A Puppet Tap Dances

It seems that j. Kim Sorensen, on of the most influential people in travel, is caught a little short on facts and original comment in the recent Travel Weekly Column, In The Hot Seat.

What did Travel Weekly's Nadine Godwin get out of Kim that was not already sent out by Scott Tomer as "talking points"? Not too much.

This "interview" was so full of deflection and avoidance it was not even funny. He could not even tell how many RTAs were in the program! This is something I might expect a CEO to know.  If you want the Cliff's Notes version, here it is:

1. How many RTAs do you have? (I don't know but more than the beginning of the year)
2. Do you envision converting all RTAs to the franchise model? (I don't know and I don't want to talk about that)
3. What portion do you think might switch? (I don't know but if they don't we won't get rid of them)
4. Isn't this risky? (I don't know, but we know how to recruit people)
5. Can you explain the reason for the switch? (I don't know but we will have a manual ** available that will tell us what we need to know)
6. Will this improve your supplier relationships and enable you to reclaim IATA and RCCL? (I don't know but the general public has a better perception of a franchise than they do of network marketing)
7. When will you make a final commitment to the switch? (By the end of the year)
   

Well, he answered 1 out of 7 questions or about 14%. Which incidentally is higher than the success rate of the people in the RTA or Rep programs, but still a failure by a long shot.

He obviously knew what the interview was about and I can understand not being able to discuss the details, so why agree to the interview in the first place? Did he think Nadine was going to talk about the Statue of Liberty?

In any case, the CEO of YTB came off looking like a dolt. He lost all control of the interview and really sheds a poor light on his company. Essentially, he has said he knows nothing...which is par for the course since he has no background in the travel industry.

** It seems like YTB is hanging an awful lot on this "manual" that will be forthcoming. Does anyone want to take a guess as to what company might be producing the manual and might be getting some overinflated sales on the manual?  Perhaps a privately held company that is owned by the Principles of YTB that is reaping $8 million dollars for a stage prop?  Just a guess on my part!

Damage Control On Franchising

As with so many MLM companies, both the legitimate ones and those that are less than legitimate, the leadership creates a fervor and a cult like following. The continued success of this model is reliant on new people coming into the program and funding the paychecks of those that entered the program earlier. Some call it a pyramid scheme or a Ponzi scheme. While partially true, this is not the case, becasue in those two schemes, there is nothing involved but a money trade.  In order to "legitimize" the scheme, there must be a product. And in the case of YTB, the product is travel stores and travel. But please make no mistake, travel is merely a means to an end and a byproduct.

This comment was made on the Yahoo Finance Boards last week. Take it for what it is worth:

I worked for the corporate office for two years as a senior level programmer. I am the one who set up the systems that now run the company and I had access to the top. I was there when the stocks went skyhigh and heard the comments with my own ears from Lloyd and Scott about what they were going to buy when the stocks reached a certain level. They have no intention, nor ever had any intention, of making this a serious company. All of the programmers (very talented programmers who have since left due to the company bull@#$%) always talked about why the hell they didn't let us build a true booking engine if they were truly serious about making the company into something real.

I can tell you without a doubt that they don't want a real booking engine because there never was and never will be any intention of the company being anything other than an empty shell that funnels money into the top tier that will be used up and thrown away.

They are amateurs that only know how to scam people.

The YTB cheerleaders will call me a naysayer or a disgruntled employee but that's ok because I have seen the wizard behind the curtain.

It is funny,he references the Wizard of Oz; because I feel the curtain is about to be pulled open on YTB very shortly and there will be a lot of exposure that will not be pretty. The saddest part is that virtually everyone in the program except for 1000 or so early adopters will lost what they have invested. They will have been promised a dream and it will turn into a nightmare.

At this point in time, I believe YTB is working a new money grab with the announcement they will be franchising in 2009. While they still have a receptive audience (recruiting is tanking and more on that later) they are pumping up the benefits of franchising--a concept they derided as third rate for years. I have suggested that a new franchise (with all the bells and whistles they claim) will sell (if they can sell it) for $5000. But to the RTAs that want to switch, they can do it for $2500 and YTB will finance it over a year interest free. Of course most RTAs are not making money as it is, but this promise, this carrot, will be enough to have many make the switch. This is potentially a $325M windfall for YTB. And then you add the other accessories that will be needed to "insure" your success like manuals, support, training, collateral--all at a price!

