November 28, 2014

Work-At-Home Franchises: Real Opportunities Or Scams?

work at home scam?I’d like to make sure that you understand the difference between a home-based franchise, and a work-at- home “opportunity.” The differences are huge. . .

A franchise is a licensing system by which the owner (franchisor) of a product or a service licenses others (franchisees) to market and sell the product or service within a defined territory, following the guidelines established by the franchisor.

There is an up-front franchise fee, and you’ll be paying a percentage of your gross sales to the franchisor.  Franchises are regulated by the government, and the seller must give you a detailed disclosure document at least 10 business days before you pay any money or legally commit yourself to a purchase.

Here are some examples of some home-based franchises:

Kidzart- Children’s art instruction

Plan Ahead Events- Local event planning

Bark Busters- Dog training

Then there is the “Business Opportunity,” which operates differently from a franchise business. The investment amount is a lot lower. Some business opportunities can be purchased for a couple hundred dollars.

A business opportunity generally doesn’t have the tight structure that a franchise business inherently has (and needs).  There are usually no territory restrictions with a business opportunity, and there are no royalties. Some business opportunities are actually MLM (Multi-level Marketing) types of businesses.

Some examples of business opportunities are:

Vendstar- Vending machines

Stuffing Envelopes.net- Envelope Stuffing eBook

Carbon Copy Pro- Direct sales

Could any of the franchises or business opportunities that I gave an example of above be considered scams? I’m not sure, actually. Here’s the definition:

“A scam is a scheme for making money by deceptive, dishonest, or fraudulent means.”

The word “scam” tends to be bandied around by people who lose something they didn’t think they would lose, or know someone that did.

  • “I was scammed by that car salesman.”
  • “Investing in that penny stock was a scam.”
  • “This 2-For-1 Pizza Special is nothing but a scam.”
  • “I heard that Nancy’s work at home medical billing business was nothing but a scam.”
  • “I see that Harvey’s coffee shop franchise turned out to be a scam.”

Is it possible that any of the folks making these statements missed something? Is it possible that their emotions got in the way of fairly simple logic? Did they forget to do the necessary research that is required to make a fact-based decision? Have you ever done something similar? I have.

If you are going to look at any type of home-based business, it’s really up to you to do the research that’s required, in order to make an intelligent choice. The internet has made it possible to do almost all of your research right from your home computer.  There are several good resources, including this one at Business.gov that has an entire section on home-based businesses, both franchise and non-franchise types.

Dig in. Don’t let yourself get scammed.

* * * * *

Joel Libava on 2008 franchise trends About the Author: Joel Libava is President and Life Changer of Franchise Selection Specialists. He blogs at The Franchise King Blog.

22 Comments ▼

Joel Libava - Franchise Expert


Joel Libava Joel Libava is the Franchise Expert for Small Business Trends. Joel, The Franchise King®, equips today’s prospective franchise owners with time-tested, proven techniques designed to increase odds of success. He does this through one-on-one coaching, and gobs of useful content that can be found on places like Small Business Trends, SBA.Gov, and his award-winning franchise blog, The Franchise King Blog . He’s been featured in Entrepreneur® magazine, and is frequently called upon by national media outlets and publications for his no-spin insights into the world of franchising.

22 Reactions

  1. You omitted the fundamental feature of a franchise: the franchisor is *supposed* to teach you exactly how he ran a business that succeeded!

    Of course, he succeeded by not paying franchise fees. :)

  2. Why do I have a mentor and coach?

    EVERY Olympic athlete has a coach. The top ones hire their own personal coach.
    I’ve had my own mentor-coach in network marketing since 1991. One person actually once told me he thought it was a weakness for “people like you to admit that you need a coach to help you.”
    A weakness???
    I replied that having a coach was (and is) one of the smartest things I have ever done.
    A coach keeps you accountable and focused. There are just soooooo many opportunities in life to get sidetracked.
    Pro athletes like Tiger Woods, Bobby Bonds, Peyton Manning, all the big stars, have several coaches. Each coach teaches their own specialty.

