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.


04b_graphic-kiwi-MikeLaine
Mike Laine // GAZETTE

Kiwi 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 all-Canadian proprietary blend, [that] is fat free.”

However, recent allegations have come to light that this fat-free 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 fat-free 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 fat-free 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 fat-free 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 fat-free 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.

The 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.”

“His flavour tags above that tell [customers] what the flavour is — strawberry, blueberry, cheesecake or whatever — they all said ‘non-fat’” –Karyn Butt, manager of Mississauga franchise

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 ‘non-fat,’” 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.

After 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-the-shelf 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, Miss Sharon’s Fat Free Country Vanilla, Soft Serve (Tart) Yogurt Mix and Miss Sharon’s 3.3 Yogurt Mix. With the exception of the Fat Free Country Vanilla, all contain fat.

According to Foothills Creamery, the fat content of these products is, respectively: 5g of fat per 100ml, 0g of fat per 100ml, 6g of fat per 125ml and 5g of fat per 100ml.

According to Haider, Wiebe wanted to place another order for private label products, but the production took too much time to set up. Because of this, Haider said he offered to provide Wiebe with other products that were already being produced by Foothills Creamery — the off-the-shelf products — until Wiebe figured out “the way forward.

It was at that point that Haider told Wiebe which Foothills Creamery products he could provide him with.

“I explained to him what our Foothills Creamery products were, gave him the information on the products available, and when he placed the order he got it,” he said. “He was aware of what the products [were] — I don’t know if he was aware of any particular nutritional information.”

“[We were] told by the supplier that every item Kiwi Kraze marketed as fat-free was fat-free.” –Mark Wiebe, Kiwi Kraze founder

However, Haider explained the nutritional information is not only available on the Yogurt Distribution Company’s online portal, but the ingredients are also available on the boxes of the containers.

According to Wiebe, however, the products that were delivered to the North London location were misrepresented.

“We were given labels that indicated the products were fat-free,” Wiebe said in an interview. Psihopedas claimed what Kiwi Kraze was given was not what they thought they were buying.

“[We were] told by the supplier that every item Kiwi Kraze marketed as fat-free was fat-free,” Wiebe stated to The Gazette.

Haider countered, in an interview with The Gazette, that the products could not have been misrepresented because each box is labelled. He said he believes this situation was about neglect, as Kiwi Kraze was going through “tremendous growth” at the time.

“Everyone and their brother was asking [Wiebe] for a franchise and he had lineups and a very good season,” he said. “I would say in all fairness this would be considered a misunderstanding or confusion, or not having the foresight to check things.”

However, Butt does not think Wiebe was lacking in knowledge about the products he was ordering.

“He couldn’t have not seen the labels previously [...] there was no possible way, it being that big on the box, on the jug,” she said. “We’ve all gone to buy milk from the grocery store. We all know how to read that label, the same way that we knew the minute [those products] dropped on our doorstep.”

“They were not misrepresented.”

The Kiwi Kraze franchise owner who requested to be kept anonymous also claimed the nutritional information had been available to Wiebe since they first met him.

“I couldn’t tell you what happened before we met him, but when we met him they were receiving the same product and it’s labelled on the product,” the franchisee said. “When they receive [the product], it is labelled on the jug of yogurt itself that it contains fat.”

Other franchise owners The Gazette contacted were either unwilling to comment or did not respond to requests for comment.

Allegedly during this time, Kiwi Kraze continued to advertise the product as fat-free.

On May 11, 2012, a customer by the name of Miguel Kenedy posted on the “Kiwi Kraze – N. London” Facebook page, saying, “I tried Kiwi Kraze Yogurt and it was realy great but when we analised it we found to contain high milk fat. The same ingredients as ice cream. Is it intentionelly or are you pulling wool ove the public [sic].” The Kiwi Kraze account responded, saying, “Obviously a mistake has been made because our product is fat free as advertised.”

The North London store continued to serve these products until sometime in the fall of 2012, although no sources could confirm the exact date.

According to the statement of claim, Stinson and Butt received the Foothills Creamery products on September 24, 2012 — three days before the Mississauga store was scheduled to open — and immediately discovered that many of them contained fat. Stinson demanded an explanation from Wiebe and Psihopedas, who he claims in turn told him they had been unaware of the fat content of the products. Butt, however, said she didn’t believe them.

“We had to change manufacturers immediately. Right when we became aware of it, we changed it” –Ari Psihopedas, “directing mind” of Kiwi Kraze franchise operations

An invoice for the Mississauga store dated September 24, 2012, which The Gazette has obtained, lists the same products that had been delivered to the North London store a year earlier.

Stinson also alleges in the statement of claim they were instructed to remove the labels from product containers “to avoid damaging the Kiwi Kraze brand.” Wiebe and Psihopedas deny giving any such instruction.

It was shortly after the Mississauga franchise opened that Kiwi Kraze corporate decided to switch product suppliers, and began ordering from another dairy supplier, Coppa Di Gelato, which provided Kiwi Kraze with fat-free yogurt, according to the statements from both parties. With the exception of ordering no sugar added products, Kiwi Kraze had stopped ordering from Foothills Creamery through the Yogurt Distribution Company.

