With the saga of True Spa being brought to light again recently, it has brought to question the business structure of pre-paid packages. I am sure, they are not the first company to have such problems, neither will they be the last. When buying into a package that potentially last for years, you are practically investing in that company. You must trust in the financial management of the company as it can be very risky what the company does with the funds.
For example, by collecting the full payment of the packages up front, it would seem that the business is very profitable on a cash flow analysis basis. For accural basis, that will be very subjective. Further, it is unknown what the business owners will do with the sudden "profits".
A. They could declare it has high salaries to the "inner circle" of employees who are themselves and relations.
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