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Tom stevenson Ceo of h enderson greetings
advises newsagents to carefully consider
contractual offers when deciding on which
card company to choose as their major
stevenson suggests newsagents all those entering into
contracts should be aware of the following:
• Fixtures – Do you really, really need them? Will they cause
you to sell more greeting cards resulting in more profit? Could
you refurbish your own fixtures at your own cost and negotiate
better terms and make much more profit. This is better for
both parties, it conserves cash flow.
• period of Contract – Is it a fixed term or can it be extended
through a non-performance clause for non-achievement of a
sales performance level over the period of the contract. The
performance of retail sales is a jointly responsible matter of:
(i) The agent offering the best service, lighting and space, and
(ii) the supplier providing up to date designs, quality and
consistent and good service (remember cards are fashion
products). My advice: Cross the clause out!
• performance – Does your contract call for a specific volume
of purchases over the contract. If so, will you agree? Can you
be so sure of the future? Can you be sure the product quality
will aid sales; will external things like council road works
reduce store traffic; will shopping centres close you down for
months during refurbishment and will there be a financial
penalty for non-achievement?
• Free Fills – here is the biggest ruse, whether on purpose
or by just not knowing the law of contract. unless a credit
is issued for the lift-up of a competitor’s stock and the
replacement stock is issued to you free of charge, it will not
be a free fill, it will only be a replacement of stock if the new
stock is invoiced to you. You will then have no added valuable
benefit (consideration). If this is the case, then such should
not be a contractible item, although it often is incorrectly
included for penalty purposes. Make sure your supplier
removes the old stock they are replacing, otherwise they
can argue (probably unsuccessfully) that as you still had the
original stock, though you can’t really sell it, you do have an
added valuable benefit.
• Fixed sum ‘lift-up’ – Many contracts allow for a fixed value
lift-up ‘allowance’ of other suppliers’ stock. sometimes this
value does not equate the value of your stock removed by a
substantial amount. It should at least be equal.
• Taxation – Are you aware that many benefits supplied have
income tax complications? Does your supplier advise you on
this and does he indemnify you in the contract against this
happening? You should insist upon written confirmation.
Acceptance of the use of fixtures does have a tangible benefit to
the retailer and as such has a measurable benefit that can
be defined by the taxation department against you as taxable
income. It is not good business practice to accept the use of
fixtures; it is a sleeping penalty that can be applied by the
taxation department for not declaring it. opt to negotiate terms,
at least that way your discount is already included in your
purchases and has no problems in disclosure. Likewise cash
handouts, free stock, free anything that has a value to you.
Remember, you get “nutt’in for nutt’in” .
• benefits and/or Fixtures depreciation – Does the supplier
recognise that the partnership of supplier and retailer is
creating profits for both parties along the way, and depreciate
the benefits given and fixtures over the period of the contract,
or does the contract require you to pay back the original full
amount by way of penalties? ensure that all penalties are
identified by the supplier before you even consider signing,
as you will often find that what is in your letter of offer is
somewhat different to what is in the contract.
• discounts/rebates – Are they real? Is there any likelihood of
you ever achieving them? Is your threshold of purchases you
have to attain so high that it will result in little or no rebate?
Who sets the sales estimate? Do they neutralise your rebates?
Many rebates will, as they will be applied by some suppliers to
write off the benefit given to you in the first place – so where did
it go? Will you recognise your rebates for tax purposes if offset?
• Cash offers – Beware! Are they taxable? Are they refundable
to the supplier in total in the event of default?
• privacy – Does the contract give the supplier the right to
conduct property searches, or even take out a Lien over your
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