Suzanne submits this lengthy problem for your consideration.
I hired a pattern maker here in Utah because I loved the idea of working with someone I could see in person on a regular basis. In the beginning the agreement was that I would pay her on a per-item basis, but she offered to make the patterns, find me contractors, help me source the materials, and do all that sort of legwork for a lump fee ($2,000). When I hired her I gave her two finished product samples, the pattern I’d made and a detailed email with all the information I could possibly think she would need to make the patterns I needed, complete with photos and the changes I would like, etc. She told me she would get on the pattern right away and then have a sample for me to see and try on.
The next thing I know she is talking to contractors, getting bids from them. She used my imperfect example to get the bid from them, with no pattern in hand. (Is this normal?) In the initial meeting she told me that I could do 500 and do a different serging/snap combo per 100, no problem. She also told me I could do that with prints. Later she told me she couldn’t source such small amounts of fabric to make only 100 out of one print and recommended I buy smaller pieces (three yard pieces) and she would have the contractor make them out of these 20 odd different prints. I was skeptical but happy because I would have a greater variety to offer my customers (who collect the prints), and would have a way to use up some of the fabric I had sitting in my basement for this first run. Win/win, right? She urged me to buy the rest of the prints I would need right away, which I stupidly did. (My business is slightly different in that I am not planning for market, but rather doing runs of these items my customers have been asking of me, and slowly building up with more and larger jobs. So, this isn’t as insane as if I was supposed to be planning for market. I say that to half-way defend myself because I have read your book six times.)
She also told me it was totally possible for me to do a very small order of my items, like 100. Then I find out that she has to have an in-home seamstress do the job because no contractor wants it. Now she is telling me that beyond those 100, I would have to pay her a manufacturing ROYALTY per item. I do understand that if she is running around and delivering supplies to the seamstress and then back to me, etc. that I should pay her for her time, however that is not a royalty, that is a commission, right? She also has just told me, as in, “I don’t remember if I told you this at the first meeting but I meant to…” that if we go to “her source” in LA and do runs of 1000+ at a time she would require a royalty on each item we had made.
Other issues: these are going to be made out of cotton/hemp velour and she swears that the fabric is prewashed and won’t shrink a bit. I checked the source myself and it says that it may shrink 8-10%. This kind of thing has kept me up nights. Also, based on some of the things she has said, I get the feeling that she thinks SHE owns MY designs.
AND, when I hired her I told her I absolutely wanted to meet the sewing contractors and see the facilities and build a relationship with them. She was in total agreement with that and said it was a great idea. Then after she had met with him and right before I was to go with her to meet him, she told me that he didn’t want to meet me and only wanted to work with her. I can’t help but think he will think I am even more of an amateur than I am with her carrying a used product to him to procure a bid? I thought she was supposed to have a pattern and a sample sewn from it (that had been approved by me) before we went and talked to contractors? Beyond that, is this guy running some kind of scary sweatshop? Or is she just trying to keep me in the dark about her “source”? Or both?
Also, she went to talk to a second contractor and asked ME to provide another sample to show him. I was totally stupid and did. (Where was my first example, and isn’t it her job to make the samples? I know I paid her to make them!) Oh, and you are going to love this. She insists it’s not the pattern that determines the quality, it is the sewing. She is from Chile and told me her mother has a clothing business there, so I don’t know if this is how they do things there? I feel like she is deliberately trying to keep me in the dark as to who these contractors are so I will be dependent on her forevermore.
Needless to say, I know this has RUN AWAY! all over it. These things have piled up and then I found and read your book again last night and I want to throw up. I have to get my pattern and samples back from her first before I do anything else, right? I also want the other little jobs finished first, like the two items we contracted for. When should I reasonably expect to get a copy of the patterns that she has made? If I am getting the sample tomorrow and have changes to make to it, it is not unreasonable for her to hold it until we get it perfect, right? So when do I demand my patterns? I have the feeling that someone else is going to have to fix everything she has done already, so maybe it doesn’t really matter. I told her at our next appointment I needed my original pattern and original samples back, and that I would ultimately need a contractor-ready pattern of the the products as per our agreement.
My father is my business partner and he has a lot of experience with working with sharks in the mining industry (but no experience in the apparel industry.) He told me to get my patterns back first, then sit her down and have a Come To Jesus talk with her and lay out what I hired her to do and where I feel I have not received what I paid for. He also asked if we had a signed contract and we did not. Stupid? I guess I was so determined to not be all NDA on her that I didn’t do a contract either. With the next patternmaker, they won’t be insulted if we lay out a contract will they? I told him the worst that can happen is that I am out the money I paid her to do this work, and the time we have wasted with her since we were planning on launching these products in February, and the money I spent on all those misc. knit prints. At the worst, I could always ebay those off. He said the worst that could happen is that she could claim that she owns the patterns and sue me. Yikes.
