Have you been considering buying a business and are wondering what the difference is between network marketing and franchising? I have owned both and can help you decide which business model is best for you.
I will be upfront and honest, I will try to be neutral and unbiased, but I have been much happier with my network marketing business than I was with my franchises.
Franchise ownership for me was my dream.
I had worked hard to save and borrow enough money to buy a franchise.
This is one of the biggest stumbling blocks for most people; the liquid capital is high and you must qualify for huge loans.
Franchise start-up costs are from the 10's of thousands to the million dollar range.
The high costs of a franchise to buy and maintain, mean most franchises do not see a profit for at least 3-5 years.
This means that you will have to have 3-5 years of living expense saved up to keep the business afloat.
Why are franchise businesses so costly? One, you are paying for the name and the rights to use the name.
And two, you are paying for an established business model and leveraging another persons business experience.
Why do so many franchises fail? It may come as a surprise to you, but franchises fail just as often as any new business! Franchises fail because there are so many variables that go into a business.
A franchise has been tested and has been successful, but locations, employees, economy, and you as the franchisee are variables that cannot be tested.
Experience and knowledge does not come with your new business.
So, make sure you know what training you get as a franchisee, since training varies with each franchise.
And now..
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the biggest reason any business fails is lack of working capital..
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meaning money runs out before the business starts to profit.
Remember you need 3-5 years of living expenses...
this is a lot.
Franchises also have "territories" which restrict where you can and cannot do business.
Look at the size of the territory, the clientele included in the territory and the demographics, and the advertising restrictions in and around your territory.
The territory and the demographics are a big part of the variable in a new franchise, that can make or break your new business.
So what is different about network marketing? Network marketing is also an established business model, that allows you to own your own business, but the similarities end there.
The start-up costs are much lower in network marketing.
Most network marketing businesses can be started for less than $5,000.
Since the start-up cost is much lower, you have the ability to start earning a profit within 60-90 days.
Plus, you can work an Internet business part-time, which is many times not allowed by a franchise...
I know I had to quit my job to be eligible for my franchise.
This is a problem, since most people need to supplement their income before they can go full-time in a business.
The monthly expenses in network marketing are also much lower than a franchise.
There is no rent, no employees, nor franchise fees (the biggest expense of every franchise).
Network marketers have no territories, allowing them to travel and work from anywhere in the world.
The only items needed to do business is a computer and a phone.
This is when you really start to feel free..
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you are not tied to any location.
Both Franchising and network marketing require learning new business skills.
Both can succeed and fail.
Both require a true commitment to yourself, your future, and your new business.
So why do I like network marketing so much more than franchise ownership? Simple, I thought being a business owner meant I would no longer be trading time for money.
Franchising did not give me time freedom, network marketing did! I loved that I could start my own network marketing business with much less capital, take my laptop with me and work from anywhere in the world.
I had no inventory or equipment to maintain and repair, and I had no employees to manage.