What is a Retail distribution agreement?
It is a type of contract between partners of a distribution channel that explains the functions or duties of each partner. It is often between a producer and a distributor but may also between one distributor and another. The retail distribution agreement is also known as a product distribution agreement or distribution rights agreement.
It is a legal document; usually reviewed by a lawyer to ensure that it is properly drafted before the partners append their signatures.
The distributor gets a percentage it commission for distributing the goods on behalf of the producer.
How To Create A Retail Distribution Agreement
To create one, you need to understand the components of the agreement. You may also use an online template or contact an attorney.
What makes up a Retail distribution agreement?
The basic components of the agreement are:
- The Term: This is the period of time for which the agreement stands valid.
- Terms and Conditions of Supply: This covers conditions surrounding sales and situations in which the agreement may no longer stand.
- Sales Territory: This specifies the areas where the distributor may supply their goods.
- Type of Agreement: This state if distributor will be the only distributor for a producing company in an area (exclusive distribution) or otherwise (non-exclusive distribution).
- Type of Distribution Strategy: Information on whether the strategy for distribution will be intensive, exclusive, or selective.
- Marketing Rights: This explains who bears the duty of marketing the products
- Duties of Partners: A list that shows what function each partner is expected to perform during the period of the business.
- Trademark Licensing: This explains the extent of the rights the distributor has as regards the brand and trademark.
- Conditions for Agreement Termination: This part mentions under what circumstances the agreement may cease to exist or be considered invalid as well as the roles both partners will play when such occurs. It also includes the consequences of the termination.
- Relationship Between Partners
- Information on Supply of Products
- Payment Conditions: This states the method and timing of payment.
- Consumer Training Duties: Some goods require that technical advice be given to the buyers. In the agreement, information is written concerning the partner involved in after-sale support and to what extent the support is to be given.
- Details Reporting: In certain agreements, the distributor is paid their commission based on the number of goods they are able to sell. It is necessary to input information on what is to be reported and at what intervals. For example, a quarterly sales report.
Types of Distribution Agreement
- Exclusive Distribution Agreement
In this type of agreement, the distributor is the only distributor the producer employs to supply his goods to a particular region. In another subtype of an exclusive agreement, the distributor is permitted to be the sole distributor to certain customers.
- Non-exclusive Distribution Agreement
This type of contract allows a producer to enter into a distribution agreement with other distributors. It may be selective or intensive. That is an agreement with a small number of distributors or with as many distributors as possible, respectively.