Detecting Potential Franchise Scams
Detecting potential franchise scams is crucial for aspiring franchisees to avoid financial pitfalls and protect their investments. Here’s an 9-point checklist to help you identify red flags and verify the legitimacy of a franchise company in the Philippines.
- Ensure the franchise company has all necessary legal documents, including DTI registration, SEC registration, Mayor’s Permit, BIR registration, and other relevant certifications. Verify the authenticity of available public documents such as SEC registration and audited financial statements.
- Verify if the franchise company has secured trademarks, logos, and slogans with the Intellectual Property Office to protect its brand identity.
- Check if the company has been operating for at least two years under the same name with a clean legal record. Also Look for evidence of established physical or franchise outlets, preferably with at least two or more operating outlets.
- Ensure the company has adequate manpower assigned to essential departments for smooth business operations.
- Confirm the existence of a reachable corporate office with proper government permits, including BIR registration.
- Review the franchise agreement thoroughly, ensuring clarity on business operations, terms, and provisions.
- Ensure the franchisor offers comprehensive support for logistics, marketing, and management aspects of the business.
- Check if the company provides a list of accredited suppliers for raw materials, ensuring a reliable supply chain.
- Confirm if the franchise company is a member of reputable franchise organizations like the PFA, AFFI, or FIFA.
By following this checklist, aspiring franchisees can protect themselves from potential scams and make informed decisions when exploring franchise opportunities. Stay vigilant and prioritize due diligence to safeguard your investment and future business success.
