Empower network defines franchising and describes the differences between franchising and network marketing
In a previous blog posts we defined and explained the differences between network marketing and affiliate marketing. We also promised our next blog that would be taking us down the path of knowledge would focus on the difference between franchising and network marketing, so here we go!
Franchising is the practice of a franchise (generally a business with a known reputation) giving a franchisee (an individual person) use of their business model and branding. In return, the franchisee pays fees and royalties for the use of the proven business model and branding.
This is similar to licensing, but with licensing agreements you can sell a franchise’s products (think a retail store selling licensed sports memorabilia) with no actual rights to the franchise.
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There are many benefits to owning a franchise, like being able to profit from an already proven business model and known brand, just as there are cons to owning a franchise, like not having any creative freedom over your business.
Previously we described network marketing as being similar to franchising.
Both require an established company giving you the rights to sell their products or services, but as you’ll see here there are a great many differences between the two.
One major difference between franchising and network marketing is in franchising you hire staff to help run your business with you and in network marketing you create a team of independent contractors (or independent agents) of fellow entrepreneurs to work with.
With network marketing, you are paid for the products you sell, and often each time you recruit a new team member or that team member sells products or services. In franchising, your earnings come directly from sales of product and/or services. And the franchisor takes a percentage of every transaction in addition to the franchise fee you
In network marketing, there is no limit to the amount of people you can bring into your business. In franchising, the franchisor determines where a franchisee can sell and setup its location based on the territory and rights you purchase from the franchisor.
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