Once established as a franchise, the pressure is off of YTB to perform in the realm of travel. It is all put on the back of the individual franchisee  who will likely see lower commissions because they are based on INDIVIDUAL production. The franchisee will pay a monthly franchise fee or a royalty or both. But they will not realize this until they have bought into the franchise and are likely locked into a multi year contract.

They say that the existing program will remain. Probably. They cite the Bill of Rights and the copyrighted compensation plan. Can anyone tell me what the plan is tied to? Recruiting. So if the recruiting falls off like it is, there will be less and less compensation. They pay per the plan and the BOR, but once it dwindles to nothing, the Reps will leave. YTB will not have violated the plan in any way. All they have done is say I will guarantee you a commission as long as there is a sale. No sale no commission. It is simple really. The existing Reps will be able to continue to sell the Busiess Opportunity but not the franchises. There are a lot of legal issues with franchising that are not a part of a Business Opportunity. Is it an odd coincidence that YTB has been quietly hiring Business Development Managers with franchise sales experience for the last six months?

I mentioned the decline in recruiting. YTB is on the verge of losing more people than they are bringing on. I suspect that we will not see this in the financial reports until the third quarter of 2008. When Coach could not sell out his two cruises he opened them up to military and pastors for free--of course they all received a sales pitch and if given a free cruise, I might be inclined to cut a check for $500 to join and "repay" him.  2Q is safe, but 3Q might show a different tale.

Meanwhile, the senior management has been filtering  money to a privately held sister companies. Take for example this foam stage prop. Depending on whihch report you believe, YTB is paying $6 million or $8 million dollars to have this produced. Seems extreme to me. But what you don't know is that the manufacturer of this monstrosity is a privately held sister company owned by Coach, Scott and Kim. So, they have effectively transfered up to $8 million dollars to a very small company controlled by three insiders. Sure there is cost, but $8 million? I recently heard that Reps and RTAs were required to buy paper collateral from this same company. Do you want to venture who will be preparing all the training manuals and collateral for the franchise? Would anyone care to venture if the prices might be inflated? Do you think the private company, absent an investigation, is out of reach of the SEC?

Right now, the existing Reps are scrambling. and the blogs are alive with fear and trepidation. One in Michigan even went so far as to say he was selling the franchises (tough to do since it is not a done deal yet) for $449 and he portrayed the site as an official YTB site. He issued a press release that indicated he was speaking on behalf of YTB and only disclosed he was not in the "about us" paragraph at the bottom.  Although I am not sure he fooled anyone--while YTB may be a scam they do put on a good face and I have never seen "registerd By Go Daddy" on the bottom of one of their sites. But YTB never claimed to have the brightest bulbs in the pack.

So there you have it--my take on the YTB debacle. In terms of travel, the numbers are down, they will try some more smoke and mirrors with the franchise allowing them to filter money into a private company and prepare to move on to the next thing. I believe that they realize travel may have been a mistake. There is not a lot of margin, they have essentially failed in their expansions (not to mention the other programs like Olympics, 2 Fly Free, Cruise With Coach, etc.) and are positioning to move on. A recording of the Coach indicated that with franchising he wanted to be the biggest supplier of "products" and to take on Walmart and Sam's Club. There was no mention of travel. I have said for a long time that I felt they woudl use travel as long as they could, and tht time may be here!

Interested in reading some of the fearful blogs? Check it out here, here, here, here, here and here!

DisenFranchised With YTB?

Well, apparently, the TTAs are not the only ones that think this franchising concept is a strange idea and will benefit no one other than the top of the pyramid. A lot of the YTB blogs are alive with the counter spin. This blog warns everyone that the "other" MLM companies will be contacting them and trying to lure them away. The pleading nature of the blog entry is telling. I suspect that many will shift away--if for no other reason than they are not making any money with YTB--nothing to lose!

Not sure I follow this logic, but...

What they DIDN'T KNOW when they called many of us is that we're not worried. Even when they tried their best and used their boldest fear mongering techniques... we didn't buldge. It's not that we're all eternal optimists. It is that we understand that franchising is a GOOD THING... a real good thing. We see a bigger picture, BEYOND what the fear mongers see. Or do we? Maybe, it's because THEY ALSO SEE what a smart move YTB would be making to implement a franchise model into the existing framework. Maybe that's why they're trying to make a pre-emptive move against YTB RTAs and REPS before we are even farther out of reach. I don't know. It is an interesting thought though. What I do know is that YTB is on the cusp of something very exciting and it could be the BEST THING that has EVER happened before.

