Biz Opp or Franchise?

by Franco on March 10, 2008

One of the ways to grow a successful business is to sell versions of your business to others for a fee, either ongoing or one-time. Your business model has a value all by itself, above and beyond the products you sell. The question is, in what form will you sell it?

Among the various ways you can sell your business (and keep it at the same time!) is the license (or biz opp) and the franchise. Each has it’s own advantages and disadvantages.


A franchise is essentially selling a license to use a particular brand name.

Three elements are needed to meet the legal definition of a :

  • A trademark or brand identifier that is shared across all franchisees. That’s in essence why all the McDonalds are called McDonalds. Although McDs has a snoot-full of trademarked items in their stores, only one brand name has to be shared to meet the definition. The trademark is considered an item of value in and of itself.
  • Supplying aid and support or retention of significant operational control. McDonalds runs a training academy for franchisees. They require that franchisees purchase from the corporate supply chain and they maintain price and marketing controls over their franchise holders. The meaning of ‘significant’ in a legal sense is open to court interpretation, but essentially means that if the seller retains some say in what your business practices are, then you are a franchise.
  • Payment to the franchise holder of a fee of $500 (combined) or more over the first half-year of operation. This refers to any of the following: start-up fees; royalties; marketing fees; training costs or equipment. Just about anything except product sold at wholesale prices is included in the definition of ‘fees’.

Biz Opp

The essential difference here is that when you buy a business opportunity, you buy an idea (and maybe training) without a brand name. This is also referred to as a ‘licensing’ agreement. The other elements of a franchise arrangement apply, with control and training retained to some extent.

Note that in some states, are regulated and have their own disclosure rules. Merely dropping the shared brand name requirement might not free someone from the disclosure and regulatory requirements that franchises have. Online, it may be beneficial to operate out of a state with liberal rules.

The Downside of Biz Opp

Although much control is retained when selling a Biz Opp, they usually sell for substantially less than a direct franchise. This is simply because brand names have value. Customers come to appreciate that McDonalds in Chicago is as reliable (or as crappy) as their hometown McDonalds is. There is also a substantial savings in marketing when a brand name is shared. Each franchisee essentially shares the marketing of every other. Biz Op owners have to create and market their own brand.

The Upside of Biz Op

By essentially owning the brand name that you create, you can market and skew it to fit your local market and your own ideas. Although the licensor will retain some say in how you do business, you are not limited solely to house products. Also, biz ops are generally cheaper and spread faster than traditional franchises. This means that they require less upfront investment and risk.

Join the Global Mentors Team and get the most out of your Business opportunity!

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