Difference Between Franchises And Business Opportunities

Simply stated, a franchise is a type if business opportunity…but not all business opportunities take the form of franchises.

“Business opportunity” is an umbrella term that covers many different money-making propositions. A franchise is a package deal that gives the buyer, in return for a financial investment, the right to use the name and business management techniques of the franchise seller. In return for the security of buying into a well-established business system, the buyer expects the seller to keep a close eye on his franchise operation, making sure that the buyer does not deviate from established business practices. The buyer also receives continued training in the franchise’s unique set-up.

If you’re interested in investing in a business opportunity, see our comprehensive list of business opportunities

Defining a Business Opportunity

To the layman, a business opportunity may be as simple as being offered a job clerking in his uncle’s delicatessen. The term is so general that it has come to mean many things to many people. To date, at least 23 states have attempted to pin down and regulate business opportunities. They have passed laws attempting to define the term. Most of these statutes share some common provisions:

  • A business opportunity is defined as the sale or lease of any product, service, equipment or related material that enables the purchaser or licensee to start a business.
  • The seller states that he will assist the buyer in finding an appropriate location and/or provide the product to the buyer.
  • The seller assures the buyer of an income greater than or equal to the price that the buyer pays for the product when it is resold.
  • The seller guarantees that a market exists for the product or service he is selling.
  • The buyer must pay more than $500 to the seller in order to classify the venture as a business opportunity.
  • The buyer will purchase any products or services developed by the seller.
  • A marketing program will be provided by the seller to the buyer; the program may include the use of a trademark or trade name.
  • The seller guarantees that he will buy back any products purchased by the buyer if the buyer is unable to sell them.

Distributorships are among the most common types of business opportunities. Many of them are network marketing business opportunities or MLM business opportunities. Under the terms of becoming a distributor, you agree to sell the products of a company, without being entitled to use the company’s trade name in your business. The company who buys the distributorship may only allow you to sell that company’s goods – or on the other hand, you may be allowed to sell a variety of products from different companies, depending upon the terms of the business opportunity agreement.

Other Types of Non- Franchise Business Opportunities

In addition to distributorships, other common business opportunities include the following:

  • Vending Machine Routes - purchase of vending machines as well as vending merchandise
  • Rack Jobbing – independently distributing products through racks in stores
  • Dealership – similar to distributor but dealers only sell directly to retailers or consumers rather than to other dealers
  • Trademark / Product Licensees – obtain the right to use seller’s trade name as well as specific methods, equipment, technology or products.

A Closer Look at the Franchise

Franchisers look closely at the qualifications of those who wish to buy a franchise. Typically, the franchiser will look for self-disciplined, responsible types who are willing to accept management direction from the franchiser. In other words, potential franchise buyers must be willing to follow the rules that were written by the franchiser. Franchises can be purchased for under $10,000. However, many franchises, especially popular restaurants, are many times that price.

As a prospective buyer, you must ask yourself how much you can afford to invest, what income you need in order to get by, where you can secure financing…and do you have the necessary management skills to make the business work. For those contemplating buying a franchise, great resources can be found at:

The biggest decision in buying a franchise is whether it suits the buyer’s personality. If the potential buyer is unhappy following someone else’s business operations system, the franchise may not be a good fit. When the prospective franchisee is ready to talk serious business with the franchiser, it’s time for the franchisee-buyer to have his attorney review the conditions of sale very carefully. Buying a franchise is an expensive, long-term commitment.

Whether considering buying a business opportunity or a franchise, every prospective buyer needs to be diligent in performing extensive research before taking on the venture. These purchases always involve a certain amount of risk along with the potential for making a significant profit.

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