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EVALUATING DISTRIBUTORS

Before entering into a distribution agreement, brewers, distillers, wineries and cideries should do their homework. This company is being entrusted with your sales and can make or break your business and penetration into new markets. You need rock star distributors on your team, not underperformers who overpromise results.

SELECTING A DISTRIBUTOR:
Things to consider according to the Brewer’s Association:

Distributor Commitment:
Is management committed to craft?
Is the portfolio growing at a rate commensurate with the craft category?
Are they selective in the craft brands they choose to distribute, or are they brand collectors?
Is there a dedicated craft manager?
Does the distributor actively educate/train sales staff in the craft segment?
Does the distributor give due attention to the craft brands in its portfolio? Do they make Key Account Presentations in support of craft brands?
Are they receptive/flexible when it comes to adding Seasonal/”one-off” craft SKU’s?
Sales Planning/Execution:
Is there a market plan with specific and measurable goals?
Are they committed to spending to achieve results? Will they commit to a budget?
Do they allow craft brands to present to sales meetings? Do they include craft brands in programming/incentives?
Is there monthly programming – Management by Objective (MBO) or Pay for Performance (PFP)? Do they track results? Will they provide monthly reports?
Do they use POS? Do they have in-house design and printing capabilities?
Do they monitor competitors pricing and ads?
Building Craft Awareness:
Does the distributor promote craft brands in the local market? Do they get involved in events that promote craft beer and educate consumers?
Is there a craft focus on their website? Do they have a Beer Finder?
Do they regularly e-mail craft news with key retailers?
Has the distributor been a public advocate for franchise law reform? Does the distributor favor franchise law reform that allows brewers to move to another distributor for cause?
Quality:
Commitment to draft lien cleaning and quality.
Do they have refrigerated storage? Cases: 50° F; Kegs 40° F

Here Is A List Of Questions To Consider Asking Potential Distributors:
Do you take care of state label registration in the states where you distribute?
Where are you doing business as a distributor?
How long have you been in business?
Do you take care of price posting in the states where you distribute?
Do you do more on-premise or off-premise sales? What is your mix?
Are you affiliated with a particular large beer, wine or spirits producer? Alternatively, are you independent?
What is your product mix?
Do you already have products like mine? What are they? How have you increased sales over time for them?
How much of your portfolio is craft?
Do you have any national customers like franchises or chains?
How much wine, beer, cider or spirits did you sell last fiscal year? How does that compare with the last 2-3 years?
What are your total annual gross sales?
How many employees do you have?
How often do your sales people visit accounts?
What length of contract term do you require?
What is the territory covered by the agreement?
Is it required that you have an exclusive right to sell my products in the territory?
Are you entitled to new products that are in our product line after the relationship starts?
Will we get to continue to handle those accounts we have already established?
Are you willing to meet and jointly develop an annual sales and marketing plan for my brands, including sales goals, marketing activities and pricing?
What performance standards will you agree to in writing?
What happens if we can’t agree on sales goals and pricing?
Is the agreement for a fixed term or does it automatically renew if you meet the pre-agreed goals?
Can either of us terminate the agreement if we are not happy?
What happens at termination in terms of payments, return/buyback of product, etc.?
Who arranges for delivery of my product? When does risk of loss shift to the distributor?
What types of insurance do you have? What are the limits of liability on the policies?
Who pays for delivery of product to the distributor?
How is my product shipped, stored and delivered to retailers to ensure no impairment in quality?
Who are my sales person and/or Brand Manager? Do you have a dedicated Craft Manager?
How long has he or she worked for you?
Is he or she a top produce?
What training do you provide to keep him or her up to date on the industry?
Can I speak with some of his/her other accounts as a reference?
Can I have my own sales people visit accounts by themselves and, if we want, in tandem with your sales force?
Will you give me the names of all your accounts and all accounts visited to show my wine, spirits, beer and cider?
Who pays for samples?
What training do you provide sales reps?
What sales incentives have your sales reps used for craft in the past year?
What kind of marketing events and activities will you do, when, how will they be supported, and who pays for it? Trade shows? Promotional items?
Who pays for by the glass promotions or volume discounts?
What monthly, quarterly and annual reports will I received regarding orders, depletions, marketing and sales events and related costs?
What sets you apart from your competitors? What do you bring to the table that they don’t?

