[Author: Andy Goodman, CEO/President, I-NEDA, 2014 | Keywords: Dealer Relations, Agreements]
The Association receives phone calls and e-mails from members and non-members considering taking on new product lines; and from potential suppliers who are interested in establishing a relationship with dealers and distributors. Some of the questions asked indicate a lack of understanding about the relationship and obligations between manufacturers, distributors, dealers and consumers.
Of particular concern is the lack of a written contract spelling out the obligations of the parties. Sometimes, the new product lines are from foreign companies who do not have a clear understanding of our state and federal laws. Some foreign companies also set up distributers to resell to dealers, while others attempt to sell their products directly through dealers.
The first thing to do when considering a new product line is to contact the Iowa-Nebraska Equipment Dealers Association (I-NEDA). One of the best ways to get good information about a distributor or manufacture is from other dealers and distributors. I-NEDA can provide contact information on dealers who currently have a relationship with these companies. Even if there currently are no Iowa or Nebraska dealers who carry a specific brand, I-NEDA can locate them in other parts of North America.
When considering new products you should ask for a booklet called, “Dealer-Supplier Agreements – Mutual Terms and Principles of a Business Relationship.” Published by the North American Equipment Dealers Association (NAEDA), it is available from I-NEDA free of charge. The booklet includes a list of important contract provisions for dealers and suppliers.
Among the items listed in the NAEDA Supplier Agreement booklet is the need for a business profile about the supplier. A dealer should request to see a company profile that includes background, structure, references and financial information. This is the same type of information a supplier should obtain about prospective dealers.
In addition, dealers and suppliers should consider a number of important contract provisions:
- Terms of the contract and the legal authority – Who is authorized to bind the contract and is power of attorney needed or required?
- Trade area and market penetration – Is there a specific trade territory and is it exclusive?
- Financial requirements
- Product stocking and performance standards
- Parts ordering and return policies
- Warranty policies
- Contract termination
As you can see, there is a lot involved when establishing a relationship between a dealer and a supplier. It is important to have a clear, written understanding by both parties before entering into an agreement to carry a product line. Being pro-active will help dealers and suppliers avoid many of the pitfalls that we repeatedly see in our industry.