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Answering the Knock of a Business 'Opp'
It's not so hard to see why consumers would be drawn to ads
for business opportunities that trumpet "be your own
boss," "set your own hours," "work from
home," and "earn money quickly." But the Federal
Trade Commission (FTC) says that business opportunity promotions
like these often are scams that take consumers' money and fail to
deliver on the promises.
Before investing in any "biz opp," the FTC suggests
that consumers:
- Look at the ad carefully. If it claims buyers can earn a
certain income, it also must give the number and
percentage of previous purchasers who achieved the
earnings. If an earnings claim is there - but the
additional information isn't - the business opportunity
seller is probably violating the law.
- Get earnings claims in writing. If the business
opportunity costs $500 or more, then the promoter must
back up the earnings claim in a written document. It
should include the earnings claim, as well as the number
and percentage of recent clients who have earned at least
as much as the promoter suggested. If it's a work-at-home
or other business opportunity that involves an investment
of under $500, ask the promoter to put the earnings
information in writing.
- If the business opportunity is a franchise, study the
disclosure document. Look for a statement about previous
purchasers. If the document says there are no previous
purchasers but the seller offers a list of references, be
careful: the references probably are fake.
- Interview each previous purchaser in person, preferably
where their business operates. The FTC requires business
opportunity promoters to give potential purchasers the
names, addresses and phone numbers of at least 10
previous purchasers who live the closest to the potential
purchaser. Interviewing previous purchasers helps reduce
the risk of being misled by phony references.
- Contact the attorney general's office, state or county
consumer protection agency and Better Business Bureau
both where the business opportunity promoter is based and
where you live to find out whether there is any record of
unresolved complaints.
- If the business opportunity involves selling products
from well-known companies, call the legal department of
the company whose merchandise would be promoted. Find out
whether the business opportunity and its promoter are
affiliated with the company. Ask whether the company has
ever threatened trademark action against the promoter.
- Consult an attorney, accountant or other business advisor
before you make the deal.
- Take your time. Promoters of fraudulent business
opportunities often use high-pressure sales tactics. But,
if the business opportunity is legitimate, it'll still be
around when you're ready to decide.
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