# Question about intellectual property & partnerships.



## Thesauceboss (Feb 18, 2019)

Hello and thanks in advance for your wisdom....

I have an award winning, gourmet bbq sauce that already retails at farmers markets and smaller retail stores for $6. My “partner” claims to have 240 bottles sold, but only at $3.35 per bottle. 

My avg. cost/charge with labor and ingredients, on the low end is $3 per bottle. There would be two full days (16 hours) of labor that would go into said batch size. Your “partner’s” only cost is $0.77, for each set of bottle, cap and shrink band. 
His cost - $184.80 + delivery to “customer Z”
My ingredient cost - $324.00 + 16 hours of labor
Total COG - $508.80

He demands that I make them and then split the profits 50/50 based off the $3.35 price.

We would bank $804
804-508.80=$295.20
Split 50/50 = $147.60 each (or $73 per day of work)

Am I right in thinking that I’m getting the short end of the stick and that this deal doesn’t even make any sense?


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## someday (Aug 15, 2003)

Everything you said makes sense, but only you can answer if it is "worth it" to you or not. 

What is your partner bringing to the table that would allow them to claim 50% of the profit? Are they going to expand the business into other retail markets, etc? One person doing the labor and one person doing the "business" isn't an unheard of split for a partnership. Someone has to go out and make connections, sell, etc. Again, you're the only person who can answer if it works for you that way or not. 

16 hours seems like a long time to make a batch of sauce. Can I ask why it takes so long to produce a batch? How big does it have to be to fill 240 bottles? Are you able to get your ingredients wholesale or are you paying retail prices? 

If I spent 2 full days of work making 240 retail sized bottles of BBQ sauce I'd start seriously looking at my process and trying to cut down on that. Cause maybe ~$150 dollars for an 8 hour day is worth it?


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## sgsvirgil (Mar 1, 2017)

First things first. Do you have any sort of written agreement in place?


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## Thesauceboss (Feb 18, 2019)

Thanks for the responses!

First things first...no. (I know)
We previous had a hand shake agreement for several months - was led on believing he has a lawyer in the family that would write us something up. Long story short, that never happened and we did shut down production due to that. I have my own lawyer and agreement, making myself into a private labeler and charging him for my production, but partner won’t sign. Says he refuses to count labor and that we should just split the profit 50/50. 

This current situation is him trying to have me make one more big batch and me get paid right away, but make way less than I’ve made in the past. I’ve lost a lot of trust in him, which has my gut telling me to just walk away. 

He does have some extra connections that I don’t, but nobody bigger than a large restaurant, and nobody that I don’t know in one way or another. He also brings me the maple syrup from his neighbors (maple bbq) He’s basically picking up bottles, bringing them to kitchen and then picking them up full to be sold at the farmers markets, where he charges $6 a bottle. The “middleman” getting well over 50% margin. Our wholesale price is $4.25 to retail stores. 

And yes, I’ve for sure been working on stream lining the processes. The biggest time consumers is bottle sanitation and then the filling, sealing and shrinkbanding. I am saving up towards an Edhard filler. 

I am doing the work by myself. Batches of sauce being made in 40qt pot. I am buying ingredients from a warehouse food grocer - not ideal, but a little less than retail.


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## Thesauceboss (Feb 18, 2019)

Also, he wants my receipts for the ingredients. He doesn’t know the recipes, but claims he does, and said he could have someone else make the sauce for $12/hour. I’m charging $15/hour.


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## foodpump (Oct 10, 2005)

My gut feeling would be to walk away from the whole thing right now.

Stop production for a while and get two things:

A Bar code for each product. 
if you don’t have a barcode, no retailer with a cash register will want to know you. So right now decide if you want to do low volume, sell at farmers markets and back doors of restaurants, or case-wise to retailers

Nutritional label. Again, you’ll need this for the retail market.

Again, my gut feeling is that your partner is a schmuck. Mostly because he never considered what I just told you, but also because he wants receipts for ingredients. In other words he wants the secret crabby-patty recipie so he can find someone else to make the sauce.

You’ve got the local recognition for your product, no reason why a retailer wouldn’t want your product. The main thing to learn from all of this is that small producers should never, ever use a distributor or “ partner”( unless your married to him/her). You can hire bottle washers, cooks, etc, but you have to take control of sales.

Hope this helps


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## someday (Aug 15, 2003)

Thesauceboss said:


> Thanks for the responses!
> 
> I've lost a lot of trust in him, which has my gut telling me to just walk away.


I think you have your answer.

