THE BIZOP NEWS

Posted by michael webster at 9:01 AM | Permalink | Comments (0) | TrackBacks (0)

The National Consumer's League for Internet FraudWatch has a checklist for detecting Business Opportunity Fraud, Tips for Business Opportunities. How good are these tips?

Well, several of the tips needs to be improved.

1. Get information in writing before you decide. The Federal Trade Commission's (FTC) Franchise Rule requires franchise and business opportunity sellers to give you detailed written information, called the "disclosure document," at least 10 days before you pay any money or agree to purchase. There are some exceptions. If the company claims to be exempt from the Rule, call the FTC toll-free at 877-382-4357 to check.

This won't work at all. You need to get the disclosure document long before you even contact the business opportunity seller. Since the FTC is doesn't require the business opportunity seller to register its disclosure document with the FTC, phoning them to ask about either the disclosure document, or a legal ruling. Calling any regulatory authority will never get you much more than polite conversation.

2. Get everything in writing. The contract you are asked to sign should include all the terms of the deal and the promises that were made.

This is just worthless advice. Business opportunity sellers who are frauds will give you any written contract you want - they simply have no intention of honouring their promises.

Technorati Tags: ftc franchise rule, disclosure document, business opportunity seller, business opportunity fraud, contact, fraud tips, opportunity sellers, national consumer, business opportunities, exceptions

Posted by michael webster at 9:43 PM | Permalink | Comments (0) | TrackBacks (0)

At the website ewww.ntrepreneur.com they have a Business Opportunities: How to Investigate? , which is a type of guide to due diligence. How good is it? Since the magazine sells many franchise and business opportunities ads, can we count on it to be objective? Suprisingly, it is pretty decent, except for one lame remark about the BBB. Here is their 15 point checklist:

1. Make an honest evaluation of yourself and your abilities. If you've been behind a desk for many years, will you be happy calling on businesspeople and selling them an intangible service? If you've been a field salesperson for years, will you be satisfied selling snack foods behind a counter?

2. You must run your business enthusiastically. Will you be happy introducing a new product or an unusual service that the public knows nothing about? Can you generate excitement for an item not nationally advertised?

3. You must have complete knowledge of the product or service with which you are involved. If the parent company gives you little or no training in technical or management know-how, be wary of the business opportunity. If the licensor-seller has organized all the operating knowledge into a standard operating manual, look with favor upon this business opportunity.

4. Make a market evaluation of the product or service to be offered. Is the time right to introduce it to the public? Is there a need for this type of item, and what is its potential in relation to competition?

5. Find out how many buyers have been in the business successfully for a respectable period of time. A legitimate business opportunity will even provide you with phone numbers of other buyers, so you can verify that they're generally satisfied with the opportunity and that the seller is capable of fulfilling his or her promises.

6. Check the training and experience required to run the business properly. Is there a suitable curriculum of training? What is the scope of training? Does your background fit its requirements?

7. What is the company's profit ratio to sales; to time and service requirements; and to the financial leverage requirements? Can you make more in another type of business?

8. Do you have to work more hours to make the same amount you do now? Can you invest the same amount in the business opportunity yet operate a larger operation and get a better return on investment?

9. Check with current operators to see how they're making out. Are they happy with their businesses? What problems do they have, if any, that are common to all units sold?

10. Research company's history. Is it a new firm with little expertise and experience? Is it an older firm whose regular products have satisfied customers for years? Are the business opportunities all offshoots of their regular business?

11. Is there financial strength and strong credit behind the business opportunity? Can the licensor-seller give you an escrow agreement to deliver a building, equipment, leasehold improvements, inventory, etc., as the unit is made ready for your use? Check out the bank references given by the licensor-seller; discuss the company's financial strength with the appropriate managers.

12. Evaluate the policies and plans of the company with the associations and business groups in which the parent company or seller is involved.

