have a history of profitability?
• 3- Are they earning their revenue from royalties
  and other continuing sources of revenue, or are
  they depend upon the sale of the next franchise
  to make payroll?
• The answers will give you a clear idea of the
  companys current financial condition.

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• Other indications of fraud franchisee
• They offer Unrealistic profit Guaranteeing a
  certain amount of profit in no time is just too
  good to be true. Franchising will not give you
  overnight success, it requires hard work and
  time. There is no such thing as buy a franchise
  today and start earning tomorrow.
• As an entrepreneur, you should collect adequate
  information about the brand you are planning to
  take the franchise of. Complete research should
  be done to know about the company, its brand
  value, the number of franchisees and the vision
  of the company. You can do this by communicating
  with different franchisees of the same company,
  or other specialists in the industry.
• They guarantee other benefits A genuine
  franchising company offers to its franchisees
  many incentives in terms of a well-recognized
  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 depend on the franchisees communication
  and management skills. So, if a promoter offers
  you guaranteed success and profits, then do
  evaluate his claim by talking to experienced
  businessmen of the same sector.

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• They will offer a Money back guarantee- As an
  entrepreneur, in a franchise system, you should
  understand the value of franchise fees. If a
  promoter is offering a money-back guarantee of a
  franchise fee, then do no trust him.
• Because 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 to ensure
  the success of the franchised unit.
• Summary
• There's no predefined process to find a franchise
  scam, you have to compare all the indicators in
  making your assessment. The fake franchise
  propaganda can be easily detected through their
  unreal and unlikely offerings and demands. These
  false advertisements are generally done by new
  organizations or those organizations, who are
  intending to explore the franchise arena to
  extend their business. 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.
• There are hundreds of superior franchise
  opportunities are available today, and there's
  definitely no reason to agree for less than the
  best opportunity in your investment range. You
  must be careful while investing your hard-earned
  money in a franchisee.

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