MLM Truth: LuLaRoe Distributors in Bankruptcy as Founder Touts Financial Freedom 07 May 2019
At least 115 current or former LuLaRoe distributors have filed for personal bankruptcy since 2016.
Marlie Ezarik was 10 weeks pregnant when she was asked by the founders of the MLM clothing company LuLaRoe for her “why,” which in the MLM world means a distributor’s reason for joining a company. The question came while Ezarik was on stage at a LuLaRoe convention in Austin, Texas, in March 2017. Ezarik, who had enlisted as a distributor the previous summer, didn’t hesitate to answer.
“I’m about to have a baby,” she said.
Two months later, Ezarik was more than $15,000 in debt as a result of her LuLaRoe business.
It was a combination of things: difficulty selling the clothing and recruiting others to join the business, coupled with potential market saturation; a product line that Ezarik described as largely unsellable; and purchasing loads of inventory at LuLaRoe’s recommendation.
Fearing that she would not be able to afford daycare, diapers and baby wipes for her yet-to-be-born child, which would be her first, Ezarik called it quits and filed for Chapter 7 bankruptcy in May 2017, not quite a year after she launched her LuLaRoe business.
Ezarik is not alone.
Despite LuLaRoe’s stated mission to “improve lives and strengthen families … through fashion,” a investigation has found that at least 115 current or former LuLaRoe distributors have filed for personal bankruptcy since 2016, with more than half of those filings occurring in 2018. In fact, LuLaRoe distributors are more likely to end up bankrupt than to reach the highest tier in the company’s distributor ranks. In Ezarik’s case, she never made more than a couple hundred dollars with LuLaRoe, despite sometimes working 30 hours a week on top of a full-time high school teaching job.
California-based LuLaRoe enjoyed a meteoric rise after its founding in 2013. Aimed at moms and millennials like Ezarik, who is 32, the company markets itself as an economic empowerment opportunity with flexible hours that can bring in thousands of dollars in income each month. In order to attain financial freedom, distributors are required to make both a substantial initial investment ($5,000 to $11,000; Ezarik paid $5,000 for an “initial order kit” containing 284 pieces) followed by monthly purchases of clothing in order to stay qualified for all bonuses and compensation. Unfortunately, for most distributors the cost of the LuLaRoe business far outweighs its benefits. And for at least 115 distributors, the financial strain of a LuLaRoe business was a factor in filing for personal bankruptcy.
While these distributors face financial ruin, current LuLaRoe marketing materials make a multitude of false and deceptive income claims, including the misleading assertion that by joining LuLaRoe, financial freedom is attainable:
LuLaRoe Founder DeAnne Stidham similarly touts the ability to achieve your “family’s financial freedom” in this video taken on her phone.
In stark contrast to LuLaRoe’s proclamations of happiness and wealth, a review of the company’s only published income disclosure statement shows that the average annual bonus paid to a LuLaRoe distributor at all ranks was just $92 (the median annual bonus was $86). Ninety-eight percent of distributors don’t even earn enough money from bonuses to recoup their initial investments. As such, it’s no surprise that many LuLaRoe distributors are financially distressed.
LuLaRoe distributors have filed for bankruptcy in 35 states (see map below), with 89 filing for Chapter 7 and 26 filing for Chapter 13. The states with the largest number of bankruptcy filings are California (18), followed by Washington state (9), Oregon (8) and Virginia (6). Colorado, Indiana, Iowa, New York, and Texas each have five bankruptcy filings…. Continue Reading
Ajeya S
4 years ago
This is the first time I am reading about LulaRoe. These things bound to fail, however in India Qnet is going strong, I know 3 people who have lost lacs (5 lac, and 9 lac). Also one guy lost good high paying job, as he was doing Qnet all the time. Why these things still run in India ?
Chetan Kadam
Replied to Ajeya S comment 4 years ago
Sab paise ka chkkar hain babu bhaiyya
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