November 22, 2004 07:11 AM
Could 'Biz Opp' Offers Be Out For Your Coffers?
Excerpt: It's easy to see why ads for business opportunities like these appeal to consumers looking to make extra money: They promise good pay for little effort. But, as many consumers who have answered these ads have learned - and the Federal Trade Commission (FTC) has found - many business opportunity promotions are nothing but scams that take consumers' money up front and fail to deliver on the promises.
It's easy to see why ads for business opportunities like these appeal to consumers looking to make extra money: They promise good pay for little effort. But, as many consumers who have answered these ads have learned - and the Federal Trade Commission (FTC) has found - many business opportunity promotions are nothing but scams that take consumers' money up front and fail to deliver on the promises.
If you're a prospective business owner, what can you do to make sure this doesn't happen to you? First, do your homework, including getting pre-investment information in writing. Under the FTC Franchise Rule, most potential business purchasers have the right to receive information about the earnings potential of a business opportunity. Most legitimate business opportunity promoters don't hesitate to give this information.
Second, research other aspects of the business' performance. One way to do that is to personally interview other people who have bought into the program.
The Usual Suspects
Spotting fraudulent business opportunities is no easy task, but there are certain clues: One may be the type of business opportunity being advertised. Fraud is most often associated with vending machine, display rack, pay phone, medical billing, work-at-home, and some Internet-related business opportunities.
Promotions for fraudulent business opportunities often appear in the classified pages of daily and weekly newspapers and magazines, and online. They also may be marketed in television infomercials and commercials.
The ads use similar bait: Good pay (say, $160,000 a year) in a short period (weeks or months) for little effort. They trumpet an ideal work situation - the ability to set your own hours, be your own boss, and work from home.
What the ads don't say is that the people behind these so-called business opportunities aren't really interested in helping you run a successful business: They're interested only in getting your money. To get you to buy in, they may mislead you about the business opportunity's earnings potential and promote a "phantom" opportunity that has little chance of succeeding - for example, a business with little or no market. They may doom your chances of success by providing cheap, low-quality or out-dated merchandise; poor quality equipment (such as defective pay phones and vending machines) and locations that get little foot traffic, like rural gas stations, out-of-the-way snack shops or stores in deserted strip malls.
While fraudulent business opportunities prey on consumers, they also harm legitimate businesses. To evade the law, promoters of fraudulent business opportunities often jump from one city to the next, leaving behind unpaid bills for newspaper ads, office rent, phone bills, mail delivery, and other services.
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