Business Opportunity Scams

If you’re looking for new business opportunities, be sure to take an extra measure of caution to ensure it’s not a scam. Each year, thousands of people in the U.S. are scammed out of thousands of dollars they invested in what was described as an easy money-making scheme. If it seems too good to be true, it usually is.

One common “business opportunity” scams involve “franchising,” citing the opportunity to place vending machines in “sure bet” business locations and wait for the money to roll in. Victims shell out money for machines only to learn that the businesses didn’t want them. Or, they received malfunctioning machines or the vending products weren’t as advertised. The average cost of this type of scam is $5,000.

While there are legitimate business opportunities out there, you need to take a “buyer beware” approach to finding them. Here are some red flags to look for when researching opportunities:

  • You see a classified or internet ad or receive an email claiming high earnings without providing data on people who achieved it.
  • The promoter is unable or unwilling to provide disclosure documentation.
  • The disclosure document does not provide specific data to support its claims.
  • If the franchise disclosure document (always ask for one) offers a list of references but no previous purchasers, consider it a red flag.

When considering an opportunity:

  • Never pursue it until you are allowed to interview ten previous purchasers. Also, consult your legal and accounting advisors before signing any papers or paying any money.
  • Contact your local consumer protection agency and Better Business Bureau to see if there are any records of complaints. Also, contact the Attorney General both in the state where you live and where the promoter is located.
  • If you suspect possible fraud, report it to the Federal Trade Commission at, or 1-877-FTC-HELP.
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