Pyramid Scheme?

[Spezza]

So I just got back from a presentation put on by The Sum-It Club . Short description of the whole thing is they have about 15,000 members in the GTA (Greater Toronto Area) and if you join their club you can take advantage of their great deals with businesses (everything from furniture, automotive, movie theaters, etc). Additionally, if you purchase a higher level of membership and recruit new members you make commission on their entry and on their subsequent commissions. (Basic membership costs run $599 Cdn, my friend paid $2000 for 5 years as a recruit.) When I look at this I see pyramid scheme, but since the club is over 3 years old and public I have to assume it does comply with Ontario laws. I did a search to find whatever I could about this club, mostly looking for disgruntled customers, though I could only find this.

My questions are:

1. Is this actually legal?? (Personally, I considered the sale’s pitch moderate on a scale of intensity. I would not say it was high pressure to buy, but I could see how for some it would be. However, when members invite people they are ‘advised’ to keep their guests in the dark about the actual purpose of the meeting. I went with a friend and was told the whole nine yards about the club and how to avoid confrontations.)

2. What percentage of people who join these type of clubs actually end up making money? (They put together an impressive income presentation where you can make your money back with only recruiting three new members.)

3. How prevalent are these groups? Are they common? Do any SDMB subscribers have any experience with these ‘clubs’?

[ouryL]

@Spezza

So I just got back from a presentation put on by The Sum-It Club . Short description of the whole thing is they have about 15,000 members in the GTA (Greater Toronto Area) and if you join their club you can take advantage of their great deals with businesses (everything from furniture, automotive, movie theaters, etc). Additionally, if you purchase a higher level of membership and recruit new members you make commission on their entry and on their subsequent commissions. (Basic membership costs run $599 Cdn, my friend paid $2000 for 5 years as a recruit.) When I look at this I see pyramid scheme, but since the club is over 3 years old and public I have to assume it does comply with Ontario laws. I did a search to find whatever I could about this club, mostly looking for disgruntled customers, though I could only find this.

My questions are:

1. Is this actually legal?? (Personally, I considered the sale’s pitch moderate on a scale of intensity. I would not say it was high pressure to buy, but I could see how for some it would be. However, when members invite people they are ‘advised’ to keep their guests in the dark about the actual purpose of the meeting. I went with a friend and was told the whole nine yards about the club and how to avoid confrontations.)

2. What percentage of people who join these type of clubs actually end up making money? (They put together an impressive income presentation where you can make your money back with only recruiting three new members.)

3. How prevalent are these groups? Are they common? Do any SDMB subscribers have any experience with these ‘clubs’?

It don’t pass the smell test! :dubious:

[Joey_P]

In all honesty I didn’t read the entire post. As soon as I saw " Additionally, if you purchase a higher level of membership and recruit new members you make commission on their entry and on their subsequent commissions" it rang a bell. That smells like pyramid scheme or MLM or whatever it’s called now. Either way I’m guessing it’s not totally legal. This doesn’t sound to promising either “However, when members invite people they are ‘advised’ to keep their guests in the dark about the actual purpose of the meeting” So anyways, what are you supposed to do once your involved? Somehow I’m guessing your pushed to recruit more members under you (sorta forms a pyramid doesn’t it.) Kinda reminds me of when my GF joined Market America. She swore up and down that it wasn’t a pyramid scheme. When I started drilling her with questions she said “They told us that if people ask these kinds of questions, don’t answer them, bring them to a meeting so WE can explain it to them.” She also told me that they are totally legal, they even have cops there. I told her to ask one of them for their badge number, then I started to wonder WHY they would even need cops. Anyways, it took myself and her family about a year of pestering to get her out of it. She ended up not making a penny, and probably losing some. I’m rambling now. So in short, my gut instinct is that it’s a pyramid scheme or Multi Level Marketing. Eitherway, not good, stay away, far far away. (Oh one more thing, if you have to pay to join, run the other way. Better yet, offer to let them deduct your admission fee from your first sales, I bet that won’t work)

[Ringo]

Rather than retype the experience, I’m going to repost something I posted in July of 2002:

MLMs, or Multi-Level Marketing schemes must have a product, as Amway does, to remain legal. They are typically sold on the idea that you will successfully recruit additional dealers, and sales of the product are secondary. You will make your money off of the endeavors of those whom you recruit. Some of them barely have something you could call a product to offer.

I’ve experienced many pitches, and consequently chilled relationships, as a result of friends and acquaintance being taken with a good presentation of such. The average experience is that the inductee sells a couple of “dealerships” to the few friends and relatives that they don’t alienate, and never really make any money (back).

And never mind how much product you stash in the garage.

And you’ve no doubt been shown examples of people who are raking in $20,000 per month checks from their tiered organization. They are, of course, the exceptions to the rule and, also, I suspect, not quite real.

So let me tell you of my (vicarious) experience. Most folks go into it thinking that they can get others as excited as they’ve become, and work at it sort of part-time. The ones who do actually make some money (for a very little while) haul off and do it full-time.

Everyone’s a prospect. You’re on a full-time hunt. There is no time off.

Until you reach that understanding of what it takes. My business partner of many years got into one of these in 1999. She’d done another one in 1990 which, if nothing else, taught her to not even try me. So I got to be the diary.

I was hired away from our company about the time she reached fever pitch, but we had many mutual obligations, so we have stayed in close touch. They had a product, a little Internet-capable telephone/PDA that was overpriced, as well as discounts on office supplies that made sense if you usually went through a 55-gallon drum of white-out in a year.

So what she had was what few recruits to the MLMs do, but what is the true ideal situation.

She had a conference room, presentation media, available cubicles with telephones, fax machines and Krispy Kreme donuts and coffee. She was holding uplifting seminars a couple of times a week.

Ultimately she probably did as well as one could do. She told me her best month was $1200.

Tough to make that work.

Good luck!

What you’ve described sure sounds like an MLM. Another experience I’ll throw in is my brief employment as a rep for something called Club America. With them the pitch to recruit didn’t come until you’d proved your mettle by being able to sell the club’s primary product, a consumer discount plan.

It sounded great, and they provided slick materials. The idea was that you paid $X for a membership and saved far more than that with the discounts on restaurants, hotels, clothes, cars, you name it. Unfortunately, they couldn’t really deliver. Another thing you might check out about the organization you’re curious about. Their twist appears to be offering multiple tiers of membership. Sorta like Club America.

[Punoqllads]

If they require you to put down money to be allowed to sell their stuff, it’s a scam. If your entrance money goes in part to the “friend” who recruited you, then it’s a pyramid scheme.

If, on the other hand, you pay money only for the items you buy, and whomever recruited you gets a percentage of what you sell, then that’s a multi-level marketing … scheme. Legal, I think, but I’d still steer clear of it.

IANAL, YMMV, etc.