One reason business-opportunity investments are high risk is
that you pay a substantial sum of money upfront for the
seller's promises of future delivery of equipment or inventory.
With your money in the seller's pocket, you may have no
realistic recourse if the seller disappears on you, the shipment is
delayed or lost, or the contents disappoint you for some reason.
Consider negotiating a payment structure that protects your
position.
Yes, just about every aspect of the transaction is negotiable.
What if you offered to pay one-third upfront and the balance upon
delivery? Try even paying nothing upfront. Treat the price quoted
as the seller's opening offer, and counteroffer with a lower
price bid. Not everyone is comfortable negotiating, but let this be
your first introduction to real business dealings. What have you
got to lose?
Check Out the Seller
You can certainly check with your state agencies to see if the
seller is registered to offer business-opportunity packages in your
state. The 26 states requiring registration or filing are Alabama,
Alaska, California, Connecticut, Florida, Georgia, Illinois,
Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Michigan,
Minnesota, Nebraska, New Hampshire, North Carolina, Ohio, Oklahoma,
South Carolina, South Dakota, Texas, Utah, Virginia and Washington.
The state agencies will readily tell you if a particular company is
registered in the state. They can also provide general information
regarding business-opportunity investments.
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You should also check in with the Better Business Bureau and inquire about any
consumer complaints that might be on file for the company. Also,
visit the company's headquarters. This is a perfect opportunity
to get all your questions answered, to look the president in the
eye and to size up the home office team. Don't be too swayed by
swank appearances at the offices or the sincerity of the senior
management. Almost everything at the office can be rented, and, as
my favorite college professor taught me, sincerity is one of the
more cosmetic virtues.
Don't be discouraged by the search for a solid
business-opportunity investment. If you take your time, make
thoughtful decisions, gather the right information and protect your
money, you'll get past the sizzle and bring home the bacon.
Do Your Homework
If you're considering purchasing a package that is
regulated as a franchise (the usual giveaway is the licensed use of
the franchisor's trademark), you are most likely to receive a
disclosure document known as the
Uniform Franchise Offering
Circular (UFOC) at least a few weeks prior to your purchase.
That document will detail the basic investment information, but it
isn't everything you need to know about the franchise.
As with business-opportunity packages, the key to franchise
research is visiting current owners and operators. The UFOC
will contain a list of current owners and their contact
information. Visit them. Ask them questions: How competent is the
franchisor? Was the training done well? Did the UFOC give them an
accurate idea of the costs of setting up the business? How much
money did their businesses gross last year? Knowing what they know
now, would they buy the franchise again?
If you live in one of the 14 states that requires a franchisor
to register its offering (California, Hawaii, Illinois,
Indiana, Maryland, Michigan, Minnesota, New York, North Dakota,
Rhode Island, South Dakota, Virginia, Washington and Wisconsin),
you can check with the state agency handling that statute,
usually the offices of the attorney general. They can tell you
whether the franchisor is currently registered to offer and sell
franchises in your state.
Andrew A. Caffey
is a franchise attorney in the Washington, DC, area and an
internationally recognized specialist in franchise and business
opportunity law.
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