There must be nothing more frustrating when you have to cry I have been cheated! I have been ripped off. I have been scammed….you get the message! There are more ways to easy riches being sold over the Internet than genuine business opportunities that work well.

Have you ever asked why this is the case? A business opportunity may sound very good on paper but if you are not able to fully test its feasibility and pay good money in the hope that this is the one that is going to work – only to find it does not provide the rapid riches and way to quit your day job – where do you go to get compensation?

This is where I have to be very careful – most of the business ideas that you do see on the Internet will work…to a degree. This means that they are not out and out frauds or scams but business ideas that you have not been able to make work. This might be for a number of reasons:

1. You might not have the skills needed to run the business – for example you might need to be able to write articles quickly and your writing skills are mediocre.

2. You might not be prepared to invest the required amount into the business. For example you might need to use “pay per click” advertising in order to make a profit. If you do not speculate enough you might not even reach the threshold where any return is made.

3. There may be so much competition in the particular business idea you have chosen that you do not stand a very good chance of making a mark.

4. It is possible that the seller of the business opportunity has exaggerated the potential of the business so much that it could never work regardless of the money or the time you invested or the skills you were able to utilise.

In the latter case the seller of the business has misrepresented what he was selling. This is against the Trade Descriptions and Advertising Misrepresentations Acts. It could also be caught by the Theft Acts and of course the more recent Fraud Act 2006.

So you have the option of reporting the scam to the police. Unfortunately the police will probably pass the report (or more likely tell you to do it yourself) to your local Trading Standards office. This department within you local council is responsible for investigating such cases and if there are enough complaints when collated from around the country it is possible that an investigation will ensure. However, do not hold your breath expecting you money back – the primary focus of Trading Standards will be to close down any inappropriate activity.

If the seller is a Limited Company, a complaint to the Insolvency Service’s Companies Investigation Branch may also trigger an investigation. If the business opportunity is a scam, and is trading not in the public interest, then it is possible that it will be closed down and even that the directors prosecuted. Again, it is unlikely that you will get your money back.

So how would you get your money back if you felt that you have been ripped off. How do you get satisfaction when you cry “Help, I’ve been cheated”? Apart from complaining to the authorities and helping to protect the public by making it difficult for these fraudsters to trade, writing to or visiting them persistently is probably one way of standing a chance of getting some recompense. If you sound as if you know what you are talking about (for example dropping the names of trading standards and companies investigation branch into your letter) you might be lucky.

The honest truth is that you should do your due diligence when choosing a business opportunity!

There is no safe way to start a business. A good franchise however offers more security than starting a new business from scratch. It should offer a tried and tested business plan, using an established brand and using the principal’s expertise and experience to help establish the new entrepreneur.

However, comanies which offer franchises for sale (franchisors) are not all as reputable as might be expected. In fact some business owners that are doing poorly at their business may see franchising as a way to improve their fortunes and make some money. By using some clever marketing they can make their business look attractive and sell the right to establish branches (or franchises) around the region or further afield.

I undertook a forensic accounting investigation into a franchise for car valeting recently where a businessman had failed in previous car valeting company and was attempting to start again. For £17,500 and a percentage of ongoing income, some 5%, a person was supposed to be up and running with at least his first 30 clients ready and waiting for his services. Unfortunately after waiting around 3 months for training, then realising that the franchise fee did not include a fully fitted sign written vehicle – but only a down payment on one – there were only a handful of customers waiting. The customers, all with £20 money off vouchers, only wanted the basic £30 service – not the £200 full valet.

As a forensic accountant I always interview the victims in a scam to find out the full background – to see if it is a fraud or just sharp business practice. In this case it seemed that the person setting up the franchise had lost all interest when his previous business folded and had no enthusiasm for his new venture. Therfore he was unable to give the full support that the new franchisees needed.

Fortunately there were only three recruits, and all now have learned the business fully and are in the process of establishing thriving trades. The franchise company was closed down by the authorities (Companies Investigation Branch) and hopefully the message can be conveyed to prospective franchisees considering a similar venture:

• Check out the history of the franchise company – see if it is a long established provider or is it a fly by night fraudster.
• Is the franchisor a member of the Franchise Association (USA or UK or wherever the company is trading).
• Are you able to choose a number of franchisees to visit and discuss the business with or are you simply steered towards a flagship operation? You need to speak to as many recruits as possible – better if they have been with the franchise company for some time.
• Do all the due dilligence you would do setting up a non franchise business – for example do your own business plan and do not rely on one given to you.
• Use a solicitor who specialises in franchise law.

Although there are many frauds and scams in the franchise world, generally it is a more secure way of starting a business. Just do your homework first!

Mark Jenner