Franchise Vs. Affiliate
Franchising and becoming an affiliate representative for a company are two distinct forms of business operation. As a franchise owner, you buy into the business model and own your own franchise. As an affiliate, you agree to market goods and services for a company 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 his own business unit. The franchisee typically pays the franchisor an upfront fee as well as ongoing licensing fees in exchange for the benefits of using the business name and structure. In this type of business structure, the franchisee has ownership of his unit or location.
A franchisor can offer franchise opportunities to pocket fees and avoid investing new capital to expand his operation. Franchisors do take on risks that the new owner will operate a poor business and damage the franchise brand. The franchisee gets to become part of an established business with brand recognition vs. trying to start from scratch. He also gets to keep all profit, less any ongoing fees, from the operation of the business. Some franchisors also provide initial and ongoing support and training for operators. As the franchisee, you do give up some level of autonomy, because franchises often have contracted rules for operations. Plus, you pay for franchise rights.
In an affiliate business model, an independent seller agrees to promote or sell goods and services on behalf of a primary company in exchange for commissions. This type of structure is common on the Internet, where independent websites promote goods and services for other companies through affiliate marketing programs. In many cases, third-party affiliate programs serve as the medium between companies and affiliate sellers in exchange for a fee from the company.
For a company, taking on affiliates allows you to retain full control of the business operation. You simply pay commissions when independent entities sell goods and services. Affiliates often have little ability to oversee the methods of promotion used by sellers, though. For affiliate operators, you can promote brand-name products and services and collect commissions. Affiliates typically don't have much, if any, upfront investment, other than establishing a location or online presence. You can also work as much as you want to develop your business. An affiliate doesn't have any ownership rights, though.