Distribution agreement template

Connecting what you grant to what you expect

goHeather starts by being precise about the appointment, because the words get used loosely. Non-exclusive means the supplier may appoint others and sell directly. Sole usually means no other distributor, but the supplier keeps the right to sell itself. Exclusive usually means neither. It asks which you mean and writes it out, rather than relying on a label that two parties can read differently.

Then it connects that grant to a volume expectation. A distributor with an exclusive territory and no commitment has every reason to hold the market without investing in it, and the supplier has no way in for the length of the term. That is the structural problem in most distribution disputes.

The mechanism it builds is a schedule of minimum volumes with a stated consequence for missing them. It suggests conversion from exclusive to non-exclusive as the first-line response rather than termination, because it keeps the relationship alive while opening the market — and because ending a distribution relationship can be more complicated than the notice clause suggests, depending on where the distributor is.

• Say what exclusive, sole or non-exclusive means in this deal
• Attach a volume expectation to any exclusivity granted
• Decide what happens when a target is missed
• Set the first year realistically while the distributor builds

How much the supplier can influence what the distributor charges

Suppliers generally want some control over resale prices, to protect brand positioning and stop distributors undercutting each other. How far that can go is one of the more location-sensitive questions in the document, and it is not the same everywhere.

goHeather treats it as something to flag rather than settle. When it finds a clause fixing what the distributor must charge its own customers, it points that out and shows the alternative most suppliers use — publishing suggested prices that are clearly non-binding, with the distributor free to set its own.

It also asks whether you are operating in one location or several, because an agreement rolled out nationally has to work everywhere it lands. Where this matters to your business model, it says plainly that it is worth a conversation with a commercial attorney before the agreement goes out, not after a distributor raises it.

Direct sales, online sales and overlapping territories

Channel conflict is the most common operational dispute in distribution, and almost all of it is avoidable by naming the situations in advance. goHeather asks about each one.

House accounts first: suppliers usually want to keep certain large customers direct. Naming them in a schedule works better than reserving a vague general right, and goHeather prompts for the list.

Online selling is the harder one now. A distributor selling through its own site or a marketplace reaches customers everywhere, straight across territorial lines. goHeather asks whether online selling is permitted, whether it is limited to the territory, how marketplaces are handled, and how your own direct-to-consumer channel interacts with the distributor network. Agreements written before any of that mattered tend to be silent, which is how two distributors end up on the same listing page.

It also separates active selling into someone else's territory from simply responding to an enquiry that arrives unsolicited. Most businesses treat those differently, and the agreement reads better when it says so.

What goHeather asks you to settle before you need it

The end of a distribution relationship is where the value of the paperwork gets tested, and it is the part that tends to be drafted fastest.

goHeather asks what happens to remaining stock, and offers the two arrangements businesses commonly use: the supplier buys back unsold product at the price paid less a percentage, or the distributor gets a defined period to sell through. Either works. Neither being in the document is what causes the argument.

It also asks about outstanding customer orders, warranty obligations on product already sold, return of marketing materials, and the customer list — which is the one both sides want and neither will concede at the point of termination, so it is worth settling at signature.

One thing goHeather will not tell you is whether you can actually end the agreement on the notice written in it. How these relationships can be terminated is treated differently depending on where the distributor is, and a clause that reads clearly is not always the whole picture. Before terminating a distributor, that is a conversation to have with a commercial attorney.