Judgement favors Ziebart dealers
TROY – A lawsuit filed three years ago by 27 Ziebart dealers against their parent company has ended with a $1.9 million judgment, highlighting the contentious relationship franchises sometimes face.
Franchises in nine states accused Ziebart International Corp. of intentionally under-pricing products at company owned stores. They also said Ziebart forced dealers to pay higher fees for products they bought through the company and its suppliers. Ziebart, a Troy-based company that offers rustproofing and car-care services, has more than 500 stores worldwide.
“It was more than about trying to get money,” said Norman Yatooma, a principal of Norman Yatooma & Associates in Birmingham, which represented Ziebart dealers. “We wanted to give them the opportunity to make money, and the policies of Ziebart did not provide those opportunities.”
Attempts to contact Ziebart officials were unsuccessful.
Former Ziebart owner Ron Schoenherr found it tough to make a profit under the company’s franchise system. Schoenherr, who was among the franchises who sued Ziebart, is no longer affiliated with the company.
“It was either accept it or leave the system,” said Schoenherr, who now owns a Z-Tech dealership in Waterford.
“The way the system was working just didn’t work out. Everyone was working hard, but we didn’t make any money.”
Under the terms of the arbitration award, Ziebart franchisees are now able to set their own prices. Dealer prices will also determine costs at company–owned stores. Ziebart also must reduce the price of the products it sells to dealers through the company or through its suppliers.
The lawsuit also allows franchises terminated by Ziebart to be reinstated. In addition, dealers may end their business relationship with the company and compete against them without penalty while retaining their customer list and vendors.
Earlier this year, Yatooma received a court order to seize Ziebart’s property at its corporate headquarters after the company failed to pay the judgment. Ziebart is now paying $70,000 a month to settle the debt as part of the payment arrangement, Yatooma said.
Major disagreements between franchisers and their licensed offshoots are uncommon, said Matthew Shay, executive vice president of the International Franchise Association in Washington, D.C.
There were 767,483 franchisers in the United States last year, according to the International Franchise Association in Washington, D.C. In Michigan, there were 23,850 franchises in 2003, which produced 322,445 jobs.
“It’s a highly interdependent relationship,” Shay said. “Neither can be successful unless the other is successful. The key ingredient of a healthy franchise relationship is a well-established level of communication in which both parties recognize and understand they need to work together in a cooperative way to make the venture a success for both parties.”