Gentlemen's agreement fitted kitchen franchise ?
Discussion
I make bespoke kitchens, and operate from a trading estate unit in Aylesbury. I have a showroom there as well, but am finding it difficult to attract customers, (this was not unexpected, but I had to have a manufacturing base and therefore a trading estate unit).
I have always wanted to have a showroom (or two or three) in High Street locations. This is the sort of place from where the better class of kitchen is sold. Perhaps somewhere in an affluent market town, right where it could be seen easily, in amongst the estate agents and antique shops.
Anyway, I can’t afford anything like that, and would prefer to concentrate on the manufacturing anyway. So, I have been discussing the possibility of setting up an arrangement with a chap I know who is interested in opening up such a shop and selling my kitchens from it.
This is how it would work, probably, and I don‘t see why we would need to set up a complicated and expensive legal framework.
He would find and take out a lease on a suitable shop. He would carry out whatever refurbishment was required, and he would give the business a name of his own choosing. He would buy from me, at my standard trade prices, the necessary displays. I would install these, and would also provide him with a thorough training in how to design and sell kitchens, and how to find and supervise kitchen fitters. My kitchens have several useful USPs
He would then open the shop and (hopefully) make sales. I’ve looked into this carefully, and it is entirely reasonable to aim to achieve a turnover of £500,000, equivalent to a £20K kitchen every two weeks. He would buy the kitchen from me, and arrange to have it installed by sub-contractors (my stuff is quite easy to fit, especially as it would have been designed and made for that particular kitchen). Then he would sell another one, and so on, a process that would continue for the foreseeable future.
The only payment I would receive would be the payment for the kitchen that I supplied, so no licence fees etc
So, the benefits of this arrangement to him-
He would be taught all about the kitchen design etc (he’s an IT guy at the moment, or rather, he used to be) . He will have a supply of decent bespoke kitchen product at prices which would enable a healthy profit ( I figure £100K clear on a £500K turnover, more would be possible depending on turnover and area affluence). I would not supply anybody else in his area. He would not have to pay any annual fees etc. If he decided he didn’t want to deal with me any more then he would be free to go with whoever he chose, with no hard feelings
And the benefits of this arrangement to me-
I have an outlet for my product, without having all the costs of renting a shop, I don’t have to pay for advertising, I don’t have to deal with customers. I can concentrate on my core business of manufacturing.
One obvious question is, how much money will I want for the product? Well, I wondered about this myself, and the answer was, if I ask too much money then I will be on the same position as any other company that asks too much money- no sales. So, in effect, the prices will be self regulating.
Anyway, sorry about the long read, how does the above sound to you guys? Can this be done on a gentlemen’s agreement?
I have always wanted to have a showroom (or two or three) in High Street locations. This is the sort of place from where the better class of kitchen is sold. Perhaps somewhere in an affluent market town, right where it could be seen easily, in amongst the estate agents and antique shops.
Anyway, I can’t afford anything like that, and would prefer to concentrate on the manufacturing anyway. So, I have been discussing the possibility of setting up an arrangement with a chap I know who is interested in opening up such a shop and selling my kitchens from it.
This is how it would work, probably, and I don‘t see why we would need to set up a complicated and expensive legal framework.
He would find and take out a lease on a suitable shop. He would carry out whatever refurbishment was required, and he would give the business a name of his own choosing. He would buy from me, at my standard trade prices, the necessary displays. I would install these, and would also provide him with a thorough training in how to design and sell kitchens, and how to find and supervise kitchen fitters. My kitchens have several useful USPs
He would then open the shop and (hopefully) make sales. I’ve looked into this carefully, and it is entirely reasonable to aim to achieve a turnover of £500,000, equivalent to a £20K kitchen every two weeks. He would buy the kitchen from me, and arrange to have it installed by sub-contractors (my stuff is quite easy to fit, especially as it would have been designed and made for that particular kitchen). Then he would sell another one, and so on, a process that would continue for the foreseeable future.
