Choosing Between A Franchise And A Cooperative or Co-Op
If you have that entrepreneurial spirit and are looking to start your own business you may be considering different options. Many would-be business owners often turn to a franchise because of their proven track record and already in place business model.
One other option you might want to consider is the co-op
To some, a co-op brings to mind a group of hippies growing organic foods on a communal farm or Depression-era businessmen banding together trying to stay afloat.Co-ops have come a long way and are now a vital and widely used business model for entrepreneurs who are starting out in business for the first time.
There are many differences between franchises and co-ops and there are pros and cons to each business model.
Ultimately it is up to you to decide which business model fits you the best. The paragraphs below provide more details on some of the main differences between co-ops and franchises.
This is a big one. Most franchises will charge you a franchise fee that can range anywhere between $15,000 – $40,000. With co-ops there is no franchise fee. With a franchise you will also be paying an advertising fee that can range from 1%-3% of your gross earnings and you will also be responsible for paying the franchise a royalty fee that is anywhere from 4%-7% of the gross earnings. All these fees can really take a bite out of your profits.
Under a co-op business model there are none of these fees. A one time membership fee and annual dues that are only a very small fraction of the fees you endure with a franchise are all you ever have to pay. This allows you to keep more of the profits that you work so hard for.
Under most franchise agreements you are required to purchase all of your supplies and ingredients from the franchise. Even if you can find the same items cheaper at another supplier you have to buy them from the franchise. This is counterintuitive to the entrepreneurial mindset of keeping your costs as low as possible.
Under a co-op business model you can use the economies of scale that comes from the group’s buying power to get the best price possible for your supplies.
For some entrepreneurs the freedom to run their business the way they want to is paramount to any other benefit of business ownership. Under a franchise structure you’re limited to how you can run your business. If you want to introduce a new product that you think your customers would like you will not be able to. You cannot change the signage or color scheme of your business. You may also be required to take part in promotions that your customers may not have an interest in. If you simply want to add a product line to supplement or complement what you are already selling, this too is not a likely option in the franchise world.
A co-op will offer you the freedom to run your business the way you want. There will still be certain standards that you need to maintain but you can tailor your business to your local market and to your personality as you see fit. No one knows your business better than you do so it makes sense that you, and not some corporate bureaucracy, should decide how it is to be run.
The KaleidoScoops co-op business opportunity is one that many entrepreneurs have taken advantage of and have used to build a solid business that they can be proud of. If you have questions about any of our products, our services or seek additionaal information, send us an email and we will get back to you soon. Check out our About Us to see our story and learn more.