Agency, Distribution and Franchise Agreements
A decision to enter into an Agency Agreement is not one that should be taken lightly. Agency law differs from general contract law, and may invoke the Commercial Agents Regulations which give additional protections to the agent.
We aim to help businesses to choose the right sort of marketing structure for them by working with the business to fully understand:
- The industry they are in
- How they want to sell their product or service
- How they want to interact with their customers or clients
- How they want to manage people working on their behalf
Agency agreements are just one of the forms of marketing arrangements, and may require close supervision by the principal. For this reason, agency agreements may not be appropriate if:
- The agent and principal are based a long distance away from each other (including overseas)
- The principal does not have the time to supervise the contracts and work that the agent is conducting on their behalf
- The principal wants to retain full control over who they contract with
However, if the principal does not want to give up control over the end contract (i.e. through a distribution agreement), then an agency agreement is almost certainly the best approach to take.
If you are selling goods, products or services in the UK and abroad, you may decide to sell and supply these direct to your customers and clients. However, sometimes you may choose a distributor to do the selling for you, leaving you to concentrate on building your products or providing your service.
When you have decided to go down this route, you will need a Distribution Agreement to regulate exactly how the relationship between you, your distributors, and of course your clients will develop.
There are different ways to distribute your goods and services and different agreements to reflect this. If you appoint a ‘Sole’ distributor, it will generally mean that you cannot appoint any more distributors for their particular ‘territory’ or area. The appointment of an ‘Exclusive’ distributor would generally mean that you yourself could also not distribute to that territory.
However, Distribution Agreements are not quite as simple as this, as there are other factors to consider such as what rights other people have to sell within a territory, and the possible impact on European and International competition laws and regulation. You would also have to consider the rights that the distributor themselves would have to market or sell your products and services outside of particular territories.
When instructing a solicitor to draft Distribution Agreements, you must make sure that all the issues that arise from such agreements are covered, including, but not limited to:
- Competition law
- Term of Appointment
- Restrictions on the Distributor
- Restrictions on other Distributors
- Export and Import Restrictions
- Distributors’ Targets
- Rights to terminate
Getting any of these wrong, or omitting them and other considerations will almost certainly affect your business both now and in the future, and can seriously impact on your ability to do business in these territories.
Whether you are looking to open a franchise or you have an idea or business that can work as a franchise, a Franchise Agreement will be needed.
Franchisors and Franchisees will both be looking to get very different things from a Franchise Agreement. It is important to make sure that you instruct a solicitor who has experience in dealing with both sides, as this gives the knowledge and experience to know exactly what the other side will be looking to get from it.
Franchise law is a relatively specialised area, and so it is essential you speak with a lawyer who advises on Franchise Agreements on a regular basis.
If you are a potential Franchisee, you should instruct a lawyer as soon as possible before entering into a Franchise Agreement. This will give you the best possible chance to secure the terms that you will need to make your business a success.
Additionally, a lawyer will be able to identify other areas which you may have to give consideration to, such as asset purchase agreements (if you are taking over an existing Franchise), assignment of titles or rights, property purchase etc.
If you are looking to become a Franchisor, you should instruct a lawyer to make sure that you are getting the most from your business. This approach will ensure that it is structured in such a way as to attract the right sort of people or businesses as franchisees. Additionally, we work closely with our commercial property team to ensure that any property aspects of your transaction are covered.
For more information about our Corporate and Commercial Services, or to find out more about how we at Downs can help you and your business, please contact us.
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