If you want to start selling products, you may be wondering if opening a franchise or becoming an affiliate might be a good decision.
Let’s explain the difference between a Franchise and an Affiliate.
Franchising and becoming an affiliate representative of a company are two different ways of doing business. As a franchise owner, you accept the business model and own your own franchise.
As an affiliate, you agree to market goods and services for a business in exchange for affiliate fees or commissions.
In a franchise setup, a business operator sells the rights to use the name, business model, and processes to a franchisee who wants to operate their own business unit.
The franchisee generally pays the franchisor an up-front fee, as well as ongoing licensing fees in exchange for the benefits of using the company name and structure.
In this type of business structure, the franchisee has ownership of his unit or location.
Pros and cons
A franchisor can offer franchise opportunities to save fees and avoid investing new capital to expand its operation. Franchisors take the risk that the new owner will run a poor business and damage the franchise brand.
The franchisee can become part of an established business with brand recognition rather than trying to start from scratch. You also keep all of the profits, minus ongoing fees, from operating the business.
Some franchisors also provide initial and ongoing support and training to operators.
As a franchisee, you give up some level of autonomy, because franchises often have contracted rules for operations. Plus, you pay for franchise fees.
In an affiliate business model, an independent seller agrees to promote or sell goods and services on behalf of a parent company in exchange for commissions.
This type of structure is common on the Internet, where independent websites promote goods and services for other businesses through affiliate marketing programs.
In many cases, third-party Affiliate Programs serve as a medium between companies and affiliate marketers in exchange for a company fee.
Pros and cons
For a business, hiring affiliates allows you to maintain full control of the business operation.
You simply pay commissions when independent entities sell goods and services.
However, affiliates often have little ability to monitor the promotion methods used by marketers.
For affiliate operators, you can promote branded products and services and charge commissions.
Affiliates typically don’t have much startup investment, if any, other than establishing a location or online presence.
You can also work as much as you want to develop your business. However, an affiliate does not have any property rights.
Whether you decide to become a franchisee or an affiliate, you will receive instructions from the brand, company, or vendor you are working with.
It is important to follow these instructions carefully because violating the terms of your agreement could have costly legal consequences.
Before going, either way, it’s a good idea to do a lot of research and, if you can, talk to people who are succeeding as franchisees or affiliate program participants.
That way, you can learn what worked well and what didn’t, and incorporate that knowledge when starting your own business.