20If you own or operate a brewery that distributes beer, you have probably seen and entered into a distribution agreement (unless you’re smaller than 25k barrels and choose to self-distribute). Hopefully, you have entered into a written distribution agreement. A written agreement will generally do a better job of protecting both parties and helping to avoid disagreements (and therefore, lawsuits) down the road.
Any good distribution agreement will address the following terms and key points:
1. Territory- the agreement should specifically define the territory in which the distributor is authorized to distribute the supplier’s products.
2. Standards of performance- the agreement should address all of the standards of performance by both parties, including price, terms of payment, and other obligations of each party such as quality control, reporting requirements, inventory management, storage (including refrigeration), training/experience, and business plans.
3. Products- the agreement should state the products, product lines and brands covered by the distribution agreement.
4. Promotional Budget- the agreement should address advertising and marketing and help to establish a budget for such items.
5. Termination- the agreement should address how it can be terminated (however, be advised that any terms stated here are subject to the NC Beer Franchise Law, N.C.G.S. ยง 18B-1305).
6. Intellectual Property- typically most intellectual property (i.e., brewery logos, names, beer names and beer logos) is owned and held by the supplier, but a good distribution agreement will include an intellectual property clause which grants the distributor a license to use such intellectual property in certain situations and for certain purposes. It will also dictate how the distributor can use and display such intellectual property. As with all intellectual property, but especially trademarks, it is always important to protect your intellectual property.
7. NC Beer Franchise Law- this law is going to be fully implied into your distribution agreement, anyway, so why not explicitly state that the agreement is subject to the law and should be interpreted in accordance to the law?
These are just some of the most important terms that your distribution agreement should cover. For more information or for assistance with preparing or reviewing your distribution agreements, please contact Scott Burger at scott@ncbeerlawyer.com or at 336.705.1016.
Merry Christmas to all!
20
