A prosecution brought by Leicestershire County Council Trading Standards has resulted in guilty verdicts for two men who sold fraudulent franchise licences to victims across the UK.
Nazir Abdul Rashid, 58, formerly of Landseer Road, Leicester, was the sole director of Payrolls Direct Ltd, which sold franchise licences for a cloud-based payrolls system for between £5,995 and £9,995.
Franchisees would sign up clients, process payroll for each employee of the company they signed up, and Payrolls Direct would take 20% of the fee, with the franchisee keeping the rest.
Daud claimed that buying a franchise licence would allow people to earn between £250 and £2,000 per month. Advertising for Payrolls Direct also promised franchisees initial training, ‘ongoing unlimited support’, marketing materials and networking opportunities with successful franchisees.
But of the 18 franchisees who spoke to Leicestershire Trading Standards, only one was able to sign up any clients. Because the promised ‘unlimited support’ and training was never provided, the franchisees were unable to use the payroll system, leading to the contract with the clients being terminated.
Co-defendant Anthony Raybould, 65, of Alumhurst Road, Bournemouth, pleaded guilty to fraud by false representation under the Fraud Act 2006 and fraudulent trading under the Companies Act 2006.
The court heard that many victims had taken loans out to pay for the initial franchise fee or used savings. Several had fallen into debt and given up their own employment, and the ordeal had severely affected their mental health.
The court was told that Reybould was of previous good character and therefore a suspended sentence was imposed. As Daud has not yet been sentenced, no mitigation was made on his behalf. Raybould was sentenced to 24 months in custody, reduced to 22 months for the late guilty plea, with the sentence suspended for two years.
The judge was unable to technically sentence Daud in his absence from court, but issued a warrant for his arrest.
An order was also made under the Proceeds of Crime Act, and a timetable set for confiscation proceedings to recover any criminal benefit obtained by the pair.
Following the sentencing, Head of Leicestershire County Council Trading Standards Service, Gary Connors, said: “This form of fraud provides a quick financial return for the perpetrators, leaving the victims in financial and emotional turmoil.
“We expect the cost-of-living crisis will provide greater openings for franchise fraudsters as people look for more openings to bring in much needed income. The franchise industry is unregulated as a sector, and I would advise those seeking a new business opportunity to treat every success or income claim as totally unsubstantiated; if the seller cannot produce meaningful audited financial accounts of that success, move on.
“For Leicestershire Trading Standards Service, such investigations are resource-intensive but necessary to protect consumers and legitimate businesses.”