Q: I would like to work from home, and right now I'm back in college learning Web design. But right now my inquiry is in regards to a company* that I saw a sign for on a telephone pole--I checked out their Web site, and it mentions a positive reference from Entrepreneur magazine. Before I go headfirst into this or any other business, I want to know if such an article was ever written. Are there companies like this that I can start from home?
A: Thank you for your questions. This company* does not sound familiar to me, but that doesn't necessarily mean it's either good or bad. In any event, even if this company is a legitimate franchise or business opportunity, Entrepreneur would not endorse it, per se--we would merely provide as much information as possible to our readers, based on disclosure documents and/or other relevant data provided to us by the company, such as growth rate, size of the system, number of years in business, number of operators and so forth.
We don't get all this data for every company in existence, however, because disclosure requirements vary based on whether it's a franchise (more disclosure required, in the form of a Uniform Franchise Offering Circular) or a business opportunity (fewer regulations in place). In short, when it comes to franchises and business opportunities, our best advice is always this: Proceed with caution, and conduct your own thorough investigation.
If it's a franchise or business opportunity you want--meaning you prefer to invest in a proven business concept rather than start your own company from scratch--your job at this point is to separate the legitimate opportunities from the scams. Be wary of any opportunity that promises you'll get rich quick with little or no effort. (And it probably wouldn't hurt to be wary of any company that markets via telephone poles.) Any legitimate opportunity will take time and effort on your part to build the business and realize a profit.
To begin your investigation, gather as much information as possible about the company. We have several searchable databases online (click on the "Tools" tab); get some of the basics there if possible. We also have several sections of our site devoted to conducting your own investigation, including:
You should also contact the company directly. Find out exactly what materials and services you can expect to receive that will help you run your business. Request a list of all the buyers in your state and adjacent states, then call them. Are they satisfied with the business? Would they recommend it? Have they made money? Did the seller live up to its promises? Call several people, not just a few--you don't want to get conned into believing someone who was paid by the seller to earnestly endorse the opportunity. (This does happen.)
It's also a good idea to contact the Federal Trade Commission, Dun & Bradstreet, your state's attorney general's office and the Better Business Bureau. This will help you determine if there are any pending or previous complaints against the company as well as provide you with additional information about investigating an opportunity.
Remember, it's your money you're investing. It pays to take your time so you don't wind up throwing it all away.
*company name has been omitted
Karen E. Spaeder is a freelance business writer in Southern California.