Random musings: Is it a scam?

In the 1950's and 1960's, franchising was considered a questionable business model...much as network marketing is today. And for many of the same reasons.

Here is a passage from a book by the American Bar Association called Franchise Casebook:

The line between wholesome free enterprise and harmful greed is often thin. The “wild west” of business format franchising that emerged after WWII and created substantial wealth for a broad variety of American citizens also served the interests of dishonest individuals looking to make a quick buck at the expense of vulnerable would-be franchisees. Unethical practices led to most of the state legislation and many of the common law developments that are the subject of this casebook. But in developing laws designed to protect franchisees from a lack of information about a franchise opportunity or to curb abusive practices by franchisors, our legislatures and courts have rarely lost sight of the importance of franchising to the American economy and the unique opportunities it presents to entrepreneurs. In enacting laws and handing down decisions, they have typically sought to achieve a careful balancing of the interests of franchisor and franchisee alike.

Before franchising was regulated, there were many people who did many shady, if not illegal things. But after regulation in the 1970's, most of those problems disappeared. Are they totally gone? No...as long as there are people who would prefer to lie and steal than to actually earn some money, there will always be some problems.

And it's the same with network marketing. At one time people were promising millions by just signing your name and handing over some cash. But again, regulations have eliminated almost all of the trouble makers.

With network marketing, it is illegal to just sell distributorships. There must be products or services being sold. If there are no customers, then it's a pyramid scheme...which is illegal. As long as products are being sold to non-distributors then the company is legitimate. Distributors are allowed to buy the product or service but it must be made available to others outside the distributor ranks. There are also rules that it must be possible for someone to out-earn the people above them, so it's not true that only the people who got in at the beginning make money. They do have time as an advantage, but it can be overcome. The top earner in SendOutCards has been with the company for 10 or 11 years but there are a couple of people who have been in the company for a few months to a year, who are on a trajectory to oust him from that position.

So, is it a scam? If you find a network marketing company that has been in business for awhile and is a member of the DSA (Direct Selling Association), then you can feel pretty safe. Most of the problems come from the independent distributors making false claims, whether knowingly or unknowingly. As far as franchises go, I'm not really familiar with them.

SendOutCards has recently made the line between customer and distributor even more distinct. Anybody can sign up as a customer, at various price points. And any customer can upgrade to a distributor for $50. And all distributors must not only have a customer package but they must signup additional customers to earn commissions and bonuses. To find out more, check out my SendOutCards webpage and click on Join Now to see the different packages available.