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Michael Phelan, aged 61, was sentenced to serve seven and a half in years in jail after he failed to appear in court. The felon supposedly appeared on the first day of trial but no longer attended the next day and thereafter. He claimed that he was unwell but further investigation revealed that he lied about his whereabouts. It turns out that he was already on the run and had no more plans to appear in court.
Phelan was found guilty of 33 offences of fraud and theft. He ran a business franchise scam from 1997 to 2010 where he made around £1 million. He conned people by using a different name, Mike Jones, and enticed them to invest in his ghost franchise business. He promised a money-back guarantee if their investment proved unprofitable. He sold the rights of books with the theme of The Strangest – one of which was The Strangest Pubs in Britain – but these books never materialized. While the money of those who have invested will never be returned, the experience gave an important lesson to those who are planning to invest in a franchising business.
So how can you avoid being entangled in a franchise business is a scam? Here are some things that could help.
- Always ask the other person for a disclosure statement and once you have this, read everything even the smallest prints.
- If the deal looks a little bit too good to be true, it usually is.
- When in doubt, better seek the counsel of a lawyer.
- Businesses nowadays can afford to put up their websites – a legitimate franchise often has one so conduct your research.
- You may be better off investing your money with a reputable company that already has other successful franchisees to begin with instead of dealing with shady startups.