NEW YORK--(BUSINESS WIRE)--The business startup decision whether to go with a Franchise or an Independent Distributorship, in terms of dollars and risk, looks to be an easy one. Both offer the same thing, a business model, a brand, and delivering products and services to the end user for, ideally, profits. At the corporate level the benefit to the mother company is similar as well; each model facilitates the corporation’s expansion while spreading risk. However, from there the front end cost of a Franchise—read risk—will undoubtedly be astronomically higher, and the contract you sign will be restrictive and iron-clad. In the Independent Distributor business model, typically the upfront cost covers the materials you need to start the business---read product---with support and guidance and training an integral part of the package.
A look at Clearette Electronic Cigarette Company, one of the fastest growing US e-cig companies, helps to clarify the franchise vs. Independent Distributor issue. One of the hottest areas of growth right now is electronic cigarettes; suddenly US sales in electronic cigarettes are approaching two billion dollars this year alone. New York based Clearette has chosen Independent Distribution as their means of national and international expansion.
“We took a look at going franchise,” says Leonardo Lombardo, CEO of Clearette, “and we immediately realized we did not need to do that to create distribution and make money. Why charge some guy a big number? I mean, for what? Training? A binder or something? We know our products are great, our margins are great, we don’t need to take some guy's nest egg, or make him go get a big SBA loan, for everyone to be successful.”
Many new business owners over the years have become very wealthy from the Independent Distributor business structure in part because their initial cash outlay is dramatically less. The key focus in this type of venture is timing, product and industry. Industry analysts and experts are in agreement that electronic cigarettes are here to stay, and the growth rates, to date and projected, are beyond phenomenal. The key is alignment with the right company and simply and efficiently creating distribution of your company’s product lines in your territory. Lombardo continues, “I think our biggest challenge is determining who is real. Those franchise guys get a whole lot of money up front; they MAKE their money selling franchises and materials. Our distributor’s upfront cost is for inventory and point of sale materials, that’s it. So we have to determine who the best candidate to grow a region is. It’s a process.”
Horror stories abound as to franchises gone bad and lost fortunes to unviable franchise business plans. But it seems, once a corporation has navigated the state and federal regulations ostensibly created to protect consumers, franchise operations continue to be sometimes a license to print money for the franchisor, not the franchisee.
With an Independent Distributorship the new business owner utilizes his or her money for their new business inventory; this immediately creates an asset - which their company in turn needs to sell for a profit. With good products and pricing, this becomes an ongoing reoccurring event. Clearette gives each distributor specific territories, which they retain contractually through performance. “There is a reason companies like us, and Boars’ Head, and Snap-on Tools embrace the independent distributor business model,” Lombardo says. “It is the business owner who will always work hardest to further the business, and who, hands on, will develop and maintain the best relationships with their business partners in the territory. Our part is equally important, providing the quality product, and the training and support they will need to grow and be profitable.”
Clearette, privately owned, is growing in leaps and bounds through such relationships and is making major headway as a true rival for big tobacco’s late blooming attempts to maintain its industry stranglehold through electronic cigarettes. Lori Abbot, a new Clearette Distributor in Jacksonville Florida, says: “I was worried about big tobacco. It seemed to me they could squash little me. Then I tried the Clearette products, loved them, and looked at the industry growth and start up costs, and wrote the check.” Lori, a bubbly and vivacious mother of three, who recently signed 124 stores in the Jacksonville area, got her start with Clearette with $8500 in inventory. Similar stories with Clearette are crossing the country; currently 170 distributors are leading Clearette’s growth in 39 states.
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