Sole Dealership Hurdles - What do I do?

[arinze]

I am a young business man of 34, and have just started a service business that is less than a year old. The Parent company I represent in my area has agreed to extend sole dealership for my area to me. Apparently, the Parent company has been doing business with another company in my area (on the same sole dealership basis) over six years now, but owning to the reason that this company has not bought stock for the past two years, the parent company has decided not to do business anymore with this company, and in turn "passed" on this sole dealership to me. I have been considering meeting with the CEO of the company in my area to find out his own story, and have some reservations in doing so - afterall I may have just snatched his meal ticket.
1. Should I go ahead to meet with him?
2. I am also amazed that he is still rendering this service and has not wound up, yet. Assuming he agrees to meet with me, what level of information should I divulge to him?
3. Apart from asking his side of the story, how should I approach the topic of sole dealership with the Parent company?
4. If he offers a hand of partnership, do I accept and retain him in business or refuse? My initial business surveys indicate that he has a weakness in marketing the products and another of some some internal problems with his partners which may have manifested in his business not doing so well.

Appreciate you honest and professional answers from your experience.

Best regards,
Arinze.

[Statler]

Hi,

If you were purchasing the business off the guy, then yes, it would be a good idea to meet him and find out as much as you could about it, etc.

However, I'm not sure how much benefit it's going to be to meet this other person who used to be the sole dealership for your area. He may say very negative, untrue things about the parent company, as he could be upset at losing out on the deal. Plus, he will then know you are a competitor and may work to cut you out of the market before you have a chance to gain a foothold and make a name for yourself.

From what I can gather, it is the backing of the parent company that is important here, not this other person who they have been doing business with.

Lee

[Andrewgadd]

Hello

I'd back up what Lee has said, but there is more than one way to skin a cat... Could you phone up this other company (or get someone else to do it for you) and pretend to be a potential customer - for the product that you would be selling? That way you could get his side of the story, without revealing who you are, (and your real reason for phoning) and you might get the truth - as he wouldn't have an axe to grind. Perhaps he now offers a competitors product, that is better / cheaper / faster / better delivery etc. Perhaps the 'parent company' were very bad at delivery or support. Perhaps the paperwork was a nightmare. Take the information with a bit of caution, as he might simply be making excuses for his own failings, but it's all information for you. And, as with all market research, you can (almost) never have too much information.

Make sure (from this parent company - if you go ahead) that you really do have a sole dealership. Get it in writing that you will be the only person they will be selling to. Having them decide to "not to do business with anymore" with this other company simply isn't good enough. When you start making a success of your business, you won't want this other dealership to suddenly wake up to the potential, and start making a real effort to compete with you. The parent company might want to leave the other guy in place, because (in their mind) you can't have too many people selling your product. But they'll have to understand that you want some insurance - so that you can put all your effort into re-selling the product, without worrying about a local competitor springing up with an identical item.

Hope this helps. I've had a distributorship I was running nearly ruined because my supplier thought it was a good idea to have another re-seller local to me. If you want to be more specific, or ask further questions, I'll try to help.

Regards - Andrew