Business opportunity 500

Entrepreneur, July, 1997

Perhaps the best way to start your investigation is by understanding what a business opportunity is. The term "business opportunity" is often misunderstood because it encompasses so many types of businesses - including franchises. In general terms, a business opportunity is any opportunity that enables you to make money. Specifically, it refers to the sale of a product or service in which the seller promises buyers they will make a profit, that there is a market for the product or service, or that the seller will buy any unsold merchandise back from buyers.

While every franchise is a business opportunity, not every business opportunity is a franchise. To be a franchise, a business opportunity must meet three criteria set by state and federal law: The franchisee must: 1) pay a fee to the franchisor for the right to offer certain products or services; 2) use the franchisor's name, trademark and service mark; and 3) operate and market the business according to processes and standards set by the franchisor. A business that does not meet all three of these requirements is considered a nonfranchise business opportunity.

Franchises generally offer a lot of assistance; they also insist you follow specific rules and strict operating methods. Business opportunities offer more freedom; they let you run the business any way you desire. However, that also means less support. While most business opportunity sellers will answer your questions over the phone - and some even provide as much assistance as a franchisor - in most cases, after the seller gives you basic guidelines and enough product to get started, you're on your own.

Because business opportunities generally cost much less than franchises, they can be a great way to get into business on a budget. And you won't have to worry about ongoing royalties or other continuing fees that franchisees are usually subject to.

To research an opportunity, find out how long the company has been in business. Is it registered under any state business opportunity laws? Twenty-five states have such laws (see "Law And Order" on page 144), but many business opportunity sellers don't realize the laws apply to them, and opportunities that cost $500 or less are exempt.

When beginning your research, it helps to understand how each company fits into the world of nonfranchise business opportunities. There are no universally accepted terms for these opportunities, but based on our research, Entrepreneur divides them into five groups: dealers/distributors, licensees, multilevel marketing/direct sales businesses, vending machines, and cooperatives.

1. Dealers/distributors are individuals or businesses who purchase the right to sell ABC Corp.'s products but not the right to use ABC's trade name. For example, an authorized dealer of Minolta products might have a Minolta sign in his window, but he can't call his business Minolta. Often, the words dealers and distributors are used interchangeably, but there is a difference: A distributor may sell to several dealers, while a dealer usually sells direct to retailers or consumers.

2. Licensees have the right to use the seller's trade name and certain methods, equipment, technology or product lines. If Business Opportunity XYZ has a special technique for reglazing porcelain, for instance, it will teach you the method and sell you the supplies and machinery. needed to open your own business. You can call your business XYZ, but you are an independent licensee.

3. Multilevel marketing/direct sales businesses sell to their friends, neighbors, co-workers and so on. In some cases, they earn extra commissions by recruiting new salespeople to the company.

4. Vending machines are provided by the seller, who may also help you find locations for them. You restock your own machines and collect the money.

5. Cooperatives allow an existing business to affiliate with a network of similar businesses, usually for advertising and promotional purposes.

The listing starting on page 150 gives you basic information - such as cost, support and size of company - about 503 business opportunities. If a company sounds interesting, be sure to research it before you buy. Talk to others who have bought the opportunity (the seller should have a list); your lawyer and accountant; the Better Business Bureau; and Dun & Bradstreet, which can provide detailed information about a company's financial status.

This listing does not constitute a ranking. Business opportunities are invited to submit information for publication in this listing. Entrepreneur reviewed the companies' sales and marketing literature to better evaluate the opportunities. Entrepreneur does not, however, analyze this information. The Business Opportunity 500 in no way implies, suggests or predicts the superiority of one business opportunity over another, nor does a listing suggest any endorsement by Entrepreneur.