The only payment I would receive would be the payment for the kitchen that I supplied, so no licence fees etc
So, the benefits of this arrangement to him-
He would be taught all about the kitchen design etc (he’s an IT guy at the moment, or rather, he used to be) . He will have a supply of decent bespoke kitchen product at prices which would enable a healthy profit ( I figure £100K clear on a £500K turnover, more would be possible depending on turnover and area affluence). I would not supply anybody else in his area. He would not have to pay any annual fees etc. If he decided he didn’t want to deal with me any more then he would be free to go with whoever he chose, with no hard feelings
And the benefits of this arrangement to me-
I have an outlet for my product, without having all the costs of renting a shop, I don’t have to pay for advertising, I don’t have to deal with customers. I can concentrate on my core business of manufacturing.
One obvious question is, how much money will I want for the product? Well, I wondered about this myself, and the answer was, if I ask too much money then I will be on the same position as any other company that asks too much money- no sales. So, in effect, the prices will be self regulating.
Anyway, sorry about the long read, how does the above sound to you guys? Can this be done on a gentlemen’s agreement?
Clearly you have a very clear idea of how the arrangement will work. However, you would be very foolish not to have the agreement in a legal contract. There are so many scenarios that could occur:
What if he died? His next of kin could be the partner from hell.
What if you came to sell your company? The new owner will want more than a gentleman's agreement in place.
And, the above questions 35 and 79 of about 100 or more.
What if he died? His next of kin could be the partner from hell.
What if you came to sell your company? The new owner will want more than a gentleman's agreement in place.
And, the above questions 35 and 79 of about 100 or more.
Sounds like you are simply selling to him at trade prices but under some sort of sole agreemnet? What are the risks for you in that?
I went to an antique centre recently where 2 kitchen manufacturers have units with displays of free standing units. Selling shaker and rustic style kitchens and free standing units with a portfolio of their fitted work in nice binders. A lot less han a high street location and the client group is being taken there and generally have the money to spend. And no staffing costs as the customers pick up a card and call (could even do a free[phone from the unit?)
I went to an antique centre recently where 2 kitchen manufacturers have units with displays of free standing units. Selling shaker and rustic style kitchens and free standing units with a portfolio of their fitted work in nice binders. A lot less han a high street location and the client group is being taken there and generally have the money to spend. And no staffing costs as the customers pick up a card and call (could even do a free[phone from the unit?)
Edited by Brown and Boris on Sunday 6th April 09:36
srebbe64 said:
Clearly you have a very clear idea of how the arrangement will work. However, you would be very foolish not to have the agreement in a legal contract. There are so many scenarios that could occur:
What if he died? His next of kin could be the partner from hell.
What if you came to sell your company? The new owner will want more than a gentleman's agreement in place.
And, the above questions 35 and 79 of about 100 or more.
Hmm, interesting, this is exactly the type of response I was hoping to get. It may well be that we will need to have some kind of contract to cover the scenarios you mention. What if he died? His next of kin could be the partner from hell.
What if you came to sell your company? The new owner will want more than a gentleman's agreement in place.
And, the above questions 35 and 79 of about 100 or more.
At the heart of the matter, though, is the fact that our arrangement is based on mutual need- he needs a supply of good, saleable product (and the knowledge of how to go about designing and selling it) and I need a flow of work. As soon as one of us no longer needs (or wants) the other then the agreement would effectively be at an end. Similar to marriage I suppose.
I can't see that it is any kind of partnership at all. If anything it would be more like a situation where person A has a good trade customer and person B has a good trade supplier. If it comes to an end through death or whatever, where is the partnership that needs to be protected or dissolved?
Your response hinted at other things I need to consider, and which ought to form the basis of a contract. I acknowledge that there may well need to be a contract, but before I take all this to a lawyer I need to know what to tell him (or her) because I can't see that a modified partnership agreement is relevant. But I accept that I may be wrong and also that the other party may want some kind of legal framework to be set up
Brown and Boris said:
Sounds like you are simply selling to him at trade prices but under some sort of sole agreemnet? What are the risks for you in that?
None that I can see from hereBrown and Boris said:
I went to an antique centre recently where 2 kitchen manufacturers have units with displays of free standing units. Selling shaker and rustic style kitchens and free standing units with a portfolio of their fitted work in nice binders. A lot less han a high street location and the client group is being taken there and generally have the money to spend. And no staffing costs as the customers pick up a card and call (could even do a free[phone from the unit?)
