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Case Study: Phil McNeil

Phil McNeil, from Grande Prairie, Alberta, was a top performer with Mac Tools from 1993-1998. After receiving numerous awards and other performance related incentives, including jewellery, travel vouchers and the coveted gold ring, Mr. McNeil began to look at the whole picture as to why he felt he was not making a reasonable living. Although according to Mac Tools standards he was successful, he wondered why he was always behind the eight-ball. After an in depth investigation into his allegations, it has become apparent as to why.

The Pitch..

In September of 1993, Mr. McNeil approached a District Business Manager in Calgary, Alberta named Walter Hamilton expressing interest in the tool business. After working in the automotive and sales fields, he figured the experience he gained in those fields would be a great combination to employ in this new endeavour. At only 23 years old he was aggressive articulate and enjoyed the positive attitude that he and Mr. Hamilton figured would help him in this business opportunity.

Mr. Hamilton sent an information package that outlined the requirements and the advantages of becoming a Mac Tools distributor. In this package was, among the usual information, a projected operating expense form. This form, and another one that came shortly after, stated that the fixed operational expenses would range from $9700.00 -$10,500.00 per annum. According to Mr. Hamilton these were actual expenses of distributors with varying years of experience averaged out and he gave assurances to Mr. McNeil that they were accurate. Mr. Hamilton went on to say that they would not show prospective distributors deceptive numbers, as the distributors success is also Mac's success.

(Editors note: Mr. McNeil has provided www.mactools.ab.ca with his actual expenses for his first two years in business.)

When Mr. McNeil was inquiring about the size of the territory he was to take over, he was told that his territory would consist of the very same territory the previous distributor had just vacated. Mr. McNeil had specifically asked about a lucrative pulp and paper mill and was once again assured it was to be his as the previous distributor had enjoyed it.

During this initial consultation, Mr McNeil had asked about the Mac book keeping system. While inquiring to a competitor, they had touted their computer software package and how it saves paper work and therefore becomes an excellent time management tool. Mr Hamilton assured Mr. McNeil that the new Mac software package was going to be introduced within a few months at the 1994 Tool Fair in Dallas, Texas.

A new Mac Tool man..

Taking what he was told at face value, Mr. McNeil entered into a distributorship agreement with Mac Tools. Within weeks of signing his contract (which he says he never received a copy of), forwarding his funds for his initial inventory and purchasing his truck, he was ready to hit the road. Now that he was signed up, he says that the tone changed. During the training period, Mr. McNeil again asked about the pulp mill he was to have in his territory. To his complete surprise, Mr. Hamilton told him that he had given it to another distributor and that there was enough for Mr. McNeil without it. Upon pressing for a reason as to why Mr. Hamilton had deceived him, Mr. McNeil was, in an agitated manner, told that if he did not like it than he could quit. At this point, at this level of commitment, quitting was not an option. Though he was not happy with how he was deceived, he had committed himself and was determined to make a go of it.

In February of 1994 it was time to see the promised unveiling of the computer software system Mr. Hamilton spoke of during recruitment. At Dallas, it quickly became apparent that this system was far from being available and by all indications was not even going to be available in Canada at all. According to sources, even to this day, this software is not available to Canadian Distributors.

Undaunted, Mr. McNeil continued on and quickly became a consistent top performer. After being in the business for about 8 months it became obvious to him that his expenses were far greater than the two projections he had received from Mac Tools via Mr. Hamilton. Mr McNeil decided to contact Mr. Hamilton to ask him why three key parts (computer software, pulp mill and operating expenses) discussed during recruitment were not truthful. According to Mr. McNeil, Mr. Hamilton became abusive and reminded Mr. McNeil that he, Mr. Hamilton, could "make or break" him.

Sink or swim..

Soon After, the structure of the district was changed, Mr. Hamilton was no longer Mr. McNeil's DBM. For about six months Mr. McNeil was without the support a DBM is supposed to provide and was left to sink or swim. Hard work and an economic upswing kept the business growing and though some of the things Mac had told him were not true, at least they were filling orders. After this period, another seasoned DBM was assigned to Mr. McNeil's territory named Frank Quiring. Mr. Quiring quickly became, according to Mr. McNeil, the distributors greatest ally. By going the distance and doing what he promised, he endeared himself to his distributors; and it showed as Mr. Quiring's district was the top in the country. Mr. McNeil enlightened Mr. Quiring about the tactics used by Mr. Hamilton during recruitment. According to both Mr. Quiring and Mr. McNeil, a meeting was arranged with the (former)national sales manager Steve Eyre at the Orlando Tool Fair, in 1995, to discuss these very claims. Mr. McNeil was assured action would be taken but, according to Mr. McNeil, none was.

