Can you afford to risk an investment into a franchise or business opportunity?

Nearly ninety percent of corporations and independent businesses that sell franchises and business opportunities fail in their first five years. Simply having the right attitude and personality for operating a franchise or business opportunity can’t protect you from a relationship with a franchisor. Franchise start-up costs can be quite high for the beginning entrepreneur. Retail franchisor’s charge $20,000 to $50,000 for the right to use their trademark. When you add up the usual start-up costs, inventory and staffing, for example, you could be risking a very large sum indeed.

Business opportunities on the other hand are relatively inexpensive to start. While there are a handful of business opportunities that cost several thousand dollars, many packages can be purchased for a hundred dollars or less. The low cost of business opportunities make them extremely popular for beginning entrepreneurs. The degree of financial success may be more limited than that of a franchise but the amount of capital necessary to begin is much lower as well. While there is no way to guarantee any degree of success with a business opportunity there are a few things you can do to limit the risk of failure.

Call the BBB before purchasing a franchise or business opportunity

If you’re considering a franchise like Wendy’s or Jiffy Lube this step isn’t necessary. Before you think about calling a relatively unknown franchise or business opportunity provider, contact the Better Business Bureau. The BBB keeps “reliability reports” for companies within their city. These reports contain information about the company such as owner(s) identity, location, and most importantly complaints. The BBB keeps not only details of the complaint but most importantly includes the action taken by the company in response to the complaint. It’s important to read these reports carefully as many complaints are caused by unnecessary misunderstandings. The important thing to look for is quick and effective action to repair any damage caused by a complaint. Any company that ignores complaints doesn’t expect to be in business for much longer, at least under the same name.

Investigate the advertisement where you first encountered the franchise or business opportunity

Advertisements often tell potential customers more than the company intends. Scrutinize business opportunity advertisements. If the advertisement doesn’t say exactly what the opportunity is in ten words or less, drop it. Less obvious signs of a fraudulent business opportunity advertisement include outrageous claims, lack of details and lack of physical address.

Once the advertisement passes your tests, contact the publication. Get as much information about the company as possible. Inquire about the amount of time the company has been in business and if they pay their bills on time. Most magazine advertising departments carefully guard their client’s information. Suppose there are overdue bills or reader complaints about the company, most advertisement departments will issue a valuable warning. You could easily cut you risk in half before you ever contact a company offering business opportunities or franchises. A little telephone work could save you a lot of money.

This work is licensed under a Creative Commons Attribution 2.5 License.