Similarly, if a franchise or business opportunity does not meet the definition of a “franchise” for Minnesota state law purposes, it nevertheless may be subject to the FTC Rule. Similar to the Minnesota regulation of franchises and business opportunities, the offeror of a business venture covered by the FTC Rule must provide certain information to the prospective offeree. Also, and again similar to the Minnesota system of regulation, it is not the job of the FTC to assess the merits, completeness, or even accuracy of the information mandated by the FTC Rule. Even for ventures not regulated by the Minnesota Department of Commerce or the FTC, the FTC in its A Consumer’s Guide to Buying a Franchise brochure recommends that an entrepreneur seek the following information before investing or committing to a franchise or business opportunity: • Talk to any persons named as owners or investors in the opportunity. Don’t rely on persons listed as “references”, unless it is clear that they are truly owners or investors. • Carefully and thoroughly investigate any claims made about potential earnings. Seek written information on this topic, not just oral statements, and seek the most detailed information available (i.e., do not rely on broad claims such as “we are a ten billion dollar industry”). Independently analyze, if possible, the written basis for those claims. For example, the entrepreneur could hire his or her own CPA to independently audit that information. • Seek similar information from the business competitors of the offeror. For instance, seek the UFOCs from other offerors of similar franchises or business opportunities. • Be aware of high pressure sales tactics, and consider why they are being used; if the offeror does not have any other way to sell the franchise or business opportunity, do you really want it? Be wary of any oral statement that differs from any statement made in writing. Also be wary of any presentation that promises “easy money”. Successful entrepreneurs almost always agree that there is no “easy money”, and that owning one’s own business, while rewarding, takes a great deal of time and energy. USING PROFESSIONAL ADVISORS Before beginning any evaluation of a business opportunity, the entrepreneur should decide whether to perform that evaluation himself or herself, or engage an accountant or attorney to assist him or her. Professional advisors, such as attorneys and accountants, can greatly enhance an entrepreneur’s review of a potential business. This is true for at least two reasons. First, those professionals will have no emotional attachment or stake in that review process; their objectivity may serve as an important counterbalance to an entrepreneur’s enthusiasm. Second, those professionals should be able to provide thorough review of financial or intellectual property information provided, and should be knowledgeable of any potential obstacles to the success of the business (such as the need for licenses or permits). For instance, it is important that someone thoroughly evaluate financial information supplied by a seller or offeror, or pro forma information prepared by the entrepreneur, and in many cases a professional is best suited to that task.
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