97676508 SBA Franchising Strategy

7/28/2019 97676508 SBA Franchising Strategy

1/39

Franchising Strategy

You need a strategy before investing in a franchise. Doing your homework about thefranchise first will help you gain a solid understanding of what to expect as well as therisks that could be involved.

Be a Detective

In addition to the routine investigation that should be conducted prior to any businesspurchase, you should be able to contact other franchisees before deciding to invest. Youcan also obtain a Uniform Franchise Offering Circular (UFOC), which contains vitaldetails about the franchise's legal, financial, and personnel history, before you sign acontract.

Know What You're Getting Into

Before entering into any contract as a franchisee, you should make sure you will have theright to:

Use the franchise name and trademark Receive training and management assistance from the franchiser Use the franchiser's expertise in marketing, advertising, facility design, layouts,

displays and fixtures Do business in an area protected from other competing franchisees

In some cases, you may negotiate to have the franchiser help with several factors criticalto your business operations:

Obtain building permits Purchase or lease equipment, signs and supplies Construct or remodel the business premises

Watch Out for Possible Pitfalls

1


2/39

The contract between the two parties usually benefits the franchiser far more than thefranchisee. The franchisee is generally subject to meeting sales quotas and is required topurchase equipment, supplies and inventory exclusively from the franchiser.

As a franchisee, the franchiser often has the right to terminate your business if it fails to

operate according to the agreement, becomes delinquent on royalties, or violates othercontract specifications.

Seek Professional Help

The tax rules surrounding franchises are often complex, and an attorney, preferably aspecialist in franchise law, should assist you to evaluate the franchise package and taxconsiderations.

An accountant may be needed to determine the full costs of purchasing and operating thebusiness as well as to assess the potential profit to the franchisee.

Get More Information

If you're considering buying a franchise, you should take advantage of the manyresources that are available to help you develop a your business strategy.

Franchise and Business Opportunity Rule: Buyers' GuideOffers a guide to the Federal Trade Commission's (FTC) Franchise and BusinessOpportunity Rule, which requires franchise and business opportunity sellers to give you

specific information for making an informed decision.

Franchise and Business Opportunity Rule: FAQs for BuyersLists most frequently asked questions and answers about franchise and businessopportunities, including information on how to get a pre-sale disclosure document andlegal assistance.

In addition, it's important to know which rules apply to the company that is selling youthe franchise. The more you know about this company's requirements, the betterinformed you are when evaluating its opportunities.

The five most frequently asked questions about franchise opportunities are:

1. Where can I get a company's pre-sale disclosure document?2. How can I find out about complaints against a company?3. How can I file a complaint against a company?4. How do I know what must be included in a franchise disclosure document?5. How can I find a lawyer who specializes in franchising?

2


3/39

1. Where can I get a company's pre-sale disclosure document?

The Franchise Rule requires franchise sellers to provide to prospective purchasers with aFranchise Disclosure Document. The FTC does not require filings of these documents, sowe are unable to provide copies to consumers. A total of 13 states keep franchise offering

circulars on file. Most states provide copies of these disclosures, usually by allowingvisitors to their offices by appointment to review or copy the documents.

A few private companies may make franchise disclosure documents filed in one or morestates available for a fee. The FTC doesnt support or endorse these companies:

FRANDATA Corporation1665 North Fort Meyer Dr., Suite 410Arlington, VA 22209(703) 740-4707www.frandata.com

FranchiseHelp.com

154 Grand St.New York, NY 10013(888) 491-3726www.franchisehelp.com

Franchise-Insider.com745 Campbell Way,Herndon, Va 20170(877) 674-6677

www.franchise-insider.com

In addition, two non-commercial services make Franchise Disclosure Documents filed inCalifornia available on line without charge:

Cal-EASI (Documents not word-searchable)California Department of Corporations1515 K Street, Suite 200Sacramento, CA 95814-4052866 ASK-CORPhttp://www.corp.ca.gov/CalEASI/caleasi.asp

OpenFran - The Franchise Openness Project (Documents word searchable)PO Box 25514Scottsdale, AZ 85255480-264-0050http://www.openfran.org

3
http://www.corp.ca.gov/CalEASI/caleasi.asphttp://www.corp.ca.gov/CalEASI/caleasi.asphttp://www.corp.ca.gov/CalEASI/caleasi.asp


4/39

2. How can I find out about complaints against a company?

No federal or state agency or private organization can tell you whether a company islegitimate or operates in good faith. The FTC or the Better Business Bureau can report onwhether consumers have complained about a company. But, operators of fly-by-night

franchise scams know this, and may change the name and location of their companyevery few months to avoid a record of consumer complaints.

There is no substitute for checking the track record of a franchisor by personally talkingto at least 100 prior purchasers. Thats why the Franchise Rule requires companies togive consumers a list of the names, addresses and telephone numbers of at least 100 priorpurchasers who are geographically closest to you. Interview these prior purchasers abouttheir experiences. Ask questions to verify that they have purchased the franchise orbusiness opportunity and that they are not being paid to provide a favorable review. Visittheir business locations in person.

If you want information about consumer complaints from the FTC, request it in writing.Address your request to:

Freedom of Information Act RequestFederal Trade CommissionWashington, D.C. 20580.

Please identify your letter as a "FOIA Request" and include (1) your name, address anddaytime phone number, and (2) the name and address of the company you are askingabout.

In most cases, the FTC does not charge the public for searching, reviewing documents, orcopying. Still, it is a good idea to state the maximum you are willing to pay, so we cancontact you in the unusual event that any applicable fees for these services will be higherthan your limit.

You can also request information from the Better Business Bureau and look upinformation about the franchise seller online at: www.bbb.org

3. How can I file a complaint against a company?

If you are having a problem with a franchisor, consider talking with a private attorney

about bringing a lawsuit, or taking other action that may help resolve the problem.

We encourage you to file your complaint with the FTC because consumer complaintshelp us identify companies and practices that affect a broad segment of the public, andare useful for law enforcement purposes.

You can file your complaint online using our Complaint Assistant at:https://www.ftccomplaintassistant.gov, or by telephone at 1-866-382-4357.

4


5/39

We also accept complaints in writing, but please be aware that postal mail to federalagencies is subject to delays for security reasons. Please describe your problem orconcern writing. Tell us what you think was misleading or deceptive in the company'spromotional materials, disclosure document or offering circular. If you want your letterkept confidential, please print the words, "Privileged and Confidential," on the top of

each page. Include your name, address, and a daytime telephone number where we canreach you. It will help if you can send us copies of any written claims in promotionalmaterials or elsewhere that you believe are false. Send copies, not originals, of anydocuments you think we should have.

Please address your complaint to:

Consumer Response CenterFederal Trade Commission - Rm. 130600 Pennsylvania Ave., NWWashington, D.C. 20580.

4. How do I know what must be included in a Franchise DisclosureDocument?

The amended Franchise Rule states what must be disclosed. It is published in the Code ofFederal Regulations, Volume 16, Part 436 (16 CFR 436). The Franchise RuleCompliance Guide, which is designed to assist franchisors in complying with theamended Rule are available at: www.ftc.gov/bcp/edu/pubs/business/franchise/bus70.pdf.

There are franchise registration and disclosure laws in a number of states that require afiling of a franchisors Franchise Disclosure Document (FDD) with a state agency. In

most of those states, it is unlawful to offer or sell a franchise until the agency hasregistered the franchisors FDD after reviewing the filing. Information about these statelaw requirements can be obtained from:

North American Securities Administrators Association750 First Street, Suite 710Washington, DC 20002(202) 737-0900www.nasaa.org/Industry___Regulatory_Resources/Uniform_Forms/

You can also find the current state and federal guidelines in the Business Franchise Guide,

published by Commerce Clearing House, Inc., in many law libraries.

5. How can I find a lawyer who specializes in franchising?

Check with your state or county bar association. Many of them allow their members toidentify their specialties. Franchise or distribution law is a recognized specialty in anincreasing number of states.

5


6/39

You also may contact the American Bar Associations Forum Committee on Franchisingfor referrals. More information is available at www.abanet.org/forums/franchising.

