How to protect your investment from FAKE FRANCHISE FRAUD?

Fake Franchise fraud is nothing more than a misleading transaction used to entice / entice potential / aspiring franchisees to take the wrong business model and grab their initial investment.

• India is the second largest franchise market globally.
• There are over 1.5 lakhs franchisees and 4,600 franchisors operating in the country.

Franchising is a great model that benefits both parties (franchisors and franchisees) to successfully establish their business. Franchising offers the opportunity to be associated with an established brand and just like any business, franchising requires careful study / consideration.

One of the exciting things about being a potential future franchisee is that you are a few steps away from becoming a business owner / partner. Be prepared to face some challenges, but always be aware of one thing, which is fraud in a fake franchise / franchisee.

The franchise system is as strong as its brand, and the brand depends largely on how well the various franchises in the framework perform. If the franchisors are offering franchises to those in the system that have more money and no selection criteria, then your investment is probably at risk.

When you first contact a franchisor company, ask about the process they use in choosing a franchisee. So this is the first sign that the franchise is dangerous. There are a few things you need to consider when buying a franchise.

Do a thorough study to know the real truth

Even before you contact a franchisor, you can guess if you really have a chance. Go online and research news about the Franchise Company and industry. Visit their website and get information about their customers’ consumer offering as well as their franchise offering.

Compare the franchisor company with its competitors

Compare the franchisor company with its competitors; with both franchised and non-franchised. Find some of their stores and talk to existing franchisees. Only contact the franchisor company if you are satisfied.

Check the financial condition of the company.

Your investment will be significant. Franchisees are required to pay an initial franchise fee when purchasing a franchisee from a franchisor. In some franchisees, debt and equity combined, your investment can be more than seven figures. Each new franchisor must have the financial resources to carry out their responsibilities / duties. So you need to find the answers to the following questions.

• Do you have more skills in this game than the franchisor?
• Does the franchisor have a history of profitability?
• Are they earning revenue from royalties and other ongoing sources of income or relying on further franchise sales to generate revenue?

These answers will give you a clear idea of ​​the current financial position of the franchisor company.

Other signs of a fraud franchise

They show a willingness to make unrealistic profits: – It is very good to guarantee a fixed amount of profit on time. Franchising will not make you successful overnight; it requires hard work and time. There is no such thing as “buy a franchise today and start earning money tomorrow”.

As an entrepreneur, you should gather enough information about the brand of franchise you are considering. Thorough research should be done to know about the company, its brand value, number of franchisees and company vision. You can do this by contacting different franchisees of the same company or other experts in the industry.

They guarantee other benefits

A genuine franchising company offers many incentives to its franchisees in terms of training modules, guidance and incentives to create their well-known brand names. A franchisor can support and back up your franchisee in every way possible to work successfully and profitably. However, fraudulent franchisors never guarantee success and huge returns on their investment. The success and profitability of a franchise unit depends largely on the franchisee’s communication and management skills. So, if a franchisor is offering you guaranteed success and profits, evaluate his claim by talking to experienced professionals in the same field.

They will give ‘Money Back Guarantee’

 As an entrepreneur, in the franchise system, you should understand the value of franchise fees. If a franchisor offers a money-back guarantee of a franchise fee, don’t trust it, because a successful franchisor never guarantees you a refund. It will provide various assistance and provisions to its franchisees by collecting franchise fees to ensure the success of the franchise unit.

Summary

There is no predefined procedure for finding a franchise scam; you just have to compare all the parameters to make your assessment. The fraudulent franchise’s propaganda can be easily discovered through its unrealistic and unlikely offers and demands. These misleading advertisements are usually made by new entities or organizations that intend to bring the franchise into the franchise sector to grow their business. You should think twice before investing in a company that gives you a huge return on your investment by doing less or nothing than you do.

As franchise consultants in Mumbai, we at Franchise Birbal always provide individual attention to our clients and help them to establish franchise businesses both in India and internationally. Franchise Birbal helps franchisees start, grow, and protect their franchises. By developing a franchise business with us you get the assurance that you will be able to establish your franchise business successfully. Our franchise consulting and legal documentation services start from Rs. 15000/-* onwards.

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