Vendor Relationships
Overview
Vendors are central to the life and viability of a farmers market. At the same time, conflicts involving vendors are a real possibility. For example:
- A vendor might become disgruntled with a decision by the market management.
- A vendor might violate market rules.
- A vendor might be displeased with the booth/stall assignment.
- A vendor might use tactics that are disagreeable to customers or other vendors to market products and attract customers.
- Vendors may conflict with each other over pricing or product selection.
These conflicts can lead to an array of undesirable outcomes, including unpleasant interactions between vendors and/or market leaders, and vendors withdrawing or being ejected from the market. In a worst-case scenario, a conflict can escalate into a lawsuit. Although vendor lawsuits against markets are uncommon and usually difficult to succeed upon, the stress and bad publicity alone can negatively impact a farmers market.
For an overview of vendor relationships as a legal risk, see page 4 of this printable resource.
How to Manage this RiskDiscrimination and Eviction
Two of the most significant legal claims a vendor could bring against a market are discrimination and wrongful eviction. These are not common legal problems for markets, but they are worthwhile issues for market owners and managers to understand.
Private businesses and nonprofits are given a wide berth to develop their enterprise in the manner they see fit. However, businesses and nonprofits are not allowed to discriminate against specific protected classes in many circumstances. Making decisions on the basis of race, disability, and other prohibited factors, which vary from state to state, is a potential discrimination problem. Making solid business choices based on other factors is not discrimination.
Wrongful eviction is a possible legal claim when someone is removed from a space they are legally entitled to occupy because they own or rent the space. Most farmers markets choose vendors to participate in the market; they do not sell or rent space to vendors. Excluding a vendor from participating in the market is therefore not a legal matter of eviction.
Vendor management may not be about avoiding lawsuits so much as promoting peace of mind, smooth operations, and a good reputation for the market. Farmers markets have many ways to manage these risks. Insurance, governance, recordkeeping, and rules and procedures each have a role to play in keeping vendor management problems to a minimum.
Risk Management Tools
Rules and Procedures
Strong rules and procedures are perhaps the most important risk management tool when it comes to vendor relationship management. They create predictability and accountability, both of which minimize the chance of conflict and the chance that any conflict will escalate into a legal matter. For example, developing procedures and processes around dispute resolution can minimize conflict. Farmers markets can also prohibit discrimination in their market rules, and they can prohibit discrimination based on characteristics that may or may not be legally protected in their state, including race, color, religion, national origin, disability, age, sex, sexual orientation, gender identity, pregnancy, marital status, military status, and veteran status.
Overall, three key best practices will help farmers market businesses and organizations make the most of vendor relationship management through rules and procedures: transparency, consistency, and discretion.
The learn more about Market Rules and Procedures as a risk management tool, click here.
Insurance
As compared to other risks, insurance has a limited role to play in managing vendor risks. There is a possibility that a vendor disagreement could escalate into an issue related to whether a business owner or nonprofit director performed his or her responsibilities to the entity; and in this case, directors and officers insurance may be useful. The most likely legal claims that could be made by vendors are discrimination and eviction, which are not generally managed by insurance.
The learn more about Insurance as a risk management tool, click here.
Governance
A business structure is one of the most basic tools to limit liability. An LLC, corporation, nonprofit corporation, or cooperative can insulate market owners’ personal assets from business liabilities. In many cases, the lawsuits and liabilities that might result from vendors would be business liabilities. That means vendors could only seek the assets of the market—they could not pursue the assets of the owners/leadership personally. However, this protection is not absolute. Some discrimination claims can be made against owners/leadership personally, even when the business is incorporated.
In terms of internal governance, any business structure should have a procedure for reviewing the performance of managers and executive directors. Reviewing a manager or executive director’s performance may help the farmers market in identifying and potentially stopping behavior that might lead to poor vendor management or a lawsuit for discrimination, eviction, etc.
The learn more about Governance as a risk management tool, click here.
Recordkeeping
Farmers markets should consider where good records can reinforce the rules and procedures laid out as a risk management strategy. For example, if a farmers market creates a vendor complaint process, it should document and record that process. Notes should be kept of interviews with vendors or site tours the manager may take as part of the process. Farmers markets should keep vendor applications on file and make a written note of how each applicant stacks up against the criteria. The decision maker should also keep records of any and all commitments vendors sign as part of the application process, such as agreements that they have read and understand market rules.
The learn more about Recordkeeping as a risk management tool, click here.