American Bar Association Service Center321 North Clark Street

Chicago, IL 60610(800) 285-2221

Information for Sellers Guide to the Federal Trade Commission Franchise Rule

Explains how franchisers and businesses must comply with the FTC's Franchise andBusiness Opportunity Rule.

Franchise and Business Opportunities Rule

Regulatory Reform: Franchise Rulemaking Regulatory Reform: Franchise Rule Review Before You Buy:

o Franchise and Business Opportunity Publicationso Thinking of Buying a Business Opportunity?

Consumer Alert: Enforcement "Sweeps" Target Business Opportunity Fraud

Franchise Rule Text: Amended Franchise Rule

State Disclosure Requirements: Franchises and Business Opportunities

Know The Risks: Summary of Recent Enforcement Cases

How To Comply: Recent Staff Advisory Opinions

Franchise and Business Opportunity FAQS

6
http://www.ftc.gov/bcp/franchise/netbusop.htmhttp://www.ftc.gov/bcp/franchise/caselist.htmhttp://www.ftc.gov/bcp/franchise/netadopin.htmhttp://www.ftc.gov/bcp/franchise/netadopin.htmhttp://www.ftc.gov/bcp/franchise/netadopin.htmhttp://www.ftc.gov/bcp/franchise/netadopin.htmhttp://www.ftc.gov/bcp/franchise/caselist.htmhttp://www.ftc.gov/bcp/franchise/caselist.htmhttp://www.ftc.gov/bcp/franchise/caselist.htmhttp://www.ftc.gov/bcp/franchise/netbusop.htmhttp://www.ftc.gov/bcp/franchise/netbusop.htmhttp://www.ftc.gov/bcp/franchise/netbusop.htm


7/39

Guide to the Federal Trade Commission Franchise RuleExplains how franchisers and businesses must comply with the FTC's Franchise andBusiness Opportunity Rule.

Recent Franchise Rule Opinions (1995 to Present)

Lists informal staff advisory opinions in response to requests for interpretation of FTC'sFranchise Rule.

State Pre-Sale Disclosure Requirements: Business OpportunitiesTwenty-six states have business opportunity laws. Most of these laws prohibit sales of

business opportunities unless the seller gives potential purchasers a pre-sale disclosuredocument that has first been filed with a designated state agency.

State business opportunity laws typically cover every imaginable type of businessopportunity that might be offered. If a business opportunity seller is not required toprovide pre-sale disclosures by the Franchise Rule, these disclosures will almost alwaysbe required by the laws of the states listed below.

The disclosures required by state business opportunity laws differ, and usually providemore abbreviated information than the FTCs Franchise and Business Opportunity Rulerequires. However, most of these laws provide important rights and remedies for businessopportunity investors, including required security bonds to cover investor losses.

If you are considering purchasing a work-at-home or other business opportunity, and

reside in a state with a business opportunity law, we encourage you to find out moreabout the protection provided by your state statute before you invest.

Alaska, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky,Louisiana, Maine, Maryland, Michigan, Minnesota, Nebraska, New Hampshire, North

Carolina,Ohio, Oklahoma, South Carolina, South Dakota, Texas, Utah, Virginia, Washington,

Wisconsin

State Pre-Sale Disclosure Requirements: Franchises

Offers information on states that have laws requiring franchisers to provide pre-saledisclosures.

Information on Specific Opportunities

These helpful guides from the Federal Trade Commission provide advice on how toavoid common scams.

7


8/39

Buying a Janitorial Services FranchiseProvides helpful advice to individuals interested in buying into a janitorial franchise.Also includes information on how to avoid scams and legal problems.

Buying a Janitorial Services Franchise

Produced jointly with the Maryland Attorney Generals Office.

Contents

How Janitorial Services Franchises Work

Problems You May Face

The FTCs Franchise Rule

Protect Yourself

For More Information

Glossary of Terms

If you're thinking about starting your own business and have only a small amount toinvest, you may be considering buying a janitorial services franchise. For a fee, ajanitorial service company (the "franchisor") typically provides you (the "franchisee")with customers and marketing, billing and collection services.

Every franchisor has success stories to share. Be cautious. While success in the janitorialservice industry is possible, it's not a guarantee.

A glossary of terms commonly used in the franchise industry is included at the end of thisbrochure.

How Janitorial Services Franchises Work

In a typical janitorial cleaning franchise, you pay the franchisor a fee for a "package" ofcleaning accounts. The fee is based on the dollar value of cleaning accounts that the

franchisor will make available. The fee usually is about half the gross income theaccounts are supposed to generate in a year. For example, for a fee of $10,000, you'll getaccounts worth $20,000; for a fee of $15,000, you'll get accounts worth $30,000. Youalso may have to pay ongoing royalty or management fees.

The franchisor may offer you financing. This may sound especially attractive if you havetrouble getting credit from traditional lenders.

8


9/39

The franchisor is supposed to offer you cleaning accounts that will produce the level ofincome represented in the package you purchased. However, several factors can affectthat level of income. For example, if you don't accept an account, the franchisor may nothave to offer you a substitute. Or, if you refuse an account because you feel it's locatedtoo far away, you may lose your right to that income. Also, if you lose accounts because

you did a poor cleaning job, the franchisor doesn't have to replace those accounts.

Problems You May Face

The Federal Trade Commission and the Maryland Attorney General's Office advise youto use caution when thinking about buying a janitorial services franchise, which oftenappeal to immigrants and others who speak limited English. The franchise agreementyou'll receive from the franchisor may be long and complex. It may be difficult tounderstand your legal rights and obligations, and the obligations of the franchisor.Consider getting professional advice. Ask a lawyer, accountant or business advisor toreview the franchise agreement. The money and time you spend on professional help may

save you from a bad investment.

Here are some of the problems you may face:

Accounts offered versus accounts received. There may be a difference betweenthe accounts the franchisor promises to offer you and the accounts you actuallyreceive, as well as the revenue that comes with them. For example, the franchisormay promise to offer you accounts generating $1,000 in monthly billings for thefirst year. To meet its obligations, the franchisor may offer you more than onecleaning account. But given time conflicts, distance issues or other problems, youmay not be able to accept all the accounts the franchisor offers. What's more, the

franchisor may offer the same accounts to several franchisees on a first-come,first-served basis. If you can't accept an account because you can't get to thelocation, or if another franchisee accepts the account first, the franchisor mayhave satisfied its obligation to offer you accounts. Because the franchisor may nottell you about this policy before you buy the ''package" of accounts, you shouldnot count on receiving all the revenue that the franchisor promised at first.

Rejected accounts. The franchisor may not have to replace an account that youreject.

Franchisor-selected accounts. The franchisor usually selects accounts for you.The size, number and location of the accounts may not be what you expect. Forexample, the franchisor may require you to service more than one account at thesame time, or the job sites may be far apart.

Lost accounts. Most janitorial franchise agreements specify that if a customercancels the cleaning contract, the franchisor doesn't have to replace the accountfor you. In fact, you may have to pay an extra sales and marketing fee for a new

9


10/39

account to make up for the lost income.

Integration clauses. The franchise agreement you sign may contain a clause thatlimits the terms of your agreement to those specifically detailed in the writtenfranchise agreement. This means that any oral claims or promises made by the

franchisor are not part of your agreement. This is one reason why it's so importantto get all promises in writing in the franchise agreement.

First year time lag for receiving accounts. The package of accounts you buywill suggest a level of income within a year. But the franchisor may take severalmonths to supply you with the promised accounts. That means you may not earnany income until several months after you've purchased the package, so you maynot earn the estimated annual income. Therefore, it's important to have othersources of income during your first few months of operation.

Ongoing fees. The franchisor may charge you a monthly management or servicefee. You'll have to pay the fee even if you don't have any income from yourcleaning business that month. If you finance the franchise fee, you must make themonthly payment on that debt whether or not you're receiving income from thecleaning business. And although you may find customers without the franchisor'shelp, any income from a cleaning account you solicit will be included when thefranchisor calculates the royalty and management fees you owe.

Franchisor-owned accounts. The franchisor may own all the customer accounts,including those that you get on your own. This means that if your franchiseagreement ends, you will not be able to service the accounts for which you paid afee, and you won't be able to service the accounts you got on your own, either.

Training. Get information about the franchisor's training program before youinvest. The franchisor decides the type of training you'll get. It may involvewatching videos and reading books; it may not involve classroom or on-sitetraining.