13. The Better Business Bureau will give you a report if others have lodged previous complaints against the company.

14. Having an attorney, accountant or business consultant conduct an in-depth study of the company may be an excellent idea.

15. Visit the headquarters of the licensor-seller. Talk to the personnel and the training director. Visit the original prototype of the business being sold. Evaluate other outlets. Expose yourself to the other outlets' products and services to determine the quality dispensed. (my emphasis)

This is decent advice, except for 12, for the purchase of any distributorship.

Technorati Tags: product or service, business opportunities, snack foods, due diligence, honest evaluation, bbb, intangible, salesperson, lame, excitement, franchise, investigate, decent, new product

Posted by michael webster at 8:44 AM | Permalink | Comments (0) | TrackBacks (0)

The Texas Business Opportunity Act provides a number of required disclosures:

Disclosure Requirement

Under the Texas Business Opportunity Act, the seller must provide you with the following information at least 10 days before you sign a contract or turn over any money to the seller:

The names and addresses of all persons affiliated with the seller in this particular business;

A copy of a current financial statement of the seller;

A complete description of the actual services the seller agrees to perform for the purchaser;

If training is promised, a complete description of the training, length of training, and cost of travel or lodging during the training;

If services are promised in connection with placement of equipment or products, the full nature of the services and the nature of agreements to be made with the owners or managers of business locations;

If the seller or his or her representatives have been adjudged bankrupt or have been subject to a judgment in a civil suit involving fraud or embezzlement during the past seven years, he or she must tell you;

If the seller makes representations about sales or earnings potential, he or she must disclose both the total number of people participating in the business opportunity for the past three years and the total number of people who have actually achieved the represented sales or earnings within the past three years.

Cancellation. The seller must give you the following statement in writing as part of the disclosure requirement: If the seller fails to deliver the product, equipment, or supplies necessary to begin substantial operation of the business within 45 days of the delivery date stated in your contract, you may notify the seller in writing and cancel your contract. (my emphasis)

Imagine how powerful this information would be if it was public, and could be tested by independent third party agents. It is of no use if only disclosed 10 days before the purchase as there is not sufficient time to conduct the due diligence properly.

Technorati Tags: texas business, opportunity act, business opportunity, business locations, current financial, financial statement, bankrupt, purchaser, disclosure, judgment

Posted by michael webster at 11:30 AM | Permalink | Comments (0) | TrackBacks (0)

Federal Trade Commission There are a number of ways that the FTC, or Federal Trade Commission, can be used effectively in your due diligence and research about business opportunities. But, first let us be clear on how you cannot use their expertise: like all regulatory bodies they are not going to give a recommendation one way or the other about the opportunity. Don't expect the FTC to give you free legal advice - something for nothing.

How can you use their expertise? Basically, you want to review past scams, for example this list of State Actions against Business Opportunities Scams, and check for similar frauds or scams. Here is another summary of the recent 2005 Federal Trade Commission actions against the sellers of business opportunities. Most business opportunities scams or frauds do not develop full blown, they have been carefully crafted, changed, and added to. They are the big cons, of our day. But unlike the charming Paul Newman and Robert Redford in the movie The Sting, based on David Mauer's book, there is little to admire about these psychopaths.

Only if you are completely sure that the business opportunity is not similar to one of the criminal schemes that the Federal Trade Commission has prosecuted should you take the next step in contacting the company for their disclosure document.

Technorati Tags: federal trade commission, business opportunities, scams, paul newman, free legal advice, frauds, robert redford, due diligence, ftc, regulatory bodies, state actions

Posted by michael webster at 9:04 AM | Permalink | Comments (0) | TrackBacks (0)

One of the major themes on this site has been to trust your gut when it comes to business opportunity due diligence. The mind can too easily be swayed by con criminals waving the phantom dream which becomes more real than the actual coin of the realm. However, over at the Harvard Business School, Max Bazerman and Deepak Malhotra argue that when it comes to negotiating, we should not trust our intuition and rather rely on a rational checklist.

