Independent manufacturers rep in the powersports business (1099… commission only)
Irritated at the one sided rep agreements
Want to draft an agreement, or at least an addendum to tack on the one the distributor/ manufacture sends over
Here’s what’s objectionable with the ones we usually get handed:
Samples (can run close to $10,000 in a given year) at a crappy discount; we should either get them at no-charge or at landed/ manufacturers cost. We’re not a customer, quit billing us as such
Year to year agreements. We pioneer the brand, establish the dealer network and can get canned for no reason. A buddy of mine was terminated when he grew the territory to a point that the manufacturer fired him and hired a factory guy for 1/3 the cost. He grew the brand from zero, spent tens of thousands of dollars in gas, hotel, samples, buying clients dinner, etc. and when his work started to pay off big he got canned.
If anyone has rep agreements that they would be willing to share it would be appreciated.
Re point #2, the typical approach I see is for the 1099 to get an earn out in the event s/he’s terminated without cause. Usually it’s a payout for a set number of months after termination (3 months on low end, 6 to 12 is more standard), where monthly payment is based on either
(1) an average of actual performance of the 1099 over the last year pre-termination (e.g., average amount of monthly commissions the 1099 got paid in the year before termination). This has advantage that it is related to actual benefit thst has been delivered by the 1099 in the past, and is less easy for the manufacturer to game because the 1099 should have access to his/her own sales numbers, or
(2) a commission on post-termination sales made in the territory/accounts that are taken away from the rep. Runs risk that manufacturer plays games with post-termination sales performance, which you won’t be able to see easily without audit rights, which you’ll never get out of a manufacturer that is paying attention.
Expect some sort of non-compete and/or non-solicit as a condition to getting the earnout.
The rep has to be a heavy hitter with some leverage in order to get this kind of earn out langauge out of a manufacturer, in my experience.