You may be excited to find a manufacturer who understands your product. Before you place the order, make
sure the agreement explains what both businesses are actually committing to.
The relationship needs more than a price and a handshake. Your formula, cash, inventory and customer
reputation may all depend on how responsibilities are defined.
For hemp operators moving into cannabis, these are issues to work through with the manufacturer and
qualified counsel. A commercial agreement does not itself authorize activities that require a license.
Define the product and the approval process
Attach clear product specifications: formula or agreed formulation reference, serving and package
configuration, ingredient restrictions, packaging requirements, quality standards and expected shelf life.
Define who approves samples, when that approval becomes final and whether changes require written
consent. A sample that tastes good is useful, but the agreement should also explain the standards the
commercial batch must meet.
Clarify production dates and dependencies. A promised date may depend on artwork, packaging, inputs,
testing or deposits being delivered on time.
Protect what you bring to the relationship
Identify your existing recipes, brand assets and confidential information. Distinguish those from the
manufacturer’s existing formulas and processes.
If development produces a new formula, address ownership and permitted use explicitly. Can you take it
elsewhere? Will you receive sufficient documentation to reproduce it? Can the manufacturer use the work for
another customer?
Paying a development fee should not be treated as an automatic answer to those questions. Put the agreed
rights in writing.
Make the money obligations visible
Document minimum quantities, pricing, deposits, balance payments and the treatment of excess production.
Specify what happens if packaging minimums exceed the first production run.
Ask how prices can change and what notice is required. Clarify who owns unused ingredients, packaging and
finished inventory, and who bears storage charges.
Exclusivity deserves particular attention. If you commit to one manufacturer, understand the duration, product
scope, capacity commitments and your options if they cannot deliver. Ask counsel to assess whether the
proposed terms fit the regulated structure.
Address failed batches before one happens
Who pays when a batch fails testing or does not meet specifications? What happens if it can be reworked?
Who decides whether it should be destroyed, and who handles required records?
Distinguish manufacturer error, approved formula problems and materials supplied by the brand. Ask what
remedies apply and whether the agreement limits recovery. Discuss recalls, customer complaints, record access,
insurance and liability with counsel. Identify who performsthe operational response and who bears the associated costs.
These provisions are easier to negotiate before a problem creates pressure.
Know how the relationship ends
An exit provision should explain notice, outstanding orders, unpaid balances, remaining materials and the
treatment of intellectual property. What happens if a party loses an approval, cannot maintain production or misses
repeated deadlines? What transition assistance is available? Can you retrieve your materials, records and brand assets?
The objective is a workable relationship with a defined path if circumstances change. Your first manufacturing
partner may fit the launch phase without being the right forever partner .
Give counsel a clear commercial brief
Before legal drafting, write down the business arrangement in plain language: who develops, produces, pays,
owns, sells and manages the relationship. Flag unresolved points rather than assuming the lawyer or
manufacturer will guess your intentions.
GrowthWorks is exploring how intake, product briefs and relationship coordination can help operators reach
that discussion better prepared. Counsel should evaluate the legal structure; the licensed manufacturer should
own its regulated production obligations.
What is your biggest concern in a manufacturing agreement: formula ownership, minimums, payment terms,
quality or the ability to leave? Send me the issue you want clarified before committing.
GrowthWorks | Holly’s High Society
This article is for business-planning discussion and is not legal advice. Confirm product, licensing, manufacturing and sales requirements
with qualified counsel and the appropriate Illinois agencies.
