Handing your product to a distributor is handing them your market: the customers meet the distributor, not you. The distribution agreement is how suppliers keep that arrangement from becoming a hostage situation, a defined territory, minimums that make exclusivity earned, brand rules, and an exit that deals with the leftover inventory.
This template covers both appointment types with the guardrails that matter: exclusive or non-exclusive territory, minimum purchase enforcement, discount pricing, a scoped trademark license, and end-of-term inventory handling.
Exclusivity and minimums are one clause, not two
An exclusive territory without purchase minimums is a gift with no return obligation: the distributor owns your market whether it works the market or not, and a competitor's distributor cannot be appointed to fix it. The template links them, missed minimums let the supplier convert exclusivity to non-exclusive, shrink the territory, or terminate, which keeps the remedy proportionate and avoids the nuclear-only option. Set minimums by negotiation from the distributor's own sales projections, then review annually: a number the distributor proposed is a number the distributor cannot later call unrealistic. Non-exclusive appointments need no minimums, because the supplier retains the cure for underperformance, appointing someone else.
Distributor, sales rep, franchisee: the lines that matter
- Distributor: buys inventory, takes title, resells at prices it sets, profits on margin. Bears inventory risk; owns its customer relationships.
- Sales representative: sells on the supplier's behalf for commission, never owns the goods. Rep relationships trigger state sales-rep commission statutes with prompt-payment and termination rules.
- Franchisee: operates under the supplier's brand and system. If a distribution deal adds a required marketing plan, a fee for the right to distribute, and heavy brand control, it can accidentally become a franchise under FTC and state franchise laws, with registration and disclosure duties. Keep distribution deals free of upfront rights fees and prescribed operating systems.
Do not set the distributor's resale prices
The distributor sets its own resale prices; the agreement says so. Dictating resale prices raises antitrust issues under federal and some state laws. Suppliers may suggest list prices and may run unilateral minimum advertised price (MAP) policies outside the contract, but resale price fixing does not belong in the agreement.
Write the divorce before the wedding: inventory and brand at exit
Distribution breakups fight about two assets: the unsold inventory and the brand. The template resolves both in advance, a 90-day sell-off window or supplier repurchase at cost for clean inventory, and a trademark license that dies with the agreement so yesterday's distributor cannot market itself on your name indefinitely. The surrounding documents complete the picture: the supply side of the relationship can ride on a supply agreement or vendor agreement if the distributor also sources components, deeper brand or technology rights belong in a licensing agreement, and confidential pricing or roadmap disclosures deserve a non-disclosure agreement before negotiations even start.
Frequently asked questions
What is the difference between a distributor and a sales representative?
A distributor buys the products, takes title and inventory risk, and profits by reselling at its own prices. A sales rep sells for commission without ever owning the goods, and commission relationships are regulated by state sales-rep statutes. The choice changes taxes, risk, and which laws apply, so the agreement states it expressly.
Should I grant an exclusive territory?
Only in exchange for minimum purchase commitments and only for a territory the distributor can genuinely cover. Exclusivity concentrates your market risk in one partner; the template's remedy ladder (convert to non-exclusive, shrink the territory, terminate) keeps a missed minimum from requiring a full breakup.
Can I control the distributor's resale prices?
No, and the agreement should not try: resale price maintenance raises federal and state antitrust exposure. You may suggest list prices, and you may maintain a unilateral MAP policy governing advertised prices outside the contract. The distributor's independence on pricing is also what keeps the relationship from drifting toward agency or franchise territory.
What happens to unsold inventory when the agreement ends?
This template gives two paths chosen by the supplier: a 90-day wind-down during which the distributor sells remaining stock in the ordinary course, or a supplier repurchase of unopened, resalable inventory at the distributor's cost. Either way the trademark license ends when the inventory does, which prevents a terminated distributor from trading on the brand.
Could my distribution agreement accidentally be a franchise?
It can, if three elements combine: use of your trademark, significant control over or assistance with the distributor's operating method, and a required fee for the right to participate. Franchise status triggers FTC disclosure rules and state registration. Standard distribution terms, product purchases at wholesale, brand guidelines, no rights fee, stay outside the definition.
Who handles product warranties and recalls?
The supplier. The distributor forwards warranty claims and cooperates with recalls, but the product obligations belong to the manufacturer, and the agreement's indemnity allocates defect claims to the supplier. The distributor's matching duty is to make no product claims beyond the supplier's published materials.