Affiliate
Commission
Affiliate commission is a distribution method frequently used in the textile sector, by which a commercial person, called a commission agent, sells products belonging to another person (principal), on behalf of the latter and under his name, with the payment of a commission calculated on the turnover achieved.
The status of the commission agent is governed by Article L. 132-1 of the Commercial Code which provides that the affiliated merchant acts “in its name or under a corporate name on behalf of a principal”.
Unlike the franchisee, the commissionaire does not own the goods he offers for sale: the affiliate has received them on deposit and is responsible for selling them.
The situation of the commission agent is similar to that of the commercial agent, with the difference that the commission agent is personally committed to the buyers, even if they know the identity of the principal.
In addition, the commission agent cannot claim compensation for damage provided for by the Commercial Code in the event of termination of a commercial agency contract, unless the contract is reclassified.
He is indeed the owner of his business.
The affiliate therefore does not bear the risks and costs related to the ownership of the stock. These remain the responsibility of the brand that delivered the goods. The cost of creating and operating an affiliated outlet is therefore lower than that of a franchised outlet.
The commission-affiliate system thus has the advantage of being able to attract candidates with less equity and less management skills. In return, the affiliate’s commission is less than the franchisee’s margin. The principal sets the maximum selling price to the public of the products distributed by his commission agent, which in practice reach him pre-labeled.
The commission-affiliate has the disadvantage of placing significant stock risks on the brand if it makes errors of assessment on the composition of its assortment, the sales forecasts or the markdown. If it operates an optimized management of its assortment and its stocks, the commission allows it on the contrary to ensure an optimal management of stocks and sales.
If the provision of know-how is not a condition of validity of the contract, unlike the franchise, the commission-affiliate most often organizes the training of the affiliate, the obligation to operate the point of sale according to the standards of the network and includes obligations close to those contained in a franchise contract.
The system can be used exclusively or jointly with the franchise. Many ready-to-wear networks use both systems, depending on whether they can be used in a particular catchment area or with a particular candidate.
The commission-affiliate contract in principle includes a trademark license. Exclusivity in the sale of the brand’s products is usual. On the other hand, territorial or customer exclusivity is not the essence of this type of contract: it can be stipulated if this is the principal’s strategy, without him being forced to do so.
The commissionaire’s access to the network presupposes, as free of charge, the payment by the latter of an entry fee and annual fees.
Particular attention should be paid to the risk of reclassification of commission-affiliate contracts as employment contracts or commercial agent contracts. The drafting of the contract must provide the distributor with as much security as possible on this point.
