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Initial exclusivity agreement template

[Music] hi my name is Mike bhana Diez with the merchants of business and today I'm here to talk about exclusivity agreements more specifically I'm going to talk about exclusivity agreements from the supplier side of the equation exclusive deals or exclusive arrangements are a very powerful tactic that can help build a win-win situation for both you and your core distributors it's executed well they can create a symbiotic relationship between you and your distributors together in the minds of your customers bringing both in new business in causing repeat business additionally they're a great defensive mechanism that can create natural barriers for your competition from entering into your space distributors are your partners but like any deal you want to make sure that you structure your exclusive the agreements that creates a winning agreement for you now don't get me wrong just because it's a winning agreement for you doesn't mean it's necessarily or inherently a losing agreement for your distributor partner buy you want to make sure you create an agreement that is beneficial for yourself you never want to put your you never want to bind yourself to a situation that put you at a disadvantage commercially with that said I'm gonna cover a few things to consider when structuring your exclusivity deal before I get into the tips and tricks of structuring an exclusivity deal I want to first state that I'm not a contract lawyer whenever you do any kind of exclusivity deal especially if it's written you want to talk to a contract lawyer who's an expert at the legal aspect of this and what is viable in your region and what isn't that being said the tips I'm going to mention ahead are what I've experienced and what I've executed in the deals I've helped broker first off you want to tie your exclusivity agreements to new SKU listings this is the most important aspect of any exclusivity agreement I mean think about it when you sign an exclusive agreement with the distributor you're saying that you're going to list your product exclusively with that you're cutting off all your other channels of distribution having that portion in your contract or having that agreement that that distributor will list future SKUs gives your plate gives your line gives your brand a place of grow in the future and also shows the commitment of the distributor to grow and facilitate your brand that you're listening with them you know the last place you want to be in as you sign an exclusivity agreement is to be with the distributor that has no intention of growing your product line instead they actually used it to against you negatively where they sign an exclusive agreement with you they don't commit to new future listings they don't list your product and then that makes way for a private label to come in and take out your product secondly you want to tie your exclusivity agreement to barring competitive SKUs in the area you play depending on what country or region or state that you live in or what what business you're in there may or may not be laws around barring competition or competitive products in an exclusivity agreement from a distributor if you can that's great definitely take the opportunity to to bar your competition and say that you're going to be the exclusive provider for that distributor in that space and you can't directly do it there are ways to indirectly cause that you know without the right without outright saying it one way is to give yourself what's called the first right of refusal or to stay in the agreement that you're the exclusive provider of this product and that the distributor has to come to you first with a new idea or new listing of a product in that space that you play in if you can provide it you're awarded the the listing if you can't provide it that means the distributor can go from you to the competitors and purchase that product in listed thirdly you want to tie your exclusivity agreement to volume you know tie get the volume provides a workaround as well as a best practice when you know agreeing on an exclusivity deal if you know the market size well enough and you know the potential of your distributor you can agree to something along the lines out you know this brand will be exclusive to you mr. distributor as long as you purchase a certain amount this year next year and X percent more for the next five years if you go backwards and purchase agreement or if you go backwards and purchases year over year this agreements no longer valued that is no longer valid again you want to talk to a lawyer before you structure something like that out but I want to provide an outline which you can structure a deal if you can't say some things outright or your partner's a little hesitant to it using volume as a tool in an agreement provides coverage against a competition I mean when they agree to a volume commitment they can only do so much to don't list competitors if they list too many competitors they're gonna put your volume agreement at risk and if they break that volume you know it breaks your exclusivity deal and you can go to other distributors fourthly tire exclusivity to your rebate program it's pretty common practice that when you create a an exclusive deal or go after an exclusive deal you typically juice your rebate program especially for that exclusive product and when you do that it should come with the expectation that the partner is going to adhere to the exclusive agreement try to get a part and are a part added to your rebate program it says if you uphold your exclusivity you get this increased rebate if you don't end up hold your exclusive deal you lose your rebate check and no distributor wants to lose their rebate check at the end of the year lastly it's worth mentioning that exclusive arrangements or exclusive deals are about creating a win-win situation for both you and your distributor it's not about screwing over a partner getting the upper hand if you want a broker an exclusivity deal then make sure both parties feel like they are comfortable with the deal that they get a mo to facilitate stronger sales with that brand line and themselves agreements can have multiple aspects tying in many different conditions can help make it clear what the expectations are of the exclusive the agreement you want to be in a situation where both you and your distributor you committed it to strengthening your current relationship and supporting the exclusive product I hope you guys enjoyed listening and learning about exclusivity deals from the suppliers perspective if you're interested in learning more about channel decisions or owning the PNL or retail marketing then click Subscribe again this is Mike bhana DS with the merchants of business and that's great channel management