Back in the Saddle Again and The Franchise that says it's not"

Helllllooooooo:

My blogging has taken a back seat for a while, due to the same reason anyone else who blogs does not for a while. I ran out of time or I did not have a lot to say. Anyone who knows me would tell you that it is very unlikely that I do not have anything to say, just ask me. But. I want to put things about that have some meaning, relevance and importance to those that are going to fork out some moola to buy a business system, aka business opportunity, franchise or dealership. Oh but I digress.

Recently I received a request from a woman whose name will remain unknown. She wanted some help in looking at a business system, that she was told was "NOT A FRANCHISE". Even in the agreement that she was sent it says that it is "NOT A FRANCHISE". Well folks as nice as this sounds if it walks, acts and quacks like a duck, it is indeed a duck. There are three tests which the FTC and the States which require franchise registration require in order to determine whether or not a business system, is a franchise. As I have discussed before these are as follows:

1. It costs more than $500.00

2. It requires the use of a Trademark or Service Mark.

3. It exerts significant control or influence over the way things are done in that business.


It is this simple. It is not hard. In looking at the document that stated the business was "not a franchise" it as so much a franchise that I could not believe the company was actually trying to get away with not being a franchise.

Additionally they were asking for $60,000 in upfront fees for what amounts to be a three year term plus $750.00 per month stating from the first month. The normal franchise term is ten years. Not only were they trying to sell an illegal franchise, they were offering what amounts to be a very bad deal for what amounts to be a little bit of training and some DVD's. When asked for people that have already bought into the concept, they provided only one person. This is a really bad sign. Franchise laws exist to protect the consumer, the average Joe. In my next post I will talk more about disclosure and why it exists.

The most interesting thing about this whole issue is that this was advertised on their website as a "Business Opportunity". So, they are a business opportunity that licenses their trademark, charges more than $500 and restricts what can and cannot be done under the mark, in other words, a franchise. If they did not license the trademark they would probably be a business opportunity in which case they would still have to register with 26 States. So you see.

The question that most people has is, Who cares if they are a franchise or not? Well first of all registered franchises and business opportunities afford protection under the law. Secondly what happens to the value of your business if one of the states comes after your parent company for selling illegal franchises and puts them out of business with fines and penalties? That kind of dilutes that value of the brand you paid for, doesn't it?

In closing always remember that it's your money. Ask questions, know what you are buying and do your homework. And, when people use the term "ground floor opportunity" run like hell.