I've wondered about doing something like that, but it would still leave me doing the selling and the designing, plus all the admin that goes into getting a kitchen sucessfully installed in someone's house, and it also would mean that it would need to be local, whereas the scheme I am considering works even though this chap is sixty miles away from me.If I can set him up and he makes a go of it then the whole set up would act as a template for similar arrangements with others, as it would work best for me if I had three or more people doing this (more machines, more employees, and more time for me to administrate the business rather than to actually have to make the stuff!)
Having a nice high street shop is a lot about the message it sends, a display in an antiques centre is ideal for a small operation but I'm looking to go well beyond that. Thanks for the idea, though, don't want to seem ungrateful
Your plan is good.
You *could* run a shop yourself, and that is one way of expanding, however that is not always the best way of expanding. My advice would be to expand in what you are good at. I think you have come to the same conclusion.
A contract is a gentleman's agreement. Its just one which you can both remember all of the points exactly and perfectly - as you have it written down. The last thing you want is to fall out over something which was not remembered by you or him.
The other factor is that although it is not a nice thing to say, money sometimes makes someone a different person. Would that person break your 'verbal agreement' for £1000, £10,000 or £100,000. I don't think many people could say that they are sure for 100% here. The idea is that you will be successful, so these type of figure may be what breaking a deal may be worth.
There *is* a downside to you which you may not have thought about. Lets say, 2, 3 or 5 years time things are going well. His shop has greatly increased your turnover, in fact trebled it. You have just bought new machinery on finance as he is looking to open a second shop and the 3 new employees you took on last year are working hard and you need at least one more.
He gets a better offer from another supplier, and just drops you, like that. You are left with an expanded company with a lot more outgoings where if you went back to your current size of turnover, you would be making a loss.
If you or him are looking to invest tens of thousands of pounds into a venture, I really would be looking into spending a few hours setting out an agreement. It doesn't have to be complex, just sit down with him and say, "What will we do if..." and write down what you agree. If you want it to be written up by a solicitor who could speak with you about the possible scenarios it should only be a couple of hundred quid if you have done all the preliminary work.
You *could* run a shop yourself, and that is one way of expanding, however that is not always the best way of expanding. My advice would be to expand in what you are good at. I think you have come to the same conclusion.
A contract is a gentleman's agreement. Its just one which you can both remember all of the points exactly and perfectly - as you have it written down. The last thing you want is to fall out over something which was not remembered by you or him.
The other factor is that although it is not a nice thing to say, money sometimes makes someone a different person. Would that person break your 'verbal agreement' for £1000, £10,000 or £100,000. I don't think many people could say that they are sure for 100% here. The idea is that you will be successful, so these type of figure may be what breaking a deal may be worth.
There *is* a downside to you which you may not have thought about. Lets say, 2, 3 or 5 years time things are going well. His shop has greatly increased your turnover, in fact trebled it. You have just bought new machinery on finance as he is looking to open a second shop and the 3 new employees you took on last year are working hard and you need at least one more.
He gets a better offer from another supplier, and just drops you, like that. You are left with an expanded company with a lot more outgoings where if you went back to your current size of turnover, you would be making a loss.
If you or him are looking to invest tens of thousands of pounds into a venture, I really would be looking into spending a few hours setting out an agreement. It doesn't have to be complex, just sit down with him and say, "What will we do if..." and write down what you agree. If you want it to be written up by a solicitor who could speak with you about the possible scenarios it should only be a couple of hundred quid if you have done all the preliminary work.
JustinP1 said:
There *is* a downside to you which you may not have thought about. Lets say, 2, 3 or 5 years time things are going well. His shop has greatly increased your turnover, in fact trebled it. You have just bought new machinery on finance as he is looking to open a second shop and the 3 new employees you took on last year are working hard and you need at least one more.
He gets a better offer from another supplier, and just drops you, like that. You are left with an expanded company with a lot more outgoings where if you went back to your current size of turnover, you would be making a loss.
I would protect myself from that type of risk by having the same arrangement with others, at the moment I'm thinking three showrooms would be the ideal to generate the turnover which suits my business model. Question of starting somewhere, and with my already knowing this chap (though not very well) he seems like a good starting point.He gets a better offer from another supplier, and just drops you, like that. You are left with an expanded company with a lot more outgoings where if you went back to your current size of turnover, you would be making a loss.
