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Is a Network Marketing business a Micro-Franchise?

Although I’ve heard it called that, I’d have to fall on the side that says a Network Marketing business is NOT a Micro-Franchise business.  If  I had to, I might refer to Network Marketing as a mini-franchise with qualifications. 

First some definitions: a business that has the Network Marketing [or Direct Marketing or Relationship Marketing] tag is a business model in which independent distributors [independent contractors for, not employees of the parent corporation] have two products: the company’s basic retail product(s)/service(s) and the business opportunity [to become an independent distributor]. 

A Franchise is basically a business model in which a parent company has a proven product or service and then licenses through a continuing contract relationship the right to operate that business under the franchisor’s trade name and guidance and usually in a specific territory or area.  One famous example is McDonald’s™.

A Micro-Franchise is defined as “Microfranchising is a development tool that seeks to apply the proven marketing and operational concepts of traditional franchising to small businesses in the developing world. The primary feature of a microfranchise is its ability to be streamlined and replicated. The businesses are designed for microentreprenuers and usually target development issues such as health, sanitation, and energy.” – [ ref: http://microfranchising.blogspot.com/2007/01/definition.html ]  This is in that same category of developing nation economic growth offerings such as micro-loans.  Awesome ideas.

So, now for the discussion:  I would not categorize a Network Marketing business as either a Franchise or a Micro-Franchise.  It is what it is: its own business model.  But, then again, maybe it is like a mini-franchise but with no territory restrictions or ongoing licensing fees and you are not tied to a brick-n-mortar structure and you have no employees, but like a franchise you have a continuing relationship with the parent company, the right to sell the products and the availability of support and training.  But then again, the buy-in is vastly different.  A franchise is in the “lots of money” category, whereas the buy-in for a Network Marketing business is often small.

What do you think?

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One Response

  1. Hi Linda,
    Interesting and honest discussion. Some MLMers try to pass of their business as franchises. You are totally correct. They are not. Different business model.
    Joel Libava

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