A Legacy Food Company Files for Bankruptcy: Compliance Isn’t Just for Uncle Sam

May 10, 2024Supply Chain Chronicles

Alert – FOOD SHIPPING, HANDLING, STORAGE & RETAILERS

‘Is every link in your production and storage chain reinforced? The breakage of just one could compromise your whole infrastructure!

 You can spend decades and decades running your company like a top, taking special care to peddle your wares in such a way to sculpt a reputation any entrepreneur would kill for, and then one simple hiccup has you filing the dreaded, very public, Chapter 11.

What happened? Maybe you got complacent, too lax with your standards, rested on your laurels and let things slip. That could happen, right?

NO – It wasn’t you at all, but a third-party stepping-stone caretaker of your goods. They mishandled the product according to its inherent specs, and that’s what may have scores of your customers, vendors, and associates falsely believing that you’re “going out of business”.

This is the recent folly of Freirich Foods, a little family business that’s grown into an industry giant over the course of more than a century, maintaining the down-home charm of a mom and pop despite their sprawling operation and widespread clout as one of the premiere US proprietors of deli meats and other grocery items.

When over a million pounds of their food products, a seasonal special order quantity for St. Patrick’s Day, weren’t maintained at the proper temperature by a third-party cold storage facility, all of that merchandise was lost, driving the company into $7 million in debt, invoking a Chapter 11 filing.

Now this company with a 103-year stellar record for not only superior product quality and service, but fiscal responsibility as well, having never gone into this kind of debt before now, has a Chapter 11 bankruptcy on its record.

When ANYONE handles your goods, they are an extension of your business. It’s on you to contractually provide them with the rules, regulations, procedures, and specifications for how to conduct themselves accordingly. Your terms must be overt, clear, and accompanied by penalties and remedies for non-compliance.

Compliance may be a dirty word among business owners, evoking images of extortionist bureaucrats with no skin in the game, but that’s not you. In this case, compliance or noncompliance with these basic meat-handling standards meant the difference between a successful holiday food haul and being $7 million in the hole and legally bankrupt.

The Freirich family have expressed their intention to recover their losses, and perhaps we can read between the lines on that, but they could very well be asking themselves how they could’ve handled that deal differently at the outset, something that’s worthwhile for all of us to ponder.

Any associate, affiliate, or third-party you deal with, for any amount of time; state your expectations emphatically and hold them to account. If they don’t appreciate that? Maybe it’s time to move on to parties that share your standards.

What should those standards be? How should they be presented? How can you make sure you’re covered on the back end if something goes wrong?

These questions are why we’re here.  At Lawfinders and Commerce LP we assist clients in multiple industries to steer clear of these hazards with thoroughly-researched risk mitigation consultation.

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Contact Jonathan Scott and Commerce Law Partners – Prepare to Win!

 

 

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