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The USANA scam is a business opportunity that claims that they do everything better.  I thought I would take a look into this company and see how good they are at making you money.

Usana Scam Claims

your health. your life. your way.

Everything we do helps you love life and live it and we do everything better.

A USANA business can take your life to the next level. We make it easy.

Outstanding Earning Potential!

USANA Scam Claims

Usana Scam Reality

USANA was founded in 1992.

There is a $29.95 start up fee and a yearly $20 renewal fee.  You are required to pay them to become an independent USANA Associate.

There are two types of associates.

Non-distributing Associates: Pay taxes on the wholesale/autoship price of USANA product. They are 
forbidden to retail product and must abide by USANA’s 5 customer rule by sponsoring at least 5 preferred
customers who have all made purchases during a 4 week period in order for the associate to receive a
commission from USANA.

Distributing Associates: Pay taxes on the retail price of USANA product. They are allowed to retail 
USANA product and must abide by USANA’s 5 customer rule by selling product to at least 5 customers,
whether they are retail customers, preferred customers, or a combination of the two in order for the
associate to receive a commission from USANA.

Then you pay them more to open your “Business Center”.  They make it easy to pay them more with various starter packs.

Basic Business Pack – Preferred Price: $305.00USD
Entrepreneur Pack – Preferred Price: $624.95USD
Professional Pack – Preferred Price: $1,250.00USD – You will earn your first $100 commission check.

A Business Center is the hub of your business-building activity, through which your product purchases, volume, and sales accumulate; it’s similar to opening a store for your business.” No. It is not like opening a store.  It is like paying to get a spot in a pyramid scheme and having money flow to you from people below you.

If you have not purchased a product pack, you need to purchase at least 200 points of USANA products to open your “Business Center”. To keep your “Business Center” open you need to purchase at least 100 points of USANA products every 4 weeks. (A point is approximately $1.20, so roughly $240 to get started and $120 every 4 weeks to keep things going.)

You must develop or service at least five customers every four-week rolling period. Then you need to have 125 in Group Sales Volume on each side of your  “Business Center”.

You are now finally ready to receive commissions from USANA. – Source USANA Compensation Plan

USANA Scam Compensation Plan

This compensation plan in my opinion is designed to keep new associates from making commissions as long as possible by making them jump through the ridiculous hoop of having them balance Group Sales Volume points on both sides of their “Business Center”.

Let’s take a look at the USANA income statement to see your chances of making money with them.

less than 1% of associates reach full-time money making status.

Associates earning as little as one commission check a month and associated with USANA for more than six months equal only 3% of all ordering Associates.

There were 135,590 ordering associates as of the current income statement from USANA.

The average income for an ordering associate is $616.72 per year.

It is estimated that more than 80% of USANA associates drop out in the first year.

“Success with USANA results only from successful sales efforts, which require hard work, diligence, and leadership.”  I guess USANA does not make it easy like they claim here.

– Source USANA Current Income Statement

USANA products may be good products, but what difference does that make when you have little chance at making significant income selling the products.

No matter what they tell you in their ads and marketing material, they think so poorly of your chances at selling the products they require you to buy the products to be able to collect a commission from them.  They claim that you can just retail the products to customers and cover your required payments.  Let’s take a look at your chances of selling the products to customers.

There are 78,000 Active Associates as of 2011.

There are 52,000 Active Preferred Customers as of 2011.

There are far more Associates than Preferred Customers. It is clear that it is hard to maintain even 1 Preferred Customer per Associate.

 “sales to Associates account for the majority of our product sales and represented 91% of product sales during 2012.”

– Source USANA 2012 Annual Review

“Our recommendation, unless you plan to make a lot of retail sales (which few people do), would be to enroll as a non-Distributor Associate…”  – Source Pete and Dora Zdanis USANA Associates

You can signup as a Preferred Customer and receive the same discounts as an Associate.

If, at any time, an Associate’s PSV falls below the minimum requirement to remain active, the Associate will no longer be eligible for commission checks or bonuses or to advance in rank. The Associate will also lose any Carryover Volume, and he or she will not carry over any volume until re-activating the BC(s). The Carryover Volume will start again at zero. – Source  USANA Compensation Plan

This rule threatens associates to continue purchasing inventory. A real business would not have such ridiculous hoops to jump through. Put it this way, if an associate were to sign up 1,000 preferred customers who purchase product on a regular basis, this associate will not be paid a single penny for their work unless the associate purchases approximately $120 worth of inventory every 4 weeks.

Refund Policy

There is a 30 day 100% refund policy (shipping to you and back to USANA is not included) for the starter kit and the first order.  Once you make your second order there is a 90% refund policy for 365 day (less handling and delivery charges) if the merchandise is in resalable condition.

Associates may not purchase more than they can reasonably resell or consume in any four-week rolling period – Source USANA Policies & Procedures

If you are unable to resell your products you purchase every four weeks, you will be required to consume them to keep your business active by reordering new product.  If your business is unsuccessful you will have a limited amount of product left to return.  This required consumption is what creates the loses for the majority of USANA associates.

Company Leadership

One of the things that really upsets me is when business people in the United States achieve success here and then change their citizenship to avoid paying income taxes.

The company’s chairman and founder, Myron Wentz, renounced his U.S. citizenship in the mid-1990s and now claims citizenship in the Caribbean tax haven of St. Kitts and Nevis. He controls a 40+% stake in Usana held by a company in the Isle of Man, in the Irish Sea, which in turn, is controlled by an entity registered in Liechtenstein.

Gilbert Fuller, Usana’s chief financial officer, said Mr. Wentz renounced his U.S. citizenship because “he sees himself as a citizen of the world” and that the matter had nothing to do with the company.  I do not agree with Gilbert Fuller.

– Source Wall Street Journal 

Citizens of St. Kitts & Nevis enjoy tax-free income and an exemption from paying taxes on capital gains, gifts, wealth and inheritance.

http://www.invest-stkitts.com/a/citizenship-by-investment/benefits-of-stkitts-nevis-citizenship.html

USANA chairman and founder, Myron Wentz is selling millions in stocks without having to pay US income taxes. He owns 40+% of the company.

http://www.fool.com/quote/nyse/usana-health-sciences-inc/usna/insider-transactions

You may be asking yourself why is Dr.  Oz on the stage with Myron Wentz? Why did Dr. Oz tour the USANA factory?  Here is why in my opinion this is the case.  Myron Wentz’s Charity gave $217,100 to Dr. Mehmet Oz’s HealthCorp charity in 2012.  I will let you know how much he gave in 2013 when it is reported.

Here is Dr. Mehmet Oz with USANA’s Founder.

Dr. Oz appears with Usana's Founder Video

Usana Scam Conclusion

The USANA scam forces their distributors to make $100+ personal product purchases every 4 weeks (13 times a year) in order to qualify for commissions as well as hold onto any accumulated Group Sales Points (GSV). The vast majority of USANA Associates see little or no profit because there is little retail demand for the USANA products because of the Preferred Customer program. Associates earning as little as one commission check a month and associated with USANA for more than six months equal only 3% of all ordering Associates.

At the end of many USANA presentations they ask where do you see yourself?  I see myself losing money with the USANA scam.

In my opinion they are using a product-based pyramid scheme to take the money of the majority of new associates and should be avoided.  I believe the reason they do not share retail sales information is because this information would reveal to potential associates the reality of this scheme.

The USANA Watch Dog goes into additional detail on why they feel that USANA is an illegal pyramid scheme here: USANA Paying To Recruit

What is a product-based pyramid scheme?