A business opportunity, or biz-opp, involves the sale or lease of any product, service, equipment, etc. that will enable the purchaser-licensee to begin a business. The licensor or seller of a business opportunity usually declares that it will secure or assist the buyer in finding a suitable location or provide the product to the purchaser-licensee. This is different from the sale of an independent business, in which there is no continued relationship required by the seller.

Examples of biz-opps classified advertisements are:

• $3500 Weekly! Work From Home!
• Real Results Now! $360k 1st Year! No Gimmicks!
• $$ Make $1000+ per week... EVERY WEEK! $$
• Hottest Opportunity Ever (Numbers don't lie)!!
• Get 96 sites for $7,795. Then Retire! Call 1-800-XXX-XXXX.
• Many People Earn $36,000/year in Income, But . . . Very Few Earn $30,000/year working only five-six hours per week.

The use of a toll-free telephone number makes it difficult for customers to immediately identify the company's geographical location. Moreover, a company can own many 1-800 numbers, using a different one for each area in which it advertises. In the event of consumer complaints, this thwarts investigators from recognizing the connection between biz-ops listings in various newspapers.

A common type of business opportunity involves a company that sells bulk vending machines and promises to secure suitable locations for the machines. The purchaser is counting on the company to find locations where sales will be high enough to enable him to recoup his expenses and make a profit. Because of the many cases of fraudulent biz-ops in which companies have not followed through on their promises, or in which profits were much less than what the company led the investor to believe, governments closely regulate these operations.

Multi-level marketing is often presented as a business opportunity.

In the United States, the Federal Trade Commission receives complaints and helps coordinate enforcement action against fraudulent business opportunities^*.

References

• FTC: Business Opportunities.
• Investor Bulletin: Business Opportunity Fraud, State of Connecticut Department of Banking, July 1995.
• Not a Franchise? Do Business Opportunity Statutes Apply?.