JustinP1 said:
If you or him are looking to invest tens of thousands of pounds into a venture, I really would be looking into spending a few hours setting out an agreement. It doesn't have to be complex, just sit down with him and say, "What will we do if..." and write down what you agree. If you want it to be written up by a solicitor who could speak with you about the possible scenarios it should only be a couple of hundred quid if you have done all the preliminary work.
That sounds like a good idea, and added to what Srebbe said, I expect we will probably do that.I'm still keen to hear other 'what if's?'. So if anyone thinks of any please post them
if you are just going to sell him kitchens at trade price on a standard supplier agreement then you don't really need any paperwork beyond usual supplier order forms and delivery contract t and cs.
if however you are talking about giving him an "exclusive territory" then you are more into the relationship the car makers have with their dealers, in which case you need a sole supplier contract outlining the time the agreement will be in force, your obligations to supply kitchens to him and his obligations to you.
given the investment from his side i do not see why you are skipping maybe 1 or 2 K's worth of legal contract work in the hands of a solicitor to ensure everything is laid out. There is no such thing as a verbal contract, you need to formally outline your proposals to each other to ensure their are no misunderstandings.
so if you plan to just sell him kitchens on standard trade terms then you don't need a contract, if you plan any sort of exclusive deliveries, training, or sole supplier agreements then you need everything in the contract. for example how many hours training? how many show kitchens? how often will you replace the show kitches? will you supply show kitchens at below your standard markup as "demonstrators" and so on. credit terms, etc etc
if however you are talking about giving him an "exclusive territory" then you are more into the relationship the car makers have with their dealers, in which case you need a sole supplier contract outlining the time the agreement will be in force, your obligations to supply kitchens to him and his obligations to you.
given the investment from his side i do not see why you are skipping maybe 1 or 2 K's worth of legal contract work in the hands of a solicitor to ensure everything is laid out. There is no such thing as a verbal contract, you need to formally outline your proposals to each other to ensure their are no misunderstandings.
so if you plan to just sell him kitchens on standard trade terms then you don't need a contract, if you plan any sort of exclusive deliveries, training, or sole supplier agreements then you need everything in the contract. for example how many hours training? how many show kitchens? how often will you replace the show kitches? will you supply show kitchens at below your standard markup as "demonstrators" and so on. credit terms, etc etc
Be aware that if your partner owns the customer interface, he will in essence control your brand and your marketing. That is, if he knows your customers and you don't, and can brand your products as he sees fit (that means the entire customer experience, not just a logo), you will be dependent on hims to understand and exploit your market.
This was a major issue IIRC for Mercedes a few years ago - all the customer interaction (including the customer data) was owned by the dealer network, and was not available to the manufacturer.
If you commoditise your product, the retailer could (in theory) start procuring alternative products from another supplier (probably at a lower cost) and selling them with the same branding.
With your positioning at the premium end of the market, I would recommend holding onto at least some control over your brand and the customer interface.
Just a thought....
This was a major issue IIRC for Mercedes a few years ago - all the customer interaction (including the customer data) was owned by the dealer network, and was not available to the manufacturer.
If you commoditise your product, the retailer could (in theory) start procuring alternative products from another supplier (probably at a lower cost) and selling them with the same branding.
With your positioning at the premium end of the market, I would recommend holding onto at least some control over your brand and the customer interface.
Just a thought....
singlecoil said:
srebbe64 said:
Clearly you have a very clear idea of how the arrangement will work. However, you would be very foolish not to have the agreement in a legal contract. There are so many scenarios that could occur:
What if he died? His next of kin could be the partner from hell.
What if you came to sell your company? The new owner will want more than a gentleman's agreement in place.
And, the above questions 35 and 79 of about 100 or more.
Hmm, interesting, this is exactly the type of response I was hoping to get. It may well be that we will need to have some kind of contract to cover the scenarios you mention. What if he died? His next of kin could be the partner from hell.
What if you came to sell your company? The new owner will want more than a gentleman's agreement in place.
And, the above questions 35 and 79 of about 100 or more.
At the heart of the matter, though, is the fact that our arrangement is based on mutual need- he needs a supply of good, saleable product (and the knowledge of how to go about designing and selling it) and I need a flow of work. As soon as one of us no longer needs (or wants) the other then the agreement would effectively be at an end. Similar to marriage I suppose.
