Entrepreneurship and Small Business (ESB) Certification Practice Exam

Which business opportunity is characterized by higher start-up costs?

1. Network marketing

2. Online business

3. Franchise

4. Freelancing

The correct answer is: Franchise

A franchise typically involves higher start-up costs compared to other business opportunities. This is primarily due to the need for an investment in the franchise fee, which grants the rights to operate under the franchisor's brand and business model. Additionally, franchisees may need to invest in equipment, inventory, signage, and initial training, which can significantly increase the start-up costs beyond just the basic operational expenses. In contrast, network marketing often has lower initial costs, as individuals can start with minimal investment, typically by purchasing a starter kit. Online businesses can also vary widely in start-up costs, but many can be launched with relatively low financial investment, especially if they rely on digital products or services. Freelancing generally involves low overhead as it often requires little more than a computer and an internet connection, making it one of the least expensive options to start. This distinction highlights why franchises stand out as requiring a more substantial financial commitment, which can deter some entrepreneurs but also provides a structured business model and established brand recognition.