Franchise vs. Business Opportunity

To those without experience, a business opportunity and a franchise can seem identical on the surface, but not being wary of the differences could leave you in a situation that's not quite what you expected. The two terms intersect one another in that every franchise is a business opportunity but not every business opportunity is a franchise. There are a number of legal definitions for both terms. Put simply, a business opportunity is a prepackaged business investment that the buyer manages himself. It doesn't put any regulations on the buyer or the way he manages his business. Once the investment has been made, the relationship with the seller ends.

Business opportunities need to be handled with care in foreign countries because the term sometimes carries different definitions. This can be confusing, particularly in North America where statutes have been passed that regulate business opportunities to such an extent that their definitions often include franchises.

The typical lack of regulation and control in business opportunities has advantages and disadvantages. To look at these more clearly, they need to be contrasted with franchises. Franchise operations come with control measures and supportive structures. Franchisees are given extensive training in the industry they've chosen. They're supported in a number of ways by the franchisor. Their payments might be handled by the franchisor, for example and their schedules are often arranged externally so that the franchise is given an instant structure.

A franchise must necessarily have three core facets:

1. Continuous fees or royalties.

2. A ready-made business structure.

3. The permission to use the trademarks in business proceedings.

Franchise relationships end only if the franchisee closes the business. A franchisor will usually conduct some form of quality control on goods or services offered and the ways those products are bought. Royalties, too, are continuous. In exchange, the franchisee is given a solid brand that has proven its value and potential in the marketplace. The trademark will usually carry plenty of weight with consumers, providing instant brand recognition that few other start ups are afforded. Training and guidance are further tools gained in exchange for fees. They slot the franchisee into a smoothly operating machine more seamlessly so that a gradual learning curve is experienced. Advertising and marketing is largely carried out by franchisors. One of franchise's most characteristic icons is the trademark licence. Every franchisee's operations are made possible by the license they hold for using that trademark. It's the symbol of the strength of the business and its impact in the market place is mimicked in every franchise that operates under it.

In contrast, business opportunities are less structured. More regulations are starting to appear for this business model so that registration and disclosure documents are legal requirements investors have to heed when they purchase.

While the supportive structure a franchise offers may seem its greatest selling point, it is the trademark that yields the most weight. They command instant power over consumers. Those who spot them have immediate expectations of identical experiences in every franchise that carries that icon.