Types of Business Opportunities

The FTC identifies the most common business opportunities as follows:

Distributorship.

An independent agent who has signed an agreement to offer and/or sell the product from another company but is not allowed to use the manufacturer’s name as part its trade name. Depending on the agreement, the distributor might be restricted to selling that company’s product or may be allowed to market other products and services from different firms.

Rack jobber.

Selling products of another company via a network of racks located in various stores. These rack jobbers distribute the product to the appropriate outlets. The buyer, or agent, enters into an agreement that allows them to market their products to different stores through strategically placed store racks. The parent company acquires racks in a variety locations. It is up to the agent, to manage the inventory, to move the merchandise around in order to attract customers, and to do the bookkeeping. The agent provides the store manager with a duplicate of the inventory control sheets that indicates the amount of merchandise sold. The distributor is then paid by the location (or store) which has the rack less the store’s commission.

Vending machine routes.

Rack jobbing is very similar. This business opportunity venture requires more investment as the businessperson must also purchase the machines. But, this is reversed with regard to the payment procedure. The vending machine owner must pay a percentage based upon sales. It is important to locate locations in high-foot traffic areas and as close as possible to each other when negotiating route deals. If you spread your locations too far apart, it will be difficult to manage them efficiently and save time.

You should also be aware that there are four other types of business opportunities.

Dealer.

Similar to a distributor, but a distributor may sell products to several dealers. A dealer will only sell to a retailer or to the consumer.

Trademark/product licenses.

The licensee is granted the right to use a seller’s tradename and specific methods, equipment or products under this arrangement. Use of the tradename is optional.

Network marketing.

This term is used to describe both direct sales and multilevel market. Network marketing agents would sell products to their own network of neighbors, friends, and co-workers. Sometimes, additional commissions may be earned by recruiting other agents.

Cooperatives.

This business is similar in structure to a licensee arrangement where an existing business like a hotel or hardware shop can affiliate with a larger group of similar businesses. Sometimes, this is for the sole purpose advertising and promoting through one identity.

How the Government Protects you

The FTC Rule, which was in place since 1979 has had a wide-ranging effect on the franchise and business opportunity sector and would-be licensees and franchisees. The FTC Rule is intended to provide assurance to all prospective buyers of franchises or business opportunities that they will be provided with a complete disclosure. This includes the necessary background information to help them make informed investment decisions.

Despite all the FTC rules and state-level aggressive actions, there are still sellers who try to evade regulation. The FTC rule and state regulations cannot guarantee fraud-free transactions. The FTC disclosure statement should be read carefully.

Franchises vs. Opportunities for Businesses

The rule of thumb is that a franchisee gets more support from the parent, uses the trademarked names, and is more tightly controlled by the franchisor. On the other hand, business opportunities are not as supported by the parent company. They don’t usually get the trademarked name and they are not subject to the operational guidelines of the parent.

We’ve already mentioned that there are many business opportunities. Some can be run as turnkey operations, much like many franchises that offer package-format services. These business opportunities can provide all the necessary resources to help you start a business. They can help you choose a location, provide training and support the licensee’s marketing efforts.