Contract bidding procedures. The franchisor may not tell you how it bids forcleaning contracts or what specific services you must provide to the customers.The franchisor may only tell you that you should be able to earn $12 to $15 anhour doing janitorial work. However, when bidding for cleaning contracts, thefranchisor may offer your services at a lower rate, and you may have no say inwhether the amount charged is reasonable. So even though the account isrepresented as being worth a certain amount of money, it may not be worth thatmuch to you, and you may not be able to make a profit once you pay for expenseslike supplies and transportation costs.

Short-term accounts. People who operate janitorial franchises often find thatcustomers rarely maintain an account for more than a year. That's becausecustomers prefer short-term contracts so they can shop for the best deal. If the

10


11/39

franchisor offers you replacement accounts, you may have to pay a new referral ormarketing fee.

Performance obligations. You may have to meet minimum monthlyperformance or growth requirements. If you don't, you may lose the franchise.

Worse yet, you may not have the right to a refund of your franchise fee.

Payment for services. The franchisor collects payment from your customers. Ifthe customer doesn't pay, you don't get paid. The franchisor may not be legallyobligated to force the customer to pay, but if the franchisor sues for payment, youmay have to pay the legal costs.

Personal guarantees. Many franchisors require franchisees to personallyguarantee the obligations of the franchise business. This means that if yourbusiness assets don't cover your franchise obligations, you could lose personalassets, like your home or car.

Anti-competition rules. You and your immediate family (your spouse andchildren) may not be allowed to have an ownership interest or perform services inanother cleaning business, even if your family members don't have an ownershipinterest in your janitorial franchise. This restriction may continue even after yourfranchise ends.

The FTC's Franchise Rule

By law, a franchisor must give you a detailed disclosure document. The disclosuredocument should include:

the total number of franchises, and the number of franchises terminated or notrenewed during the previous year;

the bases and assumptions for any claims about potential earnings or the earningsof existing franchisees;

the cost of starting and maintaining the business; the names, addresses and telephone numbers of at least 10 franchisees who live

closest to you (names, addresses and telephone numbers of at least 100franchisees is required in some states, including Maryland) ;

the background and experience of the franchisor's key executives; a fully audited financial statement of the franchisor;

any lawsuits against the franchisor or its directors by franchisees; and the responsibilities you and the franchisor have to each other once you've

purchased the franchise.

You should receive the disclosure document at least 10 business days before you pay anymoney or legally commit yourself to buying a franchise. Ten business days should giveyou enough time to review the document, get answers to your questions, talk tofranchisees and get advice from an attorney, accountant or business advisor.

11


12/39

Protect Yourself

Buying a franchise is a big decision. Before you commit, take the following precautions:

Read the company's disclosure document. Review it carefully to learn moreabout your obligations, the litigation history of the franchisor and failure rates.This information will help you decide whether franchisees are dissatisfied withthe franchise.

Talk to other franchisees. Don't rely only on the information the franchisor givesyou. Talk to current and former franchisees about their experiences with thefranchisor. Their names, telephone numbers and addresses should be in thecompany's disclosure document. The franchisor may refer you directly tofranchisees who are known to be successful. Don't rely on references the companyselects.

Contact your state franchise administrator. If you live in California, Hawaii,Illinois, Indiana, Maryland, Minnesota, New York, North Dakota, Rhode Island,South Dakota or Virginia, your state has an office that regulates the offer and saleof franchises. Contact your state franchise administrator before you invest. Ask ifthe franchise you're considering is registered to offer franchises in your state. Ifyou live in Maryland, call the Maryland Attorney General's Office at (888) 743-0023, or visit www.oag.state.md.us. If you live outside of Maryland, you can findthe name of your state franchise administrator, by calling the North AmericanSecurities Administrators Association at (202) 737-0900 or visit www.nasaa.org.You also may contact your state Attorney General (www.naag.org) or BetterBusiness Bureau (www.bbb.org) for more information.

Get all promises in writing. If a salesperson tells you that the franchisor willgive you accounts near your home, but the written agreement defines thegeographic area more broadly, it's what's in the written agreement that counts. If aprovision in the agreement is different from anything you discussed with thesalesperson, demand that the written agreement be changed. If a salesperson tellsyou that you should be able to make $12 to $15 an hour, make sure that predictionis included in the disclosure document. If the salesperson or franchisor won'tagree, walk away from the deal.

Review the franchise agreement carefully. It's important to understand all theconditions of the agreement. It controls your relationship with the franchisor.Make sure the agreement spells out the details so there are no surprises.

Understand your obligations. As a franchisee, you may have to pay royaltiesand other fees. Find out exactly what types of fees you'll have to pay, how muchyou'll pay and how often.

12


13/39

Investigate claims about potential earnings. The estimated value of the packageof accounts you buy may not reflect the income you'll earn from servicing thoseaccounts. Find out how the company assigns a value to the accounts. Ask howmany franchisees made the represented income and where those franchisees arelocated.

Be cautious when financing. While financing your purchase through thefranchisor may seem appealing, the terms of the financing agreement may not bethe best deal for you. For example, you may have to sign a note to secure the debtand agree to terms that could make it tough for you to sue the company if youwanted to cancel your agreement. Before you agree to franchisor financing, besure you understand all the terms of the deal.

Consider getting professional advice. Ask a lawyer, accountant or businessadvisor to review the disclosure document and franchise agreement. The moneyand time you spend on professional help may save you from a bad investment.


The FTC also publishes a series of consumer brochures on franchising and businessopportunities. For free copies, contact the Consumer Response Center, Federal TradeCommission, Washington, DC 20580, 1-877-FTC-HELP (1-877-382-4357), TDD: (202)326-2502, www.ftc.gov.

The State of Maryland also publishes investor brochures about franchises and businessopportunities. For copies, or for more information about Maryland's requirementsregarding the sale of franchises and business opportunities, contact the Office of the

Attorney General, Maryland Securities Division, 200 St. Paul Place, Baltimore, MD21202, (410) 576-6360, www.oag.state.md.us, email: [email protected].

Glossary of Terms

Disclosure Document - A written document that outlines the general franchise offering,including background information of the franchisor, a summary of the franchiseagreement, and a list of current franchisees.

Franchise Agreement or Franchise Contract - The written document that spells out thelegally binding obligations between the franchisor and the franchisee.

Franchise Fee - The purchase price for the franchise.

Franchisee - Any person who buys or invests in a franchise.

Franchisor - Any person who sells a franchise.

13


14/39

Management or Service Fee - A fee paid the franchisee for extra or ongoing support,such as providing additional or substitute accounts.

Royalty Fee - A specific payment made by the franchisee for the right to use thefranchisor's trademark. In most instances, the franchisee pays this fee throughout the term

of the agreement, regardless of anything else the franchisor may or may not do.

The FTC works to prevent fraudulent, deceptive and unfair business practices in themarketplace and to provide information to help consumers spot, stop and avoid them. Tofile a complaint or get free information on consumer issues, visit ftc.gov or call toll-free,1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a video, How to Filea Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints intothe Consumer Sentinel Network, a secure online database and investigative tool used byhundreds of civil and criminal law enforcement agencies in the U.S. and abroad.September 2001

Costly Coupon ScamsExplains fraudulent business opportunities and work-at-home schemes that offer bigearnings by selling coupon certificate booklets or cutting coupons at home.

Costly Coupon Scams

Cents-off coupons are providing big bucks for scam artists who offer businessopportunity and work-at-home schemes featuring coupon certificate booklets and coupon

clipping services. Using the Internet to market these so-called opportunities, fraudulentpromoters are promising entrepreneurs, charity groups and consumers earnings of"hundreds per week" and "thousands per month" simply by selling coupon certificatebooklets or cutting coupons at home. The fact is that consumers and manufacturers aregetting clipped in these costlyand deceptivecoupon capers.

Theres only one legitimate way to use a coupon: Cut it out of the newspaper or othersource and use it toward the purchase of the designated product. A coupon is meant to beused only by the consumer who buys the product for which the coupon is printed. Sellingor transferring coupons to a third party violates most manufacturers coupon redemptionpoliciesand usually voids the coupon.

