Franchises vs. Business Opportunities

Estimated reading time: 4 Min Read

Business opportunities and franchises are two ways to open a business without having to start from scratch. While they are similar, they have distinct differences that should be acknowledged.

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Business Opportunities

A business opportunity is the sale or lease of any product, service, equipment etc. that will enable the purchaser to start a business. Business opportunities cover a broad spectrum of careers, and include the following:

  • Turnkey Operations
  • Distributorships
  • Dealers
  • Network/Multi-level Marketing
  • Trademark/Product Licenses
  • Rack Jobbers
  • Vending Machine Routes
  • Work from Home Opportunities

With the purchase of a business opportunity, the buyer owns the business outright and can customise virtually all aspects of the business to their own tastes. When an entrepreneur contacts an entity selling a business opportunity, they are contracting with that licenser for a business system including training, equipment or a service method that the licenser has cultivated and made profitable. Traditionally, once the purchase is finalised, and training – if applicable – is completed, the relationship is over.

Franchises

A franchise is defined as the right or license granted by a company (franchisor) to an individual or group (franchisee) to market its products or services in a specific territory.

Three common types of franchises are:

  • Product: The franchisor grants the franchisee permission to sell/distribute a product using their logo, trademark and trade name.
  • Manufacturing: The franchisor permits the franchisee to manufacture their products (i.e. food) and sell them using their trademark and name.
  • Business Format: Probably the most popular form of franchising. The franchisor licenses their brand to a franchisee for use with a predetermined way of conducting business.

When a franchise is bought, the purchaser is required to comply with strict guidelines and rules regarding the operation of the business. These guidelines are in place to protect others within the system and maintain brand consistency.  And unlike most business opportunities, costs paid to the franchisor don’t end with the initial sale. In exchange for these payments, the franchisee will receive continued support, such as marketing assistance and technical support.

Choosing the Right Option for You

Figuring out what kind of entrepreneur you are and what you’re looking for, is important for deciding which kind of business you should pursue. Both options are good for potential business owners that don’t have a unique product or service to bring to the marketplace, but still want to run a business. The big differentiator is how much support you might want.

If you’re simply looking for a jumpstart and desire more flexibility, a business opportunity is probably the route for you.  If you’re looking for consistent support, and can handle restriction in your business procedures, then a franchise might be the right path for you.

Many people want to be their own boss, but don’t want the task of reinventing the wheel.  In franchising, someone has already done the work establishing the business, and has ironed out the wrinkles.  Here are some common benefits of the franchise system:

  • The business has already been proven to work. The franchisor and the network of busily trading franchisees are testimony to that.
  • You are fully trained in all aspects of the business, and sometimes your business partner and/or key staff receive training too.
  • There is an operating system that can be learned and then implemented to the letter, or with a degree of flexibility.
  • The brand is established.
  • The franchisor helps with finding a good location that will deliver traffic if that’s what is needed (e.g. for retail or food outlets) or will be cost efficient if visibility is not paramount (e.g. for cleaning or home improvement businesses).
  • Marketing tools and ad campaigns are provided, both nationally for the brand and locally for individual franchisees. The majority of franchisors also help franchisees make a major local impact with a press launch of the business.
  • Franchisees receive ongoing support from good franchisors, delivered via toll-free numbers, a company intranet, newsletters, and regular visits by a representative from the corporate office, regional meetings and annual conventions.
  • Centralised purchasing is a feature of many franchises where the franchisee benefits from discounted pricing on goods for a retail store or ingredients for a restaurant and other supplies.

There are many different types of franchise opportunities available, with various investment commitment levels that can range from minimal to more substantial. For those not ready to leave their day jobs, there are plenty of offerings that require only a part-time commitment that grows gradually. Ambitious entrepreneurs, who want to totally commit themselves to owning a business, have a vast range of choices.

Like anything else in life, there are pros and cons involved.  Conduct indepth research to ensure the benefits of franchising outweigh the disadvantages in your personal situation.

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