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Franchises vs. MLMs


People who are actively looking for additional income opportunities have many choices, among them franchising programs and network marketing.

Both offer the possibility to increase one’s income and the chance to develop a business that can sold to another investor. Entrepreneurs need to know the differences (and similarities):

Franchising has already evolved through much of the image problem that plagued during its formative years. Having turned in a consistently stunning track record for several decades, franchising is in the middle oi a global explosion that is also changing the face of retailing. The fastest growing market in the world for U. S. based fast-food franchising operations? Brazil.

But franchising opportunities are not limited to the restaurant business. There are countless areas of opportunities to explore, from home-based mail-order franchise systems to office service centers to private postal service franchises and cleaning service franchises, giving would-be investors a wide range of choices.

As franchising matures it is less prone to be infested by quick-buck con men looking to dupe investors — not because franchising attracts overly ethical people, but because the rewards are so dramatic, the industry has developed the normal self-policing and regulatory mechanisms and organizations mature industries develop.

The network marketing industry is at the early stages of this developmental phase with several powerful trade organizations established worldwide. While it is easier to come across a fly-by-night scam in multi-level marketing than in franchising, it is a reflection less of the industry than of human nature. Fast-buck artists always gravitate to new industries where they smell large financial returns. They target new industries because the relative absence of a large group of established firms in the field makes it easier to blend int0 the business landscape as a new company just starting out.

As a rule, franchise opportunities offer a more secure return on investment when the investment is made with one of the proven systems. But this fact alone should not be enough to automatically make anyone pick franchising over network marketing.

As a rule, franchise opportunities are very costly to become involved with. The more proven the success record of a particular franchise operator, the higher the initial franchising fees will be. While it is possible to get involved with some opportunities for as little as $10,000, playing in the big time with the household names usually starts in the $350,000-$500,000 range.

Network Marketing, on the other hand, is clearly a universally low-cost entry point into the world of product and service distribution. Rarely will an MLM opportunity cost $100,000 and that normally gets the new distributor a set of professional guidelines, planning materials, varying degrees of upline and company training and support, and a generous sampling of products. There is no need to seek financing and no large additional amounts of capital needed in order to build the business.

While both businesses take time and hard work, the network marketing entrepreneur tends to have a bit more flexibility, at least in the beginning. Most franchise businesses (with the exception of most home-based plans) have rigid hours and layers of paperwork related to leasing agreements, employee benefits, equipment upkeep, materials ordering, and so on. This is not true of network marketing, an industry that seemingly takes pride in minimizing time-consuming bureaucratic functions. Adjustments are easily made, giving an individual MLM distributor the ability to build the business at their own pace.

 

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