Sadly, the business owners themselves also inaccurately believe that their business opportunities (often referred as BO) are franchises. To make matter worse, potential investors also believe on their claims.
Let us set things straight once and for all.
The difference between a franchise and a business opportunity (BO)
The main difference is the fee being charged for the investors who are interested in the business proposal. Some BO owners charge a fee that resembles a franchise fee – Some called the fee “license fee” and some others “management fee.” It is not a word-game. They are principally different. In fact, BOs are actually not allowed to charge anything that is similar to a franchise fee.
The story of franchise fee doesn’t stop there. Again, a franchise fee is what differ a franchise to a BO – This being said, the level of support given and type of relationship between a business owner (concept owner) and an investor are different accordingly.
A franchise allows you to use its brand name, its proven system and to receive extensive support and assistance. A franchise also market and promote the business and brand in communal sense, in a way that each and every franchisee receives all the resulting benefits.
In the other hand, a BO typically allows you to use its brand name (or use your own – this depends on the agreement between you and the BO owner.) A BO allows investors to use their system, but there is always a risk that investors are actually the one that trial-and-error the system (in other words, BO offers not-entirely-proven system.) It also offers a certain level of support and assistance, but not in the standard of its franchise counterparts.
Those being said, every franchise (the quality one, that is) is (or should be?) originating from a BO. Typically, after a BO successfully and profitably operates its business for 5 or 6 years, it has a legitimate chance to be a good franchise, provided it is ready for all the due diligence.
Which one is for me: A franchise or a BO?
If you have considerable amount of resource to invest, I suggest you to take franchising path. However, if your resource is limited, the BO route could be a perfect choice. However, there are things to be aware of in your decision making.
If you decide to buy a franchise, make sure you have done your due diligence – Check the financial, the background/history, and the reputation of the franchise. Don’t let a newly established franchise fool you – List your franchise opportunities by considering the age of the business – If the franchise is new but has already doing business well in the last 5 or 6 years, you get yourself a quality franchise.
If you decide to buy a BO, also be sure you have done your due diligence. Do a feasibility study – Visit the owner’s store or business premise to learn all you need to know: How the staff communicates; how smooth things are done; how well is business system work. This way, you know that you are investing in a business that can give you a legitimate chance to success.
Last note – In franchising, you cut your trial-and-error process. In BO, you are often in the middle of the trial-and-error process. Obviously, buying a franchise increases your change to succeed with your investment, where buying a BO, despite of the higher risk, presents you better success than starting a business on your own.
The choice is yours.
Ivan Widjaya
Franchise vs. BO
Image by FxyLxy.