And of course, regardless of all else..recruit recruit recruit!

So....forget about the YTB "Franchise" Scare Tactics. Better yet, IF YOU ARE NOT IN YTB, this is a GREAT TIME to consider JOINING.

YTB IS ON ITS WAY TO BECOMING A BILLION DOLLAR COMPANY! Our founders, Coach J. Lloyd Tomer, Scott Tomer and J.Kim Sorensen have said that YTB will be the largest travel company in the world. We're on our way to making this a reality. So the fear mongering...we're not buying it, and believe it or not, many if not most of us ARE NOT coming to join your "other travel MLM" company.

Funny, but when the TTAs say we are not "scared" of YTB, they all say we really are. And now it seems that YTB is saying that they are not scared of the "other MLM" but by their logic...they must be!

If I were an RTA, I would be VERY concerned. The move to a franchise is only going to deplete your wallet some more. Remember, the wallet--the piece of leather with an exit only when it comes to YTB?

YTB's Marching Orders To The Reps

The following letter of clarification and talking points was issued last week and immediately posted on hundreds of blogs and recruiting sites to explain the concept of franchising as it applies to YTB. While some people see this letter as complete, all encompassing, and encouraging; I find it the opposite. It is full of rhetoric and vague promises of a better life to come. I have a good idea as to why franchising is on the table now and I will be posting about that in a few days. Rather than interject my comments, I have put in "footnotes" for some areas that should be of concern to existing Reps and RTAs, potential Reps and RTAs, and the travel indiustry in general.

DATE: July 17, 2008

TO: Directors

FROM: Scott Tomer, CEO

RE: Franchise Press Release

I realize that many of you want more information about our July 14th announcement of the potential use of a franchise model at YTB.

While there are some things we are unable to comment on at this time, the intention of this letter is to answer many of the questions posed by our Reps and RTAs. I also want to provide you with correct information regarding the rumors, misrepresentations and untruths being circulated on the Internet.

But first, let’s talk a little history. Our goal from day one has been to become the world’s largest Internet travel company. In 2007 we were recognized as the 26th largest seller of travel in America and we are in the top 10 of those that are Internet based. While we are delighted with these results, we believe the franchise model will enable even faster growth. (1)

Here are some important points for you to know and remember.

The founders of YTB learned direct sales from Art Williams and built one of the largest

organizations in his company. We know how to build a successful sales force that will stand the test of time and the facts supporting this claim are easy to substantiate. 27 years later, my brother still operates a very successful business inside what is now known as Primerica Financial Services. (2)

We know how to recruit, build a sales force and sell products and services using the direct sales or network marketing approach. We are convinced this is the best marketing system ever created and we are ABSOLUTELY COMMITTED to continuing the use of this system with YTB. (3)

While there will be changes to the process as it relates to the sale of franchises, the downline genealogy and network marketing division will remain intact.

People may question our decision but no one can question our commitment to this industry or our people. Many factors, none more important than the protection of our Reps and RTAs futures, and many months of due diligence preceded our July 14th announcement. I’d like to share some of our thoughts with you.

Our commitment to becoming a world class travel company will be supported in the franchise system with additional tools and training for those who choose to actively pursue the travel business. The operations manual available to franchisees will provide details of the critical aspects of how to successfully operate their franchise. (4)

We believe a franchise model of our existing business will be easier to comprehend and more readily accepted by the general public. Since franchising is recognized as a traditional business model in virtually all developed countries, YTB’s timeline for global expansion will be accelerated. (5)

Additionally, franchising will allow us to rapidly diversify the products and services

offered by our franchisees. This will enable YTB to more quickly attain our goal of becoming a major distribution channel for products and services sold in the U.S. and abroad. (6)

Now let’s discuss how this will affect our existing RTAs. We anticipate everything that currently exists for RTAs will be in the franchise model and any additional products offered through the franchise will be available to RTAs should they elect to become franchisees. (7)

We also anticipate providing favorable terms to those RTAs who convert to the franchise model although we have not decided on those details as of this date. If RTAs elect not to become franchisees, they will be able to continue with no change to their status with all income opportunities and privileges they currently enjoy. (8)

I acknowledge outsiders will question this decision. We’ve been questioned before. Many so called industry experts doubted our ability to sell travel, but they can’t argue with the fact that we sold $414 million of it last year. (9)

