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Manufacturer dealer or distributorship programs and their pitfalls
May 14,2022
Manufacturer dealer or distributorship programs and their pitfalls
          Some manufacturers of alarm equipment will only sell their products to their authorized dealers or distributors.  Entrance into the program will generally require some manufacturer training and certification which the manufacturer hopes will ensure proper installation and functionality of the system.  You should expect to have to sign an agreement with the manufacturer; let’s call it a Dealer Agreement. 
          At the very least the Dealer Agreement will enable you to purchase equipment from the manufacturer.  You may get different levels of technical support when needed.  Training may be provided to your technicians.  You might be granted an exclusive territory that may give you an edge over your local competitors if the manufacturer’s products are in demand by end users. 
          So there may be some very good business reasons for you to sign up with a manufacturer’s dealer program.  But be sure to check the fine print; make sure that if you are selling your sole to the devil you know it and are knowingly accepting the risk.
          The Dealer Agreement may impose certain conditions for your acceptance into the dealer program and your ability to remain in the program.  One condition may be minimum purchase of product.  Another may be commitment to advertise the product or to carry certain level of insurance [covering the manufacturer too].  Of course there could be other conditions, like continued training, various certifications or listings with industry laboratories and licensing compliance. 
          You need to be careful about your termination from the dealer program, either willingly or at the insistence of the manufacturer.  Your concerns will be can you get continued support for your existing customers?  Can you get exchange, replacement or upgraded product for your customers?  Can you get upgraded software for systems?  Can you even keep your customers or are you forced to sell or give them away to another authorized dealer of the manufacturer. 
          You may be able to negotiate terms with the manufacturer but your bargaining strength is likely to depend on your buying history and power.  Some manufacturers may not be willing to change or even discuss their Dealer Agreement.  Before you agree and sign make sure you understand the terms and the consequences of termination.
          This contract review would be available to Concierge Clients under their courtesy monthly contract review credit and to others without the credit.

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301