4 ms·

I'm not defending multilevel marketing pyramid schemes but if you are signing up for one, you are not an employee. You do pay to run certain types of companies

I'm not defending multilevel marketing pyramid schemes but if you are signing up for one, you are not an employee. You do pay to run certain types of companies (franchises). But if the franchise isn't supporting you then you are being scammed.

JohnJamesRambo 8y ago
I'm not convinced franchises aren't far off from pyramid schemes and MLM as well. https://en.wikipedia.org/wiki/Franchise_fraud https://en.wikipedia.org/wiki/Franchise_fraud Math on a McDonald's franchise is here- https://www.mymoneyblog.com/mcdonalds-franchise-cost-vs-profit.html https://www.mymoneyblog.com/mcdonalds-franchise-cost-vs-prof... "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.
- itsangaris 8y ago
  They're similar, but I think the main difference is franchises aren't multi-leveled — they traditionally only have a single level between franchisor and franchisee.
- cooperadymas 8y ago
  How many individual people are buying new franchises these days? 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.
  - Digory 8y ago
    My impression is that McDonalds' margins are shrinking, forcing franchisee consolidation. 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.
- astura 8y ago
  Franchises are nowhere near MLMs. 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.
  - astura 8y ago
    I have to add here, the FTC found that 99% of people lose money in MLMs. This is obviously untrue with franchises. https://www.ftc.gov/sites/default/files/documents/public_comments/trade-regulation-rule-disclosure-requirements-and-prohibitions-concerning-business-opportunities-ftc.r511993-00008%25C2%25A0/00008-57281.pdf https://www.ftc.gov/sites/default/files/documents/public_com... [PDF]
Someone1234 8y ago
The difference between a franchise and a pyramid scheme is that a franchisee only sells products to consumers/end-users, not the franchise/brand itself. 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.
- pionar 8y ago
  > The substantial difference between a franchise and an pyramid scheme is that a franchisee only sells products to consumers/end-users, not the franchise itself. 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.
  - Someone1234 8y ago
    I don't understand the "Not true" there. 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...
    - cooperadymas 8y ago
      It looks like the GP possibly misread your comment and missed the extra 'e' on 'franchisee' in the first sentence.

JohnJamesRambo 8y ago

I'm not convinced franchises aren't far off from pyramid schemes and MLM as well. https://en.wikipedia.org/wiki/Franchise_fraud https://en.wikipedia.org/wiki/Franchise_fraud Math on a McDonald's franchise is here- https://www.mymoneyblog.com/mcdonalds-franchise-cost-vs-profit.html https://www.mymoneyblog.com/mcdonalds-franchise-cost-vs-prof... "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.

itsangaris 8y ago
They're similar, but I think the main difference is franchises aren't multi-leveled — they traditionally only have a single level between franchisor and franchisee.
cooperadymas 8y ago
How many individual people are buying new franchises these days? 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.
- Digory 8y ago
  My impression is that McDonalds' margins are shrinking, forcing franchisee consolidation. 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.
astura 8y ago
Franchises are nowhere near MLMs. 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.
- astura 8y ago
  I have to add here, the FTC found that 99% of people lose money in MLMs. This is obviously untrue with franchises. https://www.ftc.gov/sites/default/files/documents/public_comments/trade-regulation-rule-disclosure-requirements-and-prohibitions-concerning-business-opportunities-ftc.r511993-00008%25C2%25A0/00008-57281.pdf https://www.ftc.gov/sites/default/files/documents/public_com... [PDF]

Someone1234 8y ago

The difference between a franchise and a pyramid scheme is that a franchisee only sells products to consumers/end-users, not the franchise/brand itself. 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.

pionar 8y ago
> The substantial difference between a franchise and an pyramid scheme is that a franchisee only sells products to consumers/end-users, not the franchise itself. 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.
- Someone1234 8y ago
  I don't understand the "Not true" there. 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...
  - cooperadymas 8y ago
    It looks like the GP possibly misread your comment and missed the extra 'e' on 'franchisee' in the first sentence.