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Negotiating Performance Related Clauses
Many sponsors wonder just how far they can push the envelope in demanding guarantees related to a property's performance. Savvy sponsors aggressively negotiate assurances from properties that certain conditions will be met, or they negotiate conditional payment of fees based on certain minimum performance requirements or standards. Below are just a few performance-related issues to consider when negotiating with properties:
On-Time Performance: Just as contractors are oftentimes required to pay for cost overruns, as well as penalties, when construction schedules are not met, so too should properties be obligated to cover costs related to missed deadlines for which they are responsible. If the property is required to take care of signage changeovers, shared advertising creative, or any other time-sensitive projects, it should be held accountable for its inability to meet target dates.
Minimum Targets: Many properties boast in their proposals that attendance has risen every year, or they sell you on the fact that attendance will easily reach a certain level this year. You should take advantage of their sales technique or claim, and call them on it! If the property is so confident it will draw well, an opportunity exists for you to negotiate a flat rebate or a sliding scale refund if minimum attendance levels are not achieved.
Advertising Make-Goods: Guess who comes out on the short end of the stick and pays when television rights fees skyrocket? You, the sponsor of course. So if the property, along with its broadcast partner, requires you to purchase a significant ad package on telecasts or shoulder programming as part of your sponsorship, put the property and broadcaster on the spot.
After you tell them that you prefer not to purchase such a media-heavy sponsorship and they respond by telling you that the ad package is a requirement, you might want to ask what kind of TV viewing audience they plan to deliver. Then have it written into the contract. If those numbers aren't met, make-goods are in order.
Weather: f an event is cancelled due to inclement weather, make sure you aren't all washed up because you neglected to add a weather-related clause to the contract. If Mother Nature keeps you from receiving sponsorship benefits and delivery of those benefits can't be rescheduled, why should you be required to pay?
Winning Records: Some team sponsors attempt to negotiate provisions for a discounted fee for the following season if the team performs miserably on the playing field. The problem with such a demand is that it provides the team with justification for requiring the sponsor to pay a performance bonus if the team reaches a certain win total. If you're so concerned about winning percentages, then try to lock down a multiyear sponsorship with no escalator, or better yet, let demand dictate the fee. If the team isn't successful, it's likely you will be able to negotiate a favorable rights fee the next time your sponsorship is up for renewal. But at that point you might want to ask yourself whether it's a wise move to continue to associate your company with a losing entity that may not own a strong brand.
