While not a franchise in the true sense of the definition, Amway licenses individuals to represent their brand and a broad array of products for sale. There are no territories and Amway distributors are free to sell products and sponsor distributors wherever they may be. Distributors earn a commission on their sales and some distributors take their businesses a step further, by sponsoring others to become distributors, they earn a smaller percentage commission on the sales that originate from their distributors. The original distributor then earns commissions, not only on the sales of the distributors they sponsor, but also on the sales from the distributors that their distributors sponsor, down the line many, many levels. This multi-level commission scheme has caused Amway to gain the reputation amongst many as an illegal pyramid scheme, but the Federal Trade Commission (FTC) has decided otherwise.

After originally arguing that Amway was an illegal pyramid scheme, the FTC eventually determined that the company’s marketing plan was not an illegal pyramid scheme but was, in fact, a legitimate business model because the “distributor’s kit”, the package sold to brand new distributors was sold to them at “cost” and no commission was earned simply by sponsoring a distributor and in selling the kit. The sponsor only earns money when a distributor under them makes sales. In addition, although distributors are encouraged to carry inventory, no inventory is required to be purchased, and the Amway Corporation guarantees to buy back any inventory should the distributors decide to go out of business and terminate their license. By keeping the initial sponsorship kit fees low and paying distributors only on product sales and not on the sales of the kits, Amway has managed to stay in business and prosper for over 50 years. The company has successfully defeated all challenges to their marketing plan and compensation model and has been determined by none other than the Federal Trade Commission to be a legitimate licensing business.