Legitimate distributorships and franchises can be profitable forms of business enterprise. Examples include fast-food franchises and new car dealerships, which offer great opportunities to those willing to invest substantial amounts of money and time to operate such businesses.

Unfortunately, not all franchise opportunities are legitimate. Con artists seeking to capitalize on the franchise boom create their own "investment" opportunities, which they promote to inexperienced investors. To induce the unwary to invest, these con artists promise the world, but deliver little to nothing. Be cautious if you are given following typical come-ons:

Promises of unrealistic profits. Use your common sense when evaluating such claims. Will it really be as easy as it is claimed to make the substantial profits promised?

Promises of guaranteed earnings in a "protected market area." A bona fide business opportunity will usually not make such a sweeping guarantee. An investor in a fraudulent promotion often finds that there are other unwary investors operating in the same "protected market area."

Guaranteed money-back refund if not completely satisfied, as long as the investor "operates according to instructions." Such guarantees are usually worthless. The promoter determines what "operating according to instructions" means, and the investor is often judged not to have met the criteria -- hence, no refund.

Be wary if the promoter is more interested in selling the distributorship or franchise than in marketing a product or service. Also, if you are not encouraged or allowed to contact other investors to ask about their experience and results with the promotion, think twice about investing.

Your local Better Business Bureau or the Consumer Affairs Branch of your State Attorney General's Office may have information on the reputation of the promoter of any distributorship or franchise operation you are considering investing in. You may also wish to check with the newspaper or magazine where you saw the promoter's advertisement to see if there are any complaints against the promoter. If you have been victimized in a fraudulent distributorship or franchise promotion where the U.S. Mail was used, contact your local postmaster or the nearest Postal Inspector.

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