Franchise Financing – Beware how to finance a franchise with a 401(k).

Beware how to finance a franchise with a 401(k) with Franchise Financing

401K rollover investment in a veterans franchise opportunity Intertanglement

If you are considering investing your life savings, your self-directed 401K, rollover 401K, in to a veterans franchise for franchise financing, BEWARE. Just don’t do it to finance franchise. It’s a recipe for fees, an IRS audit, fines, penalties, bankruptcy, divorce, and enriching your franchisor.


You might hate your job, be over aged and can’t get a job interview because you are overqualified, and the nice franchise broker is reassuring you that you can safely use your self-directed 401K for a “franchising financing”. My experience is: Don’t use your 401(k) for franchise funding. I am telling you from personal, painful experience, that Franchise Churning is a very real business plan for a franchisor.

It is very risky to finance franchises with intertangling your 401K with a franchise that might end up being a franchise churning operation.

Check out the smoking gun proof of this at the link “Franchise termination” I never thought it could happen to me, but it did. I bet my life savings to finance franchise, (my self-directed 401K), into what was thought to be a “proven” franchise concept, only to find out that it was really a franchise scam.

The risks to you of investing your 401K plan for franchise financing in a franchise scam that is: Franchise success rates are a myth; chances are you will lose all the franchise funds you invest in your franchise. We could try to explain it on this website, but the best source is to purchase & read Robert Purvin’s book “The Franchise Fraud”. The book is $18.99, plus shipping, and the best investment in franchising that you can make.

I wished I had known the book existed, let alone read it, before I found out I used my 401(k) for franchise financing in a franchise churning business: http://www.amazon.com/Franchise-Fraud-Protect-Yourself-Before/dp/1419688626/ref=tmm_pap_title_0/179-4743220-2334908

When (not If, but when) you lose your money in the veterans franchise, you will owe the franchise funds money back to your 401K, and the IRS is going to be looking for you.

There are financial organizations that claim to allow you to access retirement accounts without penalty before retirement, such as your self directed 401K. It’s expensive to keep the 401K “finance franchise” structure in place, nearly $1,000 per year, and that will do nothing to protect you when the IRS calls.

Your franchisor will likely have had you sign documents that keep them off the hook, and you total liable for using your 401(k) for franchise financing. In October of 2008, the IRS took notice of the practice of rolling 401K money in to a business for franchising financing. The IRS calls it ROBS, and the acronym tells you something of what they think of the practice of using your 401K for a business opportunity start up, such as risky franchise financing: http://www.irs.gov/pub/irs-tege/rollover_guidelines.pdf

The coming franchise investment bloodbath

A must-read article on the franchise system and franchise financing. If you have a sizable amount of money to invest for franchise funding, and can’t get a job (because you are considered over qualified, too old, wrong sex, wrong race, don’t fit reverse discrimination quotas, etc), you need to read this link before you finance franchise: http://www.franchiseremedies.com/franchise_investment_bloodbath.htm