I can't see that it is any kind of partnership at all. If anything it would be more like a situation where person A has a good trade customer and person B has a good trade supplier. If it comes to an end through death or whatever, where is the partnership that needs to be protected or dissolved?
Your response hinted at other things I need to consider, and which ought to form the basis of a contract. I acknowledge that there may well need to be a contract, but before I take all this to a lawyer I need to know what to tell him (or her) because I can't see that a modified partnership agreement is relevant. But I accept that I may be wrong and also that the other party may want some kind of legal framework to be set up
It will cost you both £500 each ish.
It will repay you in SPADES in the event of problems.
lambogenie said:
so if you plan to just sell him kitchens on standard trade terms then you don't need a contract, if you plan any sort of exclusive deliveries, training, or sole supplier agreements then you need everything in the contract. for example how many hours training? how many show kitchens? how often will you replace the show kitches? will you supply show kitchens at below your standard markup as "demonstrators" and so on. credit terms, etc etc
I have been persuaded that a contract is indeed necessary, and these are some of the questions that it will need to address.ultraviolet said:
Be aware that if your partner owns the customer interface, he will in essence control your brand and your marketing. That is, if he knows your customers and you don't, and can brand your products as he sees fit (that means the entire customer experience, not just a logo), you will be dependent on hims to understand and exploit your market.
He won't be using my brand, but will be trading under a name of his own choosing. He is welcome to tell people where he gets his kitchens from, if he wants to, but I will suggest he tells customers that he has his kitchens made for him by a specialist firm in AylesburyVesuvius 996 said:
DO NOT EVEN THINK ABOUT doing this without a decent lawyer drafted contract in place.
It will cost you both £500 each ish.
It will repay you in SPADES in the event of problems.
Point taken and accepted. Will let you know when we are ready for you to draft it.It will cost you both £500 each ish.
It will repay you in SPADES in the event of problems.
singlecoil said:
ultraviolet said:
Be aware that if your partner owns the customer interface, he will in essence control your brand and your marketing. That is, if he knows your customers and you don't, and can brand your products as he sees fit (that means the entire customer experience, not just a logo), you will be dependent on hims to understand and exploit your market.
He won't be using my brand, but will be trading under a name of his own choosing. He is welcome to tell people where he gets his kitchens from, if he wants to, but I will suggest he tells customers that he has his kitchens made for him by a specialist firm in AylesburyThe fact he is trading a name of his choosing means that your partner is creating and owning HIS brand, using YOUR products. The further away from the customer you are (in supply chain terms), the less valuable your brand becomes (until ultimately you become a commodity supplier and therefore unable to charge a premium).
A brand is a hugely valuable asset - you should not pass up on the opportunity to create / develop one lightly.
UV
Ultraviolet said:
A brand is a hugely valuable asset - you should not pass up on the opportunity to create / develop one lightly.
UV
Well, if it were cars or most other consumer products then that would be very true, but not really with kitchens. I expect there are very few people outside the trade itself who could name any of the major manufacturers.UV
In any case, it's unlikely that I would be able to sell that many areas that there wouldn't be a few left in which I could eventually open my own shops, if I wanted to, which I can't see happening. Kitchen retailing is a natural for franchising, few large manufacturers sell directly, in fact I can't think of any that do.
I appreciate the help I am getting with this, thanks to all who have responded
For what its worth, we are a trade manufacturer/supplier of blinds. We supply retail shops and other linked trades from our factory, and have about 70 outlets.We don't have contracts with any of them and yet some have been with us for 20 years even though they are free to buy from whoever they choose.We don't ever compete with them, don't ever supply their competitors and keep our word on those principles.You don't need contracts, sell on service and quality, not on price and NEVER give them a reason to justify going elsewhere.It's as simple as that. The only flaw I can see in your plan is that you're probably going to need more than one outlet to cover yourself, maybe in the next town etc. Good luck, sure it will work,just don't make the whole thing too complicated for yourself.
sjc said:
For what its worth, we are a trade manufacturer/supplier of blinds. We supply retail shops and other linked trades from our factory, and have about 70 outlets.We don't have contracts with any of them and yet some have been with us for 20 years even though they are free to buy from whoever they choose.We don't ever compete with them, don't ever supply their competitors and keep our word on those principles.You don't need contracts, sell on service and quality, not on price and NEVER give them a reason to justify going elsewhere.It's as simple as that. The only flaw I can see in your plan is that you're probably going to need more than one outlet to cover yourself, maybe in the next town etc. Good luck, sure it will work,just don't make the whole thing too complicated for yourself.
