Joel Libava
Are you looking at franchise opportunities? Business Opportunities?
Both?
Go with a “Business Opportunity” if:
- You really don’t want to pay franchise fees and royalties
- You don’t want to own a business that requires strict adherence to rules
- You would prefer not to sign a 40-page upfront business contract
You do know the difference between a franchise opportunity and business opportunity, right?
If you don’t, you need to.
For example, there are no franchise fees* and no rules. You have a lot of freedom.
*Business opportunities don’t have upfront franchise fees or ongoing royalties.
Business Opportunities: No Franchise Fees And More
It’s important to realize that a “Business Opportunity” is a lot different from a franchise opportunity. A business opportunity is more of a “no rules” type business model. (When I was a franchise broker, a business opportunity seller-and actually the CEO of the business opportunity company, told us to tell our candidates that his business was a business with ‘no rules and no royalties.’)
The “no royalties” part is true. If you end up buying a business opportunity instead of a franchise opportunity, you won’t have to pay monthly royalties…those monthly checks that every franchisee sends in to corporate that are usually based on a percentage of gross sales. And, you won’t have too many-if any, rules to follow. There’s more.
The business opportunities offered these days usually provide the minimum needed to help you launch your business. The support is usually not ongoing. (Unless you’re willing to pay for it.) In addition, the people who are selling business opportunities do have rules-laws, actually, to follow. But they’re generally not held to account as much as sellers of franchise businesses are.
Business Opportunity Laws
My friend, Susan Payton, summed up some of the business opportunity laws for sellers in an article she wrote:
Anyone selling a business opportunity or bizopp must now provide information on a one-page disclosure document (PDF file) at least seven days before the buyer pays money or signs a document.
Specifically, the seller must also state the following:
- Whether legal action has ever been taken against the seller
- Whether there is a cancellation or refund policy for the business transaction
- Any earnings claims that the buyer will earn a specific amount of money through the bizopp
- References for the seller
If you’re interested in learning more about how business opportunities are offered for sale, read the rest of Susan’s article.
Franchise Opportunity/Business Opportunity Pros And Cons
There are advantages and disadvantages to both types of business models. For example:
- Franchises have rules; lots of them. Some of them are in their 300 page operating manuals
- Non- franchise businesses have rules, too-but you are the rule-maker.
- Franchise businesses have specific marketing and advertising plans.
- Franchise businesses have other like-minded business owners that you can easily contact and network with. You can even have a few mentors stacked around the country that can help you figure things out. After all, they’ve probably experienced the same things
- Generally speaking, non-franchise businesses are usually of the solo variety. You’re probably not going to talk with a lot others that are doing what you do. Plus, they are not as easy to find because each business opportunity owner has his or her own corporate name. Franchise businesses all have the same name.
- Non-franchise businesses try different things, until they’ve found what works
- Non-franchise businesses don’t have nearly as many legal requirements to deal with. They have to pay taxes, keep receipts, and maybe have some basic contracts set-up to use with vendors and/or suppliers. This one’s not even close
- Franchises are under contract. Most franchise owners sign a 10-year franchise contract. In it, mutual expectations are explained, along with enough legalese to keep an Ivy League law student engaged in learning, for months
Read The Fine Print
To summarize, as you look for money-making franchise opportunities, you’re going to run into “business opportunities,” too. That’s okay. Just know what you’re getting into and how a business opportunity differs from a franchise opportunity (besides the fact that there are no franchise fees).
Warning: Some business opportunities use the word “franchise” in their marketing. You may have to read some of the fine print on their websites and/or printed documents. I publicly call these companies out whenever possible.
Finally, if you’re looking at business opportunities or franchise opportunities, and you want to avoid the long-term financial pain that comes with choosing the wrong one, we should talk. I can help you a lot.
