A Leicester businessman was found guilty of selling fraudulent franchise licences to victims across the UK, following a four-day trial at Leicester Crown Court.
Nazir Abdul Rashid Daud, 58, formerly of Landseer Road, Leicester, was found guilty in his absence though pleaded not guilty during the trial.
Daud was charged with three counts under the Fraud Act 2006 in relation to false representations between 2015 and 2018 and a further charge of fraudulent trading under the Companies Act 2006.
The fraud has been found following an investigation by Leicestershire County Council Trading Standards Service which received statements from 18 victims.
The court heard that Daud was the sole director of Payrolls Direct Limited started in 2014.
Daud had advertised franchise licences for a new cloud-based payrolls system, which he was selling 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 per cent of the fee, with the franchisee keeping the rest
According to report, Daud claimed that the 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.
However, the investigation revealed that only one was able to sign up any clients, and as the promised unlimited help, support and training was never provided, the franchisees were unable to use the payrolls system, leading to the contract with the clients being terminated.
Co-defendant Anthony Raybould, 65, of Alumhurst Road, Bournemouth, pleaded guilty during the trial.
The court heard that Raybould was the first franchisee licence holder, although he soon became a salesperson for Payrolls Direct, encouraging people to buy franchise licences.
He pleaded guilty to charges of fraud by false representation for receiving commission for every franchisee who bought a licence.
Victims said he made false representations to them that he had many clients, was earning more than £2,000 per month on a part-time basis and was retiring to Spain, in reality he was not earning anything from the franchise.
The court heard that Daud earned in excess of £300,000 in franchise licence fees and Raybould earned in excess of £10,000 in ‘commission’ payments.
"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," said Gary Connors, head of Leicestershire County Council Trading Standards Service.
"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."
Judge Mooncey sentenced Raybould to 24 months in custody, reduced to 22 months for the late guilty plea, with the sentence suspended for two years.
The judge issued a warrant for Daud's arrest as he was unable to technically sentence him in his absence.
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