Anatomy of a Distribution Contract

A Distribution contract must include:
What product the distributor will be selling
The commission they will be receiving
Sales procedure
Obligations of the company to the distributor
Obligations of the distributor to the company
Process to be followed if a dispute arises
Term of the agreement
Process to be followed if either side chooses to terminate the contract
Process to be followed if the contract will be modified

Sample Distribution Contract

DISTRIBUTION AGREEMENT

This agreement is entered into this ___ day of _______ 20__, by and between [COMPANY] (“Company”) located at [BUSINESS LOCATION] and [DISTRIBUTOR], with address at [BUSINESS LOCATION] (“Distributor”).

Who hereby agree as follows:
BACKGROUND FACTS

The Company is engaged in the business of manufacturing and selling [MERCHANDISE SOLD] and related products. The Distributor is an independent representative. The Distributor desires to be engaged by the Company, and the Company desires to engage Distributor, as an outside independent Distributor for the Company. The Products include [PRODUCTS] and the Company wishes to increase its sales in the United States by a sales representative. Distributor is experienced selling products to customers, and wishes to act as a non-exclusive Distributor for the Company.

STATEMENT OF AGREEMENT

The Company’s Business. The Company is committed to quality and service in every aspect of its business. Distributor understands that the Company looks to and expects from them a high level of competency, cooperation, loyalty, integrity, initiative and resourcefulness. Distributor understands that, as an independent Distributor of the Company, he will have substantial contact with the Company’s customers and potential customers and that the Company’s relationship with the customers and potential customer constitutes a substantial part of the Company’s goodwill.

Use Of Company Name And Trademarks. Company hereby permits Distributor to use the registered and unregistered trademarks of its business and trade names and its associated logos on a non-exclusive and nontransferable basis solely in connection with the sale, distribution and service of services during the term of this Agreement. Such use shall be made accordance with the guidelines furnished by Company and Distributor shall use its commercially reasonably, good faith efforts to further the goodwill and reputation of Services and the Company brands and marks. Upon the expiration or termination of this Agreement for any reason whatsoever, Distributor shall immediately discontinue the use of such trademarks.

Appointment. Company hereby appoints Distributor and Distributor hereby accepts appointment, as an independent non-exclusive Distributor of Company’s products for sale. The Distributor hereby agrees to act as the Company’s Distributor for the sale of the Products. During the existence of this Agreement, the Company can continue its sales efforts at its main offices and shall be entitled to appoint other Distributors in relation to the Products.

Services to be Rendered. Distributor is an independent Distributor. Distributor will act as an independent Distributor for the Company services and, as such, will be responsible to perform those services. Although, Company will not direct the day to day details of Distributor in terms of how, where and when its work is performed, Distributor must at all times provide their services to the Company in accordance with the quality and business standards and policies established by the Company with all due and proper diligence, observe all reasonable instructions given by the Company, and use its best endeavors to increase the sale of the Services. For the mutual benefit of Company and Distributor and to help establish and expand the customer bases of COMPANY.

Procedure for Sales: Distributor will accept up to [NUMBER] units on consignment for a period not to exceed 30 days unless extended in writing by Company. When sold, all sales proceeds less commission shall be remitted to Company within 14 days after the date of sale. Along with an accounting for all sales and commission report, Distributor shall submit customer contact information (company name, contact name and title, address, telephone and e-mail) to COMPANY. Company may withhold payment until this is provided. Company may request return of a portion or all of the consigned items at any time and Distributor shall deliver the consigned units to Company or its designated storage facility within 48 hours.

The Distributor shall solicit orders for products at the prices and upon the terms established and notified from time to time by the Company to the Distributor. MSRP shall be as follows unless agreed in writing otherwise by Company:

[PRODUCT 1]: $xx.xx
[PRODUCT 2]: $xx.xx
[PRODUCT 3]: $xx.xx
[PRODUCT 4]: $xx.xx

[PRODUCT X]: $xx.xx

If the distributor provides a sales discount to a customer or bundles products for sale at a reduced price, such discount will deducted from its commission and Company will receive its full wholesale price for the products.
The draft of each sales listing content and images shall be submitted to COMPANY for final approval prior to being posted.

The Distributor shall forward to the Company all quotations and orders received by it. All orders shall be subject to acceptance by the Company in its sole and absolute discretion. The Company reserves the right to refuse any business originating from the Territory, for lack of credit of the customers or otherwise, and the Distributor shall not be entitled to any commissions thereon. The Company shall have the right to cancel contracts or orders after acceptance without any liability to the Distributor for commissions. The Distributor shall forward to the Company, promptly after receipt, all remittances in any form which it may collect or which may come into its possession.

Except as expressly authorized by the Company, the Distributor shall not purport to act on behalf of the Company, or incur liabilities on behalf of the Company. All related fees and shipping costs will be paid by Company (or absorbed by Company).

