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Alaska

Kind-of

Arkansas

YES

Colorado

YES*

Connecticut

EXCLUSIVE TERRITORY

FRANCHISE

STATE

YES

NOTES While not explicit, only one wholesaler can be named as the primary source. Termination requires a hearing and determination by director of Alcoholic Beverage Control Division. *While there is no explicit provision, the state has guidelines regarding a supplier's termination of a wholesaler. Any contract between supplier and wholesaler must be submitted to the state during the brand approval process.

YES

Termination: requires notification to the Department of Consumer Protection for evaluation. If there is a written contract, then it needs to be submitted to the state during the brand approval process. Dualing is discouraged but possible if certain circumstances are met.

Delaware

YES

Georgia

YES

YES

Termination: Department of Revenue will decide at its discretion and may choose to hold a hearing.

Kansas

YES

YES

Termination: 30-day filing requirement.

Termination: written request to commissioner at least 60 days before proposed date. Provisions for calculating “reasonable compensation” due to a terminated wholesaler in absence of good cause. Termination is only by approval from the state commissioner.

Termination: No specific provision, but must provide 30-day notice to wholesaler and Alcohol and Tobacco Tax Bureau.

Maryland

Massachusetts

YES

Missouri

YES

Nevada

YES

New Jersey

YES

New Mexico

YES

Tennessee

YES

Washington

YES

Wisconsin

YES

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Termination: copy to Commission at least 120 days. Commission will determine if good cause exists.

Maybe

Possibility to specify more than one wholesaler if in the contract. Termination: 60-day notice.

YES

Contract required. Termination: notice to the Commissioner. Termination: 60-day notice.

their profit, they will. The resulting increase in cost to the consumer will lower demand. The dilemma is that the loss of customers (lower demand) is felt by both the supplier and the wholesaler, whereas the increased profit margin aggregates to only one party, presumably the wholesaler due to the lack of in-state competition. The means to address this is through the supplierwholesaler contract. But, if a contract can’t be terminated by the supplier, then it has no teeth and the supplier is at a disadvantage.

GOOD CAUSE All franchise states allow the supplier to terminate the contract with “good cause.” However, what constitutes good cause varies tremendously between states and is itself a notoriously fuzzy and ambiguous set of standards. The interpretation common across most states is that good cause refers to either: bankruptcy of the wholesaler, the sale of most of the assets of the wholesaler, or repeated violations by the wholesaler of state or federal laws. After these, the states vary widely. For example, many states exclude failure to meet performance criteria as good cause, while a few states explicitly include performance criteria. Georgia, for example, includes a provision for a wholesaler’s failure to meet sales volumes consistent with those of other wholesalers of the brand, and Massachusetts precludes preferential selling of a brand’s competitors. Therefore, knowing the extent and limitations for each individual state becomes critically important. Although I’m frequently skeptical of supplier-wholesaler contracts, in franchise states they can be very important. In fact, some states require them, such as Tennessee, while others require their inclusion as part of the brand registration if they exist (e.g., Delaware). In franchise states they are worth the effort. In the absence of a clearly worked out contract, then the

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Artisan Spirit: Winter 2016  

The magazine for craft distillers and their fans.

Artisan Spirit: Winter 2016  

The magazine for craft distillers and their fans.