Legal Question in Business Law in California
Manufacturers controlling the retail marketplace
A partner and myself are attempting to open the first of what could become a small chain of specialty retail stores. We have start-up money, additional financing in place and solid business and retail resumes. We have located several very good retail sites.
There are 5 or 6 specialty manufacturers in this arena, the largest player represents 25-30% of the sales. We have approached this mfr. to buy from them and sell from our proposed new location. We submitted credit apps, a general business plan, etc... They so far have not approved of the locations we where we want to open. We are 6 miles from the next small specialty store selling their product, they say they would prefer 10 miles. They claim that they ''have enough distribution'' in this densely populated suburb. What they are, in effect, doing is controlling the retail environment.
Can they do this? A couple of the other major mfr's are taking a similar approach, we have one, so far, that will sell to us, but we need the other major brands. What should we/can we do?
2 Answers from Attorneys
Re: Manufacturers controlling the retail marketplace
With very few exeptions, people and businesses have no legal obligation to form contracts they'd rather not form. What's more, the manufacturers have contractual obligations to their existing retailers which they might breach by cooperating with another seller in the same area. If you want to do business with these companies you will probably have to play by their rules.
Re: Manufacturers controlling the retail marketplace
Negotiate. Prove to them it is in their interest to deal with you. Companies are free to choose their suppliers and contract partners, and are free to establish 'territories'. You'll want the protection of one for your own company. Feel free to contact me if you get serious about obtaining legal help in this.
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