There are several business agreements that need to be in place when clients are starting a brewery/distillery/wine business. One of the most important type of contract a brewery business will enter into is a brewery distribution agreement. Our Chicago business attorneys negotiate and draft these agreements to protect our clients’ interests. The following is an overview of distribution agreements, and other agreements, that clients in the brewery business ought to have in place.
Distribution
Distribution agreements are essential in the brewery business. A distributor’s main responsibilities are warehousing and delivering a manufacturer’s product. Distributors rarely engage in selling and promoting the product for small brewery business owners. A distributor’s duties are still critical for a business’s success and distribution agreements are the framework that define and enforce the relationship between a manufacturer and distributor. OurChicago business attorneys ensure the distribution agreement is well-executed and comprehensive in order to develop a mutually beneficial and positive relationship between the client and his or her distributor.
We strategize when drafting and negotiating agreements on behalf of our clients. For instance, we find that drafting the agreement so that the distributor is nonexclusive, but the franchising is limited to only one distributor, suggests that additional distributors would not be added to the nonexclusive territory so long as the distributor met the manufacturer’s objectives. This provides incentive without restricting the manufacturer’s options. We make sure to include provisions on termination, provisions addressing the parties’ responsibilities after termination of the agreement, provisions specifying which products may be returned for credit, etc., in order to avoid a deterioration of the parties’ relationship.
A distribution agreement is a vital instrument in building a relationship between a manufacturer and distributor. With a well‐executed and comprehensive agreement, a positive and beneficial relationship can develop. However, a poorly‐executed agreement may often lead to legal complications and the deterioration of any existing relationship. This is both time consuming and expensive for the parties involved. Therefore, it is essential that a comprehensive distributor agreement is in place. Moreover, we negotiate for exclusive or nonexclusive distribution agreements, based on our client’s wishes and best interests.
Other Agreements in the Brewery Business
Agreements with Suppliers: These contracts are governed by the Uniform Commercial Code (UCC). The most basic obligation in a supplier agreement is the obligation of the seller to transfer and deliver, and the obligation of the buyer is to accept and pay for the goods in accordance with the agreed upon contract.
Licensing Agreements: Once a start-up brewery has established its brand name licensing agreements become critical because it is common for a brewery to license out the use of its trademarks to retailers, suppliers, or other businesses in the craft beer industry/liquor business.
Equipment, Retail, Production and Distribution Space Leases: Start-up businesses in the brewery business often opt to lease retail space or equipment rather than purchase these, and this is often the most economically beneficial thing to do. Equipment and commercial leases become critical agreements that business owners should be aware of.
Contract Production Agreements: Many start-up breweries choose contract brewing as a way to establish their brand before they take the capital and infrastructure investments required to own their own brewery. A contract brewery is one that does not have its own facilities to produce its beer, or requires additional facilities to meet its brewing demands. This term, “contract brewer,” refers both to the brewer who contracts for its production of beer, and the brewery that provides the brewing services.
Our Chicago attorneys work with industry professionals that are highly sensitive to industry norms and can identify common problems that arise in agreements in the brewery industry.