Mr. Quiring will be the subject of another case study, but while at that very Tool Fair in Florida, Mr. Quiring was awarded the presidents choice for the best DBM in the country. His strong work ethic and company commitment appeared to be what Mac needed in Atlantic Canada to help foster growth. Mr Quiring was offered and accepted a DBM position on the east coast. Mr. Quiring moved and once again the distributors in his area were left without a DBM for another six months or so. This time frame coincided with the beginning of the huge back order and supply problem that was touched on in A BRIEF HISTORY.

Tool anarchy!

Mr. McNeil claims that during this time, not only was product becoming scarce, but his support (that he was entitled to under contract) was non-existent. Also during this time, the (former) national sales manager, Steve Eyre, was off on medical leave and, through no fault of Mr. Eyre, the company had become a ship without a captain. Not only was key product hard to come by (we are talking wrenches, ratchets, sockets....KEY PRODUCT!!) but the internal hierarchy was in dissary which in turn was reflected on the service levels of the distributor force and ultimately the customer.

Mr. McNeil, and many others, assert that these problems continued on for many months causing Mr. McNeil and hundreds of other distributors a loss of profit and goodwill. Mr. McNeil claims that he had a 2 piece ratchet set on back order for just over 1 year! Many other similar tales of service levels seem absurd and even humorous, until one reflects on the seriousness of the situation and the impact of the lone distributor.

Another DBM, Adriano Monopoli, was started in Mr. McNeil's area during the height of the operational mayhem. According to Mr. McNeil, and others, Mr. Monopoli did what he could and was a good manager. Unfortunately for Mr. McNeil it was short lived. Yet another district shuffle saw Mr. McNeil's district left without a DBM and all the support that goes with them. It was many more months before another was to start.

Mr. McNeil says that at this time, though product was scarce, he was one of the top distributors in the country. He was continually recognized as a top performer in company mailings and contests. Mr. McNeil considered that if he was considered a top distributor and he was having the difficulty that he was, what was it like for people who were not in his position? Mr. McNeil also pondered why it seemed as though he was not profiting as he thought he should, considering his "success". His answer has been a painful lesson for him and many others.

Eroding support

By the spring of 1996, Mr. McNeil's district had been assigned yet another DBM. Of all the DBM's in this district, Norm Patten had the distinction of being the only DBM to come in from outside the system. Traditionally (and in company literature) DBM's are former distributors who move-up. Mr Patten had been in the industry for many years and had been with a competitor. It quickly became apparent, to most involved, that Mr. Patten was ill prepared for the complexities of the job and more so the distributor backlash now welling up as a result of the poor service levels. By August of 1996, at a meeting consisting of two districts, with managers Adriano Monopoli and Norm Patten, the discontent and frustration came to a boiling point. It was decided to collectively draft a formal document addressing items of concern and have it hand delivered by distributor representative Claude Gaumont to the (former) national sales manager Steve Eyre. Mr. McNeil, and others, assert that almost no changes came from this effort.

Psssst...can ya spare a socket?

Mr. McNeil says that early 1997 saw a very welcome decrease in backorders and it seemed that there was the proverbial light at the end of a tunnel. Although the tools were now at least coming, Mr. McNeil contends that the quality of the product had suffered. Instances of chrome peeling or tools breaking under light service were not uncommon. Air tool availability, performance and reliability were down. This caused an increase in warranty claims from customers that, coupled with the poor service levels, caused cash flow issues for many distributors, Mr.McNeil included. In hind sight, Mr. McNeil says he should have left the business at this point. Mr. McNeil's lovely wife interjected that he should have left a lot earlier. Blaming his stubbornness and pride, Mr. McNeil was convinced that the worst was over and decided to forge on and make it work.

Though Mr. McNeil contends that he always lived frugally, he none the less he found himself in a serious cash flow situation that he directly attributed to Mac and the service issues. The decision was made to borrow more money to continue and hope that the restructuring was over and the worst, indeed, behind. In June of 1997 it was abruptly announced that Mac Tools Canada was closing down and was going to be amalgamated with the U.S. system. Unfortunately for Mr. McNeil he had virtually all of that freshly borrowed money tied up with Mac in the form of; trade account payments, broken tool credits, Mac Advantage contracts etc. Mr. McNeil was assured by management that it would be a smooth transition.

But, But...you have ALL the money!!