Psihopedas said the switch was made as soon as he and Wiebe discovered the nutritional value of the Foothills Creamery products they had been ordering.

“We had to change manufacturers immediately,” Psihopedas explained. “Right when we became aware of it, we changed it.”

Butt, however, does not believe that claim.

She cites an instruction sheet, which The Gazette has obtained, that Butt said was sent to her and other franchisees by Kiwi Kraze corporate. The sheet explains how to mix various yogurt bases with flavourings. Of the 77 mixes, 69 of them used either the 3.3, Soft Serve or Chocolate yogurt base, all of which contained fat.

Psihopedas said the reason Kiwi Kraze selected Coppa Di Gelato was because of its superior nutritional value. He explained the new product, which was delivered to all franchises opened after the Mississauga location — starting with a machine in Saugeen-Maitland Hall, a residence at Western, on October 1, 2012 — “is beyond the best on the market right now, with how we put it together.”

“As soon as all this happened, we cleared it up,” Psihopedas explained. “[We] got the best product available, and that’s all that Western has seen, and all the other stores.”

“We’re very proud of our product, and we’re very proud of our manufacturer,” he said.

The opening of the franchise in Mississauga was quickly followed by several others. In October 2012, the Kiwi Kraze dispensary was installed in Saugeen-Maitland Hall, and by the beginning of December three more franchises would open in Kanata, Vaughan and South London. There are now 13 franchises operating in Ontario, with three more opening soon, according to the Kiwi Kraze website. However, only the North London and Mississauga locations are alleged to have served yogurt containing fat that had been advertised as fat-free.

[youtube id="iq7dJhHXFhQ" width="600" height="350"]
Invoices from Kiwi Kraze - Click to enlarge
Invoices and other documentation from Kiwi Kraze (Click to enlarge) — Mike Laine // GAZETTE
KiwiKraze_Timeline2
Timeline of events (Click to enlarge) — Naira Ahmed // GAZETTE

 

Jesica Hurst and Aaron Zaltzman

Jesica Hurst and Aaron Zaltzman

Jesica Hurst and Aaron Zaltzman

Latest posts by Jesica Hurst and Aaron Zaltzman (see all)

  • Elisabeta

    I checked, there are not 13 Kiwi Kraze franchises. It was more like 9 or 10 (and a couple of places where there is a small kiosk, not a store). And since the writing of this article, at least 2 Kiwi Krazes have closed down. I think more lawsuits are sure to come.

  • Janet

    I live in Clarkson and I have been to the Mississauga location which Mr. Stinson and Ms. Butt operate, the customer service is great and I thought the frozen yogurt was really delicious, even my husband who doesn’t like yogurt enjoyed it. It is like eating ice cream. Both my husband and I have worked in the food industry for many years for retailers, manufacturers and suppliers. It is not uncommon for suppliers and manufacturers to substitute product, However in some cases a substitution can change the nutritional value of a product. I don’t trust the nutritional values to be 100% accurate, even labels can have discrepancies but if no one challenges them in situations like this then customers are the ones that suffer. I stand behind Mr. Stinson in this situation but he won’t have a case if the agreement is not in writing. Each product should have a spec. sheet and an agreement made there be no substitutions if they can’t meet the same nutritional value such as fat levels as specified. Maybe an agreement can be made going forward but there is no guarantee that Mr. Stinson won’t be duped again when the delivery truck arrives! Welcome to the food industry! Maybe you should get rid of the fat free signs! Hope you stay in business, fat or non-fat it’s delicious!!!

  • Tweenie

    I think that knowing Mr. Stinson personally for over 20 years that he would not knowingly sell a product and advertise it as something totally different. Being a very health conscience guy himself I don’t believe that he would do that to the people frequenting his store.

  • Basil

    C’mon Mair Hope, are you really a part of a nutritional team that search for good nutritional products? Give me a break! Do you think we are that stupid? How can you even know the ingredients of the product when Kiwi Kraze does not even publish their ingredients online!!! I asked for it once and never got an answer. How much probiotics does it have per gram? Since they don’t disclose it, one can only assume that the amount is minimal.

    If you really know the ingredients of their (Kiwi Kraze) product and the quantity of probiotics, I dare you to reply with the ingredients!! You won’t and you can’t because you are a fake!

  • been there….ain’t going back!!

    Yeah I went to one store recently and the nsa was labelled as non fat. I went to another and it said something like 3.5% fat….which is it??? Is this company STILL in the business of lying to the customers. I also remember looking them up on urban spoon and there was this comment on how the yogurt tasted funny now as opposed to before…hmmm…wish I had the opportunity to taste the original stuff.