    How To Choose A Coach

    Many of the coaches today in network marketing have never built an organization. Or they built it 5, 10, 15 years ago, but they can’t build it today.
    As the old saying goes, “if you can’t do, teach.”
    So these network marketing coaches go out and teach people how to do what they can’t do. What they did 10 years ago worked 10 years ago. But it doesn’t work today.
    So instead of being on the cutting edge of technology and learning (and USING!) the state-of-the-art in network marketing business-building, they hold themselves up as a coach!
    I’ve even seen one coach who shows you his huge downline geneology. If you look closely, you’ll notice it’s from 12 years ago. He hasn’t done anything since.
    If you’re going to be coached, you want to be coached by somebody who is doing it NOW, someone who is active today.
    It’s crazy, but there are even “coaches” who promote it as a virtue that they no longer do network marketing. They’ll tell you this lets them be objective. They’ll tell you that you don’t need to worry about them recruiting you into some other business.

    Here is the truth: there’s a lot more money in network marketing than there is in coaching – IF you can actually do network marketing, AND you can do the coaching anyway, while you’re building your business.

    So why isn’t this person in network marketing anymore?
    Easy. It’s because they can’t do it. Plain and simple, they can’t build it.

    It is completely insane to choose as your coach someone who is not currently successful at network marketing. You are being ripped-off, plain and simple.

    I’ve even talked to a couple of these “unbiased” network marketing coaches who actually don’t like network marketing. They don’t believe in it. Yet they will gladly take your money to coach you to success in network marketing!

    One more thing – 90% of these coaches tell you that YOU have to change. They say you have to get out of your comfort zone, become this “A” type personality. And THAT is the reason it doesn’t work.
    Those “A” personalities can go out and do anything and be successful at it. But 92% of the world can’t do that. And when you go out there telling them they have to change, it’s no wonder there’s such a high failure rate in network marketing.

    Here’s what I think:
    1. You’re perfect just the way you are.
    2. You need belief in yourself, belief in the business.
    3. Learn some skills.
    4. Take action.

    And to coach somebody in network marketing, the biggest thing they need coaching on is their belief. They don’t believe in the industry, their company, or themselves.

    Most top business people have (or once had) a true mentor, someone who’s done it before and knows what to do. The person with a mentor has a big advantage. Tom “Big Al” Schreiter was my mentor for 15 years, and I never even joined his business! I would be honored to be YOUR mentor, no matter what company you are in.
    As your coach, I will believe in YOU until you can believe in yourself!

  3. The Barking Unicorn,

    Thank you for your comment. The reason that the franchisor does not have to pay a franchise fee is because he or she came up with the idea.

    And, the franchisor has put in more money than the $30K industry average franchise fee that’s collected. A lot more.

    The Franchise King
    Joel Libava

  4. I recently bought into a business opportunity that has a monthly licensing fee. I pay for the right to produce a product under a national brand. I was given an ebook containing the blueprints and marketing outline. I have the exclusive right to produce this product in my area code. The owner has a branded 800 number which routes to me when a call is placed in my area code. Since I am paying a license fee should the company be licensed as a franchise and provide the necessary documentation? This company has been in this business for 15 years.

  5. For those considering a home-based business opportunity, the Direct Selling Association http://www.dsa.org , is a good place to start. They have high ethical standards that member companies, like Discovery Toys, must meet. I’ve been happily selling DT products for over 14 years and can tell you they’ve never reneged on a bonus check, even when it was 5-figures. There’s a network of mentors/coaches and lots of phone training and regional events to help everyone who wants to work from home. Our business is particularly attractive to young parents who can use the products with their children. I hope that anyone seeking a legitimate business will look at us.

  6. You’re right on Joel, people need to put in the time and effort to research any franchise or business opportunity to find out if it fits with their goals, priorities, timeline, etc.

