George Brenski: Snap-on Tools' Sales Policies Threaten the Company's Future

CHICAGO, April 23 -- This release is being issued by George Brenski:

In letter mailed this week to more than 200 institutional investors of Snap-on, Inc. , veteran dealer and shareholder George Brenski warned that the tool company's management policies are pumping up short-term sales while undermining long-term prospects.

"The backbone of this former Fortune 500 Company has been its dealer force," said Mr. Brenski, who has been a Snap-on dealer in the Chicago area for 33 years. "But at every instance they have tried to squeeze the dealer force, and have only wound up with a changing rotating sales force that destroys customer loyalty."

Snap-on manufactures automotive repair tools such as wrenches and screwdrivers, which are sold to mechanics door-to-door by dealers in their Snap-on tool van. A Snap-on dealer must go to the company for the inventory on his van, and for a route or "list of calls" that are supposed to contain enough customers to enable the dealer to generate a profit.

But Mr. Brenski explained that Snap-on has diluted the customer base and undermined the profitability of its dealers by reducing the number of mechanics on each route while selling more dealerships.

"The current incarnation of this policy is 'more feet on the street,'" he noted in his letter to institutional investors. "This very same company called it 'maximum penetration' a few years ago. All it means is giving dealers fewer customers and selling more dealerships. All it has created is a revolving sales force and hundreds of dealer lawsuits, with thousands more on the way. It is a disastrous policy because it dooms the dealer to certain failure after only two-to-three years in business, and alienates our customer base that sees constant changeover in the people who service their needs.

"We used to operate the 'old fashioned way,'" he continued, "that is, on customer loyalty and a long-term dealer force. Now, by trying to eliminate single dealerships and replacing them with so-called multi-route 'master' deals in an effort to eliminate field and other managers, we are destroying our most valuable asset -- the trusted Snap-On dealer."

"It's not too late to save our dealership asset," added Mr. Brenski. "But, it can only be done by fairly dealing with those dealers who have been mistreated. It's really very simple -- if we don't deal with them fairly, don't expect our shares to rise anytime in the near future. In fact, expect them to continue to fall."

"Snap-on's policy of 'marketing plans du jour' create redundancy, while its other tactics cause dealers to fail -- ultimately harming the company and its shareholders," observed Gerald A. Marks, a Red Bank, N.J. attorney representing over two-dozen former Snap-on dealers. Mr. Marks has initiated numerous lawsuits and arbitration proceedings against Snap-on on behalf of terminated dealers, alleging multiple fraudulent practices. "Those practices," he said, "include: false income representations that mislead potential dealers to believe that all Snap-on tool routes have the same profit potential; incorrectly representing that a Snap-on tool dealership is 'recession proof;' placing dealers in a 'short territory' with insufficient customer base to support the dealer's overhead and debt expenses; and extending excessive amounts of credit to a dealer so as to encourage them to purchase more tools than they can re-sell to their customers." In one case, which Snap-on is now forced to list in its franchise disclosure documents, Mr. Marks recovered over $52,000 for a former dealer who Snap-on falsely claimed owed it nearly $240,000.