Contract for a clothing sales rep
Posted by Kathleen Fasanella on Nov 21, 2006 at 9:38 am / Newbies, Sales and Marketing / Trackback
It’d be great if those of you with experience and established sales reps could help out with this question from Tish. She writes:
We are a 3 year old line working with a Sales Rep who has been valuable in placing our young designer into the top boutiques and dept stores which as a result have put her in all the magazines with Paris, Jessica etc. wearing her designs. Our amazing rep has come to us now with a bullish contract. We love her and don’t want to lose her, but need to know the norm and acceptable in sales reps contracts. Terms (length of contract), show room fees, trade show fees, commission rate, length of termination notice. She wants us to guarantee percentage of order we will ship, exclusive US representation, advances on commission? I have looked everywhere on line for apparel contracts to no avail. Can anyone fill me in on the industry norms?
I wrote Tish asking for specific details of the contract. She replied:
The sales rep in return wants a 3 year USA exclusive contract. 12% commission, $950.00 in trade room fees monthly. All Trade Show fees (Pro Rata with other lines). She wants 120 days termination with 3% paid for one year following termination. She will accept quota’s tied to the contract. She would like 1,500. advance every month. She does not include in the contract what she will do for that money.
I pulled up 5 sales contracts from the internet (none from apparel were available) and put together an agreement including general duties, relationship of parties, scope and limitations of Rep’s Authority, conflict of interest, commissions including how computed and when paid and not paid, charge backs, statements, sale of product {(here she wants shipping guarantees of 85%) I gave her the ability to terminate should we not reach this number. Won’t pay her the commissions for 85% if we don’t ship.} Expense of doing business, customer service, term and termination. Here I gave her 120 days unless there is undue “mental stress” or “financial harm” during that period. Return of material, governing law and jurisdiction, limitation of liability.
What I need to know is what is reasonable to pay a rep who has taken a huge risk and put all her energy into making a designer successful. She is amazing and would be very difficult to replace as I see others have not been so lucky. We want to be fair not stupid. Can you advise?
I have a few thoughts on the matter (and eagerly awaiting input from the rest of you). The parameters of the contract appear to be within bounds and very similar to the contract you’ll find on page 92 of The Entrepreneur’s Guide. Also, I commend you for trying to be fair. Too many entrepreneurs approach their partnerships like bargain hunting forays at Wal-Mart, much to their later detriment.
Some impressions I have are that the term of the contract (three years) may not be to your advantage; one year is more typical but I can see why she’d want to tie you in for three. If she’s as good as you say -and I have no reason to believe otherwise- it makes sense she’d want a return on the investment she’s made in your line. After all, a less than ethical manufacturer could take advantage of her, using the rep to build momentum for the line to the point that it was self sustaining and then let the rep go, getting other less expensive reps to process orders. At the same time, people (not just reps) are known to slack off if the trough is well stocked. See if she’ll go for two years; that is still one year beyond the length of the typical contract.
Regarding the rate of commission, I think (under these circumstances) that 12% is high. Obviously the line has some pull and 12% is more typical of untried lines. Proven lines pay 7%-10%. Also, when you say “She does not include in the contract what she will do for that money”, that is fairly typical too. The performance and duties of the rep are usually implied rather than specifically detailed. If this bugs you, I suppose you could itemize what she is doing for you now and amend the agreement with those responsibilities.
The 120 days termination is standard. The 3% is fair, some reps will try and demand the full rate of commission (!). The shipping guarantee of 85% is also standard, nothing untoward about that. The one thing I’m not clear about is the “USA exclusive contract”. I don’t know what that means. Does this mean she gets 12% on all US sales? Also, no mention was made of house accounts; no commission should be paid on those.
What say the rest of you?
10 Responses to “Contract for a clothing sales rep”
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November 21st, 2006
11:25 am
I pulled up 5 sales contracts from the internet (none from apparel were available) and put together an agreement including
I’d be careful about cobbling together a contract based on other contracts. Without any legal background, the likelihood that you end up creating a contract that is not legally valid is high. Also, how do you know the contracts you reviewed were even good examples to use?
It seems as though consulting with an attorney that specializes in the apparel industry is extremely important here.
