Mac Tools has a tumultuous history with its dealers and distributors.
For more recent Mac Tools news, conflicts, issues and lawsuits, check out the posts indexed at our Mobile Tool Franchise Guide page.
Recently, we were given a link to an archived version of a now-defunct Mac Tools protest website called MacToolsSucks.Com.
While not much has been saved from the original website, we found (and reproduced below) a detailed history of when the troubles allegedly began for Mac Tools distributors, and the more contentious conflicts that arose between Mac Tools and its distributors in the 1990s.
The account below is reproduced from an archived page captured April 4, 2009 from MacToolsSucks.Com.
The author is unknown (at least to us).
A brief history lesson (Not the company line)
In The beginning……..
Mac Tools was founded in Sabina , Ohio in 1938 by a group of seven men who had a great deal of vision. Seeing the growth of the automobile industry, these fellows saw a huge opportunity and seized it and started building and direct marketing hand tools to companies and individual mechanics at their place of business. Government contracts during the war years solidified Mac’s place in the tool manufacturing business and was instrumental in the growth Mac enjoyed during the post war boom times.
After building a solid company with a successful sales approach, Mac was on the cusp of being a world leader in the hand tool industry. By the late 1970’s, Mac had grown as big as it could under the structure of the previous forty years. In 1980, after some corporate shuffling, Mac became a member of the Stanley Works giving it a profile and credibility that only the biggest tool company could.
Change is in the wind……
For many years, Mac Tools was run as a separate entity under The Stanley Works and by all accounts from those that were there, was profitable and was growing at a modest but reasonable rate. Then came the 1990’s and with it a new way of doing business. The direction Mac has taken this decade is far from the philosophies it’s founders prescribed to and quite frankly would make each and every one of the seven founders turn over in their grave.
The early 90’s saw a North America wide recession and profits of many of the big companies were down. Mac Tools had seen the last of its autonomy. The word from Stanley was a huge restructuring was in the works and this marked the end of the a long tradition in the tool business. Stanley assured it’s independent contract distributors that their investment and livelihood was safe and these moves would increase profitability for all involved. Many people accepted this and were supportive while others were skeptical and with good reason.
By aligning Mac Tools with other Stanley hand tool manufacturing, they created the Mechanics Tool Division within the Stanley works. This was done to streamline operations by eliminating duplication of processes and to upgrade tool forging technologies. This was the start of a downward spiral of employee, distributor and customer confidence in Mac Tools that they have seen over the latter half of this decade.
The first wave of discontent was created when it was decided to close old manufacturing facilities and build new facilities with modern equipment and techniques. Shortly after the closure of these older facilities, the distributor force began to experience significant supply problems creating a huge back order problem. While distributors from all over the world questioned the corporate entity as to why key items were suddenly not available, Mac continually told their people that it was temporary and, it seems, neglected to truthfully communicate the seriousness of the situation.
One distributor, who was tired of losing sales and not being able to provide timely warranty for his customers, called a manager and pressed for a concrete reason as to why this company who he was contractually obligated to buy his product from was unable to supply it. Months after the start of the back order problem this distributor was told by (former) manager Doug Millar that the reason was because Mac had been in negotiation with the United Steel Workers union whose members were employees at the plants that were closing. Mr Millar said that negotiations involving severance and new employment at new factories for existing workers had fallen through and that on the last days of operations at the plants slated for closure, the union brothers and sisters committed sabotage on the equipment that was to be moved to the new factory causing the turnaround time to change from one month into several.
When asked why this was not communicated earlier to the distributor force, (former) national sales manager Steve Eyre said it would have destroyed distributor morale. Many distributors all over North America were angered because they had a financial stake in this company and believed that they were owed all applicable information that could effect the performance of their individual distributorship business. After over a year, problems persisted and many people left the business for reasons ranging from anger and frustration to bankruptcy. Many of the distributors interviewed felt the same way in that if they were a salaried employee, they did not need to know everything but as a contract distributor with tens of thousands of dollars on the line it was essential to know as much as possible.
Adding insult to injury, Mac Tools continued to recruit new distributors even though they could not adequately supply the ones they had let alone any new ones. The distributors who started at this time were at a huge disadvantage for obvious reasons and many had a tough time making a go of it. One of these distributors named Claude Gaumont was so angry about what appeared to be false information during the time he was recruited, he looked into lawsuits, but was dissuaded because of the monumental task of fighting this giant. He eventually quit the business and in his own words "has not looked back".