Their argument proceeds by analogy: just as visual illusions are compelling but wrong, so is relying on intuition when it comes to negotiation. The particular illusion they use is from Roger Sheppard's book Mind Sights: Original Visual Illusions, Ambiguities, and Other Anomalies (W. H. Freeman, 1990). (Roger Sheppard is also known for his auditory illusions: a rising pitch which seems to go up forever.) The seduction of these illusions are that even when you know the answer - for example, that the two tables are the same- it doesn't change your visual judgment that one table is bigger than the other. In terms of social influence, Cialdini calls this a click-whirr inference.

Cialdini and others point out that we need responses to our click-whirr inferences, especially when dealing with con criminals. But is the Bazerman/Malhotra approach correct for business opportunity due diligence? Do we need to be more rational? Or do we need quicker intuitive responses?

Technorati Tags: visual illusions, auditory illusions, harvard business school, due diligence, intuition, business opportunity, ambiguities, deepak, anomalies, analogy, seduction, criminals, negotiation, rational

Continue reading "When Not to Trust Your Gut." »

Posted by michael webster at 9:49 PM | Permalink | Comments (0) | TrackBacks (0)

Section 437.5 of the FTC's proposed business opportunity rule lists 18 prohibited practices, a) to r). Since four of these practices contain conjunctions, I believe that there are actually 22 deceptive practices, and since Simon and Garfunkel didn't pen a song about 22 ways to leave your lover, I call this thread 26 Ways to Leave Your Money.

Kim Klaver asked me to post the entire list of 22 deceptive practices, which are from the Federal Registrar Vol. 71, No. 70/Wednesday, April 12, 2006.

Here is the list, which I have taken the liberty of writing in plain English, or a plain as I can be.

1. Tell a prospective distributor that they have contracted out of the protection offered by the FTC Biz Op Rule.
2. Provide, orally, visually, or in writing information inconsistent with the disclosure document.
3. Provide, orally, visually, or in writing information with inconsistent with the earnings claim document.
4. Include in the disclosure document more information than is required by the FTC Biz Op Rule.
5. Provide misleading information about the gross, net income or profits, that other prior purchasers have earned.
6. Tell a prospect that the FTC or some other government prevents the seller from making an earnings claim.
7. Fail to make available to prospects written substantiation of the seller's earnings claims.
8. Fail to make available to the FTC written substantiation of the seller's earnings claims.
9. Provide misleading information about how commissions, bonuses, incentives and other rewards are paid.
10. Misrepresent the essential nature of goods being sold by the prospect.
11. Provide misleading information about the nature of support that the prospect will receive.
12. Tell the prospect that the seller, lead generator, or locator will likely find customers, accounts or locations.
13. Misrepresent the seller's refund or cancellation policy to the prospect.
14. Fail to provide the refund or cancellation, when the terms in 13 are meet.
15. Advertise the distributorship as an employment opportunity.
16. Offer the prospect an "exclusive" territory, when the terms of the territorial protection are not exclusive.
17. Offer the prospect an "exclusive" territory that intersects another territory assigned to another purchaser.
18. Tell the prospect that some trademark holder, or government agency directly or indirectly endorses the opportunity.
19. Misrepresent to the prospect that some reference, ie shill, has is a purchaser of the opportunity.
20. Misrepresent to the prospect that some reference, ie shill, can provide an independent reliable report about the company.
21. Fail to disclose that you have paid your references.
22. Fail to disclose that you have personal relationships with your references.

This is my rendering of the proposed practices into plain English, but please consult the FTC Business Opportunities Rule.

Technorati Tags: deceptive practices, disclosure document, simon and garfunkel, prospective distributor, ftc, inconsistent, conjunctions, kim klaver, biz op, business opportunity, earnings, liberty

Posted by michael webster at 3:10 PM | Permalink | Comments (0) | TrackBacks (2)

Over at the ATM Marketplace forum, a forum which discusses ATM business opportunities, Dan Roy has an excellent post on how to avoid business opportunities fraud. Mr. Roy was investigating an ATM business opportunity, One Source, and was about to make a substantial investment in what turned out to be a unregistered security, or ponzi scheme.

