Business Opportunities

Worried that you’re next in line for a lay-off or pink slip? Perhaps you’re just ready to be your own boss? If the answer is yes, a franchise or business opportunity may sound appealing. But getting into a business opportunity requires a lot of work upfront.

What You Need to Know

By law, franchise and business opportunity sellers must give you specific information to help you make an informed decision about the offer. For example, you’re entitled to written disclosures from sellers of business opportunities where the initial costs are more than $500. The disclosures must include the following information to help you check out the opportunity:

• The names, addresses, and telephone numbers of at least 10 previous purchasers who are close to you, geographically – so you can arrange to visit them and check out the opportunity in person.
• The number and percent of previous purchasers who have made as much or more sales, income, or profits as the seller claims you can make – so you can tell how likely it is that you will do that well.
• An explanation of how the seller knows how much previous purchasers have made, and how any claims about sales, profits or earnings have been calculated – so you can tell whether the basis for the claim is reasonable.

To Do

Before you buy a business:

• Study the disclosure document and proposed contract.
• Interview current owners in person. Their names and addresses should be listed in the disclosure document. Ask them how the information in the disclosure document matches their experiences with the company.
• Investigate claims about your potential earnings. Companies making earnings representations must provide you with the written basis for their claims.
• Sellers must tell you in writing the number and percentage of owners who have done as well as they claim you will. Broad sales claims about successful areas of business – “Be a part of our $4 billion industry,” for example – may have no bearing on the likelihood of your success. And once you buy the business, you may be competing with franchise owners or independent business people with more experience than you.
• Shop around. Compare opportunities.
• Listen to sales presentations with a critical ear. Be wary if the salesperson makes the job sound too easy. The thought of “easy money” may be appealing, but success generally requires hard work. By law, the seller must wait at least 10 business days after giving you the required documents before accepting your money or your signature on an agreement.
• Get the seller’s promises in writing. If a seller balks at putting oral promises in writing, consider doing business with another firm.
• Consider getting professional advice. Ask a lawyer, accountant, or business advisor to read the disclosure document and proposed contract.
• You also might want to check out the company with your local consumer protection agency, state Attorney General’s Office, and the Better Business Bureau, not only where the company is located, but also where you live. These organizations can tell you whether people have lodged complaints about the work-at-home program that interests you. But be wary: the absence of complaints doesn’t necessarily mean the company is legitimate. Unscrupulous companies may settle complaints, change their names, or move to avoid detection.