Franchise, Affiliate or Retailer – Which to chose, what is the Difference?
What’s the difference between a Franchise, an Affiliate and a Retailer?
What are the similarities?
All of them can be individuals or partnerships striving to make money by selling products or services owned by someone else.
All require a relationship with the owner of the product or service.
The owner will establish rules, standards, and guidelines that must be followed in order to act as their representatives in the marketplace.
With a franchise, the vendor sells the licensing for his idea, product, or service to others. The franchisee (sometimes called the licensee) pays a fee for the privilege of marketing the franchisor’s products or services, according to the franchisor’s marketing plan, guidelines, and standards.
The franchisee signs an agreement which stipulates that they must conform to specifications set for the store (including design, decor, and maintenance and cleanliness standards), product reproduction, marketing efforts, or any other attempts to represent the franchisor.
The franchisor still has ultimate control over his ‘reputation’ as represented by the franchisee.
An example of a big Franchise is Papa Johns (Papa John’s is one of the largest pizza delivery franchise companies in the world, with over 3,900 stores worldwide and rapidly expanding in 33 market) and currently costs approximately £70,000 / $112,000.
It’s a very legal agreement which requires a substantial up-front financial investment for facilities, supplies, and product.
A good resource for British based Franchises is the British Franchise Association (http://www.thebfa.org/)
A manufacturer ( also vendor ) may set up an affiliate program to help them increase sales.
The vendor establishes all the terms, payment policy, commission schedule, return policy, for their affiliate program.They are completely in control.
The idea is to offer terms that will entice others (affiliates) to market and/or sell the product for them.
The vendor pays a commission on each sale per his established policies, ranging from 1% to 100% of the sale price.
Ideally the vendor offers tools and marketing aids, such as banners, adverts, and content to help their affiliates close the deal.
An affiliate is a contractor who joins a vendor’s affiliate program and agrees to market products based on these established rules, standards, and policies.
An affiliate won’t stock an inventory, so no warehouse required, all fulfilment is carried out by the manufacturer / vendor.
An affiliate mostly sends traffic to the vendor’s website in hopes that the shoppers will actually make a purchase. The affiliate might place adverts on their personal website or blog, put adverts on other websites, or employ other marketing tools and tactics, such as social media, to build interest, generate traffic, and create sales.
In essence, affiliates drive traffic to a web site(s).
A good resource for Affiliate schemes is Affiliate Window (http://www.affiliatewindow.com/uk/) and a good scheme for setting up your own web site to make use of affiliate marketing is
A retailer is an individual or organisation who has established a presence in the community and has space available to sell products.
A retailer may purchase a quantity (inventory) of a particular product or products, and then sell that product at a profit, the mark up from retail to sale price can be 20% to 200% and of course some premium goods have an even higher markup and therefore provide a higher profit, such items are called Big Ticket and could be for example luxury goods like watches, jewels, and more mundane kitchens.
There is usually an agreement or contract, but basically all the vendor is purchasing is shelf space. Usually, if these are perishable products or products with freshness concerns, the vendor will rotate the older stock at regular intervals and replace it with fresher inventory.
There is a key difference between affiliates and franchises, and retailers.
A prospective affiliate or franchisee submits an application for the ‘privilege’ of selling the vendor’s products. In both situations, this is a revokable privilege.
The franchisee pays the vendor or owner of the brand they wish to represent a large fee which covers everything from licensing and training, to access to suppliers and advertising materials.
A retailer, on the other hand, is someone with space to sell things.
They may approach a vendor of a well-known brand and ask to stock their merchandise. In many cases, however, the vendor approaches the retailer to reserve shelf space for their product.
This may happen with new products or lesser-known brands, to give them the opportunity to get out in front of the public and ‘break into’ the market. There will be restrictions and guidelines to a retail agreement as well, but nothing like those imposed on a franchisee.
Of the three, it is much simpler and and far less expensive to form an affiliate relationship.
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Kevin Paul Humphrey