Pyramid schemes, also referred to as franchise fraud, multi-level marketing, or chain referral schemes, are marketing and investment frauds in which an individual is offered a distributorship or franchise to market a particular product.
Multi-level marketing is a system of selling in which you sign up other people to assist you and they, in turn, recruit others to help them. Some entrepreneurs have built successful companies on this concept because the main focus of their activities is their product and product sales.
The success of a pyramid distributorship for each and every distributor depends on continuously getting additional people to join the pyramid. However, there is a practical limit to how many distributors can be found and to how many product units they can sell or use.
Furthermore, you cannot control the efforts of the individuals under you to any significant degree. Many of them will have no real commitment to the program. They may have been high-pressured, just like you, to become a distributor.
Thousands of Canadians get introduced to pyramid schemes on a monthly basis. Unfortunately, many individuals don’t realize they are being presented a pyramid scheme. MLM entities are in numerous industries including the financial service marketplace. Student Destinations would like to suggest the following:
- To avoid being a victim of a MLM scheme find out if you are mostly responsible for selling a product/ service or are you required to constantly recruit. If recruiting is required more than selling the product/ service that you are pitching, then it is most definitely a scam.
- If you are not capable of visualizing the product or service being offered by this company on a shelf in a store, within a professional firm, supporting other products or services, or worse if you are unable to understand the product or service: walk away!
- If there is an upfront fee and/ or a monthly membership fee, be very cautious.
- If you are required to leave out of province for promotional conventions, inquire why travel is being enforced to continue operations.