Sponsorship: 5 Points to Consider Beforehand
Sponsorship deals can be a valuable source of income, products, services and/or profile especially where the sponsor’s offerings align with you personally.
Before entering into any deal it is important to consider the terms of the sponsorship agreement both from a legal and commercial perspective. Once an agreement has been signed it is difficult to change the terms, so you should always seek to negotiate the terms of the agreement before signing.
Imani Modahl is a trainee solicitor at Brandsmiths, she is also a World Athletics Athlete Representative. She has advised a number of athletes in relation to sponsorship deals.
Below are her top 5 points to consider before entering into a sponsorship agreement.
1. USE THE PEOPLE AROUND YOU
Ideally, athletes should have someone with experience acting on their behalf (i.e. an Athlete Representative). They will have experience of what is normally included in deals and how far to push negotiations. This will also take some of the pressure off your athlete and will mean that they have someone in their corner that understands the commercial and legal realities of the deal.
If your athlete is not able to have a professional on their side, they may want to share the draft agreement with family, friends and/or coach. These people may be able to provide input on where they realistically see your athlete's performance going in the foreseeable future which will help them when considering proposed amendments to the agreement. For example, their coach will have an idea of the level they expect them to be performing at which will help them to assess whether any performance based bonus clauses in the agreement are realistic.
2. FINANCIAL CLAUSES
Sponsorship deals will often provide base compensation and/or performance-based bonuses. Your athlete should review this as they may want to negotiate the figures and add additional performances that will result in bonus payments (and any caps on bonuses). It is also important to check the payment dates up front or instalments.
Usually, you are required to send an invoice to the sponsor. The time between your athlete being required to invoice the sponsor and the payment being due is usually set out in the agreement. I have seen agreements where payments are a month or two after the invoice, it is important to be aware of this.
3. RIGHT OF FIRST REFUSAL
Usually, when your athlete's contract ends the sponsor will have the right of first refusal. The clause often says that if the sponsor agrees to match or exceed the offer of a potential sponsor, then your athlete will have to stick with them.
It is important to check when your athlete can approach/speak to third party competitors (i.e. potential new sponsors) about sponsorship. Sponsorship deals often include a clause which says that they cannot discuss deals with potential new sponsors until a few months prior to the existing agreement coming to an end.
4. COMPETITOR BRANDS
Kit deals usually require that your athlete exclusively wear and use the kit provided when in public or where they may be photographed (i.e. competition, training and interviews). In international competitions, they are of course required to wear the national kit, however they can wear the footwear of their kit sponsor.
Sponsorship deals often include a restriction on using competitor brands. Often, the agreement will include a schedule which sets out a list of competitor brands. If this is not included, it should be requested. This will allow them to be clear on their obligations. If the list of competitor brands is expansive and far reaching, your athlete may seek to limit the scope to direct competitors.
The duration (term) of the contract should be carefully considered and discussed with your team. Your athlete may be offered a deal which will last for a few years, this certainty can be desirable, for example if they were to have a season where they didn’t perform as expected they would have the security of the existing contract.
The risk of entering into a shorter agreement is that their performance may not improve. However, if they expect their performance to significantly improve significantly whilst under contract, they may want to enter into a shorter agreement so that they can re-negotiate a better deal sooner.