I am going to ask the stupid question here: should I just lay out what I expect of her and see if she complies and if she does, finish up the original runs of items, extract my patterns out of her and move on? (Incidentally, there was a 50 cent difference to make the misc. prints vs. the ones that would be cut off a huge roll of velour.) I really know that the more prints I have the faster they will sell because my customers collect prints. My gut instinct is to get the first items finished, get them back and pay for them, get my patterns and stuff from her and run. Input, please? We have not spent a LOT of money YET.
Suzanne and I chatted for quite awhile. There’s so much going on here but the core issues are that the pattern maker contracted to produce production patterns and samples and rather than doing those first things, has run headlong into sourcing the package. Usually, sourcing is charged on an hourly basis, often at about $100 an hour. Second, the sources are to be disclosed to you for that fee. Any other alternative is ludicrous. Third, you’re liable particularly when it comes to contracting. As the manufacturer, you are liable for ensuring that the contractor is following all labor laws. The thing that comes to mind is the difficulties Kathie Lee Gifford had. If you’re paying for sourcing, you’re entitled to names and details. My feeling is that this pattern maker (if she even is a pattern maker) is deliberately trying to control the means of your manufacturing. It would be another thing entirely if you’d contracted with her to manage your production lots but in that case I’d still have my reservations; this situation would still be untoward. Specifically, I’d want to verify that she was insured to cover your losses in the event of poorly made products, workplace liability (the contractor), work stoppage and the like and somehow, I have doubts she is insured in this respect.
Now, if you’ve hired someone to manage your production, it is typical to pay a fee -not a royalty or a commission- per unit. On large packages it can be as little as 3 or 4 cents apiece but smaller lots won’t fall in these guidelines. With smaller lots, you may end up paying a set fee for the lot. It entirely depends on what someone has agreed to do for you, managing the lot, running interference, having to go over to the production facility to ensure quality, timeliness and delivery -both incoming of inputs and outgoing of finished goods. Based on our conversation, this doesn’t appear to be the case.
I don’t think an NDA would have provided any protections to you in this case. You have precedence anyway, you’ve been making and selling these products well before she came along so I can’t imagine how any claim she’d present would be taken seriously. There’s no way she could claim she owned the pattern if you hired her to make it for you; that is silly. Barring an NDA, that is not to say that a contract wouldn’t have been of benefit. I mean, you have a verbal contract, those are of value. I usually caution DEs to follow up oral discussions with an email to reinforce the points of the discussion and if the terms detailed in the email aren’t disputed, it’s generally accepted that you are in agreement as to conditions and the like. Maybe a non-compete, an agreement that she would not be manufacturing your product independently would be of value. Pattern makers don’t have a problem signing those.
The other thing is, you don’t have an NCA, a non-circumvent agreement, more typically used in international brokering agreements. A non circumvent agreement means that you contractually agree that you will not be attempting to discover her sources. I mean, you specifically hired her -in part- to get sources for you. Implied in this agreement is disclosure of those sources. Otherwise, why would you hire her for discovery? To be of value -worthy of signing an NCA- she’d already have to have those sources and rather, would be charging you a fee for access to deliverables from her sources. She never specifically mentioned brokering, I don’t think she’s at that level, not if she is working with contractors so small they’re willing to handle three yards of piece goods.
Miscellaneous things about this job; I have a lot of reservations about the sourcing efficacy of this person if all she could get you was three yard quantities. To me, it sounds like she was ordering sample cuts. Still, the surcharge that the contractor was levying for the smaller yardage pieces (50 cents per unit) is unusual but acceptable. I say unusual because most contractors won’t touch that or bother with it so finding a small contractor that would at only 50 cents apiece is good because you won’t be sitting on those piece goods and can actually have them processed into finished products you can sell. [As it happens, although not ideal, these costs are readily absorbed with this product/market.]
My feeling on the whole thing is to sit down with her, reiterate the original conditions of your agreement, write that out, have her sign it and get time lines on when you can expect delivery of your patterns and samples. Also get any sourcing details from her in writing. You’ve paid for all of these things. Not mentioned in this post was the fact that she is asking you for more money. I wouldn’t give her any more money (paid $2,000 so far) until she delivers what she promised. My feeling is that you probably won’t get what you were promised so you may want to steel yourself for that eventuality, going into this whole thing with an exit strategy. Cut your losses but recoup what you can.
The rest of you feel free to jump in with your input. I left plenty of room for discussion, feedback and advice. Suzanne thanks you in advance.