Has anyone ever heard of this type of contract?

It looks like I finally got this patio furniture mfg. to produce one of my designs. It is not 100% sure, but they are prototyping the series as a dining chair, club chair, barstool, and ottoman. I have not signed the contract yet, but I have visited the facility and I do trust the people I am working for.

My question is has anyone ever heard of such a royalty agreement where they give you 4% of the manufacturing cost of the frame? I can understand why they don’t want to give me anything for the cushion or the different base options that are pre-existing.(like a swivel and rocker base) I didn’t design that stuff, but I am worried that this may be unfair.

Can anyone with experience in this type of work give some suggestions on:
-is this fair?
-if not, how can i present my case to them without ruining our relationship that I have workes so hard to create?
-what would be a better option for the contract?

Thanks

how do they plan to market it? what segment will it be in and what are the top sellers in that segment? what PLC are they planning for it?

yeah, you can screwed by that sort of agreement.

find out if they have a cap on it. i know a couple of people who had a royalty contract and the piece unexpectedly sold like gangbusters…they made out big on the royalties. some companies put a cap on your royalties because of instances like this.

They are an established American made brand. As for their marketing, they retail at furniture stores dispersed all over the country, but more on the west coast. Their competition are manufacturers like, Tropitone, Brown Jordan, Mallin,… Their products are fabricated with bent alluminum extrusions so they compete with kind of middle end products. Well-priced, well-made, transitional to contemporary product lines.

I don’t know what PLC is. Please share.

I am going to try to get a copy of the contract tomorrow to check on this cap thing. But, you have heard of a “royalty on a manufacturing cost”? I have only heard of royalties on wholesale prices, but who knows.

Thanks!

no, i haven’t heard of the manufacturing cost, just “at cost”.

we do a little work for competitors of those companies too. mostly east coast/south african. good friend of mine heads design at woodard. tough market.

plc=product life cycle. you don’t want them to sit on it, then market it as your contract is about to expire.

Thanks for the info. I might have a few more questions when I get the contact, but we’ll see.

Maybe I should get a lawyer to check it out too. What do you think?

i was going to recommend that. wait until everything is on paper, sometimes particulars are lost in translation, verbally.

having a lawyer well-versed in contractual matters is always a good idea.