He didn't fall for the trap. All four of his warning signs are important.

Here is his fourth step:

"Do the research. 2-3 weeks of work is a small price to avoid a potential scam. I learned enough in 2-3 weeks that I am convinced I could have setup a legitimate company just like One Source (outsourced the placement, processing, service, etc). One catch, it was clearly obvious that locations were the gold mine in the whole business model and were not at all easy to come by. While everyone else I spoke to in the industry was dying to get new locations (even offered to buy the ones I had through one source), One Source (this company no one had heard of) somehow had 1,700 locations all set to go). Red flag! Red Flag! Red Flag"! (my emphasis)

Read the entire post and thread on One Source to avoid making a similar mistake with your due diligence on a business opportunity.

Technorati Tags: ponzi scheme, atm, business opportunities, legitimate company, business model, business opportunity, dan roy, marketplace forum, substantial investment, warning signs, fraud

Posted by michael webster at 9:23 PM | Permalink | Comments (0) | TrackBacks (0)

This is part 2 in a 22 part series about the deceptive practices identified by the FTC, a summary of their 30 year history with business opportunity frauds; these practices are explictly identified in the FTC's new business opportunity rule. The first post was about why an individual cannot contract out or waive the statutory protection given by the FTC Rule. Freedom of contract was trumped by the regulator's concerns about fraud.

The second deceptive practice, covered by 437.5(b), involves what is known in law as the "four corners clause" or the "integration clause". Generally, after negotiations conclude -which are usually oral in nature- lawyers will memorialize the contract by reducing it to writing. To ensure that every party is literally on the same page, an integration clause is part of the agreement. "The existence of such a term is conclusive proof that no varied or additional conditions exist with respect to the performance of the contract beyond those that are in the writing". This makes sense for two bargainers with relatively equal bargaining power.

But business opportunities contracts are generally not negotiated. Section 437.5(b) recognizes that frauds or scams work by the seller telling, showing, or demonstrating to the purchaser a set of facts, which the fine print then takes away.

Here is an example: The seller made oral representations about a guarantee of profits, but in the written document you "agree" that there have been no representations about a guarantee of profits. The integration clause or the fine print then takes away the benefit of the bargain that you thought you got.

This inconsistency between the oral representations and what was in the written contract is what section 437.5(b) deems as a violation of the new business opportunity rule.

Technorati Tags: ftc rule, integration clause, deceptive practices, deceptive practice, business opportunity, new business, statutory protection, frauds, year history, negotiations, fraud, lawyers

Posted by michael webster at 10:06 PM | Permalink | Comments (0) | TrackBacks (0)

The FTC has been prosecuting business opportunities frauds and scams for over 30 thirty years. The proposed new biz op rule lists some 22 ways to lose your money, 22 distinct fraudulent practices in section 437.5 of the new rule. I thought it would be useful to review these practices to see what compliance techniques were implicated in these prohibited practices.

The first prohibited practice, 437.5(a), would invalidate any term in a business opportunity contract, or distributorship contract, that would require the purchaser to waive any reliance on the disclosures required by the FTC's business opportunity rule. That is, a purchaser could not contract to say that it didn't need to review or have the FTC disclosure document.

Why is this needed, and will it work?

