Franchises Versus Licensed Business Opportunities

By ALAM QURESHI • February 24th, 2012

franchising articlesWhen it comes down to the business industry, there is a lot of terminology that can be extremely difficult to follow.  One such example of this is if whether or not a franchised is a licensed business opportunity.

For anyone who is interested in looking for various business opportunities they must first understand what  a franchise is and what that entails and what a licensed business opportunity is and what that does for you.

Franchises

  1. To start with, a franchise is a chain of companies that has a business model that has been shown to be very successful. The owner of this model can sell you the rights to use the model in opening your own company within the franchise. This also allows you to market and sell the products and services that the head company sells. When you pay the initial fee to get into the franchise and become an official franchisee member, the franchisor will help you with the system. A contract will be signed and you will be given a copy that outlines everything you are responsible for.
  2. The first thing with having a franchise is that you will be expected to give a small percentage of your profit back to the parent company. This is called a royalty fee. To accomplish maximum profits you will be expected to follow the business model down to the last fine print. With a plan already made, there is little chance of you failing. You will get quite a bit of help with this because the head company’s reputation is at risk with every new store opening. For effective marketing you have to pay the head company a yearly fee so they can advertise all the products properly. This is less stress for you.

Licensed Business Opportunities

  1. However, a licensed business opportunity works slightly different.  The perks with a licensed business opportunity is that you are granted more freedom. This mean you don’t have to ask the head company for every little thing. Nor are you expected to pay the royalty fee. Financially such a business opportunity is more affordable than buying into a franchise.  This is due to the fact that you are only buying a license and not an entire business model.
  2. You will be given the company logo with instruction on how to use it and then you are set free so to speak. The way you run the business and advertising is entirely up to you. The drawback to this that are more inclined to have a trial and error period that you would not have with an actual franchise.  So this means a licensed business opportunity is more for those with prior experience.

When you go about looking at franchises and licensed business opportunities take the time to weigh both the pros and the cons of each. This is very important since they are two very different things.  You may be working for a specific company, but how it runs in the end all depends on what you choose. Good luck with your decision.

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