Multi Level Marketing Opportunities and Pyramid Schemes.

My mother maintains a vendor booth at an indoor swap meet and farmers market in her city. She is keeping it mainly to promote her cheesecake business by handing out samples and business cards. She also likes to go to meet new people and has made friends there.

She called the other day and was a little vexed about a man that befriended her there. She said he was really charming and before long had pulled up a chair inside of her booth and had just kind of moved in-- talking about how he was recently widowed, etc, etc. Then all of a sudden he started pressuring her into some business deal where she would invest $1,500 dollars and she could make loads of money in return. He handed her some glossy pamphlets that looked professional. My mom responded to his gesture with, "aren't you just running a pyramid scam?"

"Oh no--that would be illegal. Just invest $1,000."

"I'm not giving you a $1,000!"

"Just five hundred then...you can write me a check."

So then, to get rid of the guy, my mom says,"My daughter Penny handles all of my business and finances." So she gives him my name, phone number and address! So, I have that to look foreword to--a call or visit from Ralph--you would think that being a con-man and all he would change his name to Alfonse or Jonathon or something wholly more attractive and affluent sounding. I am looking foreword to it...almost salivating at the thought...oh yeah...it's on Ralph!, it's on like Donkey Kong!

Multi level marketing is in many business opportunities a legitimate form of selling products. The difference between a legitimate multi level marketing business and that of a pyramid scam is easy to spot. The legitimate multi level marketing company places an emphasis on selling a product where the pyramid scam places an emphasis on recruiting people or asking for investments and in some cases like gifting clubs they will ask for donations where you in turn will recruit people below you to ask for donations or investments. The gifting clubs will sometimes use religious "feel good" terms or names like Renewal Celebrations or Jacobs ladder and might come as a special invitation from a church member.

A pyramid scheme is set up so that there is a hierarchy where people are recruited below those who have been previously recruited. Those who have been recruited make payments to the people above them in the hope of making their money back by recruiting others and gaining payment from them. In pyramids, most of the sales are made to the recruits and not the general public. The nutritional supplements or what ever they have going only serves as way to make the scheme look legitimate.

1. Never feel pressured into joining a multi level marketing group.
2. Never feel pressured into signing or investing in something that you aren't sure of.
3. Take the time to investigate any business opportunity.
4. Check the business out on the Better Business Bureau website at http://welcome.bbb.org/
5. Never make investments at the swap meet!

Always keep in mind, that it's a felony in the United States to participate in a pyramid scheme and is punishable by fines and time in jail. People participating in the scam are viewed as engaging in illegal activities rather than being a victim.

Should You Invest In a Franchise?

My brother-in-law came to the United States from Damascus, Syria. There, as a young man in his early twenties he was trained and worked as a Chef in the Sheraton Hotel in Damascus . It was his American dream to come to the United States and open a restaurant of his own. After many years of saving, he and my sister had the money to invest. They chose to go with a franchise instead of creating a resturaunt of their own. With a franchise they would be able to have a turnkey business that has been established in the area and receive support and training. Most importantly, with a franchise they would have brand recognition and customers that were familiar with the restaurant. They chose an upscale hamburger franchise in Southern Californa. They met and liked the owners and talked with other franchisees in the franchise network so they would know what to expect. They were able to watch the restaurant being built from raw land and into a brand new establishment with a fabulous kitchen! They have been very successful and happy with their decision.

A franchise will typically offer the prospective franchisee:

• An established business name, trademark, customer recognition


• Business support (business plans, help with location, training)


• Help with financing


• Proven track record


• Product

The downside of opening a franchise over an independent small business:

• Monthly franchise fees of around 6% to 10% of gross sales


• Loss of freedom in product or services


• Reliance on the performance of other franchisees in the system.


• The franchise can terminate your agreement at the end of your contract term.


• You are leasing the trademark name you do not own it.

If you are considering investing in a franchise:

• Evaluate the amount of money you have to invest in the venture.


• Go to Franchise trade shows and talk to the various franchisors and determine what kind of work you would like to do.


• Have the franchisor back up any financial claims with tangible written documentation. The Federal Trade Commision requires all franchisors to provide prospective franchisees with a complete disclosure statement so that the franchisee can make an informed decision.


• Look at franchises that have been in existence for a long period of time--they have a higher rate of success and profitability.


• Talk to other franchisees in the franchise system to find out what you can expect in terms of operation and profit.


• Look at the annual sales and make sure they are increasing and not declining. Do the same with net profit.


• Don't rush into anything. If you feel pressured --walk away.

Check any prospective franchise opportunity for complaints with the Better Business Bureau at

http://welcome.bbb.org/

If you would like any further information to evaluate if a franchise is right for you, The Small Business Administration is an excellent place to start. They have great resources and people trained in helping you to start up a small business including financing options and research materials.

http://www.sba.gov/