We became a publicly traded company in 2004 and the skeptics said we would never make it.People said we were crazy to introduce a Reps ‘Bill of Rights’ at the 2005 ‘Your Time to Build’ national convention. It was unheard of in our industry. No one had ever guaranteed earnings for its Reps prior to the 2006 ‘Business of Champions’ YTB convention, but that didn’t stop us from introducing the Success from Home Magazine program with its $6,000 Guarantee. We became members of the Direct Sales Association in 2007 and added the First Amendment to the Bill of Rights’ at the ‘Cleared for Take Off’ National Convention to the dismay of our detractors. (10)

We’ve never asked nor do I care about the opinion of our competitors and skeptics. Let them say what they will. So what if they don’t agree with what we do. While it disturbs me that they make inaccurate, deceitful, slanderous and outright fraudulent statements about YTB in an attempt to recruit people, I refuse to respond. (11)

What I do know is this. YTB is responsible for more travel sales through YTB Travel Network than all of the other network marketing companies selling travel combined. I stand on our record of Rep and RTA protections and challenge any of them to step up and compete.

We’re building a company for the ages and I am proud to be in business with you.

YourTravelBiz.com.

APPROVED FRANCHISE STATEMENTS

For the RTA:

- We anticipate everything that currently exists for RTAs will be in the franchise model.

- Any additional products offered in the franchise model will be available to RTAs

should they elect to become franchisees.

- We anticipate providing favorable terms to those RTAs who convert to the franchise

model although we have not decided on the details.

- If RTAs elect not to become franchisees, they can continue with no changes to their

status with all income opportunities and privileges they currently enjoy.

- An Operations Manual will detail the critical aspects of how to successfully operate the franchise (not yet approved).

For the Rep:

- While there will be changes to the process related to the sale of franchises, the downline genealogy and network marketing division will remain intact.

General Statements:

- We believe a franchise model of our existing business will be easier to comprehend and more readily accepted by the general public.

- Our commitment to becoming a world class travel company will be supported in the franchise system with additional tools and training for those who choose to actively pursue the travel business.

- Franchising will allow YTB to diversify the products and services offered by its franchisees more quickly.

- Since franchising is recognized as a traditional business model in almost every country, YTB’s timeline for global expansion will be accelerated.

- Franchising will enable YTB to rapidly attain its goal of becoming a major distribution channel for products and services sold in the US and abroad.

1. Nowhere in this letter does it say how franchising will affect that growth.
2. How does the success of Scott Tomer's brother in Primerica (a struggling entity as it is) have any impact on the success of YTB?
3. If they are convinced that network marketing is the "best marketing system ever created", why the switch?
4. This tells me that the training to date has not been adequate enough to market YTB as a "world class" travel company.
5. While franchising is certainly more accedpted than MLM, I thought the whole principle behind YTB was to not rely on any public conception, but to utilize the market of friends and family. To date, the global expansion has been met with resistance in Canada and essentially failure in Bermuda and the Bahamas.
   
6. Curiously absent from this paragraph is any mention of travel. Does this model now include other products on top of cars and flowerrs and camping gear? Is this new franchise looking to model after Market America?
7. This essentially advises the RTAs that there will be additional ongoing monthly expenses in order to poerate as a franchise. Can the average RTA who earned $120 in commissions last year afford to pay any more money to YTB?
8. Like (7), this is advising the existing RTAs that there indeed will be a franchise fee associated with this move on top of the $500 already paid to become an RTA. While it is undecided at this point, my best guess would be $5000 for new and $2500 for existing financed over a year interest free. What is curious is that they say if they decline to franchise, they will still maintain what they have. Is YTB a franchise or an MLM? They need to decide because I am not sure you can have it both ways. Or are they simply saying they will keep the website alive for $49.99 a month?
9. Sure we can. There was no real substantiation of your sales in 2006 and a partial substantiation in 2007. While Scott claims $414 million, it needs to be noted that according to Travel Weekly, $203M of that was not by the RTAs.
10. It also needs to be noted that they became public by a reverse merger which required no SEC oversight. And once they took over, they were delisted for irregular accounting practices which have recently been corrected to allow them to be relisted on the OTC. Ast to the Bill of Rights and other documents, they are essentially worthless once the company is sold or liquidates. Although many presentations will tell you that YTB registers these documents with the Attorney Generals of "every state", they are mere marketing ploys.
11. OK, the comment about inaccurate, deceitful, slanderous and outright fraudulent statements to recruit really strikes me as funny. I would like to see what Dr. Seligman thinks about that!