In court, distributors contend Tupperware is a franchise

"This case will hinge on the definition of the distributor's relationship with Tupperware," says Stewart. "Our contention is this is a franchise." Tupperware declines to comment on allegations from the distributors, who contend the company overstated anticipated business and revenue when they signed on to sell the plastic ware.

www.msnbc.msn.com
October 10, 2004

In court, distributors contend Tupperware is a franchise
Company's lawsuit says Canadian dealers didn't pay entire debts.
Christine Selvaggi Baumann

ORLANDO — Though stay-at-home moms made the company's signature parties a well-known, household event, Orlando-based Tupperware Corp. doesn't have much to party about these days.

The plastic container icon's Canadian division is suing a handful of its former distributors for between $200,000 and $300,000 each.

At issue is the company's promissory note policy, which must be signed in order to become a Tupperware distributor. The note puts the distributor in debt in exchange for an assigned territory and sales force that hosts Tupperware parties, where the goods are sold.

In the case of the Canadian distributors, Tupperware maintains that the five they are suing left the company before paying on the promissory note and, by doing that, owe the full amount regardless of how much already had been paid down on the debt.

But in a countersuit, the distributors contend they not only couldn't reach the profit margin promised by Tupperware, but they actually lost money when the company changed some of its marketing and sales strategies, including reducing product prices — and distributor profits — in hopes of increasing Canadian gross sales.

Tupperware's difficult time
The timing of the suits comes at a difficult period for the company: Tupperware just announced it is laying off 28 employees, or 7 percent of its Orlando work force — the second time this year cutbacks have been made.

In addition, the company's revenue has been stuck around the $1 billion mark since 2000, while net profits have plunged from $74.9 million in 2000 to $47.9 million in 2003.

As for the legal battle, the former distributors have teamed up with Les Stewart, a self-proclaimed franchise expert, to try to convince the courts that Tupperware is a franchise. That definition is vital to the case, as franchises in Canada are governed by a separate set of laws under which the distributors can sue Tupperware for losses and damages.

"This case will hinge on the definition of the distributor's relationship with Tupperware," says Stewart. "Our contention is this is a franchise."

Tupperware declines to comment on allegations from the distributors, who contend the company overstated anticipated business and revenue when they signed on to sell the plastic ware. Instead, the company released a statement saying it "regrets that despite efforts made over several months, it was unable to reach an accommodation with the former distributors."

In its complaint, Tupperware says it offered to consolidate the distributor's debt on a no-interest basis, which the sellers declined.

Debt from the beginning
The lawsuit troubles began this summer when Tupperware Canada Inc. filed suit against five of its 34 Canadian distributors, claiming they each owe hundreds of thousands of dollars for products that were sold and delivered, but never paid for.

Take the case of Darrell MacInnis.

MacInnis and his wife, Michelle, signed on with Tupperware as distributors in 1996, taking on $129,000 in debt. They paid it down to about $20,000, though Tupperware now is suing the couple, seeking the full amount. The company also is seeking about $90,000 from the MacInnises for receivables — the products that were shipped to them but were never paid for.

Says the distributor: "We had concerns about the amount of product Tupperware was selling at reduced prices while our profit level was small or nonexistent.

It was stories from distributors like the MacInnises that led Stewart to become involved in the ongoing saga. He posted a section on his Web site — www.cafo.net — called "Tupperwars," detailing the five distributors' stories and claiming that Tupperware was untruthful, deceptive and misrepresented its sales force numbers and earnings possibilities.

Calling the site a "full-scale attack" that is "aimed at harming" the company's relationships with its sales force, Tupperware then went to the Ontario Superior Court to have "Tupperwars" shut down. In late September, a Canadian judge sided with the plastic container maker and forced Stewart to remove the information until the legal case is heard.

More recently, Tupperware blamed its lagging performance on its voluntary removal from Target stores.

But ironically, expanding into 1,100 U.S. Target stores, as it did in October 2001, hurt Tupperware's primary selling tool — its 1 million strong independent seller sales force, the company says.

MacInnis, meanwhile, says he, his wife and the other former distributors are eager to have the lawsuit settled, but they won't give up their fight until Tupperware addresses the issues they brought up when profits started to slip.

"Our margin was being eroded, and we were in difficulty … and we didn't get the help we needed," MacInnis says.

Orlando Business Journal


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