To the new entrepreneur, a business opportunity and a franchise may appear to be the same thing.These terms are often used interchangeably, but there are significant differences you should understand. And, while technically, all franchises are business opportunities, not all business opportunities are franchises. There are many similarities, such as that both are the sale of a packaged goods and services, and both afford the purchaser the opportunity to capitalize on a proven successful business. Here, we will discuss some of the differences between the two.
In simple terms, a business opportunity is any packaged business investment that allows the purchaser to begin a business. Typically, the seller of a business opportunity has little to no control over the purchaser’s business operations; the relationship is terminated once the sale is complete. Business opportunities are much like buying and selling a home. Once the seller has signed the home over to the buyer at closing, the seller can no longer make decisions on what the buyer does with the house and the seller is no longer legally responsible for the home. If you do decide to go the business opportunity route versus buying a franchise, be sure to do your research and have structures inspected, the same way you would with the purchase of a home. Because the legal ties end at the final sale, if there are problems, you inherit them.
A turn-key business opportunity is a business opportunity where everything already exists for the buyer to start, or take over, a business. A popular example is a bar or pub. A seller decides he no longer wants to be a bar owner, so he sells it to someone else. The structure exists with bar stools, pool tables, cash registers, and keg taps inside. The buyer must simply hire her staff and arrange for alcohol delivery. She can change the name or leave it the same and list it as “under new ownership.” In some cases, the alcohol and staff may even be part of the sale.
A partial turn-key is similar to a turn-key business opportunity in that the buyer is set up to start a business from an existing business, but what is included may be limited. For instance, a restaurant. The building with built-in booths may exist, perhaps it even has all of the appliances. However, the seller will need to take care of the rest, including menus, food, tableware, and a name. In a partial turn-key, the basic business exists, but the purchaser cannot simply take over. If you purchase a partial turnkey business opportunity, it is important to have it documented, legally, what is included in the sale.
Franchises are the sale of a business, along with the use of a Trademark. A franchise is a legal, ongoing relationship between the business owner and the franchisor. This is a pretty significant difference from a business opportunity. Generally, the buyer will pay royalties to the seller for use of the Trademark. With the purchase of a franchise, the business model and practices remain the same. Because the Trademark is attached to a franchise, usually there is ongoing support and training offered by the parent company. The benefit to a franchise is the instant brand recognition.
Which one is better? There is no clear answer to that question; it all depends on what you, as the potential owner, are looking for. While purchasing a business opportunity allows more room for creative freedom, it also offers less brand recognition and support from the known successful parent organization. With a franchise, there is a lot of room for success if the original business model is used, but you must continue to pay royalties to rely on the brand name.
Either opportunity is great for an entrepreneur and requires much less work than starting a brand new business from the ground up. Both opportunities set an entrepreneur up for success. The most important factor in the success of your business is you. How much effort are you going to put into it? Do you believe in the business or is it simply a way to make money? Becoming a business owner is much more than buying a business. Owning your own business can be very satisfying and rewarding if you do it right.