As the direct costs for providing good and services are taken into account before profits upon which commissions are based. The Distributor shall be responsible for its own operating expenses, including marketing and associated costs directly attributable to its sales efforts. The expenses incurred by the Distributor in its sales management are its sole responsibility. COMPANY reserves the right to, at its sole discretion, assume extraordinary expenses under special conditions.

Obligations of Company. Company will:

Lawful performance. Fully comply with all the laws, rules and regulations affecting Distributor’s & Company’s business and the services performed by him hereunder.

Insurance. Maintain in full force and effect all and insurance required by law. Company shall maintain at all times a policy of product liability insurance covering the Services supplied hereunder.

Changes. Notify Distributor of changes in procedure or pricing at least 10 days prior to implementing such a change in procedure, technical specifications or services and services.

Compensation. As the sole and complete compensation for Distributor’s services hereunder, the Company shall pay a commission [X]% of retail sales price to the Distributor on all sales concluded by the Distributor for all [PRODUCT 1] units, [PRODUCT 2] and/or [PRODUCT 3] units sold individually or in any combination. The Company shall pay a commission of 10% of retail sales price to the Distributor on all sales of removable [PRODUCT 4] units concluded by the Distributor. Even after completion of the contract between Company and the Representative, the Representative shall be entitled to the commission that is generated by sales to customers that have been generated during the duration of the representation. The Company shall have the sole right to charge back to the Distributor’s commissions the amount of any commissions already credited in connection with all proper and allowable deductions made by the customer, such as discounts, allowances and adjustments for returned Services. Distributor will track sales on a sales sheet and fax to the office weekly. Company will generate a report with account payments and reconcile with weekly commission sheet on Distributor’s sales.

Independent Contractor Status. Distributor is engaged solely as an independent Contractor and not as an employee, partner, or otherwise of Company, and no employer/employee, partnership, or other relationship is created or inferred by this Agreement. Distributor has no authority, actual, apparent, or implied, to act for on behalf of Company or to bind Company in any contract, in any manner, without the express written approval of Company. Any agreement reached by Distributor must be approved by Company before Company is bound, liable, or obligated thereby. Distributor must not make any representations to anyone concerning his authority with this paragraph. Neither of the Parties nor any of its Affiliates will take a position contrary to the foregoing.

Distributor must provide, assume and pay for all expenses and other costs incurred by and in the performance of his duties and obligations hereunder including any person recruited and managed by him to assist Distributor in his performance of duties. If Distributor uses any assistance, it will be responsible to provide any worker’s compensation, disability, unemployment and other employer responsible cost, taxes and insurances associated with such assistance and will indemnify Company for any assessments or penalties, including attorney fees.

Distributor is responsible for the payment of all federal, state and local income taxes, all employment taxes, FICA disability, workers’ compensation and all other taxes with respect to income derived from the services performed pursuant to this Agreement.

Distributor will hold all legal insurances to allow them to operate as an individual entity and will under no circumstance name Company in any legal lawsuits.

Dispute Resolution. The Parties intend that all disputes between the Parties arising out of this Agreement that do not involve claims by or against third parties shall be settled by the Parties amicably through good faith discussions upon the written request of either Party. In the event that any such dispute cannot be resolved thereby within a period of sixty (60) calendar days after such notice has been given, such dispute shall be finally settled by binding arbitration at the request of any Party.

Each arbitration hereunder shall be conducted in [CITY], [STATE], and shall be administered by the American Arbitration Association under its Commercial Arbitration Rules then in effect, before three (3) independent arbitrators to be appointed as follows. Each Party shall appoint one (1) arbitrator, and the two (2) arbitrators appointed by the Parties shall appoint a third arbitrator in IR accordance with paragraph (c) of AAA Rule R-15 (Appointment of Neutral Arbitrator by Party-Appointed Arbitrators or Parties) currently in effect.

Each Party may demand arbitration by filing a written demand with the other Party within thirty (30) calendar days after the expiration of the sixty (60) day period described above. The arbitrators shall have the authority to grant any equitable and legal remedies that would be available in any judicial proceeding intended to resolve a dispute, including the termination of this Agreement. Notwithstanding the foregoing, either Party shall be entitled to seek preliminary injunctive relief from any court of competent jurisdiction, pending the final decision or award of the arbitrators. The award rendered in an arbitration hereunder shall be final and non-appeal-able.

