Article featured in Bowls Queensland’s July edition of the Queensland Bowler.
In the previous edition of Bowler Magazine, I discussed some of the ways that you can both attract new sponsorship and also retain existing sponsors, by ensuring that you add value for your sponsors. This is especially important when times are tough and marketing budgets may be limited. In this edition, I look at important issues to cover off in an effective sponsorship agreement.
The sponsorship agreement should clearly set out the benefits that businesses will receive from their affiliation with your club. Benefits may include some of the examples that we touched on in part 1 of this series: providing access to your club’s database of members who have consented to receive marketing communications; showing the sponsor’s logo around your bowls greens; naming rights for teams or function rooms; events hosted for the sponsor; and/ or introducing the sponsor to other club members and sponsors, and encouraging them to do business together.
What will the sponsor provide in exchange for the benefits that they will receive? Will they simply pay an annual sponsorship fee, agree to cover the cost of the new team shirts to be printed with their logo, or provide value in kind? For example, a builder might agree to perform certain maintenance work for your club, or provide a discount on labour costs to erect new shade structures.
Term and renewal
A common pitfall of informal sponsorship arrangements is that the parties do not discuss the length of the agreement. The attitude is that the sponsor’s logo will be displayed around the club’s greens (for example) for some indefinite period and the sponsor is content to pay a few dollars upfront for the privilege. The problem is that this robs the club of the opportunity for a further cash injection by renewing the sponsorship in 12 or 24 months’ time, and invariably leads to a breakdown in the relationship between club and sponsor when the club decides to replace the sponsor’s logo on the fence with someone else’s.
Another issue to consider is the sponsor’s right to renew once the term expires. Two common approaches are:
- Sponsorship renewal: The sponsor may have an option to renew the sponsorship agreement, similar to a lease. A typical clause might include that the sponsor can renew for a further 12 months’ if they are not in breach of the agreement and provide say three months’ notice prior to the end of the term.
- First right of refusal: The sponsor may have a first right of refusal, such that in the final 6 months of the sponsorship agreement, your club must allow the existing sponsor an opportunity to match or better any sponsorship offers that you receive from a competing business, before you accept sponsorship from the new business.
The sponsorship agreement should confirm whether or not your club is allowed to take up further sponsorship offers from competing businesses, in which case the definition of other “competitors” should be carefully considered. This is an important clause for a prudent sponsor and something you should bear in mind developing a list of potential sponsorship targets.
Your agreement should list the ways that both the club and the sponsor business will use each other’s intellectual property such as logos. For example, will the sponsor be permitted to advertise its affiliation with your club in its promotional material and if so, will your club be required to approve the material before it is published? If the sponsor is promoting a specific event or competition, will your club logo; the sponsor’s name and logo; or other logos (for example the Bowls Queensland logo) appear more prominently in event signage? If you have a sponsor’s board in your clubhouse, where will the sponsor’s logo appear and how large will it be in comparison to other sponsors? Will you show the sponsor’s name and logo only, or must you include their promotional slogan as well?
Default and termination
Like any commercial agreement, the sponsorship agreement should set out what will happen in the event of a breach by either party. Unlike other commercial arrangements however, sponsorship agreements are unique in that they should also provide additional rights to terminate if one party’s image or reputation is damaged to a significant extent, in which case the other party may require the right to terminate the agreement so that their own image or reputation is not damaged by association.
Some clubs take the view that sponsorship agreements are all well and good for the high-stakes world of professional sport, but overkill for their own organisations. This ignores the benefits of having an agreement setting out important terms such as the above, clarifying the benefits and obligations that both parties should expect from the arrangement. Indeed, the mere fact of having a sponsorship agreement in draft, ready for businesses to sign up, shows that your club is well-run and serious about its relationship with the sponsor, which are two of the biggest hurdles to attracting good quality sponsorship in the first place.
I hope these short articles may go some small way towards helping your clubs to weather the financial storm of COVID-19. Should you require a sponsorship agreement or if you have any other questions relating to sponsorship issues relevant to your club, then I would be pleased to hear from you on 07 3224 0353.