THE SURGE IN BOGUS BUSINESS OPPORTUNITIES
Business opportunities have received considerable attention in recent years, owing in large part to the decline of traditional job security and the large number of individuals who have lost jobs due to corporate downsizing. Many business opportunity deals offer the entrepreneur a pre-packaged small business. Typical business opportunities involve vending machines, amusement games, pay telephones, and display racks for such items as greeting cards and CD ROM computer software.
Ideally, the vending machine, display rack or other item is located in a high-traffic area, such as a mall, airport, or bowling alley. The operator is responsible for cleaning and restocking, and collecting the money. The promoter is responsible for providing the machines or racks, finding locations, relocating machines when necessary, and providing replacements.
Always quick to seize on a new way to make an illicit buck, con artists have picked up on the changes in the traditional American job market. The result: fraudulent telemarketing operations are now pushing overhyped or worthless small business deals on unsuspecting entrepreneurs, individuals looking for a second income to make ends meet, and people who have lost jobs and cannot find replacements for them.
Investigations show that business opportunity scams are most often promoted at trade shows and through small ads that appear n the classified sections of newspapers and magazines. Once touted almost strictly on a face-to-face basis, business opportunities are increasingly being promoted through slick telemarketing. Most of the schemes:
- Use classified ads that urge the prospect to call an "800" number.
- Make wild and unsubstantiated claims about potential earnings. Include claims about "proven" concepts.
- Suggest that no experience is necessary.
- Promise exclusive territories.
- Rely on high-pressure telemarketing sales techniques to pressure a victim into turning over his or her money.
- Make assurances about good locations for vending machines or display racks, or the assistance of a professional locator.
- Hype references handpicked by the company (instead of providing a list of all current business opportunity owners in the region).
- Fail to provide prospective investors with a complete disclosure document containing pre-sale disclosures about their experience, lawsuit history, audited financial statements, and substantiation for any representations made about earnings.
Rev. February 7, 1996