Coupons are big business: More than 3,000 manufacturers distribute nearly 330 billioncouponsworth an estimated $280 billionevery year in an effort to help consumerssave money. Indeed, it is thought that 77 percent of American households use some eightbillion coupons to save $4.7 billion on their grocery bills.

Yet, fraudulent promoters are making money marketing and misrepresenting coupon-based business opportunities to unwary consumers and even savvy organizations.

14


15/39

Among the victims are:

would-be entrepreneurs trying to run a business from home, people withotherwise limited income opportunities, and people just trying to make a living,who are losing savings and time and effort;

charity groups, lured into selling coupon certificate booklets as fundraisers; and

consumers who are dealing with complicated forms involving difficult proceduresand handling fees to receive the same coupons manufacturers give away for free.

Heres how the coupon scams work.

Coupon Certi ficate Booklet Scams

A promoter sells an investor a business opportunity selling coupon certificate booklets.The investor is supposed to sell the booklets to consumers for $20 to $50 each. Thebooklets contain 20 to 50 certificates, each of which can be redeemed for $10 worth of

grocery coupons. That makes each booklet "worth" between $200 and $500 in coupons.To redeem the certificates for coupons, the consumer must complete and mail a form,select 30 to 50 products from a list and include a self-addressed, stamped envelope and aprocessing fee.

In theory, the investor should make big profits selling the booklets to consumers. Andconsumers should save big money by using the coupons when they buy the groceries. Inreality, though, the promoter is the only one who makes money.

Investors who spend several hundred to several thousand dollars to buy the certificatebooklet distributorship lose money because inflated earnings claims never pan out.

Consumers who pay out substantial processing fees and postage for coupons lose moneybecause they can clip coupons for themselves from their newspaper. To redeem $500worth of certificates, for example, a consumer might pay postage and processing fees ofover $100. And everyone loses on false claims that coupons have no expiration date:Only a tiny share of coupons issued by manufacturers have no expiration date.

Coupon Clipping Scam

A related scam centers on coupon clipping. Promoters make overblown promises aboutthe income or profit potential for consumers working at home clipping coupons. Theseclaims certainly sound appealing, but they are unsubstantiated at best and bold lies at

worst. Making moneyparticularly "hundreds per week" and "thousands per month"isnt that easy. Success generally requires hard work.

Sometimes, fraudulent promoters use coupons clipped by consumers to fill orders fromother consumers who redeem the coupon certificates. Many manufacturers have policiesthat do not allow coupons to be transferred. That is, the coupons that are being sold maynot be redeemed by the retailer or manufacturer.

15


16/39

Coupon Scheme Clues

You can avoid losing your money to a bogus work-at-home coupon opportunity. Listenfor these tell-tale tactics:

Guarantees of big profits, high income or amazing savings in a short time. Claims that no risk is involved. Lots of pressure to act now. Claims that this is a hot, "cant miss" opportunity.

Still tempted to get involved in a coupon clipping venture through an ad in the newspaper,a magazine or on the Internet? Exercise caution. Ask questionsand make sure theanswers add up.

Ask for details of the companys refund policy before you invest any money. Ask for the total cost of the work-at-home program, including supplies,

equipment and membership fees. What will you get for your money? Find out who will pay you, whether youll be paid on salary or commission, and

when you will get your first paycheck. Get all promises in writing. Any promises you hear should be written into the

contract you sign. Check out the company with the consumer protection agency or Better Business

Bureau in your own area and in the city where the company is located. Theseorganizations can tell you whether other consumers have complained about thework-at-home program that interests you. Its not fool-proof, but it is prudent.

Find out all the costs and fees associated with getting the coupons and then do themath. Often, in addition to buying the coupon certificates, youll have to pay hefty

postage and processing fees.

Where to Complain

If you have been or are involved in a coupon certificate or coupon clipping businessopportunity that isnt making good on its promises, contact the company and ask for arefund. Let the company know you plan to notify officials about your experience. If youcant resolve the dispute with the company, you may want to turn to one of theseorganizations for help:

The advertising manager of the publication that ran the ad. The manager shouldbe interested in the problems youve had with the company.

Your local Postmaster. The US Postal Service investigates fraudulent mailpractices.

The Attorney Generals Office in your state or the state where the company islocated.

The FTC works to prevent fraudulent, deceptive and unfair business practices in themarketplace and to provide information to help consumers spot, stop and avoid them. To

16


17/39

file a complaint or get free information on consumer issues, visit ftc.gov or call toll-free,1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a video, How to Filea Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints intothe Consumer Sentinel Network, a secure online database and investigative tool used byhundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

August 1997

Lotions and Potions: The Bottom Line About Multilevel Marketing PlansGives an overview of multilevel marketing plans that may or may not be legal.

Lotions and Potions: The Bottom Line About MultilevelMarketing Plans

Lose weight! Firm up! Look better! Live longer!

'Tis the season for consumers to be confronted with a wide range of health, beauty andfitness products and promotions. Many of these items aren't available on store shelvesand are sold only through distributors.

What Are You Buying?

Many companies that market their products through distributors sell quality items atcompetitive prices. But some offer goods that are overpriced, have questionable merits orare downright unsafe to use.

The Federal Trade Commission warns consumers to apply a healthy dose of cautionbefore buying products advertised as having "miracle" ingredients or techniques andguaranteed results. Many of these "quick cures" are unproven, fraudulently marketed anduseless or even dangerous.

Before using one of these products, the best prescription may be to check with a healthprofessional.

What Else Is For Sale?

Some distributors sell more than diet and exercise plans, vitamin supplements or wondercreams. Many may sell "opportunities," too-a chance for you not only to buy, but also to

17


18/39

market, the products. In addition to describing the benefits of their product or program,these distributors may encourage you to become a distributor.

If you sign up as a distributor, you may be promised commissions or other rewards-forboth your sales of the plan's goods or services and those of other people you recruit to

become distributors. These plans, often called "multilevel marketing plans," sometimespromise commissions or rewards that never materialize. What's worse, consumers areoften urged to spend or "invest" money in order to make it.

Watch Out For Pyramids

Steer clear of multilevel marketing plans that pay commissions for recruiting newdistributors. They're actually illegal pyramid schemes.

Why is pyramiding dangerous? Because plans that pay commissions for recruiting newdistributors inevitably collapse when no new distributors can be recruited. And when a

plan collapses, most people-except perhaps those at the very top of the pyramid-end upempty-handed.

How to Evaluate a Plan

If you're thinking about joining what appears to be a legitimate multilevel marketing plan,take time to learn about the plan before signing on.

What's the company's track record? What products does it sell? How does it back upclaims it makes about its product? Is the product competitively priced? Is it likely toappeal to a large customer base? What up-front investment do you have to make to join

the plan? Are you committed to making a minimum level of sales each month? Will yoube required to recruit new distributors to be successful in the plan?

Use caution if a distributor tells you that for the price of a "start-up kit" of inventory andsales literature -and sometimes a commitment to sell a specific amount of the product orservice each month-you'll be on the road to riches. No matter how good a product andhow solid a multilevel marketing plan may be, expect to invest sweat equity as well asdollars for your investment to pay off.

Your Responsib ilities

If you decide to become a distributor, remember that you're legally responsible for theclaims you make about the company, its product and the business opportunities it offers.That applies even if you're simply repeating claims you read in a company brochure oradvertising flyer.

When you promote the qualities of a product or service, you're obligated to present thoseclaims truthfully and to ensure there's enough solid evidence to back them up. The

18


19/39

Federal Trade Commission advises you to verify the research behind any claims about aproduct's performance before repeating those claims to a potential customer.

Likewise, if you decide to solicit new distributors, be aware that you're responsible forany claims you make about a distributor's earnings potential. Be sure to represent the

opportunity honestly and to avoid making unrealistic promises. If those promises fallthrough, remember that you could be held liable.

The FTC works to prevent fraudulent, deceptive and unfair business practices in themarketplace and to provide information to help consumers spot, stop and avoid them. Tofile a complaint or get free information on consumer issues, visit ftc.gov or call toll-free,1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a video, How to Filea Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints intothe Consumer Sentinel Network, a secure online database and investigative tool used byhundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

January 2000

Medical Billing Opportunities: Worth a Second OpinionIdentifies medical billing opportunities that often do not provide pre-investmentinformation required by law.

