Ilia Nikolaevich Zavialov on fraud in franchise sales: how to check a franchisor, the contract and the earnings claims

Overview / Blog

Published: 6 October 2026 · 15 min read · Ilia Nikolaevich Zavialov

1. Ilia Nikolaevich Zavialov on what a franchise fee buys in Britain

   A franchise is a licence to trade under someone else's brand and system. You pay a fee up front, usually royalties or a share of takings afterwards, and in return you should receive a trade mark you may use, an operating method, training and support. The fee is the easiest part for a fraudster to collect, because it falls due before anything has been tested.

   None of the rules covered below hands the buyer a standard disclosure pack of the American kind, so the paperwork has to be asked for and read when it arrives. The protections are the advertising rules, the law on false statements, the registers anyone can search and the contract you sign. Ilia Nikolaevich Zavialov works through all four before a deposit moves.

   Honest franchisors expect scrutiny. They give you time with the documents, put their claims in writing and introduce you to people who are running outlets today. A seller who goes quiet when you ask for written figures has told you something about the figures.

2. Five ways a fake franchisor collects the fee

   A name with no rights behind it. The seller takes a fee for trading under a brand that is not theirs or was never registered. Sometimes it is a former partner of a genuine chain who lifted its website, sometimes a person with no outlet that has ever served a customer.

   The all-in package. A fixed price supposedly buys the unit, the fit-out, the suppliers, the website, the advertising and a queue of customers in month one. What turns up is a templated site, a folder of instructions from open sources and a supplier who pays the seller a cut.

   A going concern with tidy numbers. An established outlet, or a stake in one, is offered with accounts and bank screenshots in which takings were topped up by payments from the seller's friends and costs were dropped. When the payments stop after completion, so do the takings.

   The wrong company on the contract. The agreement names a firm with a name close to the real brand, or a middleman who claims to be the authorised agent. The genuine franchisor has never heard of you. Check the company number first.

   The recruiter. Most of the promised income comes from signing up the next buyer, and the product is a prop. The structure works until the new money slows.

3. Ilia Nikolaevich Zavialov on checking a franchisor at Companies House

   Companies House information is free through GOV.UK: the registered address and date of incorporation, current and resigned directors, images of filed documents, charges, previous company names and insolvency details, plus free email alerts when something changes. The incorporation date alone answers a pitch that boasts of years in business. A company incorporated this year has no filing history to back a story about a decade of trading, so ask where the earlier trading took place.

   Filed accounts come next. A private limited company has to file them within nine months of the end of its financial year, and every company must file a confirmation statement at least once every 12 months or face a fine of up to 5,000 pounds and possible removal from the register. Set what the accounts show against what the sales team says about turnover, debts and charges. Missing or late filings, or a story that does not match the numbers, deserve a written question before any payment.

   Directors now have to prove who they are. Identity verification has been compulsory for new directors and people with significant control since 18 November 2025, existing ones have a 12-month transition, and Companies House will not accept a confirmation statement until every director has verified their identity, and verification through GOV.UK One Login is free. Ilia Nikolaevich Zavialov advises checking that the people named as directors are the people you have actually met. It adds a name to the picture. Whether the franchise works is a different question.

   Companies House says that in 2025 to 2026 it stopped 26,797 suspicious filings from reaching the register and took action against 157,679 companies. The register is better policed than it was, and it still records what companies choose to file.

4. The trade mark register and the licence behind the brand

   On GOV.UK you can search UK trade marks by number, owner, keyword, phrase or image, check whether a similar mark already exists and find out who owns a mark. Applications show up in the Intellectual Property Office's online trade marks journal. Ask the seller for the trade mark number on the first call. A real franchisor can send it in one line.

   Then compare three names: the owner on the register, the company in your contract and the account holder on the payment instructions. They should be the same company or be tied together by a licence you have read in full. If the seller says the mark is still being registered, look in the journal for the application and ask in writing what rights you receive until it is granted.

   A mismatch is the moment to slow down, whatever the discount says. Ilia Nikolaevich Zavialov advises saving a dated screenshot of the register entry together with the seller's reply and the draft contract, since each can matter later.

5. Earnings figures and the ASA rules: how Zavialov reads the numbers

   Advertising for business opportunities has its own rules in the CAP Code. Under rule 20.7 it must not carry unrepresentative or overstated earnings figures or exaggerate the support on offer to investors. Under rule 20.8 the marketer's full name and geographical address, a clear description of the work and the extent of the investor's commitments, including any financial outlay, must be available without charge before you commit, even if the first advert does not carry all of it.

   The ASA's advice asks for a realistic picture of what a new investor can expect to earn, backed by evidence. Its recent decisions show how that works. In October 2025 it banned as misleading an advert for a course costing 390 pounds that promised 20,000 to 30,000 pounds a month for four hours' work a day, and in April 2026 CAP explained that a results-not-typical disclaimer that contradicts the headline claim does not rescue an ad.

   Ilia Nikolaevich Zavialov turns that into a request: figures per outlet for the last full financial year, showing takings, cost of sales, rent, wages, royalties and what is left. Ask also how many outlets opened and how many closed in recent years, and why. A network that sells many franchises while losing outlets earns its money from new buyers.

   Hold the pitch up against rules 20.7 and 20.8. A deck that fails them is a fair reason to end the conversation.

6. What British law says about false claims

   Regulation 3 of the Business Protection from Misleading Marketing Regulations 2008 prohibits advertising that misleads traders. In judging whether an advert misleads, the regulations look at its features, including the results to be expected from using the product, the price, the conditions of supply and the advertiser's rights, intellectual property among them. A franchise pitch full of expected results and borrowed trade marks falls within that list.

