Are you interested in purchasing a business opportunity or franchise? Which is best?
Though similar, each has its pros and cons, and it’s vital to the success of your business and the protection of your investment to consider which option will benefit you the most.
One way to do that is to investigate the regulations governing each, such as the business opportunity rule. The rule helps you assess whether to invest in an opportunity or not.
Business Opportunity vs. Franchise: Are They the Same?
Though similar to a franchise, a business opportunity is different. The business that presents the opportunity to you wants to expand their business without using their own money, as is the case with a franchise. However, a franchise owner has more control over the business than does someone with a business opportunity. Franchise owners are heavily involved in the marketing, training, and daily operations of the franchisee’s business.
You’ll recognize a franchise by its reputation and branding. Examples include McDonald’s, Hilton, Taco Bell, 7-Eleven, and Dunkin’ Donuts.
Business opportunities often consist of work-from-home or set-your-own-schedule types of jobs, like:
- Medical billing
- Craft assembly
- Vending machine routes
The Business Opportunity Rule – What You Need to Know
You can find a higher measure of security with a well-established franchise than with a business opportunity. As a franchisor, you have a long-term relationship with the franchisor, one of transparency and support.
A business opportunity is a one-time transaction. Therefore, there’s an opportunity for investors to fall into the trap of scammers or shady businesspeople.
For this reason, the Federal Trade Commission (FTC) established the Business Opportunity Rule in 2012.
The goal of the rule is to protect people who want to invest in a business opportunity. The Business Opportunity Rule states that in exchange for payment for their “business in a box” plan, they’ll provide an investment offering. The offering can include:
- Locations for vending equipment use
- A buy-back agreement/arrangement
Having access to this information from a business opportunity seller allows a buyer the opportunity to weigh the risks of buying this type of work-from-home business, thereby allowing them to make an informed decision.
Protect Your Investment by Investing in a Franchise
To purchase a franchise, you need to have tens of thousands to millions of dollars in liquid assets. The average is $254,000. The return on investment for a turnkey business, though, can be promising and can save you a lot of time.
Because of looser regulations, some people might be inclined toward a business opportunity instead of a franchise. However, the person who often pays the price if something goes wrong is the investor.
Protect yourself and your money. Consider investing in an established, legally protected franchise. If you’re still unsure which path is best, talk to a franchise attorney to examine your options.
Make sure you’re protected! Contact our team for a free consultation to discuss what’s needed to legally protect you and your company.