It's the Royal American Morning
Of the Royal American dream!
For a Royal American Harvest,
Join the Royal American Team! --Royal American Food Co. recruiting jingle. Jim Adams, who made enough money selling life insurance to retire at 38 and stands to make another fortune if Americans can be persuaded to eat tofu and soybeans, is a believer in the old sports adage that the best defense is a good offense.
Whenever he's asked, and sometimes before, he runs down a long list of the things that have gone wrong with companies like his--questionable sales practices, inflated earnings projections, conflicts with state regulators, overextension of capital, shoddy products, bookkeeping foulups--and explains why they can't happen to his Royal American Food Co.
The reason the questions arise is that Royal American, bankrolled by businessmen with impressive track records in other endeavors--including James Cummings, founder of the Century 21 real estate network and stock market analyst Joseph E. Granville--has plunged into the thicket of multilevel marketing.
Royal American sells its unconventional food products not through retail stores but through a network of individual distributors who make most of their money by signing up other distributors and taking commissions on the "down line" sales of their network.
Granville's message to the distributors is, "Buy food, sell food" because "the parabolic curve has peaked in gold and oil. The next parabolic curve in this country, and in the world, is food," and Royal American will be a "blue chip company . . . long after all of us have turned to dust."
Royal American's line of products includes soy-based dinners with flavors such as "sweet and sour," whey-based beverages, bakery goods, and a diet supplement powder called Royal Nutrition, developed by a Bethesda scientist who says he is "66 years of age going on 50. Three years ago, before Royal Nutrition, I was 63 going on 80 and ready to say I don't give a damn."
The latest addition to the line is instant tofu, a bean curd which Royal America bills as "the yogurt of the '80s." All the products are sold directly to Royal American distributors, who function as independent business operators. The distributors make money on the retail markup of the product, but their greatest promise of earnings is in commissions on the sales of other distributors whom they sponsor.
Adams says he knows all about the problems some multilevel companies have had with the Federal Trade Commission and with state regulators, who tend to be suspicious of them as possible "pyramids." But he also says that giants of multilevel marketing, such as Amway and Shaklee, are "accepted members of the business community." At Royal American, Adams says, the organization, the marketing plan and the product were designed from scratch to avoid the problems that have plagued the industry.
So far, at least, his grand design appears to be working. Royal American, which was created only nine months ago, had gross revenues of about $6 million "cash in the door" by the end of January and anticipates total wholesale sales of $10 million to $12 million in its first year, Adams said in an interview.
The company has signed up more than 20,000 distributors, and is enrolling new ones at a rate of more than 300 a week. This is tiny compared to Amway, which has a million distributors, but industry experts say it represents very rapid growth. And Royal American has stayed out of legal trouble. The National Association of State Attorneys General, which has energetically pursued other multilevel companies accused of deceptive practices, says it has no record of complaints against Royal American.
In the Washington area, the company recruits distributors in weekly meetings at Armory Place in Silver Spring. Carl Woodham, 28, of Bethesda, Royal American "communicator" for the Washington-area network, says there are about 250 distributors between Baltimore and Fredericksburg.
Unlike other multilevel companies that emphasize how much money individuals can make by sponsoring other distributors, Royal American protects its flanks by emphasizing the products first and the income potential afterward.
"We are not just signing up distributors, saying 'sponsor, sponsor, sponsor' and then wondering what to do next," Adams said. "We are in the food business, selling the product." Royal American will revoke the distribution contract of anyone found to be making unauthorized claims about potential earnings, he said.
But it is the nature of the multilevel marketing business to gain distributors through the promise of commissions on the "down line" sales. Woodham, at a recruiting meeting here, gave this analogy:
"If you eat in a restaurant and tell five people how good it was and each of them goes out and tells five others and each of them tells five more, you create 780 new customers for the restaurant. What will the restaurant give you for doing that? Nothing," he said. "But if you have 780 people with a sales volume of $100 a month each in your network, at the minimum bonus rate of 4 percent, that's $3,120 for you."
Royal American does not, however, promise that any individual will earn any specific amount. Adams said the company set up its program to comply with guidelines set down by the Federal Trade Commission when it ruled the Amway marketing system was acceptable.
This means, Adams said, that no one is paid for signing up distributors; no one is required to put up any money, except the $44 cost of a distributor's manual, and no one is allowed to buy more than $500 worth of products in an initial order. Later orders, limited to $5,000, will be filled only when the distributor can show that 75 percent of previous shipments have been sold.
According to Robert J. Levering of the Direct Selling Association, Royal American's position as a "member in good standing" means "they are pretty clean. We have an extremely strict code of ethics, with an anti-pyramiding code."
A pamphlet recently issued by the association and the National District Attorneys association warned that "pyramid schemes are illegal scams in which large numbers of people at the bottom of the pyramid pay money to a few people at the top," and are inherently fraudulent.
"Pyramid schemes often choose products which are cheap to produce but which have no established market value, such as new miracle products, exotic cures, etc.," while multilevel marketing plans such as those at Royal American, the association says, represent "legitimate income opportunities," based on the sale of legitimate products.
To overcome Americans' preference for meat and the widespread feeling that soybeans taste like erasers, Royal American boosters often serve their meals to friends without saying what they are. The company's monthly magazine, The Sower--published by a public relations firm in Salt Lake City--is full of successs stories about these events, such as the one about a Detroit distributor who served Royal American foods at her daughter's wedding and reported she had "never had so many compliments."
One of the latest products is instant tofu. Tofu, known to most Americans as the cheese-like stuff floating in some oriental soups, is being promoted by Royal American as nourishing, low-calorie, easily-digestible substance useful in desserts, soups and casseroles.
Royal American sells the dinners at a wholesale price of $52 for a case weighing 11 pounds 5 ounces. The suggested retail price is $65. A 3-pound package of instant tofu mix is $20 wholesale, $25 retail.