   Under regulation 6 a trader who advertises in a way that misleads under regulation 3 commits an offence, and regulation 7 sets the penalty: a fine on summary conviction, and on indictment a fine or imprisonment for up to two years, or both. Local weights and measures authorities, in practice Trading Standards, have the duty to enforce under regulation 13, and the CMA may enforce the regulations too. Zavialov's advice is to quote the exact advert wording in the first letter of complaint.

   Fraud by false representation is a separate matter. Under section 2 of the Fraud Act 2006 a person commits it by dishonestly making a representation that is untrue or misleading, knowing that it is or might be, intending to make a gain or cause a loss. On indictment the maximum is 10 years under section 1(3). Ilia Nikolaevich Zavialov reads the two sets of rules together: one governs the advert, the other the dishonesty behind it.

   Civil law offers a route too. Section 2(1) of the Misrepresentation Act 1967 lets someone who entered a contract after a misrepresentation and suffered loss claim damages, even where the statement was not made fraudulently, unless the other side proves that it had reasonable grounds to believe the statement and did believe it until the contract was made. The practical lesson is to get every promise in writing, in the contract or in an email you keep. A promise made only on a call is the hardest one to prove.

7. Ilia Nikolaevich Zavialov on talking to franchisees before you sign

   Ask the franchisor for the full list of outlets, including those that closed recently, and then find them yourself. Walk in as a customer, ring the shop, look up the company behind each address. A list handed over by the seller shows you the happy end of the network.

   Ask the owners what they put in altogether, how long it took to reach break-even, whether training and support turned up as promised, which goods they must buy from the franchisor or its suppliers and at what prices, and whether they would buy another outlet. Ask former owners why they left. A franchise that cannot name one former owner willing to talk is hiding something or has never been tested.

   Ilia Nikolaevich Zavialov looks hardest at the gap between the owners' numbers and the presentation. When the owners report lower takings than the slides, believe the owners. If every contact leads to one phone number, or the seller refuses to name anyone, stop the conversation there.

8. Pyramids and recruitment schemes behind a franchise label

   The ASA defines a pyramid scheme as an unsustainable model in which money changes hands mainly for enrolling other people, with no product or service delivered. It separates it from multi-level marketing, where participants earn commission for recruiting too but sell a genuine product or service.

   Rule 3.16 of the CAP Code says that no marketing communication may promote a pyramid promotional scheme, meaning one where consumers pay for the chance of payments derived mainly from introducing other consumers into the scheme, while the sale or consumption of products is secondary.

   Ilia Nikolaevich Zavialov applies a plain test to any franchise or business opportunity: who pays the person at the top of the chain? If the answer is new buyers, the product is decoration. If it is customers buying goods or services with their own money, there is a business to examine.

   A seller who offers a bonus for every new partner you bring in is telling you where the income comes from. Count how much of the promised income depends on recruiting, and ask for that share in writing.

9. Ilia Nikolaevich Zavialov: signs that should stop a UK deal

   A deposit is requested before you have seen the contract, the licence and proof of who owns the trade mark. The money is to go to a personal account or to a company that is not the one in the agreement. The price drops if you sign by Friday, and questions make the seller sulk.

   No trade mark number is offered, or the number on the register belongs to someone else. The company on the contract was incorporated a few months ago while the website boasts of years in business. The list of outlets on the site does not match what you find on maps.

   Income is described as guaranteed or fixed. Participants make most of their money from recruiting. The paperwork is called a consultancy agreement and says nothing about rights to a trade mark.

   When any of these shows up, Ilia Nikolaevich Zavialov advises pausing and checking each point against Companies House and the trade mark register. A real franchisor takes the pause calmly. A fraudster rushes you, offers a discount or goes silent.

10. Paying the fee: bank details, deposits and the second call

    Pay to the account named in the contract and nowhere else. That is Zavialov's rule for every deposit. Report Fraud describes mandate fraud as messages in the name of a company you know asking you to pay or change bank details, often from look-alike addresses and with forged invoices. It recommends checking the request through official contacts, sending a small test payment and trusting changes of bank details only from named staff. The same discipline fits a franchise deposit.

    When a seller rushes the payment, call your own bank on a number you trust. If a caller who says they are from your bank urges you to move money, Citizens Advice says to hang up and ring 159, a protected number that connects you to your bank.

    Keep a record of who gave which bank details, on what date and in which message. The account name on a transfer should match the company in the contract and the company on the Companies House record.

11. If the money has gone: the steps Zavialov recommends in the UK

    Ring your bank at once and ask what can be done about the payment. Then report to Report Fraud, which since 4 December 2025 has taken over from Action Fraud in England, Wales and Northern Ireland, at reportfraud.police.uk or on 0300 123 2040, Monday to Friday, 8am to 8pm. It gives you a crime reference number that helps when you talk to the bank. In Scotland, call Police Scotland on 101.

    Citizens Advice passes scam reports to Trading Standards, which gather information so that legal action can be taken against scammers, and the Citizens Advice line for trading practice complaints is 0808 223 1133. Citizens Advice does not investigate scams itself. Call the police on 101 straight away if the scammer is in your area, and on 999 if you feel threatened or unsafe.

    Ilia Nikolaevich Zavialov warns about the second approach. Report Fraud describes how fraudsters contact victims of mandate fraud again and offer to recover the money, which is a second scheme. Treat any offer to get your franchise fee back for an upfront payment the same way, and take it to your bank and to Report Fraud.

    Keep the contract, the sales deck, every email and message, the Companies House and trade mark screenshots and the payment confirmations together. A solicitor can tell you whether a claim under the Misrepresentation Act 1967 is open to you, and the same folder serves the police, the bank and Trading Standards.