Franchise vs. Network Marketing Business Opportunity: Which is Right for You?

There are success and failure stories with both franchise and network marketing businesses. Take a look at the similarities and differences of each opportunity to determine which one is right for your situation.

As you try to determine the right business opportunity for your consideration, it makes sense to compare and contrast a network marketing business opportunity with buying a franchise. There are great success stories in both categories, as well as stories of monumental failure and financial loss. Careful analysis and comparison will help you understand the risks and costs involved so that you can move forward with the right opportunity for your unique situation and financial goals.

Understanding a franchise opportunity

There are thousands of franchise opportunities available to purchase. From well-known, expensive, high-end franchises like Starbucks, McDonalds, or Subway to more affordable, obscure companies that provide products and services for specific niches, you’ll have a wide selection of franchises to choose from.

The best thing about a franchise is that there is a business model that has been tested and approved and is ready for you to implement. Typically, once you purchase a franchise opportunity, you have access to training and tools designed to help you build a strong foundation for your franchise business.

Understanding a network marketing business opportunity

With a little research online, you can discover numerous network marketing opportunities. Also known as multi-level marketing or MLM, network branding businesses often serve specific niches, such as the sale of vitamins, diet products, cosmetics, kitchen items, or home décor. But there are also MLM companies that have a wider range of product offerings, like an online supermarket or a health food store.

The network marketing business opportunity allows you to earn income from retail sales as well as through the retail sales of your recruits. You receive a portion of what your downline sells. Training and networking are a big part of the MLM business, because training your recruits well and nurturing relationships with distributors often translates into great financial returns.

Differences between franchises and a network marketing business opportunity

Buying a franchise means that you are buying the business model, as well as any training that comes with the purchase. However, you will be personally responsible for delivering the product or service, hiring staff, and maintaining business records.

With network marketing, you’re buying into the business model, but someone else produces the product, stores it, and fulfills your customers’ orders, as well as delivers it. Basically, your only job is to find customers and distributors. The typical headaches associated with a new business or franchise are eliminated, because you don’t have to deal with issues like payroll or human resources.

Another important difference between the two business models is the cost involved. With a franchise, your initial fees alone can cost you thousands of dollars. Then you have the upfront costs involved, like real estate, equipment, and employees, not to mention the royalties you have to pay to the franchisor, which is typically 4-8% of your gross sales. To top it off, franchises reportedly don’t even break even until the second year of business.

A typical network marketing business opportunity can cost you anywhere from $100 to $1,000 in business setup fees, depending on the business. There may be monthly costs involved, but usually no more than $50 to $200 max. Because the initial cost is so low, you break even right away, and then go on to grow your income with commissions ranging from 5-15%.

Clearly, the costs of taking advantage of a network marketing business opportunity are much less than buying a franchise. However, you still need to decide what is best for your business interests and financial goals. Both opportunities show great potential to generate significant income, so it’s up to you to determine your skill set and personality type, so you can determine the right opportunity for your unique needs.