SCORE Small Business Blog

Franchise or Business Opportunity: What’s the Difference?
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If you’re considering starting a business, one of the options you might be thinking about is buying a franchise. But as you investigate the world of franchising, you’re likely to come across a related option called a business opportunity. Business opportunities are similar to franchises, but they also differ in some key ways.

A business opportunity is a package you buy that allows you to start a business. In this way, it’s like a franchise. One key difference is that, unlike a franchise, where you will get training and ongoing support, with a business opportunity there is usually no ongoing relationship between you and the company you buy the opportunity from.

As a result, a business opportunity offers greater freedom than a franchise. With a franchise, you must follow the systems put in place by the franchisor. With a business opportunity, you’re free to run the business however you want. In addition, you usually won’t have to pay continuing royalties.

Of course, the flip side of freedom is that if your new business starts to falter, you may not have anyone you can turn to for help. And because business opportunities are not regulated as closely as franchises, there are some scams masquerading as opportunities out there.

So how can you protect yourself? First, even though a business opportunity typically costs far less than a franchise (some cost only a few hundred dollars), you still need to do your homework before you buy. Some states do regulate business opportunities; in those states, sellers may be required to give you a disclosure document at least 10 days before you buy the opportunity. You can contact your state’s attorney general’s office or consumer protection agency for more information.

Try to investigate the business opportunity just as you would a franchise. That means searching online, reading everything you can find about the opportunity, contacting the Better Business Bureau and talking to current and former licensees who have purchased the opportunity. Don’t just talk to the names picked by the biz opp seller—see if you can get a list of everyone who has bought the opportunity. And work your networks of personal and business contacts, too—with social media, it’s easy to find friends of friends who have firsthand knowledge of an opportunity’s pros and cons.

Don’t get me wrong—not all business opportunities are scams (far from it). But you do need to take steps to protect yourself and make sure the business you choose is the right one for you.

Still uncertain what business to start? A SCORE Mentor can help you assess your skills and make the right choice. Visit the SCORE website to get matched with a Mentor and get 24/7 advice online.

Rieva LesonskyCEO, GrowBiz Media
Rieva is CEO of GrowBiz Media, a content and consulting company specializing in covering small businesses and entrepreneurship. She was formerly Editorial Director of Entrepreneur Magazine and has written several books about small business and entrepreneurship.
www.growbizmedia.com | @rieva | More from Rieva

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Discussion (2) Comment

  1. You’re correct. Many states have laws that pertain to any opportunity that costs $500 or more. Always check with your state officials before you invest any money.

  2. I believe that some states do regulate such business opportunities. You can contact your state’s attorney general’s office or consumer protection agency for more information.

 

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