If you're looking for a home-based business that can help you pull in $20,000 to $45,000a year using your computer, a work-at-home opportunity doing medical billing may

sound like the perfect choice. But before you part with your money, consider this: TheFederal Trade Commission (FTC) has brought charges against promoters of medicalbilling opportunities for misrepresenting the earnings potential of their businesses and forfailing to provide key pre-investment information required by law.

Medical Bil ling Scams

Ads for medical billing business opportunities appear on the Internet and in the classifiedsections of local newspapers and "giveaway" shopper's guides. In the "Help-Wanted"classified sections, the ads may appear next to legitimate ads for hospital medical claimsprocessors, leading consumers who respond to think they're applying for a job, not

buying a business opportunity.

The ads lure consumers with promises of substantial income working from home full- orpart-time - "no experience required." They direct consumers to call a toll-free number formore information.

If you call, a sales representative will entice you to sign up by telling you that theprocessing of medical claims is a lucrative business, that doctors are eager for help with

19


20/39

electronic claims processing, and that you - even without any experience - can do thiswork from the comfort of your home.

Medical billing scammers charge a fee of hundreds, or even thousands, of dollars. Inexchange, they claim to provide everything you supposedly need to launch your medical

billing business: the software program to process the claims and a list of potential clients.

But the reality is that few consumers who pay for medical billing opportunities findclients or make any money, let alone earn the promised substantial income. Competitionin the medical billing market is fierce, especially for those who are new to it. Manydoctors' offices process their own medical claims. Doctors who contract out their medicalbilling often use established firms, not individuals working from home.

Promoters of fraudulent medical billing opportunities are not interested in helpingconsumers, either. They only want their money. Many times, the client lists they provideare based on out-of-date databases of doctors who haven't asked for medical billing

services. The software they send may not work or may not have been properly authorizedand so is useless. And the money-back "guarantees" often prove worthless. Even aftermaking repeated calls to the promoter or complaining to their credit card companies,government agencies or consumer groups, only a few people actually get refunds.

How to Protect Yourself

To avoid losing your money to a bogus medical billing business opportunity, the FTCadvises you to:

Ask the promoter to give you the names of many previous purchasers so that youcan pick and choose who to call for references. Make sure you get many namesfrom which to choose. If the promoter provides only one or two names, becareful: The contacts may be "shills" - people hired to give favorable testimonials.Interview the references, preferably where the business operates, to get a bettersense of how the business works. Ask for the names of their clients and adescription of their operation.

Consult with organizations for medical claims processors or medical billingbusinesses and with doctors in your community. Ask them about the medicalbilling field: How much of a need is there for this type of work? How much workdoes medical billing entail? What kind of training is required? Do they knowanything about the promotion or promoter you're interested in?

Check with the state Attorney General's office, consumer protection agency andthe Better Business Bureau in your area and the area where the promoter is basedto learn whether there are any unresolved complaints about the businessopportunity or the promoter. While complaints may alert you to problems, theabsence of complaints does not necessarily mean the company is legitimate.Unscrupulous companies may settle complaints, change their names or move tohide a history of complaints.

20


21/39

If the medical billing opportunity sells another company's software, check withthe software company to find out whether company representatives know of anyproblems with the medical billing promoter.

Consult an attorney, accountant or other business advisor before you sign anyagreement or make any payments up front. An attorney can review the promoter's

contract and advise you on how best to proceed.

Where to Complain

If you think you've been defrauded in a medical billing business opportunity scheme,contact the company and ask for your money back. Let the company representativesknow that you plan to notify law enforcement and other officials about your experience.Keep a record of your conversations and correspondence. If you send documents to thecompany, send copies, not originals. Send correspondence by certified mail - and requesta return receipt - to document what the company received.

If you can't resolve the dispute with the company, file a complaint with:

the Federal Trade Commission. Call 1-877-FTC-HELP (1-877-382-4357) or logon to www.ftc.gov.

the Attorney General's office in your state or in the state where the company islocated. The office will be able to tell you whether you're protected by any statelaw to regulate work-at-home programs.

your local consumer protection offices. your local Better Business Bureau. your local postmaster. The U.S. Postal Service investigates fraudulent mail

practices.

the advertising manager of the publication that ran the ad. The manager may beinterested to learn about the problems you've had.

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair businesspractices in the marketplace and to provide information to help consumers spot, stop, andavoid them. To file a complaint or to get free information on consumer issues, visitftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. TheFTC enters consumer complaints into the Consumer Sentinel Network, a secure onlinedatabase and investigative tool used by hundreds of civil and criminal law enforcementagencies in the U.S. and abroad.

April 2002

Multilevel Marketing PlansCovers the risks involved in multilevel marketing opportunities, which are sometimesillegal.

The Bottom Line About Multi-Level Marketing Plans

21
http://www.ftc.gov/http://www.ftc.gov/


22/39

Multilevel or network marketing plans are ways to sell goods or services throughdistributors. Typically, these plans promise that if you sign up as a distributor, youll getcommissions not only from the sales you make, but also from the sales of the people yourecruit to become distributors. These recruits sometimes are called your downline.

Not all multilevel marketing plans are legitimate. Some are pyramid schemes. Its bestnot to get involved in plans where the money you make is based primarily on the numberof distributors you recruit and your sales to them, rather than on your sales to peopleoutside the plan who intend to use the products.

Joining a pyramid is risky because the vast majority of participants lose money to pay forthe rewards of a few people at the top.

How can you tell the difference between a bona fide multilevel marketing plan and apyramid scheme? According to the Federal Trade Commission, the nations consumerprotection agency, it takes research, some business sense and a healthy share of

skepticism.

Evaluating a Plan

Whats involved in doing research? Asking your sponsor and other distributors toughquestions, and digging for details. Dont consider it nosy or intrusive: you are on amission to check out a potential opportunity that will require your money and your time.

1. Find and study the companys track record. Look for newspaper ormagazine articles about the company. Do an internet search. Look through severalpages of search results to get a good idea of the information available about the

company.o How long has the company been in business? Does it have a positive

reputation for customer satisfaction?o What can you find out about the product and the service?o Whats the buzz about the company and the product on blogs and

websites?o Has anyone sued the company for deceptive business practices? Checking

with your local Better Business Bureau, Chamber of Commerce and stateAttorney General for complaints about any company youre consideringinvesting in is a prudent thing to do. But remember that a lack ofcomplaints doesnt guarantee a companys legitimacy.

2.

Learn about the product. What will you be selling? Are similar products on themarket? Is the product priced competitively? Is it safe? Can your sponsor thedistributor who is recruiting you support claims about the productsperformance?

3. Ask questions. Ask your sponsor for the terms and conditions of the plan: thecompensation structure, your potential expenses, support for claims about howmuch money you can make and the name and contact information of someone atthe company who has details about the terms and conditions and can tell you how

22


23/39

much the average distributor makes before and after expenses. Get thisinformation in writing. Avoid any plan where the reward for recruiting newdistributors is more than it is for selling products to the public. Thats a timetested tip-off to a pyramid scheme.

Multilevel marketing plans usually base at least part of your monthly income andbonuses on the sales of the distributors you recruit. Keep in mind that if yousolicit new distributors, you are responsible for the claims you make about howmuch money they can earn. Be honest, and avoid making unrealistic promises. Ifthe promises fall through, you could be held liable, even if you are simplyrepeating claims you read in a company brochure or advertising flyer, or heardfrom another distributor.

If you dont understand something, ask for more information until it is absolutelyclear to you. Your sponsor and other distributors should be willing to answer yourquestions. Be skeptical and carefully evaluate the information you get. Remember

that your sponsor and other distributors above you likely will make money if youjoin the program. So take your time, and dont yield to pressure to join.

