Difference between a distributor, agent, franchise or license
For international expansion
As you can’t have your own people all around the globe, you will need another avenue to be represented. Working with agents, distributors or franchisees will give you a broader exposure in the market and ensures distribution of the products and services you want to offer to your customers.
The difference between a distributor and an agent
Agents will sell your goods without taking ownership, distributors will buy your goods and resell them. Agents and distributors are both companies that will represent your brand in foreign markets, but are still working under their own name. It is important to know the differences between these two, as this can have various legal implications.
Ownership of goods
Agents do not take ownership of goods. An agent represents the supplier as a manufacturer or service provider in the foreign market.
Distributors purchase goods and resells them to consumers. They also provide support and after-sales services.
Revenue model
Agents are paid by supplier through commission on sales. The supplier sets the selling price. The commission on the sales should be enough to make it interesting for the agent to sell your goods or services.
Distributors add margins on top of prices, which can be higher than an agent’s fees. Subsequently, the price becomes higher for consumers. It is important to set the transfer price such, that the distributor can make a reasonable margin.
In-market operations
Agents orders will be forwarded to the manufacturer or a designated distributor for fulfillment. The agent will focus on sales development.
Distributors keep stock, they extend credit to customers and provide more services than agents thus their fees are mostly higher than an agent’s is.
Product range
Agents have smaller product ranges than distributors. An agent may have more focus on your products.
Distributors sell multiple products. Their focus is more divided.
Franchisor, franchisee and license
For your business to thrive, not only is it very essential for you to find the right business partners, you also need to find the perfect sales models for you and your business venture. If you have a strong concept that can not easily be copied, setting up a franchise or licensing structure may be useful.
A license is a formal permission or authority to do something that otherwise would be forbidden, for example using a brand, patent-protected technology, software or a database.
If you licensee your brand, this is mostly called a franchise.
A franchise is a contract between a brand owner (the franchisor) and another party (the franchisee) to use a brand, but also to obtain products, services and support from the franchisor. While using the brand the franchisee is often obliged use the shop furnishing, signs and corporate style and to pay a part of his turnover or profit to the franchisor. So this is substantially more than a distributorship.
There are three different kinds of franchise:
- Product Franchise – an outlet for a particular product
Examples: Coca-Cola, Exxon, the Ford Motor Company, and Osim - System Franchise – authorized to conduct a business according to a system developed by the franchisor.
Examples: American Idol, Hilton, and UPS Store - Process or Manufacture Franchise – franchisor supplies a critical ingredient or know-how for a production process.
Examples: Dunkin’ Donuts, Famous Amos, KFC, McDonalds, and Starbucks Coffee
Distribution channel management
Once you get your sales partner active, it does not mean you let them do all the work. The whole process would still involve ongoing communication and support.
With sales agent, stay in regular contact. Get them excited about your products. Help them to be a competitive player in the market.
With distributors, be aware of how products fit with ranging policies. Train their sales team. Help in promoting the products and stay on top of seasonal and dated stock.
With Licensees, make sure legal documentation is sound. Make a good effort to understand the licensee’s business.
With Franchisees, use a franchise consultant to help develop the package. Spend enough time on training and on understanding your brand values.
Franchise agency or franchising agent
Normally franchisees act as distributors: they mostly purchase goods from the franchisor, own them, and sell them to their customers.
Agents, on the contrary work under their own name and do not take ownership. A franchise agency uses the brand of the franchisor and sells the products or services of the franchisor under that brand.
Franchising agents can be used to sell products or services, without having to employ sales staff. The agents are paid a commission on the sales they make, and can also provide part of the services that they sell along.
Our structured approach to find a distributor abroad
Alliance experts has a proven methodology to start or increase your sales in a new market. Our local teams in over 30 countries help you define your pitch and to find and convince the right sales channels or clients. The scan phase can be short, but is essential as preparation. The Launch phase may take several months, depending on the country.
Scan the market
- We learn about your offering and what target group you want to approach
- You receive a first list of potential agents, distributors, partners or direct clients
- Together with you we draft a localised pitch document
- We discuss recommendations for next steps with you
Launch your product
- We approach the companies on your list and find the right decision maker
- We send your pitch and follow-up several times
- We connect interested parties directly with you and join you in the first call
- We guide negotiations and support you till your product starts to sell
Grow your sales
- We help you search for more distribution channels or clients
- We evaluate existing sales channels on their performance
- We can do troubleshooting in case of complaints or logistic issues
- We suggest new markets to expand your business in
Companies we have helped with distributor search
Frequently asked questions
An agent sells your product on behalf of you, but is no party in the delivery: you deliver your goods or services directly to the client and you pay the agent a commission. A distributor will buy from you and re-sells the goods or services to the client. The difference in sales price with with you and with the client is the margin for the distributor. Distributors also can take stock and finance a transaction, agents don’t do that.
Both agents and franchisees can sell your products or services and receive a commission. An agent will typically act under his own brand or company name, while the franchisee will use your brand to profile himself in the market.
A license is the right to use a brand name, concept or software application. A franchise is also the right to use a brand name, but that comes as part of a bigger package to sell goods or services under that brand.
The best way to find distributors abroad is through local consultants who know the market and can reach out effectively to the top-distributors for you. A trade show is also a way to find distributors, but then you have to be lucky that the right one visits your booth.
Franchisees are often difficult to find, especially if they need to invest in an outlet, stock and branding. You can either approach entrepreneurs who are already active in the sector, or be present at franchise matchmaking events. A local consultant can help.
First check whether your product normally is sold through an agent in the country where you want to go, or that other distribution structures are more common. Then determine the characteristics of your ideal agent, and find a number of these, or outsource this search. When you approach the first few, you will learn what they find important and who your competitors are, and you can get an indication of the commissions they want.
A wholesaler can be part of your distribution structure and is a distributor as well. Typically a wholesaler does not sell to consumers and focuses on larger quantities.
An importer buys products from you, ensures custom clearance and sells the product in his country. An importer can be a wholesaler, distributor, retailer or even franchisee, depending on his role in the further sales process.