← All Posts

Guide April 16, 2026 · Guidance Team

• ✓ Always define IP ownership and confidentiality to safeguard your brand's unique assets.
• ✓ Mandate detailed quality specifications and recall procedures to protect your product integrity.
• ✓ Implement clear inventory tracking and liability rules for all your materials.
• ✓ Specify pricing, payment terms, and yield targets to control your production costs.

Define Ownership of Your Recipes and IP

Your product formulas and processes are your brand's core value. The agreement must explicitly state that you own all recipes, proprietary processes, and any improvements developed during the partnership. Include a robust confidentiality clause that prevents the co-packer from sharing or using your proprietary information with other clients or for their own benefit. Co-packers often work with multiple brands, so this clause is critical to prevent your unique competitive advantages from being compromised. Clearly define what happens to your intellectual property if the relationship terminates, ensuring its safe return and continued protection.

Mandate Clear Quality and Production Standards

Do not leave product quality to assumption. Your agreement needs to detail every aspect of product quality and manufacturing. Specify ingredient specifications, processing parameters like cook times, temperatures, and fill weights, and finished product attributes such as Brix, pH, and texture. Reference your brand's specific Quality Assurance and Quality Control protocols. Include provisions for corrective actions if quality deviations occur and outline clear recall procedures. This protects your brand's reputation, maintains consumer trust, and ensures compliance with food safety regulations.

Protect Your Ingredients and Finished Goods

Your raw materials, packaging, and finished products stored at the co-packer's facility are your assets. The agreement must cover detailed inventory handling procedures, appropriate storage conditions (e.g., temperature, humidity), and clearly define liability for loss, damage, or spoilage. Specify regular inventory counts and reconciliation processes to ensure accuracy. For brands using Guidance, this is where real-time inventory management and lot traceability become invaluable. You can cross-reference co-packer inventory reports against your own system, tracking every lot from raw material supplier to finished goods shipment, ensuring accountability for your valuable assets.

Outline Production Schedules and Forecasting

Establish clear expectations for production planning. Your agreement should define lead times for placing production orders, minimum order quantities (MOQs), and how production slots are allocated and reserved. Clearly outline your responsibilities for providing accurate sales forecasts and the co-packer's commitment to meeting those forecasted needs. What happens if the co-packer misses a scheduled production window, causing stock-outs for your brand? Consider including clauses for penalties or make-up runs. This manages expectations and helps prevent costly disruptions to your supply chain.

Specify Pricing, Payment, and Yield Targets

Be absolutely precise about all financial terms. Detail the pricing per unit, including any surcharges for small runs or volume discounts. Define payment terms, such as net 30 days or deposit requirements. Crucially, include specific yield targets for each production run. If the co-packer uses more of your expensive organic ingredients than agreed upon to produce the finished product, who absorbs that additional cost? This directly impacts your Cost of Goods Sold. Guidance's COGS module tracks this automatically, updating costs on every production run, providing you with real-time insight into your true production costs.

Plan Your Exit Strategy and Termination Clauses

No business relationship lasts forever, so plan for the end from the beginning. The agreement needs clear termination clauses, including notice periods, acceptable reasons for termination (e.g., breach of contract, consistent quality issues, non-payment), and the process for winding down the relationship. Define what happens to any remaining inventory, packaging, and specialized tooling you own. How will your intellectual property and confidential information be securely returned? A well-defined exit strategy prevents messy, expensive disputes and ensures a smooth transition to a new co-packer if necessary.

See How Guidance Handles This

Guidance is a CPG operations platform built by the CEO of Claros Farm. Apply to join the design partner program.

Apply as a Design Partner →

Frequently Asked Questions