Rachelle Bachman thought she had the business world by the tail when she paid $10,365 to become a home-based distributor of licensed Walt Disney Co. merchandise.
After all, Disney toys, watches, clothing and collectibles are perennial bestsellers in the $16.7-billion U.S. market for licensed movie and cartoon merchandise.
The working mom's dreams of running her own business seemed within reach as she pictured Disney merchandise flying off her in-store display racks with each new film and classic video release.
"I had been raised on Mickey Mouse," said the Huntington Beach resident. "I thought, 'What could possibly go wrong with Disney?' "
Plenty, in what has turned into an unhappy toy story for Bachman and thousands of would-be entrepreneurs trying to cash in on the Disney "magic."
From envelope stuffing to phone-card marketing, work-at-home ventures are tempting an increasing number of Americans searching for job security or extra income. Some of these deals, which might be advertised at trade shows or through classified ads, are legitimate, but others prey on inexperienced investors looking for financial independence, authorities say.
Amid this surge of self-employment opportunity, a fast-growing breed of companies with no connection to the Burbank-based entertainment giant has begun offering individuals a chance to start their own Disney-products business.
Selling Disney merchandise is "the ultimate high-profit business," according to the marketing manual of one promoter, which promises to supply the inventory, displays and know-how to launch even novices into the lucrative world of Disney memorabilia.
"This just might be the world's best investment," crows another.
Purchasers envision themselves becoming mom-and-pop Disney Stores,
selling the latest merchandise on consignment through convenience marts and other small retailers.
In reality, many have found that they've paid anywhere from $10,000 to $50,000 for ubiquitous Disney knickknacks worth a fraction of that amount, including slow-selling items that competing retailers dumped from their shelves long ago.
"They never did carry anything from 'Toy Story,' which was in high demand," said Tim Dillon, a struggling Northern California distributor who paid a Florida company $21,640 to set him up in the Disney-products business. "But we could get plenty of 'Hunchback of Notre Dame' stuff that wouldn't sell."
Accused of swindling investors out of millions, companies such as Louisiana-based Kingdom of Toys, which sold Bachman her distributorship, have been hit with lawsuits, are being scrutinized by regulators and are even targets of FBI investigations.
Kingdom of Toys and other promoters have denied any wrongdoing and suggest that some disgruntled investors simply didn't possess the business acumen to succeed.
Disney has expressed concern that its name is being used to entice people to invest in business opportunities it doesn't endorse. But company executives say Disney can't fully control where its 3,000 licensees sell their merchandise and has only tenuous legal standing to pursue disreputable business-opportunity promoters in court.
"It has been very frustrating for us," Disney spokesman Chuck Champlin said. "But the wronged party is really the investors."
Disney's reluctance to take an aggressive stance, coupled with the public's appetite for all things Disney, has produced a climate for these business opportunities to thrive, according to industry watchers.
At least a dozen firms have emerged selling distributorships for Disney-licensed merchandise, up from a handful just a few years ago.
"The attraction is tied to the Disney name," said Kansas Atty. Gen. Carla Stovall, whose office in April seized luxury cars from two Kansas City-area firms--Parade of Toys Inc. and Wonderful World of Toys Inc.--whose principals are accused of fleecing investors out of at least $14.9 million. "That's their hook into these folks."
Authorities say the proliferation of questionable Disney-product distributorships mirrors an upswing in business-opportunity fraud nationwide. Exploiting the climate of anxiety created by corporate downsizing, scam artists are finding ripe pickings among Americans looking to become their own bosses.
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Since 1995, the Federal Trade Commission, working with state law enforcement authorities across the country, has launched two major crackdowns on self-employment ventures. The schemes run the gamut from pay phone investments to work-at-home medical billing operations and multilevel marketing scams.
Among the 75 businesses charged in the latest action are three firms selling Disney-product distributorships. Authorities charged Parade of Toys, Florida-based American Marketing Inc. and Universe of Toys in Texas with violating business-opportunity laws as part of that 1996 sweep, dubbed Operation Missed Fortune.