Know what you mean. However, in my experience if you ever came to sell your company it could have negative connotations. A buyer may perceive these relationships as 'owner dependent', thereby increasing their perceived risk. In fact, formal contracts may increase the (perceived) value of the company up to 20% or more. That's my experience. Contracts generally reduce a buyer's perception of risk which usually increases the buyer's 'comfort level' and resultant price.Can see your point, but the staff are as big an asset as the owner in a successful company, and after all we are talking about a guy who is starting rather than selling his business at this stage.Contracts for small businesses to customers are always loaded toward the customer,( and a large customer can easily tear it up and say "sue us"
hence my comment steer clear and supply on merit. Would totally agree with you on slightly larger concerns though,if selling I assume that customer contracts would be expected ?
hence my comment steer clear and supply on merit. Would totally agree with you on slightly larger concerns though,if selling I assume that customer contracts would be expected ?sjc said:
.........we don't have contracts with any of them and yet some have been with us for 20 years even though they are free to buy from whoever they choose................
If I had a quid for every time a client of mine has come to bitterly regret this, I'd be a wealthy man.When you've worked your whole life to build your business, and you come to retire, and you want to sell up, or when you need to raise finance using your business as collateral, what do you think will happen?
The Banks/a Purchaser will arrive at your door expecting to "kick the tyres" of your business in a process called Due Diligence. They'll want to assess your business and how valuable it is, and one of the major things they'll want to see is whether you have decent contracts in place which guarantee revenue and business.
In your case, no doubt you're feeling pretty chuffed that you've saved money on lawyers' fees and time in not drafting and negotiating them. But your Bank or Vendor will (rightly) view this as a siutation where your business has no revenue stream to rely on (by your own admission your customers and suppliers can walk away on a minute's notice) and where there are no guarantees at all that there will be business tomorrow.
This makes your business WORTH A LOT LESS MONEY.
Sorry mate, but you need to sort this out quick.
Selling a business without decent contracts in place is like trying to sell a car with no service history or log book. It's throwing money down the drain.
Edited by Vesuvius 996 on Tuesday 8th April 09:43
singlecoil said:
I make bespoke kitchens, and operate from a trading estate unit in Aylesbury. I have a showroom there as well, but am finding it difficult to attract customers, (this was not unexpected, but I had to have a manufacturing base and therefore a trading estate unit).
I have always wanted to have a showroom (or two or three) in High Street locations. This is the sort of place from where the better class of kitchen is sold. Perhaps somewhere in an affluent market town, right where it could be seen easily, in amongst the estate agents and antique shops.
Anyway, I can’t afford anything like that, and would prefer to concentrate on the manufacturing anyway. So, I have been discussing the possibility of setting up an arrangement with a chap I know who is interested in opening up such a shop and selling my kitchens from it.
This is how it would work, probably, and I don‘t see why we would need to set up a complicated and expensive legal framework.
He would find and take out a lease on a suitable shop. He would carry out whatever refurbishment was required, and he would give the business a name of his own choosing. He would buy from me, at my standard trade prices, the necessary displays. I would install these, and would also provide him with a thorough training in how to design and sell kitchens, and how to find and supervise kitchen fitters. My kitchens have several useful USPs
He would then open the shop and (hopefully) make sales. I’ve looked into this carefully, and it is entirely reasonable to aim to achieve a turnover of £500,000, equivalent to a £20K kitchen every two weeks. He would buy the kitchen from me, and arrange to have it installed by sub-contractors (my stuff is quite easy to fit, especially as it would have been designed and made for that particular kitchen). Then he would sell another one, and so on, a process that would continue for the foreseeable future.