  7. Richard,

    The best thing to do would be to contact a reputable business attorney familiar with both franchising and licensing.

    At least you’ll know that way.

    The Franchise King
    Joel Libava

  8. Robert,

    Thank you for commenting.

    That reminds me. I have not been to Lotus Jump in awhile…

    The Franchise King
    Joel Libava

  9. Great article. I recently became a consultant for a new company and I am a huge skeptic about “business opportunities” The skepticim quickly departed when I got my first check. I agree that people have to do their research and make sure it’s a good fit before diving into anything whether it’s a franchise or other opportunity.

    http://www.jointeamb.com

  10. It is SO important to do your research and maintiain a healthy sense of skepticism on these “work from home” opportunities. I know someone who is facing bankruptcy because she responded to an infomercial about selling products from home, got starry-eyed about the potential for making money, and didn’t do her research. She paid escalating amounts of money to this company, and then was truly scammed by another guy claiming to offer “coaching” and marketing services. I also wrote a blog post about this subject recently: http://ohiosmallbusinesslawyer.com/?p=181.

  11. Joel,

    I think it is good that you have covered this issue. I have checked out several home based business opportunities during the years. I have a good understanding of the network marketing industry. Please feel free to send me an email if you want to learn more about this area, i.e. “the good, the bad and the ugly”… ;)

  12. Often times people are just lazy to do there due diligence in checking a company out. They are filled with emotions and excitments to make money fast and easy at the initial stage of things, but when reality hits home, its often too late.

  13. Joel, you leave the impression that business opportunities are not regulated, which as you know is false.

    As from the FTC Franchise Rule, which confusingly also regulates business opportunities, there are 26 states with separate business opportunity disclosure requirements.

    Here is the list of states:

    http://www.ftc.gov/bcp/franchise/netbusop.shtm

  14. I would like to mention that there are many mlm’s and home based opportunities that are regulated, such as Avon, Dove Chocolates, etc. There is a company called the Direct Sellers Association that allows membership to these large corporations based upon very specific criteria. If anyone is looking into a direct sales, low investment opportunity, it is best to choose off the DSA’s list rather than accepting the opportunity from someone advertising it.

  15. TVI Express Is A Great Home Based Business

  16. For the most part, people often why decry that a particular home business is a scam might have only tried it for a week or a month and gotten nothing out of it.

    It is an unfortunate fact that many that try these kinds of businesses have unrealistic expectations on how quickly their income can rise, or how much hard work it is.

    Good stuff and thanks for posting.

  17. Kurt,

    Thanks for the comment!

    The Franchise King

  18. If you franchise, you buy the franchise, then pay every month. Each year you have to pay a fee to renew the franchise, and if it has been successful, you will have to pay a lot more. You never stop paying for a franchise. It is like buying a job over and over again. Dont expect any mercy. If you got a bad franchise, it doesnt matter, you gotta pay a minimum every month. If you want to walk away, good luck. The franchiser wont really have any respect for you either. After all, you are buying a job from him. Not really starting a business. Dont do it.

    • Hi James,

      Thanks for commenting.

      You sound like an, “Ex-franchisee.”

      While it’s true that franchisees have to pay royalties for the life of their contracts, if it’s a good choice to begin with, (which in my world means that it’s a nice fit for the person buying it) then the payment of royalties is no big deal.

      The franchisor took the time to come up with a (hopefully) viable concept. In addition, it takes a lot of money to franchise a business-if done correctly. So there was some risk taken. $$$$

      I am a Franchise Ownership Advisor, James. People that don’t want to try to figure out how to choose, research, and buy a franchise correctly—and safely, come to me for proper guidance. I help lots of people become owners…but only if it’s right for them.

      The business model of franchising rocks. Would-be franchise owners just need to do a lot of things right, and there are lots of good resources available to them if they’ll take the time to look.

      I’m truly sorry that things didn’t work out too well for you.

      The Franchise King®

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