July 15, 2011
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Affordably Build Your Brand
FedEx Global Brand Management Director Monica Skipper shares a cost-effective way to build a bigger brand for your small business.
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Franchise opportunities and business opportunities are two terms that are frequently used interchangeably—though there are subtle yet important differences. To some, this may seem like a simple case of, "I say to-may-toe, you say to-mah-toe." But as a business owner, it can’t hurt to get the facts straight.
A business opportunity has a cut and dry definition. The Federal Trade Commission mandates that, among a few other things that vary across states, the seller of a business opportunity makes an earnings claim and/or a promise to provide business assistance to the buyer. However, the providing business assistance part of the definition is where the true difference lies.
The company that is selling a business opportunity provides guidance as needed, serving as a mentor, not a boss. An example is vending machine distribution: The person buying machines may receive assistance for set up and finding locations that are ripe for new machines, but not much else. On the other hand, could you picture a franchise like Five Guys selling a restaurant to Joe Schmo in Idaho and leaving the menu, decorating and pricing up to him? Surely, the experience at his location, with locally sourced ingredients and the decorations by a starving artist, would not even remotely replicate the experience of a New Yorker going to a NYC Five Guys.
Given the less intensive nature of the relationship between a business opportunity seller and buyer, biz opps are generally less expensive than franchises, both in startup fees and ongoing royalties. Other pros to a biz opp are that there is more flexibility in customizing the business model, advertising campaign and brand development. This is very appealing for someone who wants to innovate and look for creative ways to grow a business.
On the other hand, franchisors (think headquarters, the big guys) tend to be stricter about the manner in which a franchisee (entity that runs one or more locations) conducts business. With a franchise, assistance is not so much available as it is required. It's often outlined in the franchise agreement. Many franchisees appreciate the straightforward approach of franchisors implementing proven methods into new locations. Franchisors strive to create a consistent customer experience, regardless of location, so they're more involved. Lets not forget, the never-to-be-underestimated brand name is ultimately at stake.
It is this same line of thinking that is responsible for McDonalds' golden arches being as homogenous as its burgers. Exactly one McDonald's location, out of over 32,000 worldwide, has a non-yellow M hanging on its walls. So if you ever want to know how to beat the McDonald's system, ask the owners of McD's in Sedona, Arizona, who were given permission to hang a teal M because it complements the surrounding scenery!
The benefits of franchising are numerous. The pre-established brand name and proven playbook are huge pluses for anyone new to running a business. However, franchises can be expensive and a franchisor may not want to expand in certain locations.
All franchises are business opportunities, but not vice-versa. All rules for business opportunities apply to franchises. But franchises have a list of rules that extends beyond that of a non-franchise business opportunity. People who believe that they can institute their own methods to turn sales of pre-existing products into profit should pursue business opportunities. Those who are better suited to carry out specific orders and follow battle-tested methods should find franchising to be a great option.
OPEN Cardmember Sandeep Kella is the Co-Founder of FranchiseHelp.com, a leading resource for information on franchising and listings of franchise opportunities.
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