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Slinging

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Reply with quote  #1 
We have Sysco South West Florida paying as much as $250,000 for accounts for 3 year deals. I could not imagine working for a company that has resulted to writing checks to grow their street business. 

I would like to know the legalities of this situation? 

What happened to the ethics of this company. They approach the customer give them a check and then raise their prices 15% plus to get their money back. They hurt the customer and take advantage of situations. They make their money back 2 fold and then the customer is in a very bad situation financially long term. 

If I worked there I would be ashamed and this is telling the team they have no intangibles to grow their business threw normal channels in the sales industry. 

Does anyone hear other markets doing this?
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FOOD REP GAL

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Reply with quote  #2 
They (Sysco) have been doing the same thing in my market for a long time.  I see US Foods doing it as well.  I agree with you; this is a long-term bad situation for the customer.  But how do you convince a customer that the up front cash is a bad thing?

I'm wondering what happens after the initial time frame has expired (one year, two years, three years) - if Sysco has to buy the business the first time, won't they have to buy the business EVERY time?

How is the cash handled by the customer?  Is it treated as profit?  As a liability (basically a loan that has to be repaid)?
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Sales424

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Reply with quote  #3 
Sounds like a Cheney rep who is pissed at getting beat at their own game.....
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2 companies down

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Reply with quote  #4 
And it trains the customer. As soon as that term is up, they have their hand out to the biggest offer. I prefer an earned backend rebate. Drop size and prompt pay.
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Winenot

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Reply with quote  #5 
I'm wondering if you're new to the industry, because this has been going on for years.. Sysco, US Foods and most other distributors (big and small) have gotten in on this game.. No, it's definitely not illegal, but its most certainly unsavory..
It's essentially a high interest loan.. And you're right, most of the time it locks the customer in for 3 years and if they want to end the contract they will have to pay whatever the remainder is.. God forbid they go out of business and can't repay what's left over they will either be sued or forced into bankruptcy..The area I work in - this is a very common place practice - and in fact one distributor may buy out another distributors contract to secure that business... I had one customer who had done this and regretted it greatly, and referred to it as making a deal with the devil.. I really feel that's what customers are doing when they enter into these stupid contracts.. Unfortunately some customers need the money and this becomes a very attractive offer on the front end. They are better off going to a bank and securing a personal loan (and having the freedom and ability to buy what they want, from who they want)... Honestly this is what I usually tell customers.. Its really just unfortunate that we can't go out and get business the old fashioned way - and instead have to bribe customers with money to win their business.. Also these are usually very low profit accounts for the rep and sometimes you even get dinged on the commission depending on how they were set up..We certainly aren't looking out for the customers best interest.. The take away here is yes this is a very common practice, it's been going on for years, and it is not going away anytime soon..
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Investigator

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Reply with quote  #6 
With billions of sheltered income dollars flowing in they might as well use it to create a 3rd income stream in the form of high interest loans to a captive client. The biggest irony is Sysco is essentially lending the operator his own money, taken via sheltered income/falsely inflated prices. 
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Sidney

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Reply with quote  #7 
The Corleone Family comes to foodservice
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Foody

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Reply with quote  #8 
Investigator, what is it you want? All distributors need “sheltered income” as you call it or their operating expenses would outpace their actual margins.
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Reply with quote  #9 
Quote:
Originally Posted by Foody
Investigator, what is it you want? All distributors need “sheltered income” as you call it or their operating expenses would outpace their actual margins.


You guys are idiots. Please tell me how this "tsunami" would happen if Wall Street didnt embed the price of their products with fictitious costs that they never in fact incurred. How is it legal to pass on costs to an end user that you never incurred? 

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Sidney

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Reply with quote  #10 
Calling people "idiots" is totally inappropriate  for a message board and totally disrespectful. If you can't be mature then I had rather not hear you comments.
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Sidney
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Reply with quote  #11 
Quote:
Originally Posted by Sidney
Calling people "idiots" is totally inappropriate  for a message board and totally disrespectful. If you can't be mature then I had rather not hear you comments.


Now that wasnt difficult to predict, that some poster would claim insult. But you don't mind operating within a criminal industry now do you? How can you and your distributors add $15.00 per case to the price of product "X" when in fact neither the supplier or the distributor really incurred this $15.00 per case cost? Then it's shipped down the channel to some poor sucker that foots the bill? Naughty, naughty, and it's the cash flow needed to consolidate the distribution networks that then allow nothing through the system that doesnt carry these fake costs. 

And you're not hearing my comments you're reading them.
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Foody

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Reply with quote  #12 
So, if the manufacturers charge $10.00 for a case and offer a distributor $.50 as “shelter” because they buy more product than anyone else, isn’t your problem with the manufacturer because you believe the $10.00 is “false” cost?
Just trying to understand your perspective. I don’t think there is a distributor out there earning more than a very reasonable margin per case after expenses to receive, pick and distribute are calculated.
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yogibuck

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Reply with quote  #13 
While investigators brash and offensive to some, it doesn't change the fact that sheltered income is pretty much a sham.

Say the case is $10, if the distributor asks for $2 of back end money, does anyone think the manufacturer doesn't just add that $2 to the case?  So that case now costs $12?  And the $2 comes in the back door as "marketing money."

So anyone on a cost plus program is actually being scammed.  Which is why, as investigator has pointed out, some of the largest distributors in the world have been sued and lost over this very concept.  Mostly by government agencies which has the power to write laws that protect them, but not the average buyer.  Which just made the distributors lawyers write contracts better, to protect this scheme.

