Agents, Distributors and Franchises

All businesses want to increase their sales and profits. There are three common techniques used to expand marketing opportunities and, depending on the goods and services you supply in your commercial activities, you may already utilise these techniques: agency, distribution and franchising.

Although agency, distribution and franchising are often used interchangeably, they are distinct legal concepts with separate legal rules.

The fundamental distinction to be aware of between these concepts are as follows:

An agency is a relationship where one party (the agent) has the authority to create a contract with a third party on behalf of a principal, often for a percentage commission on the sale price. Sometimes, however, the agent will act merely in an introductory capacity, again for a commission.

A distribution arrangement, on the other hand, is one where the distributor will act on their own account and buy and resell goods from a supplier. The money a distributor makes will be from the profits on the resell price rather than a commission. A franchise is usually a complete business package where a franchisor gives permission for its branding and ‘trading system’ to be used in exchange for initial and ongoing fees. If a business has developed and is suitable for franchising, the obvious advantage is the lower costs of expansion and potential for growth.

If you are engaged or considering any form of agency, distribution, franchise or other joint venture, have you got a clear agreement as to each parties’ respective rights and obligations?

If you don’t then we can provide contracts for you. These can be based on standard precedents or contracts tailored for your specific purposes. We can also provide advice as to the key legal and commercial issues that are typically contained within these arrangements, and, in general terms, whether they will protect your commercial objectives.

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