Although there are no foolproof steps to take in evaluating a business, this section of this Guide will offer guidance on the types of questions to ask, and sources of information to review, before investing in a new business (whether or not it is a franchise) or buying an existing business. Assuming that after evaluating the opportunity the entrepreneur still wants to proceed, the sections of this Guide on Accounting for the New Business – Income Forecasting Techniques, and on Business Plans, should be consulted. It is worth emphasizing here that an entrepreneur’s analysis and evaluation should occur before he or she makes any kind of commitment (even oral), whether contractual or financial, to the business, or makes any payment, of any size, in connection with the business. In any event, a potential entrepreneur should carefully avoid obligating himself or herself to participating in any business opportunity, in any way, without first evaluating that opportunity. SOURCES OF INFORMATION One source of information is the Minnesota Attorney General, at 651-296-3353, and the Better Business Bureau, at 651-699-1111, to determine if any complaints have been filed in connection with that business. Also, the National Consumer League’s (NCL), Fraud Center is a private, nonprofit organization that operates a consumer hotline to provide service and assistance in filing complaints against unscrupulous business operators. The NCL helps the FTC and state Attorneys General by entering complaints into a computerized database to help track and identify operators of business frauds. Contact the Fraud Center online at Fraud.org. These are prudent, but not foolproof, steps in evaluating any business opportunity. Note that the FTC is another potential source of information about the offeror. The FTC’s website contains a summary of each of the FTC’s legal actions against offerors of franchises and business opportunities, along with information on specific types of fraudulent business opportunities that the FTC has become familiar with. The website contains a section of information called Franchises, Business Opportunities, and Investments, which provides resources to help people spot business opportunity and investment scams and includes the FTC’s Franchise Rule Compliance Guide , 16 C.F.R. section 436 (the FTC Franchise Rule). Remember that, as discussed in more detail in the Franchise Registration section of this Guide, the Minnesota Department of Commerce also will have copies of the registration statement made by the offeror of any franchise or business opportunity that is a franchise within the meaning of the Minnesota Franchise Act, Minn. Stat. Chapter 80C. SPECIFIC INFORMATION TO SEEK FROM THE OFFEROR If the franchise or business opportunity is a franchise under the Minnesota Franchise Act, the offeror is required to make certain filings, including the Uniform Franchise Offering Circular (UFOC) with the Minnesota Department of Commerce, before offering that franchise or business opportunity to anyone. See the section of this Guide on Franchise Registrations. Note that although the UFOC will contain certain detailed information on the business opportunity or franchise, including audited financial statements, it is not the job of the Minnesota Department of Commerce, or any other government agency, to assess the merits, completeness, or even accuracy of any of the information contained in a UFOC. That work is for the entrepreneur.
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