Franchise or Business Opportunity? Making Your Choice
There is a difference between a franchise and a business opportunity and each has its merits and its potential pitfalls. Keep in mind that the salesman has been selling for a long time and is experienced in their craft. Their job is to get you excited about the opportunity and have you make a decision to buy from them sooner than later. It is likely your first time making your own franchise decision.
The chief differences between Business Opportunities and Franchising is in the degree of the relationship:
Franchising: The franchisee’s business is identified by the franchisor’s trademark and consistency from location to location is usually important to the franchisor.
Business Opportunities: generally are not identified by the franchisor’s trademark and the trademark if used is generally incidental to the products or services being offered.
Franchising: Franchisees generally receive training, marketing and other support on a continual and ongoing basis from their franchisor.
Business Opportunities: Other than some initial training, ongoing training, marketing and other support is usually not provided and is incidental to the relationship.
Franchising: The franchisee offers products or services typically on an exclusive or semi-exclusive basis and operates their business based upon standards of performance and product line dictated by their franchisor.
Business Opportunities: Business opportunities typically allow the business owner to handle a variety of lines since consistency from location to location is generally not part of the opportunity being offered.
Franchising: The cost of entering into the franchise fee is typically significantly higher than the minimum payment. The payment is made for the right to enter into the relationship and for the use the franchisor’s system and trademark.
Business Opportunities: Under a business opportunity the cost of entrance usually relates to the purchase of identified products or services that will be resold and any fee to join the system can be very modest.
Franchising: The franchisee generally pays a continual royalty to the franchisor, which is often based on the gross sales from the franchisee’s business. The payment allows the franchisee to continue in the relationship.
Business Opportunities: If there are any continual payments, they are usually for the identifiable products or services supplied by the company to the business owner for resale.
There is a growing perception today that franchising is a “sure fire” method of expansion for business and is always a safe investment for franchisees. While it is true that a properly designed franchise program can be an exceptional method of expansion ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â± that is not always the case. The same is true for local franchises. Business comes with risk ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â± and a well-structured and managed franchise system can only reduce some of those risks.
Franchising can never be a guarantee of success.
Your decision to purchase a franchise should be based upon two broad understandings:
1. An understanding of the advantages and disadvantages of franchising in general.
2. An understanding of a particular franchise and how to evaluate them.
Suppress your emotions and base your decision on the facts and what will benefit you both personally and financially. Seek out independent advice. Read articles and books on the subject. There is a tremendous amount of information on the web that you can easily access for free.
Note: The above article is an edited version. Read the full article here.
About the author: Michael Seid is founder and managing director of MSA, one of the world’s leading franchise consulting firms www.msaworldwide.com. He is a noted author and lecturer and is an advisor to some of the nation’s largest and many of its smallest franchise systems.