Sales Agreements & Franchising
Hi I'm John Walters, partner and the head of the Commercial & IT department. Breaking into a new marketplace involves careful thought and strategic planning to ensure the long term success of the venture. This applies equally to the legal aspects when considering your route to market, of which the following are the most common: Direct Sales, Agency, Distributors and Re-Sellers. Our specialist team can advise on all aspects of sales agreements and franchising opportunities. Please give us a call to discuss your requirements.
These can be made direct to your new customers, under a supply agreement, with no intermediary to pay or to take a cut. The main disadvantage is that you have to do the hard work of breaking into the new market yourself. Where the new market is abroad, this may also involve establishing your company (whether deliberately or accidentally) in the relevant country, which may have serious tax and other legal implications.
You can employ an agent to take your product into new markets. You will gain access to their established contacts, and can keep a tight control over the sale of your products, including setting the end price. The agent acts as an intermediary for you, and can either just introduce new business to you, or can actually sign customers up on your behalf, and collect your fees for you. This depends on the level of control or involvement that you feel is appropriate in the circumstances. You pay the agent a commission and possibly a termination payment. As the sales contracts are formed between you and your new customers, as well as gaining the option of direct contact with your new customers, you will remain directly responsible to them.
We can help you set up commercial agency arrangements to suit the way that you wish to trade, and have substantial experience of agency within the EU.
We also advise agents, and are experienced at helping them get the best protection in dealings with their principal.
Distributors / Re-sellers
An alternative route into new markets is to sell your goods to well-established players in that marketplace, who can act as your re-seller to push your product out to an established network of customers, and help your brand become established.
Often (but not always) this will be an exclusive arrangement within a certain geographic area, but care has to be taken not to fall foul of competition law requirements. You will not be able to set the re-sale price of the product, and will not get a direct relationship with the end customer. However, your cash-flow may be improved, as payment on bulk deliveries is made to you by the distributor, who will also have initial contractual responsibility to the customers. We regularly advise parties on both sides of this type of arrangement.
If you have a successful business model, a very lucrative way of exploiting it is to set up a franchise chain. Franchisees pay an initial one-off fee to use your business model, system of work, branding, and to gain access to your customer base. They are usually also committed to paying over a percentage of their takings, and to purchasing supplies that are key to the business from your nominated suppliers (in whom you may have an interest)
However, if you are thinking of setting up a franchise, you need more than just a good business idea. People will generally only pay for a business model which has a proven track record, and an established image. Prior to launching a franchise, you will need to produce a very detailed business manual which documents the full business process and all its operating minutiae. You will need to run a pilot outlet for a period of time with detailed and independent records being kept, so that you can show that your model is a success. You will also need to have all of your branding in order, which our Intellectual Property team can help you with, including registration of all trade marks.
On launch you will also need to have a suitable franchise agreement in place which gives you the level of control that you want over your franchisees. This will protect both the brand, and goodwill in the business system, so as to maximise your profits over time.
We have experience of setting up and advising franchise chains in the UK and EU, and can assist you with an integrated approach to make sure that all legal aspects are on the best footing prior to launch.
On the other hand, if you are thinking of taking up a franchise, you should think carefully about where you are investing your money. Do the projected figures add up and are they independently verified? Will the business system that you are being offered provide you with a suitable financial return over time, and will it be personally rewarding? Has a pilot been run and did it actually work? Will you be tied into draconian post-termination restrictions that may blight your working life in the future, if it all goes wrong? We can help you make an informed decision about your future, and help you negotiate to obtain a fairer deal.
Recent client stories
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