Term / Terminations. The initial term of this Agreement is for a period of [X] months. This Agreement automatically renews for successive [X] month periods unless terminated or amended as follows:

by either party giving not less than ten (10) days written notice of cancellation with or without cause; or

If one or both of the parties wishes to make a change for the renewal of this agreement shall submit its request to the other party with a notice of ten (10) days prior to its expiration date. The revision will take place only if both parties agree the new terms of the agreement in writing.

This Agreement may also be terminated as follows:

Upon the mutual written agreement of the Parties.

At the election of Company, in case Distributor fails to (i) comply with its obligations (ii) make payment with respect to an invoice for Services Company accepted by Distributor and which Distributor is not disputing in good faith, and such failure is not remedied within thirty (30) days after Distributor receives written notice from Company, indicating that it is a notice of default and describing the default in reasonable detail.

At the election of either Party, if the other Party commences a voluntary case or other proceeding seeking liquidation, reorganization, or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or taking possession by any such official in any involuntary case or other proceeding commenced against it, or makes a general assignment for the benefit of creditors, or fails generally to pay its debts as they become due, or take any corporate action to authorize any of the foregoing.

At the election of either Party, if an involuntary case or other proceeding is commenced against the other Party seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official for such Party or any substantial part of its property, and such involuntary case or other proceeding remains undismissed and unstayed for a period of one hundred twenty (120) days.

In the event of the termination of this Agreement, this Agreement shall cease to have further force or effect and no Party shall have any liability to any other Party in respect to this Agreement, provided that:

Termination of this Agreement for any reason shall not release any Party from any liability which has already accrued as of the effective date of such termination, and shall not constitute a waiver or release of, or otherwise be deemed to prejudice or adversely affect, any rights, remedies or claims, whether for damages or otherwise, which a Party may have hereunder, at law, equity or otherwise or which may arise out of or in connection with such termination.

Covenants of confidentiality, non-solicitation shall survive such termination and remain in full force and effect.

Governing Law. This Agreement was negotiated and entered into in the State of New York. The parties agree that all questions relating to the performance hereunder respecting any party hereto must be judged and resolved in accordance with the laws of the State of New York. The invalidity or unenforceability of any provision hereof in no way affects the validity or enforceability of any other provision.

Proper Venue. For any lawsuit related to this Agreement shall be in Monroe County, New York.

Captions. The captions at the beginning of the several Sections and Paragraphs of this Agreement are not part of the context hereof but are only guides or labels to assist in locating and reading such Sections and Paragraphs. They are of no effect in construing this Agreement.

Binding Agreement. The rights and obligations under this Agreement inure to the benefit of and are binding upon the representatives, heirs, successors, and assigns of the parties. Furthermore, all covenants and obligations of, and restrictions on Distributor hereunder, are also binding upon all employees, Distributors and representatives of Distributor, and any breach or violation of them is deemed a breach or violation by Distributor. This Agreement, or any part of it, may not be assigned without the smitten approval of the other party.

Entire Agreement/Modifications. This Agreement contains the entire understanding of the parties and supersedes any prior understandings or agreements. The Agreement may be changed only by the Agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

Indemnification. Distributor must indemnify, defend (with counsel chosen by Company), and hold harmless the Company from and against any and all claims, losses, damages, liabilities, actions, costs and expenses, including, but not limited to, reasonable legal fees and expenses, paid or incurred by Company and arising directly and indirectly out of: (i) any breach of this Agreement by Distributor, (ii) any breach by Distributor of written policies or standards for the Company, or (iii) any other act or omission of Distributor, his Distributors, or representatives.

Consequential and other damages Neither Party shall be liable to the other Party under any contract, negligence, strict liability or other theory for any indirect, incidental, consequential, punitive or other special damages (including without limitation lost profits) asserted by the other Party.

Release. Distributor hereby fully and completely releases, discharges and holds harmless the Company from any and all claims, suits, damages or losses, of any nature whatsoever, including but not limited to claims of personal injury, whether know or unknown, foreseen or unforeseen, arising from or in any way related to the rendering of services by Distributor to the Company as described herein (excluding any claims for compensation for the services described herein).

Notices and other communications. Any and all notices, requests, demands and other communications required or otherwise contemplated to be made under this Agreement shall be in writing and in English and shall be provided by one or more of the following means and shall be deemed to have been duly given (a) if delivered personally, when received, (b) if transmitted by facsimile, on the first (1st) Business Day following receipt of a transmittal confirmation, or (c) if by international courier service, on the third (3rd) Business Day following the date of deposit with such courier service, or such earlier delivery date as may be confirmed in writing to the sender by such courier service. All such notices, requests, demands and other communications shall be addressed to the parties as set forth above or to such other address or facsimile number as a Party may have specified to the other Parties in writing.

