Understanding a White Label Agreement: key component terms, benefits and risks or sample template
Before you get into a legal business relationship, you must seek and learn deeply about thousands of business concepts, organization structures, supply chains, many types of manufacturing, and various business agreements.
Creating products or services is the most challenging matter for start-up companies because they lack resources and practical experience. Thus, working with a label manufacturing company is a wise choice to solve those problems.
In this article, you will understand everything related to the White Label Agreement – one of the most common types of a label manufacturing agreement. All the valuable information and critical guidance rearranged orderly in this writing will help you master the White Label Agreement.
What is a White Label Agreement?
White label manufacturing is a legal protocol that allows products or services to be sold and rebranded under another company’s brand. Thus, a White Label Agreement is a contract between a business providing goods or services to another business that on-sells the goods or services to the end customer.
It governs the manufacturer’s production process and sets out the terms under which the re-seller may brand the manufactured products. Whether you’re the manufacturer or the re-seller, it is crucial to have this agreement in place to secure your business deals.
For example, a start-up beverage business has limited resources to produce drinks independently, so they use white label beverage products instead. This method brings a practical solution for small businesses because white labeling is in charge of all manufacturing processes, including building formula, product quality control, product packaging, delivering plans, … and other related services based on customer’s needs.
What are White Label products and services?
White Label Products
White label products are made by a company (the provider) to be rebranded and re-sold by another company (the re-seller) to an end customer (the buyer). White labeling enables retailers to expand their offerings without producing goods from scratch, allowing them to quickly scale their offerings, costs, and revenue.
For instance, a white-labeled beverage product is manufactured by the provider, rebranded by the reseller and sold to an end customer, the buyer.
In this case, the end-users are the end consumers. White label products can be sold to businesses based on the product and service model of the white label products, suppliers, and distributors.
White Label Services
Similarly, a white-label service is where services like marketing are subcontracted. It’s like getting another agency or production house to do your work or part of the work for payment, but you offer it as your services to your customers. White label services such as marketing automation can help your customers use multiple channels to reach their target audiences and goals.
- Company A is a digital agency service provider, sells its digital agency services to company B to re-sell.
- Then company B rebrands the services with their logo and sells them to company C, the end consumer.
- The team from company A fulfills the services company C purchased from company B under company B’s name.
Typically, it’s a SaaS arrangement, and users go with it and pay every month.
In this case, the end-user is another business. White labeling can be sold to end customers based on the products and services model of the white label services supplier and distributor’s products and services model.
What to include in a White Label Agreement
With white label products, the agreement is made between the manufacturer and the re-seller, and the primary terms that are usually included are the following:
- The relationship between the two parties
- The legal nature of the agreement
- The manufacturing or development of the products
- Product packaging
- Documents of the product
- Rights of the re-seller and manufacturer
- Responsibilities of the re-seller and manufacturer
- Marketing material
- Product warranty
- Product quality control
- Intellectual property rights
- Division of profits amongst the two parties
- Repair services
- Customer support
- Usual terms of agreements found in contracts: the limitation of liability, confidentiality, force majeure and termination.
Both the manufacturer and re-seller must take into account the following in regards to the White Label Agreement:
- If the manufacturer is permitted to contact customers directly (usually it is not allowed)
- If the contract contains ‘exclusivity for parties’ term(for instance, the manufacturer may not be permitted to re-sell the product within a particular jurisdiction, region or within a specific period)
- If alterations may be made to the product
- The parties must agree on how the costs and profits should be divided
- If the manufacturer will hold ownership of the product formulation
- If the re-seller will own all the intellectual property rights
- Who is responsible for product liability
With white label services, some of the most widely used services include in a white label agreement are:
- Content: Written copy (blogs, ads, copywriting, case studies, ebooks, email copy, etc.) produced anonymously that is given as a product or service package, branded under a business’s name and re-sold to an end-user.
- Dashboard: Rebrandable dashboard on white label software provided to the re-seller’s clients to manage multiple solutions from one location.
- Digital advertising: Rebrandable digital advertising services build SEM (search engine marketing) and social advertising campaigns for re-seller’s clients under the re-seller’s .
- Digital agency: Rebrandable governed digital marketing services for re-seller’s clients. White label agencies diversify in services provided but can range from online advertising, reputation management, listings management, and social marketing solutions.
- Digital marketing: Rebrand digital marketing products or services for re-seller’s clients.
- Listings management: Listings and citation management software is outsourced but branded as the agency’s own. The agency marks up its selling price and sells the listings management software to the agency’s clients. The white-label software provider provides the listings management software.
