Manufacturer Dealer Agreements

February 4, 2011

Q: Can a manufacturer terminate my dealer agreement as long as I continue to meet quota?

A: Yes, and this is what I’ve found usually drives this: Manufacturers, just like systems contractors, make business decisions every day. As an example, we are seeing a major trend in severing direct sales agreements and moving to a distribution model. That requires the manufacturer to terminate these agreements or, in many cases, simply not renew them. Most of the time, if you are making quota, the logic behind your termination is more of an overall strategic business decision and often has little to do with your company.

Many of our members sign these very important dealer/reseller agreements and then put them in a file cabinet somewhere, forgetting exactly the terms and conditions to which they have agreed. One of the more common performance measures is credit and payables. We get fixed on quotas and forget the requirements for payments within 30 days. There may be 10 or 12 similar conditions you have forgotten, but the manufacturers haven’t, as they are so important to their reputation and profitability.

There are situations, however, when the manufacturer simply wants to limit distribution to fewer and larger systems integration firms. If you find yourself feeling squeezed out in that situation, you should — at a minimum — explore your options to get the manufacturer to fulfill any orders on outstanding proposals. Then, try to negotiate with them on purchasing any service items, software, upgrades, etc. Most of the time, the manufacturer will still be there to support you after the agreement expires. — CW

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