Business. Opportunity. Two words that go together beautifully: Business Opportunity. For entrepreneurs, it's the stuff that dreams are made of.
Business opportunities (or "biz opps") come in all sizes and shapes: franchising, licensing, multi-level marketing, and more. But "business opportunity" has a very specific meaning in the eyes of federal and state regulators.
Franchises and business opportunities both are regulated by the Federal Trade Commission. Almost 30 years ago, the FTC published rules to protect potential buyers of franchises and business opportunities from unscrupulous sellers. As part of those rules, the FTC distinguished between franchises and biz opps.
In a Plain English, easy-to-read guide to its long and complicated rules, the FTC defined two types of "continuing commercial relationships": 1) traditional franchises, and 2) business opportunities.
According to the FTC, traditional franchises involve 1) use of trademark; 2) significant control or assistance; and 3) required payment. Business opportunities involve 1) no trademark; 2) location assistance; and 3) required payment.
Legalities aside, some of the main ways franchises and business opportunities play out in the real world are as follows:
* One-time purchase
* On your own
* Less expensive
* Simpler to run
* Less or part-time
* Less disclosure
* Franchise fee, royalties
* Ongoing support
* Rigid system
* More expensive
* More complex
* More or full-time
* More disclosure (UFOC)
Of course a franchise could cost less or be simpler to operate than some biz opps. But in the large majority of cases, biz opps will cost less, be easier to run, will not demand as much time, and allow for more flexibility than franchises. Think commitment: franchisees often are betting it all on one horse; business opportunities often are part-time gigs meant to augment existing income: work your full-time job by day and stuff envelopes by night.
Whether that business opportunity is vending machine routes, phone cards, or selling calendars or other seasonal goods from a kiosk in a mall, it generally involves buying a product or service "wholesale" and selling it "retail"-whether from home, your vehicle, the Internet, a kiosk, or a fixed location. And all the profits are yours to keep (vs. paying ongoing royalties to a franchisor).
Buyer be wary
While all businesses involve some level of risk, the FTC is especially vigilant in policing business opportunities. Its web site is packed with articles warning buyers of potential pitfalls.
As with any business venture, thorough research is a must-especially when evaluating claims like "Make big money working at home only 3 hours a day." Going online is a great place to start, but it's only a beginning. Get out and talk face to face with people already doing what you're contemplating. Don't be shy. Ask how much they gross/net; if they'd do it again; what problems surprised them. Get the downside down.
Disclosure of potential earnings by the seller is key. Requirements are more stringent for franchising than they are for business opportunities-which is why the FTC web site for biz opps is full of warnings for potential buyers. Twenty-six states have regulations governing business opportunities-more than twice as many as for franchises. (See www.ftc.gov/bcp/menus/consumer/invest/business.shtm for more.)
Finally, get the seller's promises in writing, and get professional advice (lawyer, accountant, or business advisor).
Pink Cadillacs and plastic containers
Network marketing, also called multilevel marketing (MLM) or direct sales, is another type of business opportunity. MLM brings to mind Tupperware parties, Amway supplies, and Mary Kay Cosmetics. These biz opps have the lowest price of admission, in the hundreds, not thousands, of dollars.
Choosing which model-franchising, business opportunity, MLM, self-employment-is best for you is a highly individual choice. Much depends on your goals and circumstances. Money, of course, often is the deciding factor; generally it costs more to buy a franchise than a business opportunity. Other factors include skill set, passion, financial goals, style (personal, work, and life), geography, and timing. The key is to find what's right for you-and find out as much as you possibly can before committing.
Share this Feature
Comments:comments powered by Disqus
- Multi-Unit Franchising
- Get Started in Franchising
- Open New Units
- Featured Franchise Stories