The only payment I would receive would be the payment for the kitchen that I supplied, so no licence fees etc
So, the benefits of this arrangement to him-
He would be taught all about the kitchen design etc (he’s an IT guy at the moment, or rather, he used to be) . He will have a supply of decent bespoke kitchen product at prices which would enable a healthy profit ( I figure £100K clear on a £500K turnover, more would be possible depending on turnover and area affluence). I would not supply anybody else in his area. He would not have to pay any annual fees etc. If he decided he didn’t want to deal with me any more then he would be free to go with whoever he chose, with no hard feelings
And the benefits of this arrangement to me-
I have an outlet for my product, without having all the costs of renting a shop, I don’t have to pay for advertising, I don’t have to deal with customers. I can concentrate on my core business of manufacturing.
One obvious question is, how much money will I want for the product? Well, I wondered about this myself, and the answer was, if I ask too much money then I will be on the same position as any other company that asks too much money- no sales. So, in effect, the prices will be self regulating.
Anyway, sorry about the long read, how does the above sound to you guys? Can this be done on a gentlemen’s agreement?
Hi,I have always wanted to have a showroom (or two or three) in High Street locations. This is the sort of place from where the better class of kitchen is sold. Perhaps somewhere in an affluent market town, right where it could be seen easily, in amongst the estate agents and antique shops.
Anyway, I can’t afford anything like that, and would prefer to concentrate on the manufacturing anyway. So, I have been discussing the possibility of setting up an arrangement with a chap I know who is interested in opening up such a shop and selling my kitchens from it.
This is how it would work, probably, and I don‘t see why we would need to set up a complicated and expensive legal framework.
He would find and take out a lease on a suitable shop. He would carry out whatever refurbishment was required, and he would give the business a name of his own choosing. He would buy from me, at my standard trade prices, the necessary displays. I would install these, and would also provide him with a thorough training in how to design and sell kitchens, and how to find and supervise kitchen fitters. My kitchens have several useful USPs
He would then open the shop and (hopefully) make sales. I’ve looked into this carefully, and it is entirely reasonable to aim to achieve a turnover of £500,000, equivalent to a £20K kitchen every two weeks. He would buy the kitchen from me, and arrange to have it installed by sub-contractors (my stuff is quite easy to fit, especially as it would have been designed and made for that particular kitchen). Then he would sell another one, and so on, a process that would continue for the foreseeable future.
The only payment I would receive would be the payment for the kitchen that I supplied, so no licence fees etc
So, the benefits of this arrangement to him-
He would be taught all about the kitchen design etc (he’s an IT guy at the moment, or rather, he used to be) . He will have a supply of decent bespoke kitchen product at prices which would enable a healthy profit ( I figure £100K clear on a £500K turnover, more would be possible depending on turnover and area affluence). I would not supply anybody else in his area. He would not have to pay any annual fees etc. If he decided he didn’t want to deal with me any more then he would be free to go with whoever he chose, with no hard feelings
And the benefits of this arrangement to me-
I have an outlet for my product, without having all the costs of renting a shop, I don’t have to pay for advertising, I don’t have to deal with customers. I can concentrate on my core business of manufacturing.
One obvious question is, how much money will I want for the product? Well, I wondered about this myself, and the answer was, if I ask too much money then I will be on the same position as any other company that asks too much money- no sales. So, in effect, the prices will be self regulating.
Anyway, sorry about the long read, how does the above sound to you guys? Can this be done on a gentlemen’s agreement?
First thoughts, sorry if blunt:
Fine idea if this guy is your son.
Basically, it sounds like you are going to have to wetnurse some bloke who knows nothing about the product and is starting with no existing client base or shop front.
I'd run a mile. You'll end up doing all the work.
Get a deal with someone who already has the shopspace (in a similar industry) and needs a new revenue stream to increase his already existing profit margins.
Never, go into business with someone who is not already in profit and has complementary products or experience.
First thought would be to find a top notch furniture store and stick one of your kitchens in a corner and brief the sales staff to corner prosepctive clients, take down details and pass them to you to make the close.
You are the best person to sell your product.
zippy3x said:
What if this (former IT) guy is no good at selling?
That effectively means his territory will be a dead zone for you, as you've agreed not to supply anyone else.
Yup. Never ever offer or agree to exclusivity.That effectively means his territory will be a dead zone for you, as you've agreed not to supply anyone else.
If someone grants it it is because their product is crap.
If you grant it you will make the guy lazy and complacent as he has no competition.
Best to have two people in one highstreet selling your product. They will sell four times as much as one guy an an exclusive.
Gassing Station | Business | Top of Page | What's New | My Stuff