To the untrained eye, franchise and business opportunity
investments look pretty much the same. Both invite you to purchase
a package of goods and services and business concepts. Both offer
you the chance to capitalize on a business idea that has already
proved to be successful. Both provide some training, handholding
and access to a valuable marketplace.
In reality, though, there are huge differences between the two
concepts. While these fundamental distinctions sometimes appear
subtle, detecting and understanding them can help you protect
yourself when you take the plunge into your new business.
If there's one telltale difference between a franchise and a
business opportunity, it's the role of a trademark. The
licensing of trademark rights is a hallmark of franchising: Every
franchisee of a McDonald's, Subway or Holiday Inn is operating
under a trademark license. The consistent image portrayed by these
and other franchise systems symbolizes their strength in the
marketplace, and is the direct result of a trademark license. If a
program grants you the right to operate under a trademark owned by
the seller, you're most likely looking at a franchise rather
than a business opportunity.
Content Continues Below
Never underestimate the value of that trademark. The well-known
marks of franchises like Burger King or Pizza Hut are powerful
consumer magnets. This magnetism is created and maintained by years
of national advertising-we've grown up with these brand names.
The power of a franchise trademark is that it promises consumers
constancy. When someone pulls off a road at the sight of a
trademark on a sign, he or she knows exactly what to expect.
Consequently, weaker marks, such as those of a new franchise system
or those new to your area, don't have that same marketplace
pull and won't be as valuable to the franchisee.
Franchises also put an emphasis on training and ongoing
assistance in the operation of the business. The appeal of
franchising-being in business for yourself but not by yourself-is
rooted in the know-how and services supplied by the franchisor
throughout a long, supportive business relationship. On the other
hand, most business opportunity sellers offer self-contained
programs with some instruction (often recorded) and little or no
ongoing business support.
Another distinction between franchises and business
opportunities is the cost. A retail franchise program can involve
initial fees of $30,000 or more with a total business investment of
$50,000 and up. In contrast, most business opportunity purchase
prices are low enough to be put on a credit card, running from a
few hundred to a few thousand dollars.
Federal and state laws subject the two types of programs to
similar disclosure and registration requirements, but the rate of
compliance is significantly higher in the franchise community. This
means a franchise investor is more likely to receive a disclosure
statement (the Uniform Franchise Offering Circular, or UFOC) than
is a business opportunity investor.
Page 1 |
2 |
3 |
4 |
5 