YTB International
YTB International (Template:Otcbb), sometimes known as Your Travel Biz, operates a "network marketing" opportunity under the holding company YourTravelBiz.com, Inc. through owner-affilliate websites offering travel, excursions, and lodging. Participants, who pay a $495 set up fee and $50 per month to maintain an "online travel agency" website,[1] can collect commissions for recruiting new participants, utilize the website for their own travel purposes, as well as sell travel packages to others.[2] YTB International is a member of the Direct Selling Association.[3]
California Attorney General Jerry Brown and former employees sued the company in early August, 2008, alleging it to be a pyramid scheme, among other claims. The Illinois Better Business Bureau and Illinois Attorney General Lisa Madigan joined Brown in investigating the company.[4]
Other YTB subsidiaries include YTB Travel Network, Inc. and REZconnect Technologies, Inc, with which YTB merged in 2004.[5][6] The company is based in Wood River, Illinois. International subsidiaries operate in the U.S., Puerto Rico, the Bahamas, Bermuda and Canada.[7]
History
J. Lloyd "Coach" Tomer, his son Scott Tomer, and Kim Sorensen launched YTB in 2001. The company's business model of selling travel-related websites to work-at-home travel sales agents has been the same since its inception. Growth was slow until 2004, when YTB's creators bought controlling interest in a related company, increased their marketing budget, and aggressively recruited new members with videos of successful salespeople --- along with material incentives for their best performers.[8] In 2007, 73% of YTB's revenue came from the sale of YTB websites and monthly fees, with a further 10% from the sale of marketing and training material to members. 14.5% came from the sale of travel.[9] The company's success led to a $25 million new headquarters in a rehabbed Kmart building to accommodate its rapidly growing staff.[10] The number of agents increased exponentially until 2008, when it shrunk slightly: class="wikitable "
- *Source indicates "nearly 60,000". **The second source is for the figures for 2008.
YTB laid off 17 employees in late August, 2008, stating the move was part of a reorganization.[11] As of 2008[update] the company's revenues are $44.8 million.[12]
YTB have stated they are considering replacing their referring travel agent business model with one based around franchises.[13] On October 18, 2008, they introduced a new tier of affiliates in an attempt to fit better into the travel industry, saying the new training program they will be introducing for those who remain as 'referring travel agents' improves over the previous "one-day classroom event".[14]
Pyramid scheme accusations
Critics, including California Attorney General Jerry Brown -- as well as former associates suing the company, allege that its operation is a scam and a pyramid scheme. Brown sued the company for $25 million in early August 2008, charging unfair business practices, false advertising, and operating a "gigantic pyramid scheme that is immensely profitable to a few individuals on top and a complete rip-off for most everyone else".[15] Brown found that in 2007, only 38% of members earned commissions on travel, and those who did earn a commission made a median income of $39, less than the monthly fee for a YTB website.[1] According to the St. Louis Post-Dispatch, SEC filings showed that the company's three creators earned more than $2 million in 2007, a dozen salespeople earned more than $800,000, and dozens earned more than $100,000.[8] The Post quotes Brown's lawsuit as indicating that 45,000 sales reps earned an average of about $90 in 2007 and of their 200,000 agents, 125,000 earned nothing and 37,000 earned less than $39.[8]
Several former agents filed a class-action lawsuit — seeking to include more than 1,000 of their peers — around the same time, alleging the company to be an illegal pyramid scheme. The lawsuit says that the company "claims to sell travel services, but said company's main business is inducing others to become travel agents".[16] YTB responded by stating that it intends to "vigorously defend the case".[16] Illinois Attorney General Lisa Madigan, after her office and the Illinois Better Business Bureau received more than 150 complaints about the company, partnered with Brown's office in his state's investigation of the company. The BBB indicated that 80% of YTB revenue came from new agent recruitment, with agents earning an average of $111 per year, almost $400 less than the initial $499 sign-up price.[17]
Several current YTB reps have characterized the complaints from former agents as sour grapes from those who didn't spend enough time attending to their business. "We are proud of our business model and how our operations are conducted in an ethical and transparent way," said chief executive Scott Tomer. "We also are wholly confident that our business model will withstand scrutiny, and look forward to setting the record straight in court."[18]
YTB was also investigated for similar allegations in Rhode Island.[19]
Other complaints include deceptive or misleading claims about comissions by reps. One such claim is making 60% of the comission on a travel sale, but actually is 60% of YTB's comission on the sale.
References
- ^ a b Gareth, Lacy (August 05, 2008). "Brown Sues To Topple Online Pyramid Scheme". California Attorney General Press Office. Retrieved 2008-09-14.
{{cite web}}: Check date values in:|date=(help) - ^ Lifsher, Marc (August 05, 2008). "Jerry Brown sues YourTravelBiz.com over alleged pyramid scheme". Los Angeles Times. Retrieved 2008-09-14.
{{cite news}}: Check date values in:|date=(help); Italic or bold markup not allowed in:|publisher=(help) - ^ Robinson, Amy (August 8, 2008). "DSA Statement Regarding the California Attorney General's Complaint Against YourTravelBiz.com". Direct Selling Association. Retrieved 2008-09-14.
- ^ Steve Gonzalez. "YTB targeted in federal class action lawsuit". Madison County Record.
- ^ http://findarticles.com/p/articles/mi_m0EIN/is_2005_Jan_5/ai_n8683762
- ^ "REZCONNECT TECHNOLOGIES,Inc. MERGES WITH YTB TO CREATE MEGA TRAVEL ORGANIZATION". PRWeb.
- ^ http://www.secinfo.com/d12TC3.t2Gq.d.htm
- ^ a b c Logan, Tim (August 31, 2008). "YTB sells dream of prosperity, but some say it is a nightmare". St. Louis Post-Dispatch. Retrieved 2008-09-13.
{{cite news}}: Italic or bold markup not allowed in:|publisher=(help) - ^ "California v. YourTravelBiz.com, et al: Complaint" (PDF). California Attorney General. August 2008. Retrieved 2008-09-14.
- ^ Logan, Tim (August 24, 2007). "Travel company will expand its headquarters; YTB International will spend $25 million to rehab a former Kmart in Wood River". St. Louis Post-Dispatch. pp. Business, pg. B2.
{{cite news}}:|access-date=requires|url=(help); Italic or bold markup not allowed in:|publisher=(help) - ^ "YTB cuts 17 positions". St. Louis Business Journal. August 29, 2008.
{{cite news}}: Italic or bold markup not allowed in:|publisher=(help) - ^ PRNewswire-FirstCall (August 15, 2008). "YTB International Announces Financial Results for the Second Quarter of Fiscal 2008". CNNMoney.com. Retrieved 2008-09-14.
- ^ "YTB International Contemplates Implementation of Franchises". PR Newswire.
- ^ Nadine Godwin. "YTB creates 'affiliates' label for agents making referrals only".
- ^ Kelsey Volksmann (August 5, 2008). Brown sues over alleged pyramid scheme, Los Angeles Business from bizjournals.
- ^ a b Kelsey Volkmann (August 11, 2008). Former agents sue YTB International. St. Louis Business Journal.
- ^ Kelsey Volkman (August 8, 2008). UPDATED: BBB received 90 complaints about YTB, Ill. AG received 70. St. Louis Business Journal.
- ^ Tim Logan (August 8, 2008). Illinois launches probe into YTB International travel company, St. Louis Post-Dispatch.
- ^ George Dooley. "RI Agency Investigates YTB Business Model".