Technorati Tags: ftc, stupid dumb, business opportunity, purchaser, disclosure document, business opportunities, new biz, biz op, distributorship, frauds, scams, fraudulent, fairness, reliance, distinct

Continue reading "26 Ways to Leave Your Lover - Well almost 26" »

Posted by michael webster at 10:11 PM | Permalink | Comments (0) | TrackBacks (0)

Many individuals who first learn that some 23 states and 3 provinces provide them with some protection against fraudulant sellers of business opportunities fail to take advantage of the wealth and diversity of the state and provincial regulations. For example, even if the business opportunity is not in, say, the State of Illinois's jurisdiction, it does not make their statutory filing requirements irrelevant to your due diligence. Why is this? Well, the Illinois Business Opportunity disclosure document gives you some good questions to ask. It gives you a nice checklist to fill out. Illinois requires the biz op seller to state his or her qualifications for this particular industry or business, for example. Florida requires the driver's licenses as proof of identification, which is fairly clever.

Now there is one trap with this checklist and every checklist. Who should fill it out and ask the questions?

Technorati Tags: state of illinois, illinois business, business opportunity, due diligence, disclosure document, ask, business opportunities, biz op, scammers, bogus

Continue reading "Illinois Biz Op Checklist" »

Posted by michael webster at 10:39 PM | Permalink | Comments (0) | TrackBacks (0)

In Florida, the seller of a business opportunity is regulated by the Florida Department of Agriculture and Consumer Services. It has some terrific advice, and probably the most important is this:

"No state or federal agency can tell you whether a particular business is legitimate. Although this state requires that sellers register their business opportunity with the state before they may lawfully advertise or sell here, compliance does not guarantee that the seller is a legitimate company. However, if a seller has not registered, its failure to comply with the law may be a red flag warning about deceptive business practices. To avoid getting burned by a scam, you need to beware, and to do everything you can to check out the seller's claims before you purchase, including checking on whether the business opportunity is registered. If you don't, you may lose your life savings, as many thousands of consumers already have. Even the best legal remedies too often cannot recover your investment from a company that is here today and gone tomorrow. Can you afford that risk?" (my emphasis.)

Although very important, it will be ignored by 98% of the individuals who purchase a biz op. Why?

Technorati Tags: florida department of agriculture and consumer services, business opportunity, deceptive business practices, legitimate company, state, terrific advice, department of agriculture, red flag

Continue reading "Florida Biz Op Checklist" »

Posted by michael webster at 10:12 PM | Permalink | Comments (0) | TrackBacks (0)

The US Department of Justice announced several weeks ago a large global operation against a number of telemarketers. The RCMP, since they were part of the operation, offered the following advice when dealing with telemarketers.

* DO NOT believe that everyone calling with an exciting promotion or investment opportunity is trustworthy, especially if you do not know the caller or their company.

* DO NOT invest or purchase a product or service without carefully checking it out.

* DO NOT be afraid to request further documentation from the caller so you can verify the validity of the company.

* DO NOT be fooled by the promise of a valuable prize in return for a low-cost purchase.

* DO NOT be pressured to send money to take advantage of a "special offer" or "deal."

* DO NOT be hurried into sending money to claim a prize that is available for only a "few hours."

* DO NOT disclose information about your finances, bank accounts or credit cards (not even the credit card expiry date).

* DO NOT be afraid to simply hang up.

* DO contact the Phonebusters National Call Centre at 1-888-495-8501 and visit RECOL at www.recol.ca if you are contacted by someone who promises you great prizes, but requires you to send money in advance for shipping, handling, taxes, etc., or requires you to purchase a product to qualify.

This is all very well, but there is a much simpler defence against telemarketers: buy an answering machine. You would not leave the keys in your car, you would not leave the keys to your house or apartment in the lock, so why would you leave the telephone open to be assaulted? Use an answering machine and call back, if you want to on your own time. But give yourself time to check out the phone call before you return the call. Take your time, and chase down the assumptions that the caller wants you to make.

Technorati Tags: send money, telemarketers, us department of justice, credit cards, global operation, investment opportunity, rcmp, bank accounts, department of justice, trustworthy, disclose, validity, finances, invest, carefully, credit card expiry

Posted by michael webster at 9:37 PM | Permalink | Comments (0) | TrackBacks (1)

Dennis Marlock's book entitled "How to Become a Professional Con Artist" is an insightful discussion about the psychology of fraud, from a retired police officer. Here are the discussions I found useful.