The salesman on the street doesn't know/isn't told how much is sheltered, so they are left to wonder why one of the biggest distributors in the world is so high on the street vs a smaller competitor.  I've seen these "programs" as high as 30%.  They also unknowingly lie on behalf of the distributor because they truly don't know how much is sheltered.  they often aren't suave enough to use the political language of "invoice cost" vs "actual cost," etc.  If they are getting paid/bonused on margin (stated cost and not actual cost) vs sales $, they are the ones also getting screwed.  I've never seen a distributor reps contract, but I would guess it is very carefully crafted and worded (after many years of litigation).

As to the lump sum payments to end users in exchange for loyalty, I've never seen one of the actual contracts, but would love to look at it if someone posted one here.  Obviously, we all know its not going to be to benefit of the customer.  The distributor is going to get paid.  I would imagine they might have some suppliers that might kick in some cash for a guaranteed income stream.  Or they may take some large, one time lump sum marketing payments from suppliers and allocate those in this manner to steady their income stream.

Keep in mind, that many pizzeria owners in the old days were put in business by loans from food service companies, in exchange for loyalty (and sometimes other services).  So in theory it has been going on for a long time.




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yogibuck

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Reply with quote  #14 
Quote:
Originally Posted by Sidney
The Corleone Family comes to foodservice


"The Family", according to some, has been in food service from the very beginning.

Restaurants at one time were mostly cash only businesses.  Customers paid cash and invoices were paid in cash.

Which made restaurants very attractive to those who needed a method to clean money.  Or to skim off the top.

In low income areas of the country, business is often still done in cash.
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Reply with quote  #15 
Quote:
Originally Posted by yogibuck
While investigators brash and offensive to some, it doesn't change the fact that sheltered income is pretty much a sham.

Say the case is $10, if the distributor asks for $2 of back end money, does anyone think the manufacturer doesn't just add that $2 to the case?  So that case now costs $12?  And the $2 comes in the back door as "marketing money."

So anyone on a cost plus program is actually being scammed.  Which is why, as investigator has pointed out, some of the largest distributors in the world have been sued and lost over this very concept.  Mostly by government agencies which has the power to write laws that protect them, but not the average buyer.  Which just made the distributors lawyers write contracts better, to protect this scheme.

The salesman on the street doesn't know/isn't told how much is sheltered, so they are left to wonder why one of the biggest distributors in the world is so high on the street vs a smaller competitor.  I've seen these "programs" as high as 30%.  They also unknowingly lie on behalf of the distributor because they truly don't know how much is sheltered.  they often aren't suave enough to use the political language of "invoice cost" vs "actual cost," etc.  If they are getting paid/bonused on margin (stated cost and not actual cost) vs sales $, they are the ones also getting screwed.  I've never seen a distributor reps contract, but I would guess it is very carefully crafted and worded (after many years of litigation).

As to the lump sum payments to end users in exchange for loyalty, I've never seen one of the actual contracts, but would love to look at it if someone posted one here.  Obviously, we all know its not going to be to benefit of the customer.  The distributor is going to get paid.  I would imagine they might have some suppliers that might kick in some cash for a guaranteed income stream.  Or they may take some large, one time lump sum marketing payments from suppliers and allocate those in this manner to steady their income stream.

Keep in mind, that many pizzeria owners in the old days were put in business by loans from food service companies, in exchange for loyalty (and sometimes other services).  So in theory it has been going on for a long time.






I sure don't see what the mystery is. Take a $50.00 case and the distributor adds on $10.00 (20%) load to the price. This 20% is fictitious no matter how you look at it and they embed it in the price from the manufacturer portraying it as a cost when in fact neither the manufacturer or distributor has incurred this $10.00 add on. It's purely parasitical and it forces the operator to fund their games. Both the distributor and their suppliers should be sued. And with private label product the crimes have to be much greater than national brands. In the case above to add injury to insult the distributor can mark up the fictitious portion of the cost another 30% making for a $13.00 per case hidden tax. 

As far as up front monies, this is the tactic of a Coca Cola or Pepsi. In any large account these companies offer up front monies in return for the fountain rights for a given period of time say 3-5 years. I have heard that Sysco now has many ex PepsiCo people in their management.

Pepsi by the way has a history of being an organized crime company. In 1934 a partner of Meyer Lansky , named Wallace Grove purchased 'Loft Candy's" and that was the beginning of Pepsi Cola. 

QUOTE:

Wallace Groves (c. 1902–30 January 1988) was a prominent financier, who, after his release from federal prison in 1944, moved to the Bahamas and there founded and operated the free trade zone, resort, and casino development Freeport on Grand Bahama Island. Investigators of U.S. organized crime associate him with the Meyer Lansky syndicate operating offshore casinos from Miami Beach. These ties notwithstanding, he is credited with being a driving force in the development of the modern Bahamian economy.

https://en.wikipedia.org/wiki/Wallace_Groves
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Reply with quote  #16 
Quote:
Originally Posted by yogibuck
While investigators brash and offensive to some, it doesn't change the fact that sheltered income is pretty much a sham.

Keep in mind, that many pizzeria owners in the old days were put in business by loans from food service companies, in exchange for loyalty (and sometimes other services).  So in theory it has been going on for a long time.






One of the first to use "loans" in exchange for business was mobster Louie Jacobs of Emprise. Today Emprise is one of the largest concession and foodservice management companies in the world going under the corporate name of Delaware North Companies. 

https://www.bostonmagazine.com/news/2013/03/27/jeremy-jacobs-family-history/

A more recent sighting of the Jacobs family was their son in law John Victor Holten who in the late 1990's began buying up custom food distribution which became known to all in the foodservice business as Ameriserve which went down in bankruptcy about Y2001. 

Major media writing on the collapse of Ameriserve would only identify the CEO John Holten as a "mysterious Norwegian" when in fact he was the son in law of Delaware North's Jeremy Jacobs, having married his daughter in 1982.
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