Multilevel Franchise or Pyramid Scheme
对比了合法的多层次特许经营与非法的金字塔骗局，概述了主要监管理论，并为小企业投资者提供了筛选营销计划的建议。
MULTILEVEL FRANCHISE OR PYRAMID SCHEME? Multilevel franchises have a special appeal for many small business investors because of the low initial investments required and the promise of business autonomy. These same individuals are highly vulnerable to the pitches of pyramid promoters who use similar marketing plans to attract investors illegally. Pyramid sales schemes similar to those that experienced tremendous growth during the late 1960s and early 1970s are reappearing. In Utah, which is sometimes regarded as an incubator of pyramid schemes and other forms of consumer and security fraud, at least 210 such companies were formed during the first six months of 1981. Utah corporations alone have defrauded investors around the country of as much as $80 million. Not all multilevel distribution plans are illegal, of course. Amway Corporation, Mary Kay Cosmetics, and other quite legitimate operations are experiencing growth while operating within the vast network of state and federal regulations. Multilevel franchises have become big businesses which may eventually displace department and discount stores as the primary mode of mass merchandising. The problem faced by small business investors, whether promoters or participants, is distinguishing between such legal multilevel franchises and illegal pyramid schemes. Numerous court and commission rulings on pyramid schemes cut across a variety of regulatory theories. Since no central theory of regulation nor one comprehensive summary of the various theories exists, the small business investor has little guidance to evaluate a multilevel franchise's marketing plan. In this article, the significant features of multilevel franchises and pyramid schemes are outlined and contrasted. In addition, implications of major regulatory theories for actual practice are presented. Finally, criteria are suggested for small business investors to use when screening promotional marketing plans. MULTILEVEL FRANCHISE VERSUS PYRAMID SCHEME Nearly every manufacturing firm uses a system of middlemen to distribute its products. Various wholesalers add value to the product by breaking bulk and facilitating distribution. A pyramid shape emerges, with the manufacturer at the apex, supported by an ever-widening group of wholesalers and retailers, based upon a foundation of consumers. A common method of retailing is direct, or door-to-door, sales. The strategy is to go directly to the customer to create demand for the product rather than allowing the customer to be exposed to competing products at a retail store. The key to success is a large number of sales people. Since salaries are paid on straight commission, the sales force's efforts are a variable cost to management. The company achieves flexibility to hire as many sales people as possible, and theoretically, each person's effort is the only constraint on his or her income. Because of the need for managerial personnel to supervise and hire sales people, multiple organizational levels are created. Multilevel franchises combine both traditional distribution and direct selling techniques. Consequences stem from promotional marketing plans which allow distributors to enlist other participants to sell the product. Typically, the product travels through the chain of distribution at a wholesale cost to the lower level distributors, who sell it at a retail price to the consumer. Intermediate distributors profit not only by their retail sales, but also through a series of bonuses or override commissions from the sales volume of their underlings. As a distributor acquires more downline sales people, he ascends within the distribution system and his bonus increases. Most multilevel franchises have three or four levels. Pyramid schemes likewise involve three or four levels through which products are channeled to the ultimate consumer. A participant can normally enter at any level. …