Franchises and business opportunities are a part of the same family, both are regulated by the Federal Trade Commission, both are regulated by state specific laws, and both require a pre-sales disclosure process. The difference between a franchise and a business opportunity is that in a franchise transaction the franchisor possesses the legal right to exert on-going and long-term control over the operations of the franchisee whereas in the sale of a business opportunity degree of control is limited to the initial establishment of the business.
Both business models relate to the establishment of a new business. When the new business is established under a franchise model, the agreement between the parties is called the franchise agreement and within the franchise agreement the franchisor (the party selling the franchise) possesses the legal right to exert control over the initial and long-term operations of the franchised business. When the new business is established under a business opportunity model, the activity and control of the seller of the business opportunity is limited to the initial start-up of the business, e.g., such as selling initial equipment, vending machines, customer lists, etc…
Below is a summary of some franchise vs. business opportunity distinctions:
Are Business Opportunities an Alternative to Franchising?
No they are not alternatives and, in fact, the line between what constitutes a business opportunity and what constitutes a franchise is extremely close. For this reason both are regulated by the Federal Trade Commission and at the state specific level and both require a disclosure document. Franchisor’s who comply with the franchise laws are typically exempt from business opportunity laws and regulations.
If you have a question about business opportunities or franchises, call our team at (800) 976-4904 or by email.
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