The following information was developed by a multi-state task force coordinated by the Federal Trade Commission, which monitors business opportunity sales. The information is provided as a reference tool for consumers.
Select a question to expand the answer.
Do you have any complaints or other information about a business opportunity seller called Company X?
If you call us at 1-800-HELP-FLA (435-7352), we can check to see if the company you are considering has any complaints against it. But even if we don't have any complaints on file about Company X, that doesn't necessarily mean it's a good company. Unfortunately, there are so many business opportunity frauds out there that finding a legitimate business opportunity is a lot like looking for a needle in a haystack.
Consumer protection agencies across the country have found that most business opportunity frauds go out of business so fast that they disappear without a trace before a single consumer complaint shows up about them. That's because the fraudulent seller convinces dissatisfied purchasers that their lack of success is their own fault. So instead of filing a complaint right away and cutting their losses, purchasers keep trying to save a bad investment by working even harder.
Is Company X a legitimate, reputable business opportunity seller?
No state or federal agency can tell you whether a particular business is legitimate. To avoid getting burned by a scam, you need to beware and to do everything you can to check out the seller's claims before you purchase. If you don't, you may lose your life savings, as many thousands of consumers already have. Even the best legal remedies too often cannot recover your investment from a company that is here today and gone tomorrow.
Do you have any complaints or other information about a locating company called Company Y?
The Florida Department of Agriculture and Consumer Services does not have information about specific locating companies. (Locating companies work to find locations for vending machines.) There is no guarantee that a locating company will get you profitable locations, even if it claims that a survey of your area has found good locations, guarantees that you will get profitable locations, or promises you free relocation assistance if a location doesn't work out. Most locating companies charge about $200 per machine or display rack for locations, and promise a lot more than they deliver. They typically send a locator from out of state who tears through your area trying to find locations as fast as possible to maximize the profit from the $100 per location he receives. The locator knows what investors do not — that all the profitable locations are already under contract to local vending companies, and only poor, low-traffic locations remain. Investors usually find that they are stuck with unprofitable locations once the locator leaves town, and that the locating company hardly ever honors its satisfaction guarantees and promises of relocation assistance.
How can I check out a business opportunity?
The first thing to do is ask for a copy of the seller's disclosure document, which contains key information to help you check out the company. We suggest you check out the claims for yourself, by possibly visiting areas where the business opportunity has been set up by previous or current investors. Be wary of excuses for not giving you these important disclosures, because the seller is probably violating the law.
Florida law requires sellers of business opportunities to give you these disclosures at least three working days before you sign a contract or pay any money for the deal. Federal law requires sellers of vending machine and display rack business opportunities to give you these disclosures at least 10 business days before you sign a contract or pay any money for the deal. Any legitimate company selling any kind of business opportunity will also want to give you a disclosure document if it plans to profit from your success, rather than take your money and run.
How can I check out claims about how much money I can make?
The best way to get the straight scoop on earnings is to go in person to meet a prior customer of the seller and watch them work the business. You could also visit someone in your community who is engaged in the business. That way you can see with your own eyes whether the actual collections from the business opportunities are as great as the seller claims and maybe get some important tips for success.
The worst way to check on earnings is to call one of the two or three "purported" customers that business opportunity sellers typically give out as references. These references are often phony. They are called "shills" or "singers," because they are paid to promote the business opportunity. They may even be salesmen at the seller's offices who are pretending to be satisfied purchasers, thanks to call forwarding and answering machines. So don't rely on phone calls to seemingly satisfied customers to check out a business opportunity. They're probably just selling you a bad deal.
How can a business opportunity be fraudulent?
The key to these frauds is false claims about how much money you will make. Business opportunity sellers provide handy earnings charts that show you will break even or make a good income if you sell only a third or a half as many items as the charts indicate you can. But the truth is that the charts and the claims about earnings are complete fiction. Most purchasers find they are lucky to sell a few items a day, and never come close to recovering their investment.
Business opportunity sellers also typically promise far more than they intend to deliver. They claim they have profitable locations for the business, yet leave you to deal with independent locators who don't know your area and get bad locations. They claim their vending machines are the best, but the ones you receive are used or low quality, and the coin mechanisms jam or break continuously. They claim that the business is simple, but don't mention expensive and time-consuming state, local or industry requirements. They even claim there is a market for a good or service when they know perfectly well that no one really wants or needs it. And last, but not least, they often charge you two or three times as much as it would cost you to obtain the same equipment or supplies they are selling from some other source, and that means it will be even harder to break even, if you ever do.
What can you tell me about buying a medical billing business opportunity?
State and federal consumer protection agencies receive a large number of complaints about medical billing opportunities. Dissatisfied purchasers often complain that they can't find doctors or dentists in their area who want help with billing, since most prefer to do their own billing and already have the computer software they need. Purchasers also say that the seller charges a premium price for the out-of-date computer equipment it provides, that the training in using the billing software is inadequate, that they can't get needed updates and bug fixes for the software, and that they are unable to get promised access to the electronic clearinghouse required for Medicare and Medicaid billing.
What can you tell me about buying a vending machine business opportunity?
State and federal consumer protection agencies receive a large number of complaints about vending machine opportunities. Dissatisfied purchasers routinely complain that they pay two or three times the price the machines would have cost from a reputable manufacturer and that they receive used or low-quality machines with bad coin mechanisms that repeatedly jam and are easy to break into. Purchasers also say that they receive bad locations for their machines, rather than the highly profitable locations they are promised, and that the daily sales per machine fall so far short of what the seller led them to believe that they can't begin to recover their initial investment.
What can you tell me about buying a display rack business opportunity?
State and federal consumer protection agencies receive a large number of complaints about display rack opportunities. Dissatisfied purchasers typically complain that locators place their display racks in bad locations and that the seller charges them retail prices, rather than wholesale prices, for their initial inventory of products, not to mention two or three times what the display racks are worth. Purchasers also say that the products they receive are often poor quality or out-of-date items that simply will not sell at the recommended markup to cover a reasonable profit for themselves and the owner of the store where the display racks are located. As a result, purchasers find that their earnings fall so far short of the seller's claims that they can't begin to recover their initial investment.
What can you tell me about investing in a work-at-home business opportunity?
State and federal consumer protection agencies receive a large number of complaints about a wide variety of work-at-home opportunities — everything from envelope stuffing to craft assembly to coupon-clipping to work-at-home directory schemes. Dissatisfied purchasers often complain that the seller fails to disclose all the costs of the business, including the cost of equipment, supplies and training materials, and the limited or non-existent market for the goods or services to be sold.
Purchasers also say that they receive overpriced, low-quality or out-of-date equipment from the seller, that sellers who promise to purchase the goods they produce reject them for failure to meet vague quality standards, and that their earnings fall so far short of the seller's claims that they never recover their costs and investment and often fail to earn as much per hour as they would from a minimum wage job.
What can you tell me about joining a multilevel or network marketing business opportunity?
State and federal consumer protection agencies receive a large number of complaints about multilevel marketing opportunities, sometimes called "network" or "matrix" plans, especially now that they are so common on the internet. What most consumers don't know is that many of these plans are thinly disguised pyramid sales schemes that are illegal in every state. Most consumers also don't know that pyramid schemes are illegal because far fewer than 10 percent of the participants typically make as much money as they invest and over 90 percent of the participants lose money. Pyramid schemes promise you income primarily from recruiting new participants, whereas legitimate multilevel marketing plans pay commissions only on the sale of goods or services to end-user consumers. In general, beware of multilevel plans that promise huge earnings from recruitment or require or encourage you to purchase expensive inventory or training.
