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Network Marketing Failures vs. Franchise Failures

Guest post by: Andy Acciaioli

Article Overview: Franchise failures are extremely low especially when compared to network marketing failures. This article presents three areas as the reason for this: financial, operation and training, and strict compliance to the system.

Network Marketing Failures vs. Franchise Failures

I can speak on behalf of both network marketing and franchising. For a good part of my life I owned a tour business with 21 branch offices here in New England, many were franchised. And, I have been involved with network marketing for 20+ years.

The International Franchise Association states that after 5 years, 92% of franchises are still operating. What percentage of reps do you think are with the same network marketing company after five years? Considering that it is the general consensus that only 3% of network marketers make more than $500 per year, would it be out of the ballpark to say that the majority of the team members in a typical mlm will no longer be in the same opportunity after five years?

Depending upon the size of the market area franchised, the cost to get into one of my travel franchises was in the $30,00 to $70,000 range. The vast majority of network marketing companies offer their business opportunities at a cost of anywhere between $200 to $500, some lower and some higher.

With the lower cost of a network marketing business, any wonder why so many join and then walk away as they have far less to lose than in a typical franchise situation or in a traditional business for that matter?

Our franchise operations manual was extensive and covered every detail of how to operate a successful office: what it had to look like, what type of uniform the staff had to wear, exactly how the phones were to be answered, etc. The training was intense covering one week at our main office and one week in their office. In network marketing we do provide training either in person or with a vast compilation of tutorial videos. However, we encourage our new team members to step out and immediately introduce our business opportunity to anyone who will read an email or answer a telephone. This baptism by fire approach may work in network marketing but is completely unthinkable in franchising.

In franchising, individual franchisees are strongly discouraged from innovating. A constant expression is to duplicate not innovate. Which makes sense since the financial disclosure forms are based on a prototype franchise location doing exactly as was specified in the operations manual. There are no such constraints in network marketing. Over the years in spite of encouraging team members I have worked with to stick with the program, some often find ways to get creative…in the wrong way leading to their eventually quitting the business as it just did not work. (Actually most network marketing companies do work, the problem arises when the team member does not work within the system as specified by you, the upline, the company or the training material.)

With just those three areas (financial investment, business operations including intense training and strict compliance) you can see where our network marketing industry falls short when compared to a typical franchise system. However, because the cost of entry is so low into our business and we pump up the hopes of those we sponsor, it is our responsibility to provide them with all the financial, operational, training and marketing advice we can. Keep your new recruits from getting stuck in any one area by keeping them focused on the big picture: their goal for doing the business in the first place.

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Article Tags: franchise failure rate, franchise failures, network marketing failure rate, network marketing failures



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