November 21st, 2006
12:18 pm
I think this is the time when consulting with an attorney that specializes in apparel contracting would be worth its weight for years to come. The attorney should know the industry “standards” s/he can educate you on them and prepare a contract for you, with explaination of why things are done the way the’re done. This will give you a good foundation for future growth.
November 21st, 2006
12:38 pm
Hi, I have been selling and a Sales Manager since 1970. If you cannot live without the rep than I guess they own you. Maybe you need to be a bigger part of your business. Now on the rep situation #1). in the better area 12% is the Norm. Showroom participation in NY is about $750 per month - $500 for shows in Dallas, $350+ for Atlanta - The Chicago show could be $500 2 times per year, etc. In LA the showroom participation is differetn with the buildings, etc. A contract must be fair for both sides - 1 year is fine and the guarantee of shipping is normally 85% - but maybe have a clause that says if she only sells 24 pieces of a style you are not responsible for that style, etc. Or whatever your minnimums are. It has to be a two way street. Any more info - ask me..
Best,
Richard
November 21st, 2006
3:34 pm
What does shipping guarantees of 85% mean?
November 21st, 2006
4:12 pm
I’m still trying to get my jaw off the floor about the 120-day termination. Man, I work on contracts all day at my day gig, mostly for very well paid doctors and surgeons. Standard termination is 30-60 days. Why 120 days in the apparel industry? There must be some reason. And to not spell out the duties the rep must perform leaves the contract just ripe for breaching. There is a thing called “consideration” that every contract must have, which means “something for something.” Please, don’t ever have a contract without it. Don’t ever leave it to assumption of what you are paying for–be specific. Even if you can’t find an industry-specific attorney, go to a good contract attorney. Maybe that’s what I need to do as a side business, is to draft sales reps contracts. Hmmmmm….
November 21st, 2006
8:17 pm
I may be wrong; but, I presume the long leave-of-notice is to dis-incent the wholesaler from replacing the rep because they took the account “direct” or found a cheaper rep. Those simply aren’t “good enough” reasons on their own to switch reps.
In my opinion, I would have no problem ensuring the deal was equitable. I think 120-days notice is reasonable for an established performer. But, I would ask that the contract explicitly cite examples of circumstances under which the rep could be released immediately and waive the 120-day runout for commissions (e.g. X accounts more than 20% delinquent, etc).
I think the showroom fees are high. But, I have a limited frame of reference. I would need to see invoices to substantiate that figure.
I also think the draw on commission is steep, too. But, I’d need to analyze previous performance to know if that were the case. Typically, reps in other industries (i.e. insurance and food purveyors) are paid a draw when they’re green. To keep their position, they need to net the draw down to zero by meeting monthly quotas. Missing the quota (or, not making it up w/in 30 days) is grounds for immediate dismissal without residual commissions - they are legitimately “direct accounts” at that time.
Guaranteeing commission to pay out based on 85% of the shipped value I think is reasonable. But, I think the rep needs to be involved in the collection process if you’re guaranteeing their earnings when yours are not. An example would be when accounts are 30-days past due. I consider this to be a reasonable request since they introduced the slow payer to you.
January 5th, 2007
3:16 pm
I’ve had a clothing line for a few years now… and am now realizing I need a sales “road” rep. I am having a heck of a time finding good resources for this. I’d love to find someone with a few years experience, obviously someone that would want to travel a territory by car, someone that also handles other similar type lines.
Is there a good resource for this on line? I did find a site called fashion jobs central… are there others?
thanks!
February 11th, 2007
7:57 am
That website, fashion jobs central is a scam. No legitimate job hunting site should charge job hunters for posting their resume or job searching. I think that you might even do well searching resumes on craigslist.
April 9th, 2007
11:06 pm
I am currently a student and am thinking of starting
a small showroom to represent a few cdesigners in our town. What is the norm regarding commission, shipping costs, monthly fees? Also, any advice on starting this and tips would be GREATLY appreciated.
November 27th, 2007
8:24 pm
I am currently employed as a product development manager for a contemporary line. The buisness is only a year old and we have just completed a years worth of trade shows. I was asked to do sales at the shows for the first year only. Now, my boss would like me to continue to do 4 shows a year. I am asking for a commission but I am not sure what a fare rate would be. I am not a proffessional rep, but I am performing extra duties I was not hired for. Any tips for negotiation?