Canadian And Other Foreign Companies Selling Into The United States Through Intermediaries Should Beware Of Franchise And Other Distribution Laws

Mondaq News Alerts:

A Canadian or other foreign company looking to obtain a presence in the United States market without having to set up its own U.S. sales operation may consider using intermediaries to sell its products or services in the U.S. The most common types of intermediaries are independent distributors and sales representatives. A distributor typically purchases the foreign company’s product, imports it into the U.S., and then sells the product to end users. The distributor often provides buyer financing and handles after-sales service and warranty needs. A sales representative, rather, typically acts as an independent agent who sells the foreign company’s product on commission but does not at any point own the product. The sales representative often solicits orders within a specific geographic area with the foreign company delivering those orders directly to the customer.

The use of an intermediary may allow a Canadian or other foreign company to gain an immediate presence in the U.S. market. However, distribution in the U.S. is subject to increasing legal regulation. As part of its export plan, the foreign company should examine any proposed distribution relationship with a U.S. intermediary to determine whether the relationship will be subject to U.S. franchise or other distribution laws. This article discusses generally some of the laws regulating distribution in the U.S.

Franchise Laws…