Two weeks after that take over date, Mr. McNeil had no word on his money and became anxious. He, and many others coast to coast, exerted enough pressure to prompt a visit from the newest corporate head of the show, Tim McDonald. Mr. McDonald and Mr. Eyre (in a reduced role of Regional Manager from National Manager) toured a few hot spots in the country to explain Mac's position and help clear up complaints. Of concern to Mr. McNeil was that his money was tied up in their system, but they refused to send him product. After voicing this to Mr. McDonald, he was assured it would be taken care of. Soon after, Mr. McDonald joined the ranks of so many other Mac people and quit. Needless to say, everything was not taken care of and the situation was not getting better. McNeil says that when he was trying to have his difficulties solved that he was told by managers that he was the only one having these problems. At the end of July, 1997 , a letter was sent to the distributor force asking some very familiar things. It seemed that these very same problems were coast to coast. Mr. McNeil answered this letter, but he says he never got a reply. Regional manager Steve Eyre replied to the letter and in it, according to Mr. McNeil, confirmed many points of contention that were never admitted before. Around the same time, an action report sent out by Steve Eyre on behalf of the soon to be departing Tim McDonald revealed much of the same. According to Mr. McNeil, it stopped with the document. Nothing changed.

After faltering in his job since day one, Mr. Patten became ill and was put on medical leave leaving Mr. McNeil, and the whole district, once again without a DBM. On occasion Mr. McNeil said he could rely on another DBM ( Adriano Monopoli) and it was he who ultimately helped free up Mr. McNeil's funds, After 2 months of diligent effort!!

Sue them!

Angry and frustrated, Mr. McNeil explored legal action, but was dissuaded by the expense as money was at a premium. At this point, Mr. McNeil finally had enough and to the great relief to his wife, started winding down the business and poising himself for termination. Convinced that he had a case, Mr. McNeil again resumed a legal remedy and let Mac know his intentions. At the end of 1997, Mr. Patten returned from his medical leave. Mr. McNeil was still owed money for warranty adjustments he was obliged to make while he was without a DBM. Mr. Patten, according to Mr. McNeil, took exception to Mr. McNeil and transferred thousands of dollars in product to Mr. McNeil's trade account (which Mr. McNeil says he never ordered or received) and recoursed Mac Advantage delinquent accounts to his trade account. This, according to Mr. McNeil, was done contrary to contractual and company policies. Mr. McNeil brought this to the attention of regional sales manager Steve Eyre, who like many other times, said he would get right on it. Again, nothing was done except a parting of the ways between Mac Tools and Norm Patten. Once again, Mr. McNeil was left without a DBM. At this point it did not much matter as Mr. McNeil was in the process of selling out and was on the verge of litigation.

Tell it to the Judge!

In January of 1998, Mr. McNeil's solicitors, the capable Bishop and McKenzie, served notice of a statement of claim. This lawsuit was based on the new Alberta Franchise Act, a piece of legislation that was enacted to help prevent the abuses within the franchise context. The Mac tools program was called a distributorship, but in Alberta it is considered a franchise. Under that law, both parties are required to deal fairly and in good faith in the performance and enforcement of their agreement. Mr. McNeil and council believed that Mac Tools violated sections of the Act and the original distributor agreement. Off to court they go.

When the new Mac Advantage system was introduced in 1995, it superseded another agreement called the Mac Cap agreement. In the Mac Advantage agreement, there was a clause that stated "any disputes relating to this or any other document must be settled through arbitration" This was obviously put in by Mac in order to protect themselves from claims arising from the Mac Cap system mentioned in so many lawsuits. Well, Mac's hired guns convinced the Judge that the actual distributor agreement ( the agreement the lawsuit is based) is a related agreement to the Mac Advantage agreement and therefore, Mr. McNeil could not seek legal remedy and must peruse alternative dispute resolution.

Mr. McNeil says he was disappointed that the law was ineffective, but was convinced that any reasonable and unbiased person who reviewed the evidence would find in his favour. Short lived was Mr. McNeil's optimism. Mac's attorneys tried yet more strong arm tactics and Mac continued to put more fictitious charges on Mr. McNeil's trade account and ultimately terminated the distributor agreement.

You be the Judge....

Over the span of the last 1.5 years, Mr. McNeil says he has been trying enter into arbitration, as the Judge ordered, to no avail. McNeil also claims to have pleaded with the presiding Judge to exercise any power he has to enforce his ruling, to no avail. Mr. McNeil insists that for almost a year Mac and their attorneys have ignored Mr. McNeil by not returning phone calls, faxes, or e-mails.

Mr. McNeil, therefore, has submitted all information to www.mactools.ab.ca.

After what he, and countless others, have been through at the hands of this company he has decided to take the battle to a higher authority. The court of public opinion.

Questions? comments? WEBMASTER