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Business Opportunities Versus Franchises, What’s The Difference?

People often tend to get confused between business opportunities and business franchises. There may be similarities between the two, but they are poles apart and understanding the difference between the two concepts is very important for any investor. The factors involved in both of these options are very different from each other. Some people may feel that investing in a franchise is not as profitable as starting their own business. This is not the case. A business franchise is just as good as a business opportunity, maybe even better. There are pros and cons of everything and similarly, these two also have their pros and cons. Let’s see the differences between the two:

Business Opportunities

A business opportunity means an option to start some work, whether based on a new idea or old, with a minimum amount of investment. A business opportunity allows the investor to start a business to gain profits. A business opportunity may involve something that is started from scratch or bought from the current owner. Once bought, the previous owner has no control over the functions of the business after it is passed onto the new owner. The previous owner has no stake in whether the business does well or not.  A business opportunity may have a high or low risk factor; the higher the risk of the business, the higher the profits. The business opportunities which are based on new ideas are usually riskier than the ones that are based on already-being-done ideas.

 

Pros

  • New ideas can be used to skim the market with a first mover’s advantage and make handsome profits
  • No control of the previous owner
  • You can set your own goals and targets, make your own guidelines
  • All the earnings belong to you
  • No one has authority over the business owner, which leads to job security - No one can fire you
  • First hand contact and experience with customers which gives real insight to what consumers want
  • You can sell the business when you retire which makes for a very good retirement plan.

 

Cons

  • High financial risk is involved
  • New business means unknown problems and circumstances.
  • Apart from the money, a lot of time and hard work is needed to take the business off the ground.
  • High investment in building of clients and customers.
  • The brand may or may not pick up. The business owner will be on his or her own.

 

Business Franchises

A business franchise is a brand name bought after an initial investment. There is an already established business, which sells its brand name and customer base to an investor for a price. The parent company has a say in the operations of the franchise. The parent company also helps train and constantly supports its franchise. The parent company needs the franchise to do well, because the reputation of the brand is at stake. Even if one franchise of a brand gets a bad name, the whole business would be affected. The owners of a franchise can make their own decisions related to the business but within the guidelines provided by the parent company.

 

Pros:

  • Constant support from the parent company
  • Well established policies and goals are inherited with the brand name
  • An existing loyal client base, saves money on marketing and advertising
  • Option of working from home
  • No prior experience required (depending on the industry you choose to invest in)
  • You are your own boss
  • Risk is much lower as compared to a start-up or stand-alone business

 

Cons:

  • Less control and privacy over functions of the business
  • Investment costs are higher, and a minimum net worth is necessary for most business to let an investor buy their franchise

The parent company may not give adequate support that is expected