  • Johnny teach

    Sounds like the Kiwi Kraze fixed the issue. If I read the facts, here Kiwi Kraze had their product supply run short. Then their supplier tried to substitute a product that was inferior. What’s a company to do? Find a new supplier. Which they did. The food industry miss labels product all the time. Putting consumers like Kiwi Kraze in a tough spot. Glad to hear once Tom Stinson was made aware the product had Fat he kept selling it any way. In good conscious he did not close his doors. Yet sounds like he wanted Kiwi Kraze corporate to close. Mr. Stinson with all due respect are you the pot or kettle. Sounds like Mr.Stinson should be suing Sam Haider and Foot Hills. I am sure Sam Haider and Foot Hills did not send out any notice that product supply was running low. Given Kiwi Kraze time to Find a soloution.

  • iwriteallthedearlifes

    rofl

  • http://facebook Sammy Smith

    @iwriteallthedearlifes @ Unlike all of you peeps that hide your real names….I have no problem displaying my real name…..I live in London and am happy to meet any of you at my favorite store KiwiKraze……

  • iwriteallthedearlifes

    Sammy Smith? Come on, that isn’t even a good fake name. You were just eating a green apple when you came up with that, weren’t you?

  • Worked Here

    @ frequentreader I have to agree. I will repeat – I lied every day that I worked at Kiwi. We served a product with a fat content until late November 2012 but we said on the flavour labels that it was fat free or non-fat. This story is not lies. The lies are anyone who was in this store, behind the counter and says that they did not know.

  • frequentreader

    Is it just me …or does it seem like… the comment section is… being spammed… by the same individual ………?

  • http://facebook David Walshi

    This is an excellent company….before I got into the business of protandim, I inquired starting a KiwiKraze.. I was shown the product and tasted the product…. I loved the product and so did about 100 people that were in the store… I was surprised it was on a Sat in December , tons of snow and the store full of people eating KiwiKraze yogurt….This company knows give the customer the best product and you will build a great business… No way would this fast growing Canadian company do knowingly do anything to upset or disappointed their customers….This article proves we have hatters in this world that stop at nothing to discredit a great company like Kiwikraze….. Mr Stinson its clear that you have made a lot of money being part of this company , that you are trying to get more without working for it…. this a white collar crime that you are doing here….you must be from the USA they sue everyone to gain money there……lol

  • http://facebook Mair Hope

    AAA product….I am part of a nutritional team that search for good nutritional products….This product is yes fat free and some are sugar free… After reading this I asked myself why is this company still in operation and growing?? Answer is because they do have the best product on the market and Obviously making great money…This is one Canadian company that has grown so fast…because of its integrity,good values and excellent business strategy. It really upsets me to read such nonsense, if the store did serve a product that shouldn’t have then the distributor delivered the one wrong product.. As a business owner myself, I know for a fact that degenerates will always attack a good company, because they are unable to put forward a great concept like this company has….. great product….congratulations ..

  • http://facebook Sammy Smith

    Are you people serious….Hello peeps lets read between the lines…..No way would a leading franchise like this would disappoint and mislead customers…..its clearly a disgruntled franchisee and manager with a cruel agenda against a good company… I love the product …great for people who are watching their carbs…..I ate it once a day all summer and lost weight not gained..,

  • Anna Decanto

    This is absolutely off the wall…Common now everyone can see that this franchisee has issues with the company… And really now the franchisee says he bought the franchise because the product was fat free….Omg didn’t you do the required training at another store…didn’t you read the ingredients..sure you did…and continued to sell the same product in your store….If KiwiKraze sold product that contained fat…then they were being mislead from the distributor…Let’s get serious and see what this is about…franchisee trying to discredit a Good company..

  • Art Vandelay

    I’m surprised Rudy Giuliani hasn’t weighed in on this yet.

  • frequentreader

    I can’t believe they claim they had no idea it was fat-free. I doubt that would go unnoticed for a year. Great investigative story. I definitely won’t be going back to Kiwi Kraze.

  • Jean

    This says that Kiwi Kraze immediately fixed the problem? It looks to me that it took at least a year or so it seems by the invoices. How is that immediate? When I think of all the “great things” Kiwi Kraze has said that they do in our community, pulling the “wool over our eyes” is not one I saw coming. As a business owner it is your responsibility to be truthful with what you are selling especially when it is food related. You had a responsibility to know what you were serving the whole time you were selling it. As a parent and a regular Kiwi Kraze customer – This is shameful and very disturbing.

  • Worked Here

    It was unspoken – but we all knew from the beginning. To afraid to ever say anything – probably would have lost my job. I don’t know about the chocolate or the tart but the 3.3 was 3.3% fat and it was what we always had the most of. The lady in Mississauga is right – you just had to look at the box. I felt bad every day for lying to everyone and I am so glad that someone finally did something. What they changed to tastes so different and the only thing that was better about changing was I didn’t have to lie to everyone anymore.

  • Carlo

    I thought these guys were religious. Guess the type that lying is OK – pathetic. Won’t be going back

  • iwriteallthedearlifes

    Aahahahahahah I’m hilarious

  • iwriteallthedearlifes

    Congrats on the exclusive *scoop*!