Calling Card of Business Opportunity Fraud
In the mid 1990's, the FTC had an excellent Panel Discussion on Franchise Business Opportunities Advertising.
Not much has changed since then, in fact the opportunities for fraud in advertising have only increased with the internet.
Here is the analysis of a typical business opportunity ad.
"A couple of examples as typical as any, I think, illustrate the approach. First, during the week of March 6, 1994, 154 newspapers ran this ad: "Huge Profitmaker: $3,000 to $4,000 weekly income possible. All cash vending business. Prime groups available. Buy now and save. Zero down and qualified. Call Ed or Cindy or Lou at 1-800-192-1202."
This was an ad for what we came to call at the FTC, "the Wolf Group." The Commission sued them in South Florida last year for operating a business under dozens of business names in four different states, selling vending and game machine businesses to consumers who paid at least $10,000 to $15,000 and sometimes much more.
The catch for the Wolf Group operation is typical of this kind of fraud -- the promise that consumers are getting a turnkey business. You're going to get the product to stock the machine. Most importantly, there have been prearranged, preselected retail locations that we surveyed and we know are profitable. You're even going to get your own territory, and we're here to provide you ongoing support.
The consumer needs no special expertise or business acumen; the company supplies that. You only need to do the work of replenishing the product and collecting the profits. What consumers didn't get is a disclosure document providing basic information about that investment, as they're required to get under the Federal Trade Commission's Franchise Rule.
The profitable locations either didn't exist or they produced very little income. Multiple investors were staked out in the same exclusive territory. The so-called references that the company provided were phony, paid by the company to lie."
The first element of the fraud, is the big lie about earnings. Individuals anchor on this number, but then cut it in half or third to be on the conservative side. The criminals know that the earnings are off by a magnitude of over 100.
The second element of the fraud works by alleging taking all the risk out of the business enterprise. All is guaranteed - the location, the customers, and there is no risk for this amazing opportunity.
Finally, there is a group of shills - canned laughter- in the background urging you on.
Technorati Tags: franchise business opportunities, vending business
