Tussling with Tupperware

The case may become a contest between libel and trademark laws and the right to free speech in commercial disputes…Mr. Stewart described the women as victims of unfair pricing policies and other abuses. "The claims would bankrupt all five of them."

The Ottawa Citizen
September 28, 2004

Tussling with Tupperware
A Kinburn couple tells Andrew Mayeda how taking on a distributorship for the famous containers turned into a quagmire of lawsuits.
Andrew Mayeda

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Distributing Tupperware turned out not to be such a party for Julie and Ken Hanna.

Four years ago, the Kinburn couple thought distributing Tupperware's plastic products and helping salespeople to organize the company's famous social gatherings would make a solid business.

Now, they are embroiled in a legal battle with a firm they say misrepresented the earnings potential of the business.

They are not alone. Four other former Canadian distributors are being sued by Tupperware Canada Inc., a unit of the Orlando company founded by inventor Earl Tupper in 1946.

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The former distributors and two colleagues, calling themselves the Group of Seven, have banded together and posted their stories online at www.cafo.net, the website of the Canadian Alliance of Franchise Operators.

The legal disputes come as Tupperware Corp., which has about a million salespeople who distribute its brand in more than 100 countries, struggles to overcome declining profits, faltering North American sales and a heavy debt load.

Tupperware Canada claims the Hannas owe $436,638 in debt on goodwill and goods sold and delivered. It alleges they breached agreements signed when they bought the distributorship.

The Hannas counter that the company overstated the sales and profits of the business, the individual salaries they could earn, and the number of sales consultants and managers they would supervise.

"What they told us would happen did not come to fruition," said Julie Hanna. "We did what Tupperware told us to do. We followed their plan."

They are seeking $850,000 in damages from Tupperware.

None of the allegations has been proved in court.

Ms. Hanna joined Tupperware as a sales consultant in 1995 and quickly rose to manager, then executive manager. In 1999, her team sold $300,000 in Tupperware products, according to her website account.

In 2000, she was about to resume her teaching career when Tupperware approached her and Mr. Hanna, who was running a lawn and snow business, to become the company's distributors in Ottawa.

According to the Hannas' statement of defence, a Tupperware official showed them pro-forma income statements indicating the Ottawa operation had $1.6 million in gross sales and a gross profit margin of 21 per cent. The company told them they could each expect to earn $35,000 a year.

But sales averaged much less, and the business was losing money by the third year, Ms. Hanna says. Meanwhile, her managers and salespeople were quitting in droves. She says the company hamstrung her with ineffective marketing strategies such as overly steep discounts.

"I was installed into a ship they knew was sinking," Ms. Hanna wrote on the website.

Still, the Hannas bought the distributorship for Hull in 2002, thinking they could squeeze out higher margins. Eventually they were swimming in debt. They passed on a trip to France awarded for meeting their sales goals but still couldn't pay their bills. In May, the company demanded they sign a promissory note to repay their debts.

The stress at work and home became too much for the Hannas, who have three young children, two of whom suffer from cystic fibrosis. They sought legal help and resigned.

"I could no longer take the pressure of fighting all week to make an impossible situation turn around, and then go home and fight for our children's lives," Ms. Hanna wrote.

Though she just found work as a supply teacher, the Hannas are struggling. "We're basically living off a line of credit and credit cards," she said.

The company is seeking repayment of the goodwill debts they took on when they bought the distributorships. But the Hannas argue the debt is owed by the corporation they established, not them. They also believe Tupperware functions like a franchise and therefore should be subject to Ontario's Arthur Wishart Act, which requires that franchises disclose all "material facts" related to becoming a franchisee.

Since Tupperware did not provide such disclosure, the distributorship agreement is void and the company should compensate the Hannas for their losses, they argue.

Tupperware claims it is not a franchise.

In a statement, it said it is open to an "amicable resolution" to the lawsuits.

"Tupperware Canada Inc. regrets that despite efforts made over several months, it was unable to reach an accommodation with the former distributors regarding their outstanding debts," it said.

Meanwhile, Tupperware has threatened legal action against the CAFO unless it removes all references to the Tupperware trademark from its website, as well as a number of "untrue, disparaging and defamatory" statements against the firm.

© The Ottawa Citizen 2004


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