Sounds shady and I wouldn't get involved or sign anything. You and your sauce are the business, not him...if he's already threatening you with someone else to make the sauce I say walk away. Sounds like in order to keep 100% of the profits all you have to do is deliver the bottles yourself and find another place to buy maple syrup.

Also, who are you charging $15 an hour? Your not paying him are you?


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## Thesauceboss (Feb 18, 2019)

Thank you everyone. Your input means a lot and really helped solidify my answer. We’re meeting up today and I’m going to tell him that at the rate he wants to pay, it’s just not worth it to me when I can focus my energy and talents into more rewarding and less stressful projects. 

My proposal, which he won’t sign: $15 an hour is what I would charge for my time - a steal for an executive chef with over 20+ years experience. My ingredient cost is included. He provides the empty bottles and maple, honey, etc. I’ve kept track of everything and after 6 months of doing this, it averages to around $3 per bottle. That’s what I would charge him. He puts in his order and I’d have it ready within 10 working days. He could charge whatever he wanted, to whomever he wanted. 

His deal: stay on handshake deal. give him receipts and he will reimburse. Based on whatever he decides to sell it for, I get half the profits. 

It was definitely a learning experience, for sure.


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## halb (May 25, 2015)

Exactly what is your relationship with your "partner"? Does he have money invested in the business?


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## Thesauceboss (Feb 18, 2019)

He’s a farmer. One of my suppliers. I’ve been making sauces for years and he asked me to join up and make sauces out of the products he grows, under his brand. 

Started off as “partners” but was soon excluded from having any say in the business. Was asked why he would ever give up a part of the business his family started 4 years ago. Then told only responsibility is to “put sauce in the bottles”. 

Cool. I can do that, but as your private labeler and you’re gonna pay me X amount per bottle. You can keep your family business, I have my own to run.


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## halb (May 25, 2015)

Under his brand? Did he have a brand that he was marketing products under already or was it his idea that if you produced the sauce he would come up with a brand to market it under?


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## sgsvirgil (Mar 1, 2017)

The recipes are the intellectual property and what matters. If they are your creations, there is nothing stopping him from claiming them as his own. 

If you live in the states, my suggestion to you would be to write down your recipes sparing no detail, sign them all and date them. Place them into a sealed envelope and mail them to yourself. This is a "poor man's copyright" and should at least give you some sort of protection in the event he tries to lay claim to your recipes.

Whether or not you should leave this arrangement is up to you. I think your arrangement is very one sided. If he is unwilling to formalize the arrangement and agree to certain concessions, that leaves you with only two choices: continue as is or leave. 

Good luck.


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## chefwriter (Oct 31, 2012)

Just walk away. Your "partner" has already clearly shown he's looking out for himself only. Walk.


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## Thesauceboss (Feb 18, 2019)

halb said:


> Under his brand? Did he have a brand that he was marketing products under already or was it his idea that if you produced the sauce he would come up with a brand to market it under?


When we started this, he was already in the process of rebranding his products from his original business name. My sauces were in an additional product line.


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## CoChef19 (Feb 12, 2019)

Someone needs a new partner!


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## CoChef19 (Feb 12, 2019)

Or go it alone, you or being someone in 10/90 to help with labor!


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## halb (May 25, 2015)

Actually I don't even see him as a partner, he's a customer. You produce a product and sell it to him. The fact that you may buy produce from him or he put's his label on the product that he buys from you is irrelevant. You have every right to charge whatever you feel is necessary and it's none of his business how you arrive at what you charge. If both of you can't agree on a price tell him to go elsewhere or make it himself if he thinks he can. It sounds like you don't need him anyway, he's way more of a PITA than he's worth. So fire him.

I also wouldn't be concerned about your sauce recipe being intellectual property. It may be, but by the time you do what you have to to protect your rights you won't have any money left to make it.


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## Thesauceboss (Feb 18, 2019)

UPDATE: It was awkward in our meeting yesterday; in the end it worked out in my favor as I got exactly what I asked for. He orders x amount of bottles. I charge z amount per bottle, everything included. 

But, during our entire discussion, it felt like he was a controlling ex-boyfriend that was trying desperately to win me back. (I’m male btw, lol) “you’re the one walking away.” “We could be making sooo much money.” “Im offering you a deal I wouldn’t give anybody else, because I like you.” “I’d rather split the profits with you instead of paying someone else $12 to make it for me. Because I like you.”
Obviously turned me off completely.

He kept going back to his original deal...the same exact one that got us in this predicament. ‍♂ 
I’m sticking to my guns. He needs me more than I need him. Sure, anybody could make good bbq sauces and hot sauces, but they wouldn’t be as good as mine 

He agreed. Guess I won that battle.


