Franchising vs. Network Marketing: Startup costs

As Robert Kiyosaki points out in his best-selling business book The Cash Flow Quadrant, there are three common models that a person starting their own business can adopt: corporate, franchising, and network marketing. All three are valid, and they take different approaches to the heart of business: getting leverage.

Leverage is how you gain advantage and multiply your results. You can get leverage with capital, you can get leverage through employees, or you can get leverage through a network of like-minded people. If a corporation is an organization like General Electric, and a franchise operation is like McDonalds, then network marketing is more like a church.

I assume you are already very familiar with the corporate model. You have probably been working inside one most of your life. You also know that while a corporation is a familiar business model, it is no guarantee of success. With a corporation come employees and headaches.

Francising and network marketing are no guarantees of success either. But with franchising, someone else has already figured out the system and the products, does the marketing, and all you have to do is buy the store and follow the system to the letter. You still have employees and headaches.

With network marketing, someone else has figured out the system, produces the products, probably warehouses and ships the product to fill your customers' orders, and handles the taxes and finances. They send you a check once a month. Your job is to find customers and distributors (NOT employees!) and cash the check. NO headaches!

On May 12, 2003, Business Week magazine published an article about franchising as a new career for people who have been downsized and don't want to go back to the corporate world. This is an excellent article and anyone thinking about starting their own business should definitely read it before deciding to do a corporation and invent their own system, get their own products produced, and make a heavy investment in facilities and employees.

However, you should also look at what network marketing has to offer, and in particular the spectacular difference in out-of-pocket startup costs. That's what this story is about.

According to Business Week, the first hurdle to overcome in a franchise is the initial fee: $1000 to $200,000 or more. Also, franchisors will want an annual royalty of 4% to 8% of your GROSS sales, AFTER you pay for your startup costs - real estate, building, equipment, employees, etc.

Here are some franchising costs and the royalty paid to the franchisee. These are actual companies, but the names have been left out and identities disguised a bit here. If you want the real company names, get the May 12 copy of Business Week.

According to Business Week, the annual incomes run in the low six figures, although you may need to buy more than one unit to hit six figures. You can't expect to break even until the second year in business.

Compare this to costs involved in setting up a basic network marketing business with the company I am working with, and the payout:

• Business Center on the Web: $499 (one-time expense, first month only)
• Monthly Costs: $200 (may vary - its up to you) - your first month will total $699
• Commissions: 5% to 14% initially

If you follow the simple system that I can teach you in about five minutes, you can begin building your own business in the trillion-dollar nutritional supplements industry. The system is simple, the work is hard, and you must be consistent and accurate in your efforts to maximize the compensation plan. Not everyone makes it, just as not everyone makes it in conventional businesses or in franchising. However, many people have become happy, wealthy retired network marketers. If these people never work another day in their lives, they will continue to enjoy comfortable incomes because they built a self-sustaining network.

Want to know more? Contact me through this weblog.

Let's make it happen for you!