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What should I look out for in a club sponsorship contract?

16 March 2022

Q: Our local rugby team has lost its shirt sponsor and we’ve been offered a deal if we can make a quick decision. What are the key things to look out for in a sponsorship contract?

A: Firstly, the very fact that you are looking to put in place a written sponsorship agreement with the club is a great start. A well-drafted written contract allows both parties to clearly document their rights and obligations in relation to the sponsorship — helping to avoid any “misunderstandings” later down the line as to what each party has agreed to do. One of the most important things to consider in any sponsorship contract is the level of “exclusivity” the sponsor will enjoy within its “brand sector”. As a sponsor, typically you will pay a sponsorship fee to the club in return for the right to display your company brand or logo on the team shirt. To the same market sector as you.

For example — if you run a small chain of coffee shops and you are paying to become the club’s front-of-shirt sponsor, you wouldn’t be too pleased to find out that the club had also agreed to display the logo of your biggest competitor on the team shirt sleeve.

How widely the “brand sector” is defined in the contract is up for negotiation, but at very least the contract should give you exclusive sponsorship rights within the “coffee shop” sector and the club should commit not to grant sponsorship rights to your direct competitors.

One season, you might want to push for a reduced sponsorship fee in the event that the team is relegated from its present league. You should also give some thought as to how the fee will be invoiced and paid — the club might want 100 per cent of the sponsorship fee up front as a lump sum, but it may be better for your cash-flow to pay the fees in instalments (this also gives you the chance to withhold payments down the line should anything go wrong).

What else can the club offer you as part of the sponsorship deal? Yes, you’ll get your logo on the team’s kit, but most sponsors will use the contracting process as an opportunity to push for as many marketing and sponsorship rights as possible. You may be able to wangle additional brand exposure on the team training kit, on pitch-side perimeter boards, the club website or in the match-day programme.

Can the club offer you free tickets or the chance to benefit from any hospitality facilities on offer? Do your shirt sponsorship rights extend to the kits for the club’s women and youth teams too? Might you want naming rights over the club’s home?

Whisper it quietly, but one thing Covid-19 has shown sponsors (and lawyers) is that you really should hope for the best, but plan for the worst. What happens if the c-word rears its ugly head again and the club’s rugby games are indefinitely postponed or cancelled? The value of your sponsorship will significantly decrease if your brand isn’t out there for people to see, so you may want to negotiate rights to a refund or reduction of your sponsorship fee in the event of “undelivered sponsorship rights” in this scenario.

Alternatively, consider whether the club could offer you any replacement rights to compensate you for games not played in the team kit displaying your wonderful company branding on the front.

Naturally there will be a few other important “i”s to dot and “t”s to cross in the contract — such as ensuring that the club caps its contractual liability at a reasonable level, and adding an appropriate licence of your intellectual property to the club for the purpose of delivering the sponsorship rights. Get a lawyer to help with these trickier aspects if you need.
However, provided you try to negotiate the best commercial terms possible and tackle the contractual risks head-on, you’ll be able to convert local fans into paying customers in no time.

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