As existing distributors saw new distributors starting, many noticed that many of the key items they were needing, but were on back order, were available in "starter inventory packages" the new guys were receiving. Often, after a new distributor cycled some of his inventory and went to reorder, he too was faced with a huge supply shortage just like the rest of the distributor force.
It is very interesting and certainly worth noting that the turnover rate of distributors is traditionally high. Certainly higher than Mac will tell a potential distributor when they are being recruited. Mac has an aggressive recruiting program as they always need warm bodies to replace their departing distributors. In fact, the district managers are paid bonuses and receive accolades for having the most "starts". As long as there are new people to fill routes, Mac gives little effort to retaining existing distributors and assisting them in clearing hurdles that often have been placed in front of them by Mac themselves. As one former manager said "it is easier to start a new guy than to try and clean up the problems of an existing one".
If it is easier and they are paid for new starts, than why would they try to lend support to existing guys? Many of the managers who practised this have quit because they know it is an unethical practice, but many more practice this on a daily basis as it appears to be company policy.
During this very tumultuous time, Mac decided to implement a new credit system for customers who want to make large purchases. Traditionally, it is the distributor who finances customer purchases on a short term basis, however larger purchases required more formal financing for a longer term. This system is called Mac Advantage and although it was conceived to increase sales on large-ticket items, increase market share and contribute to Stanley’s bottom line it has been very unpopular with a great deal of distributors and customers.
When Mac Advantage was introduced to the distributor force, it was presented to the distributors with several key points; 1) Annual interest rate of 12%. 2) No recourse to the distributor if account defaulted. 3) Start date April 1994. The system Mac Advantage was to replace was called "Mac Cap"and because it was 18% per annum and full recourse to the distributor, it was very unpopular. Distributors were told that all contracts under the Mac Cap system would automatically roll over to the new Mac Advantage system on the conversion date. Once the presentation was made, distributors from all over were told to promote and sell contracts based on this criteria.
After being told this information and given the mandate to sell, distributors from all over did what they were told based on the information that they had been given. The system was not implemented until March 1995 (not April 94), the interest rate was 18% per annum (not 12%) and there was recourse to the dealer (not "no recourse"). Quite a bit different from what was communicated from management.
Customers were angry because they were told their interest rate was going to be 12% not 18% and the distributors were angry because they were not given the same system described to them earlier. During this time, the distributor’s credibility was quickly eroding due to product availability issues and because of the way Mac Tools presented and implemented the "new and improved"system.
Not only were problems created during the initial phases of the Mac Advantage system, the bulk of complaints were about to become apparent. Often, distributors (past-present) have stated that contracts, customer payments and credits due were apparently "lost" creating a delay in receiving credit notes. This causes many distributors unnecessary grief and cash flow problems and erodes the professional image and credibility distributors work to build and maintain. Many customers have had problems with Mac Advantage ranging from missing payments, interest over charges, timely service and even alleged fraud perpetrated by an "agent" of Mac Tools. Complaints about this system have come in from customers, distributors and managers from Vallejo, California to St.Johns, Newfoundland from Vancouver Island to Dade county, Florida.
Distributors demand action!!!
Distributors were now getting frustrated and many of those who have litigious freedoms, particularly in the U.S., began looking to the courts for vindication. A landmark decision by the Supreme Court of Idaho awarded one such distributor named Bill Griffin $500,000 in compensatory damages based on Mac’s "wanton, malicious and outrageous conduct" and the "repeated and flagrant violation"of Idaho’s consumer protection act (little FTC act). This decision opened the door for others with similar complaints and the attorney who represented Mr. Griffin himself settled over fifty claims against Mac Tools for a total of more than $1.8 million in 1995 alone. Many cases have been argued or are pending all over North America, with virtually all of them based on the same complaints.
Growth At What Cost??
Along with the restructuring and re alignment on the manufacturing side of their business, Mac also began implementing other changes to the distribution and the time honoured sales approach that had been with them for almost sixty years.