Severability If any provisions of this Agreement shall be held to be illegal, invalid or unenforceable, the Parties agree that such provisions will be enforced to the maximum extent permissible so as to effect the intent of the Parties, and the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. If necessary to effect the intent of the Parties, the Parties will negotiate in good faith to amend this Agreement to replace the unenforceable language with enforceable language which as closely as possible reflects such intent.

Waiver Any waiver by a Party of an instance of the other Party’s noncompliance with any obligation or responsibility herein contained shall be in writing and signed by the waiving Party and shall not be deemed a waiver of other instances of the other Party’s noncompliance hereunder.

No assignment This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and permitted assigns of the Parties. Nothing in this Agreement shall confer any rights upon any Person other than the Parties and their respective successors and permitted assigns. Neither Party may assign this Agreement or its rights hereunder to any Person without the written consent of the other Party. No assignment by any Person of this Agreement or of any of such Person’s rights hereunder shall release such Person from any of its obligations hereunder. Any attempted assignment of this Agreement shall be void and of no effect.

Construction This Agreement has been negotiated by the Parties and their respective counsel and shall be fairly interpreted in accordance with its terms and without any strict construction in favor of or against either of the Parties.

Interpretation and construction of this agreement Unless the context shall otherwise require, any pronoun shall include the corresponding masculine, feminine and neuter forms, and words using the singular or plural number shall also include the plural or singular number, respectively. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. All references herein to Articles, Sections, Annexes, Exhibits and Schedules shall be deemed to be references to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement unless the context shall otherwise require. The headings of the Articles and Sections are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretations of this Agreement. Unless the context shall otherwise require, any reference to any agreement or other instrument or statute or regulation is to such agreement, instrument, statute or regulation as amended and supplemented from time to time (and, in the case of a statute or regulation, to any successor provision). Any reference in this Agreement to a “day” or a number of “days” (without the explicit qualification of “Business”) shall be interpreted as a reference to a calendar day or number of calendar days. If any action or notice is to be taken or given on or by a particular calendar day, and such calendar day is not a Business Day, then such action or notice shall be deferred until, or may be taken or given, on the next Business Day.

Specific Performance Each Party agrees that each other Party shall be entitled to obtain an injunction or injunctions in accordance with the dispute resolution procedures contained herein to prevent breaches of the provisions of this Agreement, or any agreement contemplated hereunder and to enforce specifically the terms and provisions hereof, in each instance without being required to post bond or other security, without being required to prove irreparable harm, and in addition to, and without having to prove the adequacy of, other remedies at Law.

Export Control Each Party shall comply with the any and all Foreign Exchange and Foreign Trade Laws, the U.S. Export Administration Regulations and any other applicable export regulations with respect to Services supplied hereunder, and each Party shall not, directly or indirectly, export or re-export Services or any part thereof, any information, technical data, or services received from the other Party, or any direct product thereof, to any destination or country prohibited by such Laws and regulations, unless properly authorized by the applicable Governmental Authorities.

Force Majeure Neither Party shall be responsible for any defaults, failures to assist, or delays in delivery which are due to causes beyond its control, including, but without limitation, acts of God or of a public enemy, acts or any order of a government, or any preference, priority, or any order of such government, currency restrictions, fires, floods, epidemics, quarantine restrictions, strikes, embargoes, unduly severe weather, or incidents of war.

Counterparts This Agreement may be executed in two or more counterparts, each of which shall be binding as of the date first written above, and all of which shall constitute one and the same instrument. Each such counterpart shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart.

IN WITNESS WHEREOF, the parties have entered into this Independent Distributor Agreement as of the date set forth above.

President: [NAME], [COMPANY]

______________________________________

Date: _

Distributor: [NAME], [DISTRIBUTOR]

______________________________________

Date: _

Please Initial & Date Each Page of Two Copies. Retain One Copy For Your Records.

Business Principal Personally Guarantying Payments & Performance By Business

Administrative Information
Distributors and Distributors Required to provide the following Information

Business or Individual Legal Name
Assumed Name. “dba” or fictitious name
EIN
Primary contact name and title
Secondary contact name and title
Address
Business Phone
Home phone
Call phone
Fax
Email
Alternate email
Duns Number

Company Principal Personally Guarantying Performance

Name
Drivers License Number
Social Security Number
Address
Business Phone
Home phone
Call phone
Fax
Email
Alternate email

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