Page 6 - Beverage Master February March 2020

Craft Beverage

Distribution Agreements:

Negotiate Your “PreNup” Carefully

By: Brian D. Kaider, Esq.
S tarting a brewery requires learning a lot Supplier/distributor relationships are governed

of new skills and practices that have noth-
by franchise laws in most states. In the absence of
ing to do with making great beer. One
of the most confusing and frustrating is franchise laws, the relationship is defined entirely
by a distribution agreement between the parties.
the issue of distribution. If their state allows, most But, even in franchise states, the distribution agree-
new breweries initially distribute their own prod- ment can play a critical role, particularly in the ter-
ucts and, if the brewery is content to be relatively mination of the distributor relationship.
local, that might never change. But, in many cases,
brewery growth necessitates working with a distrib- Too often, however, breweries accept a distribu-
utor. This is not a relationship to be entered into tor’s “standard” agreement and when the relation-
lightly. A distributor becomes an ambassador for ship sours, the supplier finds that they are stuck
the brewery’s brand and, once retained, the suppli- with no viable option to terminate. The best prac-
er may have little control over how its beer is mar- tice is to engage an experienced attorney to negoti-
keted. Further, these relationships can be difficult ate the terms of the distribution agreement. While
or financially impossible to break once established. even the best attorney cannot evade state fran-
chise laws (which generally prohibit a distributor

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