A woman I have met before, but don't know very well personally, has asked me if I would consider making cakes, etc. as part of party packages she offers through her childrens' themed party planning business. Here is part of what she wrote:
"How it would work is, a mom would order a party from me, either a tea party, a princess party, Under the Sea Party, or a Spa Party, and she would have the option to order a coordinating cake/cupcakes or cake pops, choc covered strawberries as an add on. Any orders that come in, would go to you, and you would provide that through me. I would bill and collect and pay you. In return I would keep a percentage of the sale, say 20% or whatever you feel is fair for the referral."
This is not a typical referral, where she would tell her clients that she recommends me and then gives them my contact information (for that, I would not pay a referral fee). Rather, when she has a client that would like to "add on" a cake to a party package they purchase through her, that client automatically goes to me, so there is regular, guaranteed work involved here. I would be her only cake vendor, so there is no competition. In this case, I don't see a problem with a referral fee. However, I'm new to this - is 20% a reasonable take? If not, what is? Do you foresee any issues I would have to watch out for? Thanks for your input!
Is she handling the cake details with the client? I spend a significant amount of time quoting, explaining what the cake will be, arranging deliver, decor details etc. If she is willing to do that for you plus she is marketing her company and bring you business then I think you have a sweet deal. If she is putting you in touch with the client to arrange the details yourself then I might considering something a bit less then the 20%.
However, it all depends on what your pricing is like and if you will still make money after giving up 20% of your price.
I had a thread on this a month or two ago. I was approached by a wedding planner with a similar deal where she takes 10% of all wedding cake jobs sent my way from her. I turned it down. I'm not comfortable yet with this kind of arrangement for many reasons and her contract had unfair terms like I wasn't ever able to interact with her clients and they were not to know who was the company doing their job. She and her company would be the face of everything.
All the experienced event planners who have hired me for wedding cakes or cupcake orders never discussed percentages to be paid back to them. The only time I got this type of request was from a new entrant into the events planning field. I don't think my prices can accommodate giving away money to someone else unless it is labour / employee. Just MYO.
Also, you need to consider how long she has been in business for and her business reputation. The promise to send lots of business your way is going to depend on how long she has been in business, the size of her client base and frequency of orders. I didn't sign the contract with the events planner who asked me to give her 10% of wedding cake sales she sent my way because she just started her business just as she and I met and I know from experience a brand can take a long time to be built successfully. So her promise of lots of orders was not going to be fulfilled for me anytime soon from her. Plus, it takes time to find the right time of clientele who will pay for quality. Again, just my opinion*