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CONSUMER ALERT
MIKE COX
ATTORNEY GENERAL
The Attorney General provides Consumer Alerts to inform the public of unfair, misleading or deceptive business practices, and to provide information and guidance on other issues of concern.
VENDING MACHINE BUSINESS OPPORTUNITIES
Opportunity of a lifetime...for whom?
Fraudulent businesses across the country sell vending machine business opportunities, offering the chance to lose thousands of dollars each year. Their sales pitches, frequently found in classified sections of newspapers nationwide, make outstanding claims, such as:
"Be your own boss, you don't have to quit your job, you can work out of your own home, choose your own hours, make big $".
Entrepreneurs who invest in vending business opportunities rarely make the big money they are promised. It is the Attorney General's experience that the sellers often supply undesirable merchandise, poor quality machinery and unprofitable locations or nothing at all. In many cases, the purchaser pays extra to have the machines located in supposedly established, profitable locations. More often than not, the locations don't exist or make little or no profit for the purchaser.
The Federal Trade Commission recently announced a sweep of 40 enforcement actions against fraudulent vending business opportunities. The sweep dubbed "Operation Vend Up Broke" is described in more detail on the FTC web site (www.ftc.gov). Michigan enforcement actions included:
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Assurance of Voluntary Compliance: |
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Worldwide Vending (snack ) |
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Assurance of Voluntary Compliance: |
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American Paytel, Inc. (payphone)
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Assurance of Voluntary Compliance: |
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Private Issue Telecents (phone card) |
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Cease and Desist Order: |
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A.J. Communications, Inc. |
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Cease and Desist Order: |
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Hi Tech Mint Systems, Inc. |
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Cease and Desist Order: |
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System One Telecom, Inc. |
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Notice of Intended Action and Opportunity to Cease and Desist: |
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Millennium Cappuccino Service Corp. |
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J.S. & Company |
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Mazales Company, Inc. d/b/a American Family Vending |
If you are thinking about investing in a vending machine business opportunity, you can check the reputation of the business by requesting a list of previous investors as well as their addresses and phone numbers. The Federal Trade Commission Franchise Rule requires it, and any legitimate business should be happy to provide it. The specific requirements of the FTC Disclosure Rule are set forth more fully at 16 CFR 436. If possible, visit one or two investors and their locations in person. If you seek information by telephone only, you may well end up talking to a person hired by the seller (called a singer) to give you a glowing report on the business.
If the seller makes earnings claims, insist that written substantiation be included in the disclosure document required by the Franchise Rule. Be sure it includes the number and percent of others who have earned at least as much as the seller claims. If the seller recommends a locator, ask for a copy of the market survey in your area.
Consult an attorney, accountant or other trusted financial or business advisor before you sign any agreements or make any up front payments. Call the Attorney General and Better Business Bureau where you live and where the business is located. Ask if there are any unresolved complaints on file.
To file a complaint against the company, write or call the Consumer Protection Division, Franchise and Business Opportunity Section:
Consumer Protection Division
Franchise and Business Opportunity Section
PO Box 30213
Lansing, MI 48909
Telephone: 517-373-7117
If you are considering getting involved with any business opportunity, the Attorney General cautions you to ask questions and get answers before you open your checkbook!
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