Distributor and dealer relationships to manufacturers have many features in common with franchises. Most often, state laws governing franchises may have clauses that directly relate to distributors and dealers. Yet, the franchise concept is fundamentally different from the distributor-dealer model. Traditional distributors and dealers never pay an up-front fee to the manufacturer for the privilege of selling the producer's goods—but may be contractually required to buy some minimum amount of goods.

As a distributor one is an independent selling agent who has a contract to sell the products of a manufacturer. One must be careful not to represent him or herself as the producer but may display the producer's trade name in signage and in the sales situation. A distributor may be limited to selling only one brand of a product.