4. Understand any restrictions. Get the companys refund policy in writing. Makesure it includes the process for returns as well as restrictions on or penalties for returning unused products if you choose to leave the plan. It may seem likeyoure minimizing your risk if you can return products for a reimbursement, butpolicies vary on getting full refunds and how long it could take. Many plansrequire you to buy training or marketing materials or pay for seminars if you wantto get product discounts or create your own network of distributors. Find out howmuch time and money other distributors spent on training, marketing materials

and seminars when they joined the plan, and whether the plan requires you toparticipate in periodic training. What happens if you opt out of the training?5. Talk to other distributors. Ask your sponsor for the names and contact

information for distributors at all levels of the plan. Get in touch with them to askthe same questions you asked your sponsor. In most plans, upline distributorsstand to benefit when you buy into the system, so they should be willing toanswer your questions with specifics. If you get vague answers or guesses, askfollow-up questions until you hear and understand the information you needto make your decision. Be aware that there may be shills decoy referencespaid by the company or distributor to pretend they had success earning moneythrough the plan.

6. Consider using a friend or adviser as a neutral sounding board or for a gutcheck. You may want to consult with an accountant, a lawyer or another personyou trust who is not affiliated with the plan to review the terms of compensation,determine whether the plan can back up any claims about the amount of moneyyou can make, and analyze the information youve gathered and the answers toyour questions.

7. Take your time. Dont pay or sign any contracts in an opportunity meeting.Take your time to think over your decision. Your investment requires real money,

23


24/39

so talk to the distributors in settings that make you comfortable and when theresthe opportunity to take your time.

8. Think about whether this plan suits your talents and goals. Ask yourselfwhether you would enjoy selling products to the public. Find out how many hoursa week your sponsor and other distributors spent on the business when they joined

the plan and how much time they spend now. Remember that no matter how gooda product and how solid a multilevel marketing plan may be, youll need to investsweat equity and money for your investment to pay off. Consider the otherdemands of the business for example, training, recruiting new distributors,managing paperwork, inventory and shipping and factor how much time itcould take to achieve the amount of money you anticipate.

Asking Questions

Here are some important questions to ask your sponsor and distributors atdifferent levels of the organization. Their responses can help you detect falseclaims about the amount of money you may make and whether the business is apyramid scheme.

1. What are your annual sales of the product? How much product did you sell todistributors? What percentage of your sales were made to distributors?

One sign of a pyramid scheme is if distributors sell more product to otherdistributors than they do to the public.

2.

What were your expenses last year, including money you spent on training andpurchasing products? How much money did you make last year that is, your incomeand bonuses minus your expenses? How much time did you spend last year on thebusiness? How long have you been in the business? How many people are in yourdownline?

Its important to get a complete picture of how the plan works: not justhow much money distributors make, but also how much time and moneythey spend on the plan, how long it takes to make money and how big adownline is needed to make money.

3.

What percentage of the money you made income and bonuses minus yourexpenses came from recruiting other distributors and selling them inventory or otheritems to get started?

Another sign of a pyramid scheme is if the money you make dependsmore on recruiting getting new distributors to pay for the right toparticipate in the plan than on sales to the public.

24


25/39

The FTC works for the consumer to prevent fraudulent, deceptive, and unfairbusiness practices in the marketplace and to provide information to helpconsumers spot, stop, and avoid them. To file a complaint or to get freeinformation on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP(1-877-382-4357); TTY: 1-866-653-4261. The FTC enters consumer complaints

into the Consumer Sentinel Network, a secure online database and investigativetool used by hundreds of civil and criminal law enforcement agencies in the U.S.and abroad.

October 2009

Net Based Business Opportunities: Are Some Flop-opportunities?Advises consumers who are considering internet-related business opportunities.

Starting an internet business can sound like a dream: work from home, set your ownhours, be your own boss. But most internet startups require significant investments oftime and money, and many of them fail. If youre considering buying an internet businessopportunity, know that the promise of big earnings and ideal work conditions is a pipedream for most. Regardless of the handful of stories youve read about college-ageentrepreneurs turning into internet gazillionaires, theres no such thing as a sure thing.

You may encounter pitches like Start your own internet business; No experiencerequired; Experts available to coach you in a variety of places: on the Web and in e-mail offers, infomercials, classified ads, flyers, texts, telephone pitches, seminars, and

direct-mail offers. The Federal Trade Commission (FTC), the nations consumerprotection agency, says that many of these solicitations are scams that promise more thanthey can possibly deliver. Often, bogus internet opportunity sales pitches are short ondetails and long on high-pressure tactics to persuade you to buy before youveinvestigated the offer.

Short on Details

An internet business is just like any business it requires a solid business plan. Anyonewho sells legitimate business opportunities should give you detailed information. Beskeptical of a seller who offers vague descriptions of what the business is and how it will

work. Sit down and ask yourself some critical questions, like:

What would you be selling or doing? How and why shoppers would find and use your website? How would the business generate income and what are your specific expenses?

Answer these questions before you pay any promoter the price of admission to a business.

25


26/39

Some sellers claim you dont need to understand the details of the business because itsthe internet or because their expert coaches and support staff will take care ofeverything for you. The internet is not a magic place for business owners: in an internetbusiness success requires the same solid planning and hard work as in any other venture.Its your business and your reputation; you cant afford to be in the dark about key details.

Long on Pressure

Scammers try to create the impression that if you dont buy immediately, youre going tomiss out on a valuable opportunity. They emphasize the need to act fast, and may suggestthat other buyers are ready to take your place if you hesitate or ask questions. They wantto persuade you to give up your credit card or bank account information before youvehad time to research their claims or other peoples experiences with the company. Thescammers know that if you do even a little research, youre likely to find reports of rip-offs. In fact, a quick internet search often is enough to reveal alarming complaints.Legitimate business opportunities dont need to use high-pressure sales tactics: if an offer

is good today, it should be good tomorrow.

As part of their sales pitch, scammers often hype a no risk refund policy to encourageyou to buy an opportunity before youve researched it. Heres a tip: dont rely on a refundpolicy or a money-back guarantee because you have nothing to lose. No matter theguarantee, scammers will make it virtually impossible for you to get your money back.

Before you buy any business opportunity:

Consider the promotion carefully. If it claims buyers can earn a certain income,the promoter also must give the number and percentage of previous purchaserswho earned that much. If the promotion makes an earnings claim - but theadditional information isn't there - the business opportunity seller may well beviolating the law.

Study any disclosure documents. Under the Business Opportunity Rule, which isenforced by the FTC, many business opportunity promoters are required toprovide a document to potential purchasers that includes information aboutcancellation and refund policies, whether the seller has faced any lawsuits frompurchasers or other legal actions alleging fraud, and contact information forreferences who have bought the opportunity.

Interview previous buyers in person. This helps reduce the chance of being misledby phony references.

Do a few internet searches by entering the company name, or the name of thecompanys CEO or president, and words like complaints or scam. Contact thestate attorney general's office, local consumer protection agency, and BetterBusiness Bureau, both where the business opportunity promoter is based andwhere you live, to see if complaints are on file. While a complaint record mayindicate questionable business practices, a lack of complaints doesn't necessarily

26


27/39

mean the company or the opportunity is legitimate. Unscrupulous dealersoften change names and locations to hide a history of complaints.

Consult an attorney, accountant, or other business advisor before you put anymoney down or sign any papers. Entering into a business opportunity can becostly, so it's best to have an expert check out the contract first.

Report Possible Fraud

If you suspect a business opportunity promotion is fraudulent, report it to the attorneygeneral's office in the state where you live and in the state where the business opportunitypromoter is based. You should also report it to the FTC. File a complaint online at ftc.govor call toll free 1-877-FTC-HELP (1-877-382-4357).

If You Have A Complaint

The FTC works to prevent fraudulent, deceptive and unfair business practices in themarketplace and to provide information to help consumers spot, stop and avoid them. Tofile a complaint or get free information on consumer issues, visit ftc.gov or call toll-free,1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a video,How to Filea Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints intothe Consumer Sentinel Network, a secure online database and investigative tool used byhundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

March 2011

Take This Scheme and Stuff It: Avoiding Envelope-Stuffing Rip-OffsProvides information on how envelope-stuffing business opportunities actually work.

Take This Scheme and Stuff It: Avoiding Envelope-

Stuffing Rip-Offs

$550 to $3,000 weekly. $2 for each circular you mail...Free Postage...Free Supplies... No Advertising!

Paychecks mailed to you every week!Advance paycheck forms included in your package!!

Sound familiar? Ads for envelope-stuffing opportunities can be anywhere from yourmailbox to your inbox, in the newspaper or on an online search. Promoters usuallyadvertise that for a small fee, theyll tell you how to earn big money stuffing envelopesat home. They may say you will earn money for each envelope stuffed, making itpossible for you to earn hundreds or even thousands of dollars each week.

