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68 WINES&VINES August 2016 BUSINESS PRACTICAL WINERY & VINEYARD O ne of the most common questions I get from winery clients is: "My distributor (in a franchise state) has no incentive to sell my brands–he knows I cannot fire him. Do I have any leverage at all?" This is a valid question: Is there anything a winery can do to encourage performance from a distributor in a franchise state? Failing that, can the winery terminate the relationship? Written distribution agreements I recently exchanged emails with a winery executive who was entering the market in a franchise law state and preparing to ap- point a new distributor. I asked my custom- ary threshold question: "Do you have a written agreement for the distributor?" The executive replied, "No. Isn't an agreement worthless in a franchise state?" This is a typical response from wineries experienced enough to know the nightmare that is alco- holic beverage franchise law, and the simple answer is "NO," although there is admit- tedly a more nuanced response, depending on the state in question. The fact is that a written agreement, prop- erly drafted to respond to the specifics of a particular state's franchise laws, is usually the supplier's only leverage against the distributor "deck-stacking," which occurs in states with alcoholic beverage franchise laws. Good cause termination Let's start with a basic premise. All franchise states allow a winery to terminate its relation- ship with a distributor for "cause." Some franchise states define the universe of what constitutes cause under that state's laws. Other states provide examples that are not an exhaustive list, while other states give no guidance at all. Some of the more unfriendly states have very narrow definitions of cause and even go so far as to state that cause does not include a distributor's failure to meet any particular goal or quota. 1 Surviving Distributor Power Plays Knowing your rights and protecting your brand in a franchise state By Suzanne DeGalan EDITOR'S NOTE This is the second installment in a two-part series about franchise laws by attorneys John Trinidad of Dicken- son, Peatman & Fogarty and Suzanne DeGalan of Hinman & Carmichael. Trinidad's article, "Why Producers Hate Franchise Laws," appeared in the April 2016 issue of Wines & Vines.