| When considering life as an entrepreneur, it is | | | | there usually are not ongoing royalties to pay to the |
| important to understand the differences between a | | | | seller. |
| franchise, business opportunity and a start-up | | | | - Business opportunities afford a proven system of |
| business. There are, of course, advantages and | | | | operation and products and services. |
| disadvantages to each style of business. In this article | | | | - Financing is many times readily obtained through the |
| we will discuss the advantages and disadvantages of | | | | leverage of the parent company. |
| business opportunities and the difference between a | | | | - Comprehensive training programs are usually |
| franchise and business opportunity. | | | | provided, making the learning curve much easier and |
| BUSINESS OPPORTUNITY: | | | | shorter. |
| All franchises are considered business opportunities, | | | | - Site selection is often chosen by experts at the |
| but not all business opportunities are franchises. A | | | | parent company, usually providing the best location |
| business opportunity involves the sale or lease of | | | | for marketing the products. |
| another's product or service that will enable the | | | | - Marketing and advertising are usually a joint effort |
| purchaser to establish a business. Other types of | | | | between the opportunity provider and the purchaser. |
| business opportunities besides franchises include: | | | | This can decrease dramatically promotional expense |
| - Turnkey operations - A product or service which | | | | for the licensee. |
| can be provided or resold to another immediately | | | | - Purchasing power is a great advantage. The larger |
| after it is purchased. It is often considered the same | | | | parent company can often get better deals by |
| as a franchise, but not all franchises are turnkeys. | | | | buying equipment and materials in bigger quantities. |
| - Distributorships - An independent agent that has | | | | Disadvantages: |
| entered into an agreement to market the product of | | | | - Since the purchaser usually does not pay any |
| another, but does not use the manufacturer's trade | | | | ongoing fees to the seller, there is typically no |
| name as part of their name. Distributors may sell to | | | | incentive for ongoing support to be provided. If the |
| several dealers. (For example, food service | | | | seller runs into problems, he/she is usually on his/her |
| distributors that provide bulk items to restaurants, | | | | own. |
| hotels, schools, hospitals, etc.) | | | | - Exclusivity clauses can put limits on what a licensee |
| - Dealer - Similar to distributorship but they sell only | | | | is allowed to sell. If the entrepreneur deviates from |
| to consumers and retailers. (For example, auto | | | | the clause, the licensor can cancel the agreement. |
| dealerships) | | | | - Even though sites are usually selected by experts |
| - Vending Machine routes and Rack Jobbers - Two | | | | within the parent companies, some poor choices can |
| methods of marketing another company's products | | | | be made. It is important for the licensee to research |
| through distribution systems to various stores. | | | | the area themselves for marketability of the |
| - Network Marketing or Multi-Level Marketing (MLM) - | | | | products/services being offered. |
| A business model that needs a distributor network to | | | | - If the parent-company would go bankrupt, there is |
| build the business. It involves selling products directly | | | | the risk of the licensees losing their businesses as |
| to consumers, as well as through a network of other | | | | well, although the risk would be greater if it were a |
| agents whom you recruit. You usually earn | | | | franchise. |
| commissions on both your sales as well as those of | | | | Any type of business opportunity should be carefully |
| the other agents you recruit. | | | | researched and investigated before taking the plunge |
| - Trademark/product licenses - The licensee may use | | | | in order to minimize the risk. A potential entrepreneur |
| the seller's trade name as well as certain of their | | | | must also carefully evaluate his/her personality traits |
| methods, products, equipment, and technologies. | | | | and family situation to see what sort of business |
| - Cooperatives - An existing business may affiliate | | | | would best suit his/her needs. |
| with a larger network of similar businesses in order to | | | | It is suggested you contact a franchise business |
| advertise and market products and services, using a | | | | consultant to discuss if franchising is right for you. |
| common identity. | | | | You can visit and click on the Franchise Consulting link |
| Advantages: | | | | to have a local franchise business consultant contact |
| - Typically the initial start-up costs are less than | | | | you for a phone interview. |
| establishing a franchise. Upfront fees are lower and | | | | |