What do advertisers, scam artists, and professional magicians all have in common? According to Marlock, "even when you know the magician is about to deceive you, seldom are you aware of how the deception worked. Thanks to some misdirection, ample amounts of showmanship, lies of omission, the obvious is overlooked." The obvious in a business opportunity fraud is that you will pay, for example, $5000.00 for a $200 product which may or may not work, for non existent locations.

Marlock suggests also that the victims of fraud share some common characteristics: a) millions of Americans dream of a path to easy riches, b) the con artist plays upon the ordinary American's sense that their life is humdrum and banal, c) when given a choice most people will believe what is comfortable to believe, d) even though most people can think, most of the times they won't, and f) if you can bring out the greed demon in a person, you can get him to believe just about anything.

This is a useful intenal checklist when you find yourself reviewing a business opportunity, which appears to have generated uncontrollable or excessive enthusiasm.

Technorati Tags: business opportunity fraud, con artist, professional magicians, scam artists, showmanship, banal, magician, omission, police officer, insightful, psychology

Posted by michael webster at 3:22 PM | Permalink | Comments (0) | TrackBacks (0)

The FTC's new business opportunity rule is intended to deal with illegal pyramid schemes, such as the late, and possibly lamented, Bioperformance, recently shut down by the Texas AG. (For some excellent court video, see the following stories and accompanying video.)

According to the FTC, one of the problems with an illegal pyramid scheme is that the scheme does not clearly disclose to the individual at the beginning how many people have dropped out and therefore earned no money. While this seems laudable, will it work in practice? The MLM has to update its disclosure document every 4 months, but surely there will be reporting lags. In the case of Bioperformance, we learned that the company's owners made $5 million in approximately 5 months, leaving only 10% in earnings to be shared with the rest of the other "lucky" distributors. Thus, the proposed disclosure might not protect anyone until it is too late.

What might be a better requirement, or use of the disclosure document?

Technorati Tags: illegal pyramid scheme, illegal pyramid schemes, disclosure document, ftc, texas ag, lags, business opportunity, new business, disclose, mlm, earnings, lucky

Continue reading "FTC Business Opportunity Rule" »

Posted by michael webster at 3:21 PM | Permalink | Comments (0) | TrackBacks (0)

Once again, we are fortunate to be saved from our desire to believe in weird things, like the 4-Corp magic gas pills, by the sound thinking of Tony's Guide to Fuel Saving. It is pleasure to read such well thought out, reasoned, and researched analysis. Here, I quote from the summary, but please don't just read the summary, review the entire page to understand the time and trouble Tony has taken to provide great due diligence on this business opportunity. (There is another nice debunking here.)

Here is what Tony concludes.

* The product was apparently primarily designed as a way to reduce diesel emissions

* The theory does not, to me, seem to support expectations of large economy improvements

* The test data is predominantly related to diesels, and predominantly smoke - economy improvement on gasoline engines does not automatically follow

* CARB's largely negative results from testing D-1280X point to Ethos FR also being of limited benefit

* The media reports seem inconclusive and their tests lack scientific rigour

Now would the new FTC Business Opportunity Rule, which would cover multi-level marketing, have required this analysis? If not, would it provide other equally trenchant and useful analysis?

Technorati Tags: gasoline engines, diesel emissions, due diligence, fuel saving, diesels, test data, ethos, business opportunity, ftc business opportunity rule

Continue reading "Magic Gas Pills Round (2) 4-Ecorp" »

Posted by michael webster at 2:07 PM | Permalink | Comments (0) | TrackBacks (0)

The Fraud Discovery Institute has an interesting approach to detecting white collar fraud: combine the practical skills of a former fraudster with professionals who specialize in fraud detection, lawyers and examiners. The underlying premise behind Mr. Barry Minkow's enterprise is that the existing educational materials have not and will not prevent corporate fraud, but his checklist program will. He states that there are always three elements to a fraud: a) failure to disclose material facts, b) diversion, and c) drawing big conclusions from little evidence. Apparently, his checklist program is designed to identify these features in an interactive method.