In order to help streamline distribution, warehouse facilities in California and Canada were abruptly closed causing many loyal employees to once again lose their livelihood. The distribution restructuring caused Mac Tools Canada to cease to exist causing not only the aforementioned loss of jobs, but also caused the Canadian distributors even more grief as they were now dealing with international borders as well as the difficulty of being amalgamated with a completely different system. Operational problems were now very common causing many Canadian distributors a great deal of loss and in turn many deemed this newest obstacle the last straw and quit the business many had put so much into.
Now that Mac Tools had laid the foundation by streamlining the business (many believe on the backs of loyal distributors, employees and customers) they were poised to increase their market share. What they did was unveil a plan to replace the entire U.S. distributor force, through attrition (who have a financial stake as contract distributors), to an employee distributor force (with no financial stake). This way they can expand into new markets and more importantly can increase the bottom-line by reaping not only the wholesale profit they have always had, but by now reaping the retail profit that the traditional distributor used to have. Not only is it more profitable for them, but employees have no reason to enter the legal forum as do traditional distributors when perceived wrong doings can’t be rectified any other way.
Many traditional distributors who are still with Mac in the U.S. feel that they are actually being forced out to make way for a new "Mac Direct" employee distributor. Many feel that the already scarce product line is being given to the employee distributors before the traditional distributors, creating even harder feelings.
One fellow from Indiana recently said "I got forced out by having a hard time getting the product that my customers wanted. Therefore I was having a hard time collecting money, which started me on that hold problem." Another distributor said "I was in for 5 years as a traditional distributor and I was a top performer, $166,000 in sales in the first 5 months of this year. I quit because I could not get enough product. it seems that the employee distributors did not have the same problem" By all indications it seems that the traditional distributor is going to become a memory with Mac Tools….except in Canada.
Only In Canada, Eh?
When Mac Tools Canada was closed it ceased being a separate entity from Mac Tools Inc. Now it is considered a district under the U.S. system. It has the distinction of being the only district to continue to recruit in the manner it always has, in other words it is business as usual in Canada and you will not see any employee distributors in that district. Why?? Good question, so we did some in depth investigation and came up with an appalling explanation:
When Stanley decided they wanted to increase their market penetration (by expanding the sales force with employees) and profits (by reaping wholesale and retail level profits) one district was left out of the equation….Canada. It was determined that the cost of business in Canada was prohibitive, so they would continue as always with traditional distributors. A letter sent out to the entire Canadian distributor force in August of 1997 confirmed this by saying "There are no plans to introduce Mac Direct in Canada. …. The geographical size of Canada and population would make managing the employee distributor very costly, and not feasible." If it is too expensive for the Mac Direct program to operate profitably, then how can an individual distributor do it?
According to an independent financial report commissioned by a group of distributors in eastern Canada, they can’t. The report, entitled "Mac Tools Distributors’….Chances Of Success!…" outlined key issues that were prohibitive to the Canadian distributor. Such things as "inappropriate financing of inventory levels" and "gross margins realized on products sold are insufficient to cover fixed operating costs, debt servicing requirements and satisfy personal financial obligations." were discussed at length and the conclusion, just as the Stanley report determined, it is too costly to do this business in Canada.
Business As Usual!
As mentioned earlier, District Business Managers (DBM’s) are paid bonuses for recruitment to keep the routes filled. The rate of turn over is high because not only is getting product and support difficult, but distributors also begin to realize the lack of profitability. Fresh recruits assure that the wholesale profit Mac has enjoyed for years is not lost and the lack of profit at the retail level is squarely on the shoulders of individuals thus dissipating the loss over the distributor force and reducing Stanley’s exposure. Great for profit, bad for the people who buy into the program.
As the Mac Direct system goes full steam ahead in the U.S., more and more stories with great similarity are being told at a greater frequency. In Canada, it remains "business as usual." Recruiting is paramount, while retaining seasoned people seems not to be of concern. While deceptive statements and figures during recruitment keep new people coming in. The reality of the return on investment keeps people leaving. But rest assured, a new distributor will be recruited…….and so the cycle continues.
The system has gone through radical changes in the latter half of this decade. Ranging from U.S. traditional distributors being cast to the wayside, to Canadian distributors walking through a revolving door as cannon fodder in the relentless pursuit of profit, to loyal customers losing value of their investment because of a shrinking product line and no equally valuable replacement. Distributors, customers and employees are tired of taking the loses so the corporation can continue to profit. Much of the strategies have since passed, but the effects Mac has had on a great deal of families will live on for years to come.
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