- Marketing software: Rebrandable software platform that the re-seller brands own, mark up their prices and re-sell to their customers.
- Marketplace: Rebranding marketplace where retailers can curate a selection of digital products, apps, packages and solutions to their customers as their own. Many products are re-brandable, allowing them to provide customers with the most efficient tools while maximizing their brand’s expansion.
- Platform: Rebrand software platform which the re-seller brands as their own, marks up their prices and is re-sold to the re-seller’s clients.
- Reputation management: Online reputation management software is outsourced but branded as the agency’s own. The white-label software provider provides reputation management software. The agency marks up its selling price and sells the reputation management software to the agency’s clients.
- SEO: SEO or related service that is outsourced but branded as the agency’s own. The agency marks up its selling price and sells the SEO software to the agency’s clients. A white label SEO software provider provides the SEO software.
- Services: Rebrandable services for resellers sell to their end-user customers, fulfilled by the white label service supplier.
- Social media management: Rebrandable social media marketing software for agency re-sellers to sell to business customers. Allow businesses to grow their fan base, increase engagement and share relevant content across all social media channels from a single location.
- Websites: Re-sellable, easy-to-use website creation platforms or services that are sold to web design and development agencies.
Pros and cons of working in a White Label Agreement
- Build your brand
By rebranding a vendor’s products as your own, you are reinforcing your branding and reputation. You also build a stronger relationship with your customers.
- Set your margins
You can charge the price at which you want to re-sell the vendor’s suggestions.
- Maximize profits by bundling support
Because of being in charge of supporting end customers, you can bundle support and control as much as you want for help.
- Add value by selling 3rd party products.
By reselling white-labeled 3rd party products, you can add or reduce different vendors’ offerings and optimize your product line.
- It can be challenging for start-ups and smaller organizations
As a smaller or a new company, it can be challenging to position yourself as the vendor.
- Requires in-depth IT knowledge
As the go-to resource for your clients, you need to be able to answer all their IT-related questions and issues.
- Be rich in resources
Being in charge of end-customer support typically requires enormous resources.
- Time-consuming and slower on-boarding
You need to create documentation like FAQs, marketing and training tools, etc.
White Label and Private Label – What is the difference?
In short, the difference is who specifies what the product or service will contain. In a private label relationship, the buyer determines the packaging, ingredients, formula or offerings. While the provider or manufacturer may offer a range of customizations to fit specific needs in a white label relationship, they still specify the design, parts, ingredients, or offerings.
A private label product is formed by a contract or third-party manufacturer and sold under your brand name. As the buyer, you specify everything related to the product – how to make it, how it’s packaged, what the label looks like. Generally, you pay to have it produced and delivered to your store, although you can sometimes contract to drop shipping. Then you sell the product to other wholesalers or directly to end-consumers.
White label products are produced by a contract or third-party manufacturer and sold under your brand name. As the customer, you only specify the label of the product. In this matter, the manufacturer is already an expert in creating the product you need. They produce the familiar product under other brand names. Therefore, the manufacturer focuses on specific product characteristics and how it’s packaged more than the name you specified that appears on the label.
Choose Private Label when:
- You have already designed a product
- The product that you created is overperforming more than any white label product offering.
- You desperately want to manufacture your product yourself at some point.
- You need to reduce manufacturing costs because of small quantities or reduce expenses in establishing and conducting manufacturing operations.
Choose White Label When:
- You want to get into the market faster
- Your R&D budgets are not ready
- You have a brand demand but can’t build products to fulfill
- You don’t need to be an expert in some specific products.
- The White Label Choices meet Your Quality control Requirements.
Free Sample White Label Agreement template
After understanding everything about the White Label Agreement above, you must wonder how a white label agreement looks on paper or how to identify and organize a ton of legal terms in a contract. This section will give you a direct answer to these questions. Here is a sample white label agreement template that we have chosen essential terms carefully and reorganize systematically.
To sum up, a white-label agreement can help you utilize your business’s unique branding to offer a product or service without investing too much in infrastructure or technology creation around the solution. The result is you can focus on building your brand and selling your services while simplifying the conversion path for your customers.
Tan Do Beverage company also offers various manufacturing services which can bring you multiple solutions for your beverage business. Check out our services to experience more!
Tan Do is a global beverage ODM/OEM manufacturer and supplier located in Vietnam. Since 1996, we have built trust and credibility not only throughout Vietnam but also in many parts of the world. Leveraging state-of-the-art technology, we have crafted thousands of products that align with ISO, HACCP, HALAL, FDA, and many other standards.