27


28/39

But when it comes to offers promising quick and easy income stuffing envelopes at

home, be skeptical and check it out.

The ads may sound appealing, especially if youre looking for a home-based business.But according to the Federal Trade Commission (FTC), the nations consumer protection

agency, ads like these dont tell the whole story namely, that the promoters arentreally offering a job.

Heres what happens: once you send your money, youre likely to get a letter telling youto get other people, even your friends and relatives, to buy the same envelope-stuffingopportunity or another product. The only way you can earn money is if people respondto your solicitations the same way you responded. The promoters rarely pay anyone.

Promises of big earnings through an envelope-stuffing scheme are false. But if you aretempted to send any money or sign up to receive more information, ask the promoter:

Who will pay me?Where is your business located?How long have you been in business?How and when will I get my first paycheck?Will I be paid a salary or will my pay be based on commission?What will I have to do?What is the total cost of the envelope-stuffing program?What will I get for my money?Will I have to pay for supplies, ads or postage?

The answers to these questions may help you determine whether an envelope-stuffing

opportunity is appropriate for your circumstances.

It also may help to check out the company with your local consumer protection agency,state Attorney General and the Better Business Bureau in your community and thecommunity where the company is located, which you can find at bbb.org. You can findout whether theyve received complaints about the promotion that interests you, butremember just because there arent complaints doesnt mean the promotion islegitimate. Unscrupulous promoters may settle complaints, change their names or moveto avoid getting caught. In addition, consider other peoples experience by entering thecompany or promoters name with the wordcomplaints into a search engine. Read whatothers have to say. After all, you are making a decision that involves spending yourmoney.

If youve spent money and time on a work-at-home program and now believe it may be ascam, contact the company and ask for a refund. Let company representatives know thatyou plan to notify officials about your experience. If you cant resolve the dispute withthe company, file a complaint with the following organizations:

28


29/39

The Federal Trade Commission. The FTC works for the consumer to preventfraud and deception. Visit ftc.gov/complaint or call1-877-FTC-HELP (1-877-382-4357).

Your local postal inspector. The U.S. Postal Inspection Service investigatesfraudulent mail practices. Visit postalinspectors.uspis.gov.

The Attorney Generals office in your state or the state where the company islocated. Find yours at naag.org; the office will be able to tell you whether youreprotected by any state law that may regulate work-at-home programs.

Your local consumer protection offices. Your local Better Business Bureau, which you can find at bbb.org. The advertising manager of the publication that ran the ad. The manager may be

interested to learn about the problems youve had with the company.


The FTC works to prevent fraudulent, deceptive and unfair business practices in the

marketplace and to provide information to help consumers spot, stop and avoid them. Tofile a complaint or get free information on consumer issues, visit ftc.gov or call toll-free,1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a video, How to Filea Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints intothe Consumer Sentinel Network, a secure online database and investigative tool used byhundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

February 2010

The Gifting Club-Gotcha

Explains the pyramid scheme of Gifting Clubs.

Protecting Your Child's Personal Information at School

Back to school an annual ritual that includes buying new notebooks, packing lunches,coordinating transportation, and filling out forms: registration forms, health forms,permission slips, and emergency contact forms, to name a few. Many school formsrequire personal and, sometimes, sensitive information. In the wrong hands, thisinformation can be used to commit fraud in your child's name. For example, a child's

Social Security number can be used by identity thieves and other criminals to apply forgovernment benefits, open bank and credit card accounts, apply for a loan or utilityservice, or rent a place to live.

The Federal Trade Commission (FTC), the nation's consumer protection agency, cautionsthat when children are victims of identity theft, the crime may go undetected for years or at least until they apply for a job, a student loan or a car loan, or want to rent anapartment.

29


30/39

Limiting the Risks of Identity Theft

There are laws that help safeguard your child's and your family's personal information.For example, the federal Family Educational Rights Privacy Act, enforced by the U.S.Department of Education, protects the privacy of student records. It also gives parents of

school-age kids the right to opt-out of sharing contact information with third parties,including other families.

If you're a parent with a child who's enrolled in school, the FTC suggests that you:

find out who has access to your child's personal information, and verify thatthe records are kept in a secure location.

pay attention to materials sent home with your child, through the mail or byemail, that ask for personal information. Look for terms like "personallyidentifiable information," "directory information," and "opt-out." Before youreveal any personal information about your child, find out how it will be used,

whether it will be shared, and with whom. read the notice schools must distribute that explains your rights under the

federal Family Educational Rights Privacy Act. FERPA protects the privacy ofstudent education records, and gives you the right to:

o inspect and review your child's education records;o consent to the disclosure of information in the records; ando correct errors in the records.

ask your child's school about its directory information policy. Studentdirectory information can include your child's name, address, date of birth,telephone number, email address, and photo. FERPA requires schools to notifyparents and guardians about their school directory policy, and give you the right

to opt-out of the release of directory information to third parties. It's best to putyour request in writing and keep a copy for your files. If you don't opt-out,directory information may be available not only to the people in your child's classand school, but also to the general public.

ask for a copy of your school's policy on surveys. The Protection of PupilRights Amendment (PPRA) gives you the right to see surveys and instructionalmaterials before they are distributed to students.

consider programs that take place at the school but aren't sponsored by theschool. Your child may participate in programs, like sports and music activities,that aren't formally sponsored by the school. These programs may have web siteswhere children are named and pictured. Read the privacy policies of these

organizations, and make sure you understand how your child's information will beused and shared. take action if your child's school experiences a data breach. If you believe

there's been a data breach and your child's information has been compromised,contact the school to learn more. Talk with teachers, staff, or administrators aboutthe incident and their practices. Keep a written record of your conversations.Write a letter to the appropriate administrator, and to the school board, ifnecessary. The U.S. Department of Education takes complaints about these

30


31/39

incidents. Contact the Family Policy Compliance Office, U.S. Department ofEducation, 400 Maryland Ave., SW, Washington, DC 20202-5920, and keep acopy for your records.


To learn more about identity theft and how to deal with its consequences, visitftc.gov/idtheft. You may have additional rights under state law: contact your localconsumer protection agency or your state attorney general for details.

For more information about surveys, readStudent Surveys: Ask Yourself Some Questions.To learn more about the Family Educational Rights and Privacy Act (FERPA) and theProtection of Pupil Rights Amendment (PPRA), visitwww2.ed.gov/policy/gen/guid/fpco/index.html.

About the FTC

The FTC works to prevent fraudulent, deceptive and unfair business practices in themarketplace and to provide information to help consumers spot, stop and avoid them. Tofile a complaint or get free information on consumer issues, visit ftc.gov or call toll-free,1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a video, How to Filea Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints intothe Consumer Sentinel Network, a secure online database and investigative tool used byhundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

September 2011

Work-at-Home SchemesBe part of one of Americas Fastest Growing Industries.

Be the Boss!Earn thousands of dollars a month from home!

Ads like this are everywhere from the telephone pole on the corner to your newspaper,email and favorite websites. The jobs might be different, but the message is the same start earning a great living today working from home, even in your spare time.

When moneys tight, work-at-home opportunities can sound like just the thing to makeends meet. Some even promise a refund if you dont succeed. But the reality is many ofthese jobs are scams. The con artists peddling them may get you to pay for starter kits orcertifications that are useless, and may even charge your credit card without permission.

Others just dont deliver on their promises. The ads dont tell you that you may have towork a lot of hours without pay, or they dont disclose all the costs you might incur

31


32/39

say, for placing newspaper ads, making photocopies, or buying the envelopes, paper,stamps and other supplies you need to do the job. People tricked by these ads have lostthousands of dollars, not to mention time and energy.

Here are some examples of work-at-home schemes to avoid:

Envelope Stuffing. For a small fee, the ad says, youll learn how to earn lots of moneystuffing envelopes at home. But once you pay, you find out the promoter never had anywork to offer. Instead, after you send in your money, you get a letter telling you to getother people, even your friends and relatives, to buy the same envelope-stuffingopportunity or some other product. The only way you can earn any money is if peoplerespond the same way you did.

