What IS Franchising? Is it the same as a “business opportunity?”
Franchising is a popular form of business – globally – and it basically involves this:
If a business owner has what they believe to be a successful concept, and wants to expand, they can attempt to raise capital (not always easy without substantial collateral); or they can expand by “franchising” their idea, trademark, business plan and proven operating “system” to investors, who, in turn, operate the franchised business within parameters defined at the time of sale through the Franchise Disclosure Document (and Franchise Agreement.) The Franchising Agreement is generally for a period of 10 years, and can be renewed upon completion of the time period, if both parties agree to do so.
Franchising is NOT the same as a “business opportunity.” Franchising is governed by federal law (and by certain states) and provides its owners with significant legal protection. Business opportunities, on the other hand, are governed by a much less protective series of laws at both the federal and state levels — therefore offer their purchasers little or no protection. There are many perfectly “legal” business opportunities available – but “biz opp” purchasers need to be aware of the legal structure of their business and its severe limitations.
In addition, business opportunities tend to be much lower priced than franchises (under $50,000), and far less “comprehensive” in their total service offering to a buyer. Whereas most franchises offer a trademark, a proven operating system, training, and ongoing support – many “biz opps” simply provide a self-training book and a product or service – and you’re “on your own.” Some may provide classroom training, and a few more amenities with the “sale” – but overall, you are not getting a proven “system” or any form of ongoing support – you’re just purchasing a concept you may market.