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Hi, I found 1 franchise biz on the net which seems very attractive. It’s basically they supplying a software to create homepage and as a franchisee, get sales and develop & manage clients’ web site. But this head office is in offshore (UK), and it makes a bit hesitation that it might be a scam. What can you suggest me to prepare and do research for this instance ? I really hope this co is genuine. Thanks heaps, James
Asked on June 11, 2009 under Business Law, Louisiana
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 11 years ago | Contributor
First, try Googling or the equivalent about the name of the company, the product, the name of any people you've dealt with, etc.--sometimes it's amazing what you get that way.
Second, ask the firm for references--other franchisees in the U.S. Call them and find out whaht their experience has been. And also check out those franchises to make sure they're legitimate!
Third, if it's British company, call the British Consulate in NYC and explain how you're looking at a franchise opportunity with a country from their fair land, but want to do the appropriate due diligence about the entity. Ask if they can help direct you to any British source of info (such as the equivalent of a British "better business burea" or other business-regulatory body).
Fourth, contact your state's better business and attorney general's offices--they track business that have been reported as scams or fraudulent. That doesn't help you if it is a scam but no one has reported it yet, but it's a good place to start.
If it's a publically traded company, go to www.sec.gov and search for them--maybe there's been some kind of a securities action involving them.
If it's software/website, find some relevant groups or associations (for example, a board or group for website designers) and see if you can find out anything from that source. Similarly, there are various franchise boards, groups, and associations--try a few and see what comes up.
You are correct to be leary--it is *very* hard to bring an action against a foreign company. So also ask yourself the "is it too good to be true" test--if the arrangements they claim (the amount of income you can make, how much time or work you need to put into it, the costs you'll need to bear) are too good, then be extra suspicious.
Also be suspicious if they want alot of money upfront, especially if there's not alot of actual "things" you need to buy to get into business. Try to find out what other similar franchises (or as similar as you can find) would charge and see if this one is charging comparable amounts.