Uh, your first clue is that you don't usually PAY companies for the privilege of becoming an employee.
It might sound like a subtle difference, but the incentives as a result of both business models are quite different.
Franchise sellers for example WANT their franchisees to operate the franchised business well. It is a "if they make money, we make money" situation. A pyramid seller only wants their agents to grow the pyramid, and they make money from sign ups even if everyone below loses money.
One is trying to create successful businesses, the other is trying to drain sign up fees from as many people as possible.
Not true. Most franchisors make a royalty from sales, but also make a profit from being the exclusive distributor of everything in the franchise - napkins, cups, food, etc.
Your general point is correct though.
I said the franchisee only sells products to consumers/end-users, not the franchise itself. It isn't a chain-sign up situation.
Your point seems to be that the franchise makes money from franchisee reselling, but I never said otherwise...
Math on a McDonald's franchise is here-
"But if you spend 40 hours a week and only keep tabs on one location, it might really feel like you bought a job."
It's looking like 5-6% net return is what you get which is worse than an index fund and you are working your ass off keeping the business running.
Franchisees don't make the majority of their income from recruiting other people to become franchisees.
Franchisees don't have "parties" where they utilize social pressure to get people to make sympathy purchases of things they don't want or need.
I can't say with certainty, but my impression is that most McDonald's (and other fast food chains, possibly other franchises as well) locations are then owned by semi-regional operators that run a number of franchises. Around here, I know most of the McDonald's are run by 1 corporation. Same with the Burger Kings. It was the same way where I lived previously.
Where margins are still fat, you'll find more one-off franchises. Chick-Fil-A, for example, used to limit "Operators" to one store. Real Estate agents are often franchises.
In the UK, we call them "pyramid scams", which is a much more accurate and damning term.
The wool is being pulled over 0 peoples (in power) eyes. Everyone (again, everyone with power) knows what is going on, including the FTC.
MLMs target those particularly vulnerable to their pitch. They leverage their information asymmetry (almost everyone will lose money in a MLM to the benefit of those above) and as you say, hide what the reality of what the "business" really is with lifestyle fantasy and rhetoric marketing.
I consider myself maybe a little smart in a few very specific areas - that has not stopped me from being outsmarted or taken advantage of at times I and think this is true for most people at some point. Labeling victims as weak minded is a simple way of dismissing the wrongdoing done by MLM actors with far more resources and power than their victims.
What they do should be illegal, and the simple reason it's not is MLMs donate lots of money to lawmakers.
There are whole blogs, podcasts, message boards, etc that are all about showing how multi-level marketing is just a flimsy set of guidelines to be able to legally dodge being busted for pyramid scheming.
> [A]t the national level the job of spotting [pyramid schemes] falls to the U.S. Federal Trade Commission. It primarily does this by checking to see if a company abides by a standard established in the wake of a 1972 lawsuit against a now defunct beauty products company called Koscot. The Koscot standard, as it’s known, says that while a company can compensate people for recruiting new sellers, it can’t base that compensation on how much inventory the recruits buy. Most state laws, including California’s, also require compensation plans to be based on sales.
It’s a simple rule. The DSA requires it of all its members. LuLaRoe didn’t follow it for the first four years of its existence, instead basing its bonuses on wholesale orders. For a while it apparently neglected to track what types of clothing actually sold.
Lularoe is a ....
Lularoe is a cult
Lularoe is a pyramid scheme
Lularoe is a ripoff.
That’s enough information for me.
It shows you what is often searched for which is informative, even if in that case it shows that racism is common (which arguably is informative within itself, albeit depressing).
Personally I like doing "[Something] Vs " to see what people consider are competitors. For example: "hacker news vs " returns:
- "hacker news vs reddit"
- "hacker news vs slashdot"
- "hacker news vs code"
Fluoride is ...
Fluoride is bad
Fluoride is toxic
Fluoride is poison
"The dose makes the poison" is not something I expect an average Google user to have modeled accurately.
Edit: after reviewing other examples in this thread, my opinion of an average Google user has fallen drastically. Was mostly having a laugh at the fact fluoride salts are generally a thing I avoid, which seems to be the intuition represented by your example.
It is something that should be addressed and looked at. Along the same lines of MLM's offering flexible schedules, more women are realtors than men. (https://www.trulia.com/research/is-real-estate-a-mans-or-wom...)
I've read in the past that women excel at realty because they are better at networking, building relationships, and are more trustworthy among the real estate un-educated. I think the same forces come into play in MLM - women trust other women and what they're selling and are sold on the "just build out your network for success" message that MLM's seem to thrive on.
The only issue is that realty can lead to success, while MLM's are designed from the very start for people to fail.
So one of the things is that MLMs have sort of succesfully branded themselves as not-a-job in a lot of cases. A large chunk of religious fundamentalists see women working outside the home as sort of against Gods will BUT single income houses are harder to maintain these days, especially if you have a bunch of kids. Enter MLMs telling these women A) it's not like a reeeaaalll job B) you can make money to support your family.
Women usually spend more on products, and pyramid schemes are definitely targeting consumers by dangling the carrot of helping them pay for the product they are consuming so much of, so it'd make sense that they'd mostly be made up of women. It's not always "falling for" in the sense that women are not always caught up in the scammy part; sometimes they really like the product that much, and sometimes it's a social thing that they're OK paying for to stay in the community. If anything that there exists consumers of pyramid schemes that are OK partaking in the pyramid part but not taking it seriously makes it worse, because it legitimizes the whole activity in the eyes of a) uninvolved husbands/bystanders and b) potential marks who are really falling for it.
This is like saying children are more likely to waste their money on toys, or young men are more likely to fall for military recruitment propaganda. It's "true", but it's got some weird correlation/causation misunderstanding.
It's not that they are more prone to falling for the business side of it, it's that they were attracted to the company for reasons besides the money they could make.
All of them were extremely happy LulaRoe customers BEFORE they became sales people.
I think if an MLM targeted the people on hacker news with a product that could make a solid side income through Programming meet-ups, mechanical keyboards, or video games, it would get a lot of us. Even if 2/3's of the people who attempted to make money the same way lost money on the MLM.
The reality was she ended up losing a lot of money, working 60-70 hours some week just to keep up with customer requests (most of which was returns and asking if she had a specific print in a specific size), and eventually burnt out with how difficult it was and how much back-and-forth the company was giving her (they had a policy where you could return product, then they totally changed the policy, then they changed it back, then changed it again). They also required that she kept up with inventory purchasing quotas, and if she didn't buy enough inventory within a certain amount of time she was cut off from selling at all and she wouldn't have access to their resources or sales systems.
She's not unintelligent and did realize the risks involved. She was just wanting to help out our family and build something for herself, and that's where I think a lot of these companies come in to feed on that desire for independence and flexibility. It was a difficult lesson for her to learn and really demoralizing.
She now runs her own cafe and is doing quite well at it, so I don't think it was her lack of business acumen that kept her from being successful.
Of course, at the bottom of the pyramid, you'd buy overpriced soap to keep up your minimums.
Avon's business model made much more sense back before we had mega retailers and the internet.