Brandon Baker Justin Stout David Harder Darrel Lanzrath

1. Brandon Baker Justin Stout David Harder Darrel Lanzrath

2. Introduction Business formed from Stew Leonard�s father Leo Leonard who owned and operated small dairy route with four milk trucks In 1968 he took out a loan for $500,000 and started partnership in the dairy retail store industry with his wife Marianne Mission Statement: Rule 1- The customer is always right. Rule 2- If the customer is ever wrong, reread Rule1 !

3. Marketing Eliminate the middleman Freshness In house processing Free Samples and Recipes

4. Customer Relations Petting Zoo with farm animals for children Liberal return Policy Animated singing animals filled the store Employees roamed aisles in cow, chicken, and duck costumes

5. Customer Relations Customer feedback is gathered through in-store focus groups. Every month 10 customers were given $20 store gift certificates for meeting with managers and offering suggestions. Elderly customers were given free rides to the dairy in a bus provided by the store

6. Employee Relations Employees were referred to as �team members� Stew believed in nepotism. Offered incentive programs for the team members The store had only a 64 percent turnover rate-supermarket industry had an average of 82 percent. Company became so successful that it started its �Stew U� training program for new employees

7. The Organization All four of Stew Leonard�s children were involved in the Business Because the business was a partnership there was no Board of Directors, shareholders, and no annual reports Customers were encouraged to pay cash for purchases Over the years, received many awards for overall store performance

8. Shit Hits the Fan Stew Leonard was questioned by the IRS for trying to take $80,00 to his second home in Saint Martin. IRS confiscated store records. Stew and his son Tom told the public that the IRS was just doing a routine audit. On July 22, 1993, the Department of Justice announced that Stew and others had pleaded guilty to federal tax conspiracy. He avoided $6.7 million in taxes between 1981 and 1991 by not reporting $17 million in sales.

9. The �Equity Program� The IRS found the computer program written by Jeffery Pirhalla, Stew�s computer programmer. The computer program systematically discounted sales and bank deposit data. Typical cash diversions were$10,000 to $15,000 per day. Dual books were kept to disclose actual and reported sales.

10. Shortweighting On July 23, 1993, a day after Stew Leonard pleaded guilty to tax evasion the Dairy was charged with violating state labeling laws. 46.3 percent of their products were improperly labeled compared to the state wide average of 5 percent. Industry experts say some of this could be a cause of handpacked and precooked items. 1,230 violations each subject to a $500 maximum fine.

11. The Aftermath Although it was drew harsh criticism, it caused minor decline in sales. Stew was sentenced to 52 months in jail and had to pay a fine of $15 million. He gave no reason for committing the crime but apologized to customers and employees. After this incident, the company continued to grow and was planning for a third store.

12. Damage Control Stew Jr. stepped up and became the leader. To make matters worse, in 1996, it was reported that Tom was under investigation for skimming cash from the store vending machines