I have not reviewed the checklist program, but I did listen to Mr. Minkow's introduction to it, you can listen to it here. As an example, Mr. Minkow suggests that his checklist program would have prevented the auditors from signing off on the New Era Philanthropy Ponzi scheme, a scheme masterminded by John G. Bennett.

The New Era scheme, as discussed by Stephen Pressman saw:

"In the early 1990s, hundreds of nonprofits gave large sums of money to Bennett. Some were prominent nonprofit organizations such as the American Red Cross, the Salvation Army, and elite academic institutions such as Harvard, Princeton, and Brown Universities. When New Era folded, these institutions all lost the money they had on deposit. John Brown University in Siloan Springs, AK, lost $2 million, close to 4 percent of its endowment. The big loser, however, appears to be Lancaster Bible College in Lancaster, PA, which had $16.9 million deposited with New Era."

How did this scheme work? In the early 80's Bennett set up a corporation which advised which non-profits or charitable organizations corporations should give donations to. It was called the "Center for New Era Philanthropy". By the late 80's, Bennett had turned to "fund raising" for the non-profits; he promised them returns of 100% within six months. Bennett claimed that he had access to a group of secret investors who would match the non-profits "investment" with the Center. The group of investors was secret because they wanted to donate anonymously - efforts to contact them would lead to them to withdraw their support for the Center.

Very bright, knowledgable and serious individuals accepted Bennett's explanation at face value. Mr. Minkow argues that this "diversion" or wall of secrecy is a huge red flag and must be investigated further or real due diligence cannot proceed.

Is Mr. Minkow right or is this just a case of reasoning after the facts, having acquired that wonderful hindsight vision which comes to all investors when they discover they have been defrauded?

Technorati Tags: white collar fraud, corporate fraud, fraud detection, ponzi scheme, barry minkow, era philanthropy, apparently, discovery institute, new era, diversion, premise, disclose, conclusions

Continue reading "Fraud Discovery Institute's Checklist Program" »

Posted by michael webster at 8:53 AM | Permalink | Comments (0) | TrackBacks (1)

Earlier, it was reported that the FTC had shut down USA Beverages, alleging that it was a Bogus Business Opportunity Scam. Ironically, just a few days before this announcement, there was a discussion of business opportunities, due diligence and USA Beverages, in particular, on the franchise-chat site.

In less than 30 minutes, using only public information, I discovered and posted several red flags according to the FTC checklist. Further, I showed that USA Beverages had misrepresented the history of the company - a huge red flag. Misrepresenting your identity and history signals that you are hiding something.

Why was the due diligence for this business opportunity relatively easy?

Continue reading "FTC Checklist, Due Diligence for Business Opportunities, and USA Beverages" »

Posted by michael webster at 10:23 AM | Permalink | Comments (0) | TrackBacks (0)

Some years ago the FTC produced an excellent little checklist screening business opportunities. Unfortunately it is no longer on their front page.

Here it is:

* Use classified ads that urge the prospect to call an "800" number.
* Make wild and unsubstantiated claims about potential earnings. Include claims about "proven" concepts.
* Suggest that no experience is necessary.
* Promise exclusive territories.
* Rely on high-pressure telemarketing sales techniques to pressure a victim into turning over his or her money.
* Make assurances about good locations for vending machines or display racks, or the assistance of a professional locator.
* Hype references handpicked by the company (instead of providing a list of all current business opportunity owners in the region).
* Fail to provide prospective investors with a complete disclosure document containing pre-sale disclosures about their experience, lawsuit history, audited financial statements, and substantiation for any representations made about earnings.

Posted by michael webster at 7:49 AM | Permalink