Thursday, April 21, 2011

The Difference Between a Franchise and Network Marketing

What is the difference between a franchise and network marketing business model? I meet a lot of people who are not sure of the differences, but if you plan on becoming a business owner you should be knowledgeable of different business models.

A franchise is the right or license granted by a company to an individual or group to market it's products or services in a specific territory ( In other words, you (franchisee) would be a third party owner of an already established company (franchiser). You would be given access to the trademarked goods, advertising and marketing methods, and services of a company. You would be given certain territories and continuous training to maintain the franchise. Some franchises need actual buildings or locations and products like a Starbucks or Subway. Others might just provide the material to get started like an interior design franchise that would give you all of your swatches. In exchange for these perks, you would pay a percentage of your gross income and fees to the company. The start up fees of a franchise can range from $8,000 to millions of dollars.

The advantages of owning a franchise is that the company will provide you with all the materials you need to get started. Including logo use, uniforms, and interior furniture and design. You also have support from the company to make your business successful.

The disadvantages of owning a franchise are that you have to be in a location or territory chosen by the franchiser. Therefore, you will work long hours concentrating on the success of your business. If you don't work, you do not make money. But for those who are passionate, it is worth it. You also have restrictions on how your business is operated and have to take inventory on all of the products brought into the store. There is training available, but you have to adhere closely to the policies. Another disadvantage is that you have to pay the franchiser a percentage of the stores sales. You do not get to keep all of the money you make.

Network Marketing
Also known as Multi-Level Marketing (MLM) is a business model in which an independent contractor is compensated for their personal sales and the sales of others they ask to join their team, creating a residual income (residual means continuous). A legit network marketing business is established to help advertise or MARKET a product. Instead of spending millions of dollars on advertising for television, radio, or through ads, a company offers the product to independent distributors or contractors that do the advertising for them. Therefore the millions of dollars that would have gone into the advertising would go directly to the sales force. As an independent contractor, you also get paid for building teams of people that are doing the same thing you are. Because you are marketing a product you usually have to purchase product monthly to have it on hand for your use and as samples. Start-up fees are very minimal ranging from free to $500.

The advantages of a network marketing business are that anyone can do it. Because the start-up fees are so minimal, anyone can learn to operate the business. You also receive everything you need to start including training. The training can help develop business knowledge and for some build self-confidence. As an independent contractor the only money or fees you are paying to the company is the product you order monthly. Otherwise you get to keep all of your earning income. Another advantage is that you do not have to have a location or territory. You can run your business from anywhere. You also have total control of your working hours. Most people start out running their business part-time, but once they see the fruits-of-their-labor, decide to go full time.

One disadvantage of owning a network marketing business is the turn-around time on seeing an income. Robert Kyosaki said "The reason most people do not reach the top is simply because they quit too soon". A lot of people assume they can start making money overnight but do not realize it takes time to build an empire. Another disadvantage of network marketing is the negative perception that the business model is a "pyramid scheme". A "pyramid scheme" is when someone invests in a company and sees no results: No product, no income, no training, and no owner. If you have found interest in a company that does not have easy access to the creators or has no clear policy on how you build a business or a cancellation policy but want you to pay, then yes, it's a pyramid scheme. All the money is going to someone at the top (hence the "pyramid"), and they are laughing all the way to the bank. A legit network marketing business would have all of these things and more accessible to anyone interested in hearing about their products.  

So as you can see there are pros and cons to both business models, you just need to decide which one is best for you. I decided network marketing was the best option for me. My team prides themselves on helping people and educating them on how health can build wealth. What type of business model is best for you? It's never to late to find one. We can help you find the one that's best for you. Contact us today!

Tamara Garrison-Thomas

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