Distribution & Franchise: Different Ways for Delivering Products to Consumers
Peter Loh is a partner and vice chair of the Distribution & Franchise Practice Group at Foley & Lardner LLP. In this video, he explains several ways in which consumer products manufacturers can bring their goods to market. Distribution dealerships and franchises each have distinct meanings, and consumer products manufacturers should be aware of how those differences can affect them.
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- A consumer products manufacturer can get their products to market in at least three distinct ways: distributorships, dealerships, and franchising. These arrangements are similar but also different in important respects.
- Distributors are an independent sales agents who buy products directly from manufacturers at wholesale prices and in turn sell them to the end consumer.
- Distributors have direct contractual relationships with the manufacturers and can have exclusive rights to sell a manufacturer’s products in a specific geographic area.
- Dealerships are also independent selling agents who sell those same products to the market at large.
- Dealerships have the right to sell a manufacturer’s products in a geographic location.
- Dealers have the right under certain circumstances, and subject to certain restrictions, to use a manufacturer’s trademarks or trade names to sell those products.
- A franchisor owns its trademarks and trade names and the system or format for selling the products it has developed.
- Franchisees pay the franchisor an initial franchise fee and an ongoing royalty for the right to operate that business system or format while using the franchisor’s trademarks or tradenames.
