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 market entry approach: scan - Launch - Grow
The best way to learn about a market is to start reaching out and develop your distribution strategy on the go. This is what we do in our Scan-Launch-Grow approach.
1st month
We scan the market
We dive into your product and what sales strategy has worked for you in other countries. We show you offering to various potential distributors or agents to collect feedback. And we review your competition so that we can determine the best market entry strategy.
2nd month
We launch your product
Together with you we develop a first pitch for your target group. We extend our long-list of potential targets further and start reaching out, getting to the right decision makers and pitching your product. And we discuss the results with you, in order to optimise your strategy further.
3rd and next months
We grow your sales
We keep searching for new sales channels and reach out to them. We also follow-up on previous contacts we had and on leads that you bring in. We introduce you to interested parties, but we can also support in meetings or close deals on your behalf. Every month we review our results.
