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thegazette • Friday, November 22, 2013
Kiwi Kraze accused of misleading customers A franchisee is suing the London-based frozen yogurt chain, claiming the product was not always fat-free as advertised. The company says it immediately fixed the problem. An exclusive Gazette investigation by Aaron Zaltzman and Jesica Hurst.
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iwi Kraze, a popular frozen yogurt chain that has recently expanded throughout Ontario, advertises itself as fresh, delicious and healthy. On its website, the London-based chain proudly describes its yogurt as “an allCanadian proprietary blend, [that] is fat free.” However, recent allegations have come to light that this fatfree branding may not always have been accurate, and for over a year of its operations, the North London corporate flagship store served products labelled as fatfree that actually contained fat. These allegations come from Tom Stinson, the owner and operator of the Kiwi Kraze franchise located in Mississauga, and Karyn Butt, the store manager. When their location opened in September 2012, most of the products they received for sale contained fat, even though, they claim, they were sold on the idea of the franchise serving fatfree products. On July 10, 2013, Stinson initiated a civil lawsuit that alleged, among other things, that the North London Kiwi Kraze store knowingly served yogurt that contained fat, while advertising itself as being fat-free. Stinson is seeking damages in the amount of $530,000 because the system he bought into was based on a product that was fat-free, which was not the product he ended up serving. These allegations have not been proven in court. Stinson’s statement of claim alleges that Mark Wiebe, the sole officer, director and shareholder of Kiwi Kraze Holdings Ltd. and
Ari Psihopedas, described as the “directing mind” of Kiwi Kraze’s franchise operations, served fatfree yogurt for only a short period time of the store’s early existence. The lawsuit claims that “Until late 2012, the Kiwi Kraze frozen yogurt products contained between three and eight per cent fat; yet, the claimed fat-free makeup of the products was at the heart of the franchise concept.” The claim states that Wiebe and Psihopedas switched to a fat-free product supplier sometime in fall 2012, over a year after opening the North London store, in order to comply with their fat-free branding. Stinson and Butt claim that Wiebe and Psihopedas misrepresented their product to them, as well as to Kiwi Kraze customers. Stinson declined to speak on the record, deferring communication for this story to Butt. Wiebe and Psihopedas, however, deny any wrongdoing on their part, and claim that they themselves were the victims of misrepresentation. In a statement of defence they filed on October 9, 2013 in response to the lawsuit, they allege that their product supplier represented the products they were ordering as fat-free, which they subsequently learned was not true. In the statement of defence, Wiebe and Psihopedas “plead that some of the yogurt it sold was fatfree while some of the yogurt was not.” They claim that as soon as they discovered the nutritional information of the products they were ordering, they immediately switched to a provider that could supply fat-free products.
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Mike Laine GAZETTE
he first Kiwi Kraze store opened on May 26, 2011 at 595 Fanshawe Park Road, just west of Masonville Place. However, the idea for the store began not in London, but in Idaho Falls, Idaho, where the first Kiwi Loco store opened in 2009. In the statement of defence, Wiebe states he and his wife were interested in becoming franchisees, but the owners were not interested in expanding to Canada. According to Wiebe, they suggested he begin his own franchise system, which would grow into Kiwi Kraze. When they first opened, Kiwi Kraze ordered their products from a dairy supplier called Foothills Creamery, through the Yogurt Distribution Company, an Ontario-based distribution company. According to Sam Haider, CEO of the Yogurt Distribution Company, the first products delivered to the North London store were fat-free. “Based on Mark’s requirements we did a private label for him, [which] means that it’s a custom mix that is exclusive to Kiwi Kraze […] that is made with his requirements,” Haider said in an interview. “He wanted a non-fat mix that was labelled as ‘Kiwi Kraze’ with his brand. And that’s what we did.” There is disagreement over the extent to which Kiwi Kraze products were advertised as fat-free at the time. Psihopedas said, “some of the products were advertised as fat-free,” and in the statement of defence, filed by him and Wiebe,
it states “it was never represented to [Stinson] that Kiwi Kraze only sells fat-free frozen yogurt,” and that it offered different products “including fat-free and sugar-free products.” However, Karyn Butt, the manager of the Mississauga franchise, said there was no ambiguity about how the yogurt was advertised. Butt said the product, with the exception of the no sugar added flavours, was “always” advertised as fat-free. “His flavour tags above that tell [customers] what the flavour is — strawberry, blueberry, cheesecake or whatever — they all said ‘nonfat,’” she said in an interview. According to Butt and another franchisee that wished to remain anonymous, the North London Kiwi Kraze store was advertised this way from the time it opened until the time of publication.
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fter serving the private label yogurt mix from Foothills Creamery in the North London location for the first few months, in the summer of 2011 Kiwi Kraze had to switch to ordering off-theshelf products that contained fat, according to Haider. “[Kiwi Kraze] was growing […] and because of [Wiebe’s] growth, we were not able to promise him further private labels,” Haider said. “We told him that we would only be able to send him our regular mix.” According an invoice dated August 24, 2011 obtained by The Gazette, the new products being delivered to the store were: Miss Sharon’s Chocolate Yogurt Mix,