Franchise vs. Business Opportunity?

Thinking of starting your own business this year, but don't want to launch a business completely from scratch?  Then consider a business opportunity often referred to as a “turnkey” business.  With a business opportunity package, you are purchasing a system of doing business that often comes with an instructional manual or a video.  There are no royalties to pay, but there are often no support or follow-up opportunities either.

There are fundamental differences between a business opportunity and a franchise. With a franchise, you are involved in a long-term relationship with a franchisee.  You purchase their signage, logos, uniforms, and systems of doing business.  A franchised business is based on a proven method of doing business. There is no opportunity for you to bring originality to the business.  You must support the proven franchised system of doing business.

Most often, franchised businesses are "look-a-like" businesses, meaning that signage, outfits, offerings, menus, vans, logos, etc. are identical.  When you pay the franchise fee, you are purchasing the rights to use these clearly identified logos and business symbols from that particular franchise corporation.

In order to run the franchise, you must follow the rules and regulations as set forward by the franchisor. You may be required to attend training classes, perhaps an annual convention, and the franchisee will require you to keep up with their standards.  According to the International Franchise Association, you are in business for yourself, but not by yourself.

Many entrepreneurs like the idea of purchasing this proven system of doing business. The franchisor may even help pick the site and help design the store, restaurant or office center.

You will be required to pay royalties every year to keep your franchise operating. The royalty fees go to a national advertising fund and also to a general fund to keep the franchisor operating at a profit.

The Business Opportunity

When you purchase a "business opportunity" package, you needn't answer to anyone.  You are purchasing instructions or materials to conduct this business, but you are not purchasing a strict set of rules and regulations.

Often, business opportunity packages are called “turnkey” operations.  The theory is that all you need to do to launch the business is buy the package, read the material, study the manual/video, "turn the key" and open your business.  Some start-up business opportunity packages cost $100 or less.  Others cost thousands of dollars.  But there is one common denominator: the opportunity should be investigated.  Remember, let the buyer beware.  There are several ways to investigate a business opportunity.

1. Call telephone information for the city in which the company is based and ask for the number of the local Better Business Bureau (BBB).  Call the BBB and ask if they have a "reliability report" filed on the company.  This report provides information about the company, including whether or not complaints have been filed against the company and if so, how the company handled those complaints.  Also call the National Fraud Information Center (800-876-7060) and the Call for Action Hotline (301-652-HELP).
2. Call the National Business Opportunities Bureau (800-829-3547) for a company report.  This respected organization has been reporting on franchises and business opportunities since 1992.  This report provides information on the company, including whether or not complaints have been filed against the company, and if so, how the company handled those complaints. http://www.nbob.com
3. Call the Attorney General's office in your state - often located in the State Capitol's office.  Also check with the Secretary of State's office to see if there are any complaints filed against the company or if there are investigations pending.
4. Where did you hear about the business opportunity?  At a local trade show? Through an ad?  If it's in an ad, call the magazine that featured the ad and speak to the advertising department.  Do they have information on the company?  How long have they been in business?  Do they pay their bills on time?  Has the magazine or trade sponsor received any complaints about the company?
5. Use your judgment.  As you study the ad, ask yourself, "Can I figure out what the business opportunity is?"  If not, then run in the other direction.  They are trying to be evasive.  If you can't contact the company and get more information on what it is you are purchasing, then don't send a dime.  Remember the old line, if it sounds too good to be true, it probably is!  Not in every case, but in many.
6. Ask the company offering the business opportunity package if you can get a list of folks who invested in the package during the last two years.  If they are legitimate, and if they are proud of what they offer, they will be happy to put you in touch with their satisfied customers.  If they won't do this, there is likely something shady about that particular business opportunity program.
7. Companies that offer a legitimate business opportunity package, and we feature many of them in this magazine, should not be scared or dismayed if you request to receive free additional information about the company before you invest in the program.  This is a perfectly acceptable request.
8. The Federal Trade Commission offers a free package of information about the FTC Franchise and Business Opportunity Rule.  Write to: Public Reference Branch, Federal Trade Commission, Washington, DC 20580 or call the FTC (202-326-2222).
9. Use your instincts.  If the opportunity doesn't sound or seem just right to you, stay away.  Do some more research before you get involved with the company by following the above tips to conduct your due diligence investigation about the business and the specific opportunity.
10.  Don't send money unless you completely understand what you are buying into, and even then, check it out thoroughly before you send any money.

We at Scenic Screen trust this has been an informative piece of information.
For further questions or to request information, please contact us.

Best of luck in your new Scenic Screen Business!