Last week we sent a letter to SEARS CEO Calvin McDonald offering a chance for us to sit down and discuss a resolution to the financial and personal struggle that dealers face every day. This is the letter we sent:
1291079 Ontario
Limited
o/a Sears Woodstock
July 17, 2013
Sears Canada Inc.
290 Yonge St, Suite 700
Toronto, ON
M5B 2C3
ATTENTION: Calvin
McDonald, CEO
Dear Mr. McDonald:
My wife Linda and I own the Sears
Woodstock Hometown Store. We are the
plaintiffs in a class action lawsuit on behalf of 260 Hometown Stores across Canada that alleges
unfair dealing by Sears.
I am writing to explain in my own
words how desperate the situation affecting the Sears Hometown Stores is and to
request that we meet in person to discuss a resolution. It is my sincere hope that you will carefully
consider everything that follows.
First, let me say that I am proud
to represent Sears. When we entered the Sears
Dealer Program 6 years ago, we were excited to be part of a brand that was
rated #1 in trust among consumers. We
were new to retail (a common trait among dealers) and we trusted your claims in
the Ownership Program Brochure that:
·
“This
business model is brilliant. You
partner with Sears and own one of our prestigious community stores.”
·
“Sears
wants you, our partner, to succeed. In
fact, we take a personal and financial interest in your success.”
We met a lot of great people
within the Sears organization. We were
honored to represent the company in our community. During this time we worked very hard and made
an average middle class income.
However, this is no longer possible
for us or for the vast majority of Sears Hometown dealers.
The business model is heavily skewed
to favour Sears, placing the bulk of the expense on Dealers.
This spring, under the direction
of Hometown Stores V.P. Terri Lowe, things got even worse. I attended our regional cluster meeting in Kitchener and was shocked
by the attitude I saw and heard. The
highlights of the meeting:
·
Advertising subsidies would be cut off to 116
stores in Tier 4. How do we sell if we
don’t advertise?
July 17, 2013
Page 2
·
A new group of corporate trainers was presented
to help improve our “poor management skills” and provide “on-boarding” for new
dealers. We were told that under the new
contracts being released in July, we would all be re-evaluated as dealers
before our contract was renewed. We were
told that the ideal candidate for a dealer store is now modeled after a
corporate store manager. This is deeply
offensive to us as we bring skill sets and perform tasks that corporate store
managers would never consider part of their job. Nor would any corporate store manager accept our
paltry compensation and heavy debt load.
·
We heard from Ian Lam who explained our
financial picture in great detail. In
this package was a chart showing that 169
stores did not make an average household income. The average income of a dealer store was revealed
to be $33,000/year. Given the 50-60
hours per week that owner managers put in, this amounts to less than minimum
wage for the average dealer. In fact,
many dealers I have spoken to pay themselves nothing.
·
A chart was also included showing an average
decline in commission from 2009-12 of 15%, while our NET income has declined a
whopping 45%. Notice the disparity
here…our costs are rising, and commissions are falling at the same time. However, Sears still makes money on our
stores, without offering a single cent to help with rising costs.
The figures are from Sears’ own
documents. The information was generated
from extensive store audits on selected stores (we were forced to participate)
performed by an independent accounting firm.
We were told that anyone who
didn’t like the program could leave. There was no thank you for investing
hundreds of thousands of dollars. No
thank you for running the most efficient channel in the company with the lowest
returns, lowest shrinkage, and pure profit margin (as you well know from your
P&L’s). After hearing this and more,
I assumed there was no other recourse than to seek legal counsel, because Terri
was speaking on your behalf.
This is not how partners talk. This is not how partners treat each
other.
Sears has re-defined our relationship
without our consent and has taken away the profit that we need to survive.
I can only assume that you are
fully aware that the dealers are not financially viable. You watch dealer after dealer throw their
life savings into these stores and then walk away with nothing, only to hand it
to the next one and repeat the cycle. There
have been 5 such stores in Eastern Ontario
alone in the last 12 months, all of which are still open for business. If the channel is not profitable for Sears,
why is it opening new stores and continuing to pursue new dealers? We know
there is profit to be shared. You know
this, and yet refuse to offer anything of consequence to help us. You refuse to share the pie.
As soon as the lawsuit became
public, I was inundated with support from the dealers. I heard from a person
who was using his retirement pension to fund his Hometown store. I heard from parents of young children who
must bring them to the store because the store does not generate enough money
for them to pay for a babysitter. I
heard from one individual who told me that he wept with relief when he saw that
the claim had been started.
July 17, 2013
Page 3
They have told me such things as:
·
“We are
fighting a losing battle trying to use our personal monies to keep the business
afloat hoping things would turn around.”
·
“The Sears business has never generated enough
income for me to make a living. I feel Sears has profited while I have tried to
“stick it out” in hope of better days ahead, but instead I have gone further
into debt with less and less support from Sears.”
·
“Not only
have we suffered financially, but our family has suffered as well. With the
amount of hours we have had to put in to just make ends meet, it has been hard
to maintain a healthy family life. I understand that when you get into business
that you have to expect to put in lots of hours and that’s fine, but I expect
to be fairly compensated for the hours I am putting in.”
How long will you sit and watch
people lose everything to support your bottom line? Do you really believe this is “just
business”?
Although you ignored our initial
requests to talk before involving the courts, we would like to offer you this
opportunity to sit down with us to explore solutions to these problems. Although your public statement is that Sears will
vigorously defend this lawsuit, we both know that this is hardly an option for
the long-term. Many dealers are hanging
on in the hopes that positive change will come about. Every month, dealers are exiting the system
with crushing debt. Attempts to find new
dealers willing to take their place will be hampered by the publicity
surrounding the lawsuit and the forthcoming efforts to bring our situation to
the attention of the public. It is not
realistic to expect that the Hometown dealers will sit back quietly while they are
being starved of funds.
The lawsuit is a response to a
dire problem. How Sears Canada chooses
to handle that problem is up to you. We
ask that you contact us or our legal counsel by no later than 5 PM on July 24
if you wish to meet.
Sincerely,
1291079 ONTARIO LIMITED
Jim Kay, President
JK/ldk
cc: David Sterns, Sotos LLP
