Toronto's Business Lawyer Blog

The opportunity to go into business for yourself is a powerful incentive for Canadians to look towards franchises as their point of entry. Unfortunately, since the highly established franchise systems are extremely costly, people have a tendency to look to more affordable franchises. These new franchise systems can provide incredible upside, since the cost of entry is considerably lower than the more mature franchise systems. Nevertheless, this also leads to their having considerable inefficiencies and at times they are outright fakes.

A recent case-in-point is a North American franchise systems, which their originators sought to ply on unsuspecting prospective franchisees. The franchise disclosure documents appeared to be extremely well presented, though this was largely a product of a well conducted cut-and-paste job. There was an auditors report, however upon further inspection, the accountants were based in New York City and were not capable of opining on the financials of a Canadian franchise system and the corporate entities that support it. Also, supposed existing franchisees contacted the prospects, in an effort to preclude the prospects from contact anyone on the disclosure documents list of existing franchisees.

These are crafty and devious individuals, who attempt to scam and cheat the unsuspecting out of their hard-earned money. Don't allow yourself to be caught by such a scam, because even though these charlatines will continue to become more clever in their deceit, it is possible to find them out. You need to question those aspects of the disclosure document that can be questioned and demand independent verification of what is being set forth. Also, you should retain the services of appropriate professionals who will take a hard look at these franchise systems and will not simply gloss over the weaknesses in the corporate presentation. With such actions you can definitely limit your vulnerability to being a victim of fraud.