The Difference Between A Franchise For Sale And A Distributor Opportunity

Date: JUN 1st, 2015

Topic: Franchise News And Advice

If you are looking for a business opportunity and not too sure the difference between a distributorship or licence agreement and a franchise for sale, then take a look through the following criteria.  
As a general rule a business is considered to be a franchise if:
  1. There is a agreement that is written, oral or implied.
  2. There is a payment of a fee, either upfront or ongoing, for the provision of goods or services.
  3. The supply of goods and /or services is under a system or marketing plan.
  4. The business is substantially associated with trade marks, advertising or commercial symbols.
So any agreement that contains the four points above is essentially deemed a franchise by law, and then requires compliance with the Franchising Code of Conduct.   

A distributorship opportunity on the other hand, is where a person distributes and sells goods under a agreed arrangement with the importer or manufacturer of those products.  The distributor can operate under their own branding and business structure.  
The distributor agreement may outline such areas as:
  • what the products are
  • the territory that is assigned to that distributorship opportunity
  • the sales targets and goals/expectations
  • the outcome if sales targets are not achieved
  • if the distributorship is exclusive
  • the term of the agreement 
  • if there is a agreement termination clause
  • payment terms for products
  • warranties for products and the process involved
  • the outcomes if there is breach of the agreement
Depending on the nature of the products distributed, there may be additional clauses included in the distributor agreement or licence.  The above list offers a general idea of what you can expect and look for when researching a distributorship for sale in Australia and New Zealand.

We highly recommend once you have completed the initial research to seek the advice of an experienced franchise consultant and legal team to make sure you fully understand your obligations prior to purchasing a business opportunity.  Some options are listed on our Suppliers Page.

As you can see there are distinct differences between a franchise for sale and a distributorship opportunity, and when these are understood it can become clearer exactly what you can expect out of each business scenario.  Now to find the right fit for you... .  

Armed with the above information you are ready to ask any franchisor or distributorship supplier questions regarding their agreements and to delve deeper into the business that attracts you.