Assembly or Craft Work. According to the ad, you can make money assembling craftsor other products at home. You may have to invest hundreds of dollars for equipment orsupplies for example, a sewing or sign-making machine from the company, or

materials to make items like aprons, baby shoes or plastic signs or spend lots of hoursproducing goods for a company that has promised to buy them.

But after youve paid money and done the work, the company doesnt pay you supposedly because your work isnt up to standard. Unfortunately, no work ever is, andyoure left with equipment and supplies but without any income to show for it.

Rebate Processing. The ad in your email says you can earn money by helping to processrebates. And the fee for training, certification or registration is nothing compared to whatyoull earn processing rebates from home, according to the promises in the ad. It says the#1 certified work-at-home consultant behind the program will show you how to succeed

like she did.

What you get are poorly written and useless training materials. There are no rebates toprocess, and few people ever see a refund.

Online Searches. The ad on the website piques your curiosity earn $500 to $1000 aweek, or even $7,000 a month, running Internet searches on prominent search enginesand filling out forms. Even better, you can be your own boss and do the work right fromhome. What have you got to lose, except a small shipping and handling fee?

Unfortunately, you have a lot to lose. The company isnt really connected with a well-

known search engine scammers are just lying to trick you into handing over yourcredit or debit card information. If you pay them even a tiny fee online, they can use yourfinancial information to charge you recurring fees.

Medical Billing. The ads lure you with promises of a substantial income for full- or part-time work processing medical claims electronically no experience needed. When youcall the toll-free number, a sales rep tells you doctors are eager for help, and in exchangefor your investment of hundreds or thousands of dollars, youll get everything you

32


33/39

need to launch your own medical billing business, including the software to process theclaims, a list of potential clients and technical support.

But companies rarely provide experienced sales staff or contacts in the medicalcommunity. The lists they give you often are out-of-date and include doctors who havent

asked for billing services. The software they send may not even work. Competition in themedical billing market is fierce, and not many people who purchase these opportunitiesare able to find clients, start a business or generate revenue let alone get back theirinvestment and earn any income. Many doctors offices process their own medical claims,and doctors who contract out their billing function often use large, well-established firms,rather than someone working from home.

To avoid a medical-billing scam, ask for a sizable list of previous purchasers so you canpick and choose whom to contact for references. If the promoter gives only one or twonames, consider that they may be shills hired to say good things. Try to interviewpeople in person where the business operates. Talk to organizations for medical claims

processors or medical billing businesses and to doctors in your community about the field.Finally, consult an attorney, accountant or other business advisor before you sign anagreement or make any payments up front.

When it comes to business opportunities, there are no sure bets. Promises of a big incomefor work from home, especially when the opportunity involves an up-front fee ordivulging your credit card information, should make you very suspicious. It doesntmatter if the ad shows up in a trusted newspaper or website or if the people you talk toon the phone sound legitimate. The situation demands both research and skepticism.

Ask Quest ions

If youre thinking about following up on a work-at-home offer, do your homework. Hereare some questions to ask:

What tasks will I have to perform? (Ask the program sponsor to list every step ofthe job.)

Will I be paid a salary or will I be paid on commission? What is the basis for your claims about my likely earnings? Do you survey

everyone who purchased the program? What documents can you show me toprove your claims are true before I give you any money?

Who will pay me?

When will I get my first paycheck? What is the total cost of this work-at-home program, including supplies,

equipment and membership fees? What will I get for my money?

The answers to these questions may help you determine whether a work-at-homeprogram is legitimate, and if so, whether its a good fit for you.

33


34/39

Youll also want to check out the company with your local consumer protection agency,state Attorney General and the Better Business Bureau, not only where the company islocated, but also where you live. These organizations can tell you whether theyve gottencomplaints about a particular work-at-home program. But be wary: just because therearent complaints doesnt mean the company is legitimate. Unscrupulous companies may

settle complaints, change their names or move to avoid detection.

In addition, consider other peoples experience by entering the company or promotersname with the wordcomplaints into a search engine. Read what others have to say. Afterall, you are making a decision that involves spending your money.

Where to Complain

If you have spent money and time on a work-at-home program and now believe theprogram may not be legitimate, contact the company and ask for a refund. Let companyrepresentatives know that you plan to notify law enforcement officials about your

experience. If you cant resolve the dispute with the company, file a complaint with theseorganizations:

The Federal Trade Commission at ftc.gov/complaint or 1-877-FTC-HELP (1-877-382-4357).

The Attorney Generals office in your state or the state where the company islocated. Visit naag.org; the office will be able to tell you whether youre protectedby any state law that may regulate work-at-home programs.

Your local consumer protection offices. Your local Better Business Bureau at bbb.org. Your local postmaster. The U.S. Postal Service investigates fraudulent mail

practices. Visit postalinspectors.uspis.gov. The advertising manager of the publication that ran the ad. The manager may be

interested to learn about the problems youve had with the company.


The FTC works to prevent fraudulent, deceptive and unfair business practices in themarketplace and to provide information to help consumers spot, stop and avoid them. Tofile a complaint or get free information on consumer issues, visit ftc.gov or call toll-free,1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a video, How to Filea Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints into

the Consumer Sentinel Network, a secure online database and investigative tool used byhundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

February 2010

34


35/39

Offers information on what to look for when considering Work-at-Home businessopportunities.

SBA Privacy Policy

General Disclaimer

Thank you for visiting the U.S. Small Business Administrations website and reviewingour Privacy Policy. While visiting SBA.gov, we will not collect any personal informationabout you unless you choose to provide that information to us. If you choose to providethis information, it will be used for the express purpose for which it was intended, such asresponding to your request for information or joining a web discussion forum. We remind

you that if you visit a link outside of SBA.gov you are subject to the privacy policies ofthat site.

Information Collected and Stored Automatically

SBA.gov automatically collects some technical information from you when you visit thesite in order to give you the best possible experience. SBA.gov uses web measurementtechnology (Google Analytics) to automatically track how visitors interact with SBA.govincluding where they came from, what they did on the site and whether they completedany pre-determined tasks while on the site. This type of usage is classified by the Officeof Management and Budget as Tier 2 usage since it is a multi-session web measurement.

Aggregate data is used to help SBA improve our user interface and diversify our contentofferings to meet the needs of our customers, track operational problems, prevent fraudand improve the effectiveness, security and integrity of the site. This information doesnot identify you personally and data is only retained in accordance with the SBA dataretention policy. For each page that you visit, we collect and store only the followingtechnical information:

Date and time of access URL address of the SBA.gov webpage visited Internet domain and IP address from which our website was accessed Type of browser and operating system used to access our site (if provided by the

browser) URL address of the referring page (if provided by the browser) Completion or success status of the request for a web page or other on-line item File size of the webpage visited

This information is only used to help us make the site more useful for you. With this datawe learn about the number of visitors to our site and the types of technology our visitorsuse. We never track or record information about individuals and their visits and we do not

35


36/39

share this data with anyone outside the SBA unless necessary for law enforcementpurposes.

Cookies

When you visit some websites, their web servers generate pieces of information known ascookies, which helps webmasters understand how users interact with their site's contentand services. Websites use cookies to track one's activities on a website (e.g., pagesvisited, links clicked on, etc.), and to record information about the user so when the userreturns to the site, customized features can be provided.

There are two types of cookies. A session cookie is a line of text that is storedtemporarily in your web browsers memory cache, and will expire when the browser isclosed. A session cookie is not placed on any hard drive, and it is destroyed as soon asyou close your browser. A persistent cookie is saved to a file on your hard drive and isaccessed whenever you re-visit the website that put it there. This lets that website

remember what you were interested in the last time you visited.

We use persistent cookies to enable Google Analytics to differentiate between new andreturning SBA.gov visitors. Persistent cookies remain on your computer between visits toSBA.gov until they expire. We also use persistent cookies to block repeated invitations totake the customer satisfaction survey. The persistent cookies that block repeated surveyinvitations expire in 90 days.

The U.S. Small Business Administration may utilize third party services to enhance itsdistribution of data and information (e.g., videos) through links from the SBA.gov website. A persistent cookie may be set by such a third party provider when you click on the

provider

Date post:	03-Apr-2018
Category:	Documents
Upload:	eaharri
View:	215 times
Download:	0 times