Manufacturing Agreements and Food Businesses
Are you a food business that contracts to have another business produce part of your food product or supply a service to you? If so, read on.
Outsourcing is especially useful for food businesses when they are starting out and cannot yet invest in extensive equipment or additional staff. Before you engage the manufacturer, you should do what you can to ensure they are competent and able to deliver what you require on time. Physically inspect the site to make sure they comply with regulatory requirements such as food safety and handling and has a high level of quality control is an important start.
Volatile prices of certain foods/products will have significant impacts for the manufacturer. They may try to cover off on this in the agreement but make sure you understand what you are signing up to. :
Once your food business has found the right manufacturer, have a written agreement drawn up by a legal professional accounting for any potential risks and covering essential points such as pricing, quality, turnaround times, responsibilities of each party, and how disputes will be resolved.
Before speaking with your solicitor, try to come to agreement about the following:
- How will the manufacturer charge? Will it be by the hour or by quantity? How much will this be? Is there a minimum charge?
- How long certain jobs will take the manufacturer to complete?
- Will the cost include indirect activities the manufacturer must undertake such as cleaning and maintenance?
- Will the cost of ingredients be limited to what is required by contract or will there be wastage? What is the shelf life of ingredients required?
- How will the food be transported, and who will pay for the delivery? Does the manufacturer also distribute your product?
Terms and conditions to consider:
- Must orders be placed at a certain time to ensure they will be produced within a certain timeframe?
- Are there minimum sizes?
- Consider the compliance measures the contractor has in place and ensure they are part of your terms and conditions;
- Are substitute ingredients allowed if usual supply is unavailable?
- Intellectual property – who will own the recipe? Usually it will be the food business, but consider what will happen if the manufacturer assists with new food product development;
- Will products require testing? How will this be done, and who will pay for this?
Often a manufacturer will be engaged by a food business for packaging requirements. Food businesses should have a specification sheet setting out exactly how packaging is to be carried out in order for their food to be protected and have a long shelf-life (if appropriate). Consider exactly what materials are to be used, size, will the manufacturer be labelling your product and meeting required regulations, and so on.
If you need further information about a current manufacturing agreement, or would like one drafted, get in touch.
This is general advice only. Liability limited by a scheme approved under Professional Standards Legislation.
Published Aug 13, 2018Go back