Document ABCs: NDAs & RFPs

We often hear pushback on the use of NDAs and RFPs.  The hesitation sounds like this:

• "What's the point of an NDA? I have heard horror stories of manufacturers stealing secrets even with NDAs in place."
• "I don't want to sit down and build a big RFP - I'll just share information as they ask."
• "We''l work out the kinks during samples & trail production"

I get it -- we're busy, we're jaded, and we don't want to put in unnecessary work of any kind. I'll address each of these concerns in more detail below, but I'll start with this: avoiding NDAs and (especially) RFPs will create a very real and tangible pain - higher trial costs, inaccurate price bids, and, in many scenarios I've seen, a lengthy onboarding process that ends in a manufacturer ghosting the brand.

A little prep here goes a long way, and Rescale has your back on this one -- let's get into it.

1. What are NDAs? 

NDAs (non-disclosure agreements) and RFPs (requests for proposal) are the core "paperwork" of a search process.  They are typically shared in a pair -- the NDA to protect your proprietary information (recipe, process, ingredients), and the RFP to share the intricate details of that same proprietary information.

NDAs contain language intended to protect trade secrets, proprietary ideas, and business plans, and they're typically 1-2 pages in length.  These agreements require signatures by you (brand) and the manufacturer.  You need an NDA for each manufacturer you share sensitive information with (more info on when you need to share that info below). It's important that you track NDAs that have been signed before sharing RFPs. Generally, NDAs are straightforward, and require no project-specific adjusting; once you have a trust template you're good to go for all projects & manufacturers. 

Addressing some concerns: Some brands think of NDAs as unenforceable, and don't see the point.  They often come to us with some horror story they've heard from a friend of a friend: a manufacturer learns from a brand's information (new formulation, new flavor, new packaging) and spin off their own product.  Although this may happen occasionally, it is an extremely uncommon reality.  You know better than anyone that innovation is only 10% of the battle -- building your brand, selling your product, designing compelling packaging, and working the demos and trade shows is 90% of the work.  Almost no manufacturer wants to take on that burden - their specialty is making product, not selling or branding it. If you remain worried that a manufacturer may not respect an NDA, there are a few precautions you can build into your process:

• After sharing your (high level) project brief, ask the vendor if they have any other brands or products that are in direct competition. If yes, then add that information to your list and continue searching if you feel worried.  It may turn out that they're still the best option, but you can go in with clear eyes and negotiate exclusives where necessary.
• Ask for references early in the process. (If this feels uncomfortable, loop in Rescale or a consultant.  Having a 3rd party that makes this step feel like a standard process can help eliminate any awkwardness.) 

If you have more questions about NDAs, drop us a note! Happy to answer in followups. (Quick plug - templatized NDAs drafted by food & bev manufacturing expert legal teams come standard in all Rescale memberships. We've also built tools to simplify building, sending, & organizing NDAs & RFPs to get brands to trial 3x faster, saving 40+ hours of tedious work. Book a demo with us here).

2. What are RFPs? 

Moving on to RFPs.  These documents, unlike NDAs,  are completely custom for each project.  They are often 5-10 pages long, sometimes more.  The intent of these documents is to provide every single detail a manufacturer will need to sit down in a conference room with their team (accounting, production manager, head of sales, etc.), and align on the feasibility of your project.  Make no mistake; this document should be as detailed as possible, but it's also a moment to sell your project.  The person that you've spoken with up to this point is now a representative of your brand project to the rest of their team, and the RFP can help them sell the promise of taking on your account.  Remember, co-mans typically take on 1 out of every 100 inbound requests. This is the stage where many fall out of the process.

A good RFP contains all of the following information:

• Company information - address, contact, typical sales channel, geographic distribution, etc.
• Formulation information for every product you're considering with this co-man. This needs to include every ingredient, which brand you're currently using, the exact measurement as a weight (no Tbs here!), and as a % of the overall recipe weight.  This section also needs to include step by step instructions on your current production, pictures included can often help.  It's unlikely that the manufacturer will have the equipment to match your production exactly, but this info will help them highlight potential deviations, and bring them to your attention now instead of after 6 months of expensive and painful failed trials.
• Packaging information for every product you're considering with this co-man — specific description and measurements on every single component (bottles, caps, shrink wraps, cases, etc).  Each co-manufacturer will have their own unique combination of equipment, and their pricing will vary depending on which steps they'll need to manually accomodate.  IMPORTANT: in this section, also detail where you're flexible!  Married to a bottle but flexible on case pack? That information can make or break a co-manufacturing relationship.
• Sales projections - use the figures that you plan to do with the selected co-man.  Promising your full production, when you truly plan to only allocate 50% of production to them is going to hurt you later, and can even cause an agreement to collapse.  At the same time, paint a picture of where these figures are coming from to sell the promise of your brand.  Have upcoming meetings with big retailers? Include those notes.  Co-mans want to know you're putting in the work to grow, even if you haven't reached their ideal volume yet.
• Appendix - artwork, packaging specs, certifications, and any other relevant docs

I know this sounds like a lot, but trust us putting in the 30 minutes of work to build this document at the beginning of your project will save you:

• Hours of back and forth communication with vendors answering questions
• Reputation hits -- looking prepared now is an excellent sign to any co-man.  It makes your brand look sharp, promising, and like one to take on as a client
• Money & time! I can't overstate this one enough.  Not unearthing potentially deal-breaking information at this stage will end up costing you thousands in doomed to fail trials, unnecessary travel for site visits, wasted ingredient costs, and more.  We've had dozens of brands come to us in the "we were dropped in the 12th hour after spending $10k on everything because they didn't realize [INSERT ANY BASIC FUNDAMENTAL COMPONENT OF THEIR PRODUCT HERE]" moment. A thorough RFP will eliminate the possibility of that nightmare scenario.

Lastly, as we've entered site visits and final negotiations with various co-manufacturers, we've watched the co-manufacturers come to meetings again and again with the print offs of their RFP.  It keeps all teams fully aligned, and working toward launch as quickly as possible.

(Overwhelmed by this process?  Great news - Rescale has template RFPs that we will build alongside you.  You can book a demo to learn more here.)

3. When are NDAs & RFPs needed?

Here's a timeline of search, with documents plotted:

As you'll see, you do not need to send NDAs & RFPs out to every single manufacturer you contact. Out of ~20-40 potential initial outreach contacts, you'll likely only move into the NDA & RFP stage with 5-10 manufacturers.

Building a non-proprietary project summary, like a "Project Brief," will help you convey the relevant project information to a co-manufacturer without sharing any sensitive information. (Great news - project briefs come standard with every Rescale membership.  They'll appear in your dashboard when you first sign up so you can hit the ground running. You can book a demo to learn more here.)

As outlined in the NDA section above, if you're feeling extra hesitant about sharing NDAs, you can add reference checks and competitor reviews in between the Project Brief and NDA stages.

NDAs and RFPs will help you get to trials quickly, and the benefits will compound in the Feedback Cycle Work process (samples, site visits, production trials). If your RFP is done well, there won't be any major pricing surprises, certification issues, or packaging/production capability misalignments. There's nothing worse than falling out of a process right at the finish line and having to start all over - it's a scenario we see happen to brands all the time when they don't organize their process like the timeline outlined above.  Luckyily for you, you now have the tools you need to execute like an expert! (If you still feel a bit unsure, Rescale has true co-manufacturing search experts with 15+ years of experience on your team throughout the process.)

That's it for now - happy searching! If you have project specific questions, or blog ideas, don't hesitate to reach out via email or book a call with me.