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## Thesauceboss (Feb 18, 2019)

I also would like to express my appreciate for everyone’s input. As a new member, I’m finding this forum to be a lot more supportive and helpful for our industry and peers, as opposed to bashing and trolling them on Chef FB pages that shall remain nameless. 

Thank you.


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## halb (May 25, 2015)

Way to go! You called his bluff. 

And IMO Facebook is useless...


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## panini (Jul 28, 2001)

Just my 2 cents. Owner for 4 decades.
STOP!!! With this new arrangement. You've somehow have gotten into this blurry litigious syndrome.
A partnership agreement is the furthest thing you need for this relationship. Your attorney should have told you it was
not necessary. That coupled with the only focus of any type of partnership agreement should be on how the partnership will
be dissolved.
I've only given this thread a cursory read.
from your statements: this persons posture at your last meeting seems to be one of buying time. For what?? That's for you.
maybe wanting your formula.
Unfortunately, as I've learned over the years, you can't give everybody the benefit of the doubt.
Don't be lead by the aggressor. Send a certified letter stating that after some thought, you would not be able
to uphold your end of your agreement. (this only because in this day of age and technology, your meeting may have
been documented in some way).
Then, you find a way to 'buy time' and actively seek alternative sources for anything you my be getting from the agreement. 
Just some thought from an old fart who's been there and done this.
My want to look into creating a vendor agreement. Signage where your current products are available stating something like market vendors needed. You may be surprised by the response. You own a business. I'm confident you have learned, never become dependant on any one job description.
Best of luck,


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## jay lancaster (Aug 26, 2016)

Why do you have a partner for something so simple?


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## wvman2374 (Nov 11, 2012)

sgsvirgil said:


> The recipes are the intellectual property and what matters. If they are your creations, there is nothing stopping him from claiming them as his own.
> 
> If you live in the states, my suggestion to you would be to write down your recipes sparing no detail, sign them all and date them. Place them into a sealed envelope and mail them to yourself. This is a "poor man's copyright" and should at least give you some sort of protection in the event he tries to lay claim to your recipes.
> 
> ...


Sorry to dig up an old thread, but I felt this needed addressed.

For context, I was an attorney for 10 years before getting back into restaurants, and I am still an active licensed member of my state's bar.

Recipes in and of themselves are NOT subject to copyrights. Copyrights extend only to "original works of authorship." They protect the particular "expression" of an idea, but not the idea itself. So to illustrate this by example, if you give a spoken word speech that you authored yourself, the speech itself and its contents are not subject to copyright. But any recording of the speech such as an audio or video recording, or a written copy of the speech, would be subject to copyright. Thus copyrights extend to things like books, song lyrics, audio and video recordings, etc.

The author of an original work is automatically the copyright holder upon completion of the work, unless there is some other arrangement that transfers ownership, such as a work for hire (e.g. a songwriter writing a song for a record label.) Registration of a copyright is not necessary; it attaches automatically. But registration provides strong proof as to ownership and dating. The owner of a copyright has the exclusive right to production, distribution, copying, performing, displaying, or otherwise using the work for a set duration of time (which is very long nowadays).

A recording of a recipe can be copyrighted, such as a cook book or a video recording showing the recipe being produced. In particular, specific expressions of a recipe would be subject to copyright, but a simple list of ingredients and method of preparation would not be. Remember, its the "expression" of the idea, not the idea itself, that is protected. So a recipe that includes a description of the history of a particular pastry would contain original expressions of an idea, but simply including the ingredients and instructions on how to prepare the pastry would not be an original expression, even if the recipe itself contained modifications making it an entirely new recipe. Copyright would protect against somebody copying a recipe from a cook book, but does not prevent them from using the recipe itself, even verbatim, and even in a commercial endeavor such as a restaurant. (If you take a Gordon Ramsay beef wellington recipe and use it verbatim to prepare a dish, you can put it on your menu and call it Virgil's Famous Beef Wellington with no legal issue.)

To simplify, a recipe is not an original work of authorship expressing an idea. It is a list of ingredients and instructions regarding a process. Anybody who knows the recipe can use it for any purpose. This is why KFC and Coca Cola go to such lengths to protect their recipes, because as soon as somebody learns it the recipe can be used by anybody else. (For them its an issue of trade secrets, which is a related but entirely different matter.) Recipes are much more akin to inventions which are subject to patent protection; but the requirement that an invention be novel and non-obvious is a very high bar for most food products to meet and is generally limited to completely new types of food or production processes used by food factories.


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## sgsvirgil (Mar 1, 2017)

This is probably one of the best written explanations of a complex issue that I have encountered in a very long time. My compliments to you, sir.


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