Free Start Your Own Business by Inc The Staff of Entrepreneur Media

Dealers/distributors are individuals or businesses that 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.
    • 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.
    • 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.
    • Cooperatives allow an existing business to affiliate with a network of similar businesses, usually for advertising and promotional purposes.
    ON THE LEVEL
     
    D irect sales is a type of business opportunity that is very popular with people looking for part-time, flexible businesses. Some of the bestknown companies in America, including Avon, Mary Kay Cosmetics and Tupperware, fall under the direct-selling umbrella.
     
     
    Direct-selling programs feature a low upfront investment—usually only a few hundred dollars for the purchase of a product sample kit—and the opportunity to sell a product line directly to friends, family and other personal contacts. Most direct-selling programs also ask participants to recruit other sales representatives. These recruits constitute a rep’s “downline,” and their sales generate income for those above them in the program.
     
    Things get sticky when a direct sales network compensates participants primarily for recruiting others rather than for selling the company’s products or services. A direct-selling system in which most of the revenues come from recruitment may be considered an illegal pyramid scheme.
     
    Since direct-selling programs are usually exempt from business opportunity regulation and are not defined as franchises under state and federal franchise laws, you will need to do your own investigation before investing any money. For more information, check out the Direct Selling Association’s website at dsa.org.
    • Direct sales (see “On the Level” above).
    Legal definitions of business opportunities vary, since not all states regulate business opportunities. (The 26 that do are Alaska, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Nebraska, New Hampshire, North Carolina, Ohio, Oklahoma, South Carolina, South Dakota, Texas, Utah, Virginia, Washington and Wisconsin.) Even among these, different states have different definitions of what constitutes a business opportunity. According to franchise law counsel Joel R. Buckberg, an attorney in Nashville, Tennessee, most definitions contain the following:
    • The investor enters into an oral or written agreement for the vendor—or someone recommended by the vendor—to sell goods or services to the investor that allow him or her to begin a business.
     
    TIP
     
    Don’t forget to ask about the franchise or business opportunity’s training program. Find out how long it is, where it takes place and the general subjects covered. Look for a well-organized plan that combines classroom time with field orientation.
    • The purchase involves a certain amount of money. In 15 states and under FTC regulations, the minimum investment is $500; in the other 11 states, that figure drops to as little as $100.
    • The seller makes any one of the following statements to the investor during the course of the sale:
    1. The seller or