Tuesday
Feb232010
10 simple answers from Medifast could dispel allegations that it relies on pyramid-style selling
Tuesday, February 23, 2010 at 03:35PM By William Lobdell
Medifast's lawsuit filed last week against the Fraud Discovery Institute and its associates (including me) alleges defamation because the business model for its Take Shape for Life program does not rely largely on an endless recruitment of independent sales people, or "coaches."
Medifast could prove this by answering 10 simple questions that would show the recent rapid revenue increase for its Take Shape for Life program can be attributed to the sale of its products, and not the recruitment of citizen sales people. (Medifast's competitors, which don't use multi-level marketing, have suffered declines in sales during the recession.)
- On its website, Medifast has advertised two income scenarios: one based on the coach selling the meal replacements to clients, the other based on the coach recruiting new coaches. One showed $8,000 a month in income, and the latter, $20,000 a month. What percentage of all coaches who have worked for Medifast over the years have earned either of those illustrated income examples?
- What is the average income of all coaches from product sales to clients, not from bonuses and commissions derived from recruiting other coaches who recruit other coaches who recruit other coaches?
- What is the average monthly income of all coaches who were enrolled during a year, not just the active ones?
- What is the average length of time that all coaches to remain active?
- In total, how many people have been coaches over the last five years?
- Medifast advertises that financial health is a key element for success in losing weight and offers its "coaching" program as the prime means for achieving financial health. What is the average net profit to the coaches gained from sales to clients, factoring in all normal business costs (i.e., advertising)?
- What percentage of all coaches earn more per month than the costs of the product and related business expenses?
- The Medifast pay plan rewards coaches to recruit more coaches. The majority of commissions, per sale, are transferred to recruiters in the upper levels, making recruiting more lucrative than retailing. When are there too many coaches in any given area? Is the sales force expected to grow without limits in all market areas?
- What percentage of coaches remain active sellers/recruiters after one year? After two years?
- Are coaches given estimates of the cost of the business, historical dropout rates and average incomes gained from direct-selling commissions vs. recruiting-based commissions?
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