Franchise opportunities and franchises are two different ways to open your own business without doing it yourself from scratch. Although the two models are very similar and share many characteristics, business opportunities and franchises have marked differences that you should know. Finding out which of the two types of business adventure fits your personal needs and goals is an integral part of the research process that precedes other decisions.
A business opportunity is defined as the sale or rental of any product, service, machinery, etc. which will allow the buyer to open a business.
Types of Business Opportunities
– Turnkey operations: a business model where a product or service is ready to be sold or offered immediately after purchase without additional buyer participation.
– Distribution rights: an independent agent has the right to market and promote the product of another company to dealers, but cannot use the name of that company as his own in transactions.
– Authorized sellers: similar to distribution rights, except that sales are made to consumers and businesses.
– Marketing networks: an agent sells products directly to consumers and hires others in the program. Generally, a commission is paid to the agent on sales, theirs and those of the agents appointed in the program.
– Registered trademark licenses: a company grants a license to use the company’s name along with its methods, products, equipment, or technology.
– Wholesale merchants: a company sells its products in stores through the services of an agent. The agent controls stocks and exhibitors.
– Vending machines: similar to wholesalers except that the agent must pay for the device and the product. The agent must also take care of the technical maintenance of the devices.
– Work opportunities from home: a company hires an agent to work remotely, usually from a computer.
According to custom, with the purchase of a business opportunity, the buyer has absolute rights over the business and can customize many aspects according to their needs.
When a potential business owner contacts a person (or entity) to sell a business opportunity, he is hiring with that licensor, a business system that includes training, equipment, or a method of offering the service that the licensor has successfully developed and It generates benefits. Once the sale has closed, training takes place – if applicable – and the business relationship usually ends.
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. It’s suitable if you often ask yourself, “How can I find a business for sale near me?”
There are three types of franchises:
– Business format: the most popular type of franchise. The franchisor grants a license to the franchisee for the use of its product or service with a predetermined way of running the business.
– Product: The franchisor grants permission to sell/distribute a product using its logo, trademark, and trade name.
– Manufacturing: the franchisor allows the franchisee to manufacture its products (e.g., food) and sells them using its registered trademark and trade name.
When a franchise is purchased, the potential franchisee has to go through a much more extensive scrutiny process before closing the deal.
In addition to an interview, the potential franchisee has to complete a detailed application with his background and work experience to assess how the person would fit the franchise system and must provide accurate information of his financial situation to determine whether he can keep the business, if necessary, until this benefits.
Then, assuming that everything goes well and the potential franchisee is considered a suitable candidate, the franchisor will present a contract that should be reviewed with legal advice before signing.
Unlike the business opportunities, after the purchase of the franchise is completed, the franchisee must abide by the strict rules and operating guidelines of the franchise. These guidelines are established to protect the franchise system and maintain brand consistency. And unlike most franchise opportunities, the costs paid to franchisees do not end after the sale.
The most common continued costs of franchises are royalties. Royalty payments usually are collected while the franchisee owns the franchise. In exchange for those payments, the franchisee receives ongoing technical or marketing support.