Why you need a sponsorship contract

Finding the right sponsors and agreeing to work together is an exciting time. Feelings are running high and the excitement is palpable, your racing season is on!

That sudden acceleration from wondering about your season to knowing it’s really happening (thanks to your hard work) makes this an exhilarating turning point in your racing calendar.

Drink it all in, you deserve it.

Before you head into pre-season testing or your first race, though, have you got a signed contract between you and your new partner? Or are you basing your season ahead on a handshake and a trail of emails?

Things rarely go as planned, so to protect yourself and give your sponsor peace of mind, you need a contract. (And if the thought of writing one yourself makes you want to bury your head in the sand, that’s fine, you can find templates here.)

Here at Racing Mentor, in addition to being your cheerleaders, we are also a logical voice amid the racing highs. We want to clear up those thoughts you’re having on whether or not a contract is needed.

The simple answer is yes, you need a contract. Here are 11 things a contract will help you with.

Define the tangible benefits

You are not a bottomless pit of giving (and nor is your sponsor).

Some of the fun-filled benefits you might offer your sponsors include race day hospitality, grandstand tickets, and track days. It’s wise to have a clause in your contract that agrees on exactly what’s offered. This prevents excess consumption, overcrowding, and events that become financially unviable. Rather than an uncomfortable ‘no’ when someone pushes for more (possibly for free) further down the road, both parties agree, via contract negotiation, on what’s right and fair for both. You can also outline how the process for any new requests from your sponsor might work, including payment requirements.

Additional resource: How to go above and beyond for sponsors on a racing weekend

Set expectations with multiple sponsors

You have to define what some sponsors get, (and others don’t).

If your brand has attracted multiple sponsors, you’ll want to be clear on the access each of them has to you; ensuring those who pay more, get more. Sponsorships tend to be relationship-based and each is unique in desired outcomes and budget. Ideally, your sponsors will make for a harmonious line-up of like-minded businesses and a well-negotiated contract sets out clearly how each sponsor benefits. This makes it easier for you to manage the workload and sets clear expectations for everyone.

Set the timing of payments

Of course, you’re after money to go racing, it’s why we’re here. So once a deal has been agreed, do you know when that money is actually coming? A contract makes it clear to a sponsor what’s expected of them and ensures you’ll get paid on time. Never, ever leave it open to a whatever or whenever structure, and then wonder (aka worry) throughout the season when the rest of that money is going to come in.

Get totally clear on the obligations of both parties

If you need your sponsor to provide anything to assist in sponsorship activation (think promotional materials or networking event space, for instance), you should be raising the topic as part of your negotiations and then including it in the contract.

Not only does this ensure you have everything you need to do a good job for them and meet the goals agreed upon, but it also gives the sponsor peace of mind that you have a professional attitude towards your obligations, and respect for their investment in you.

Agree upon deliverables

You’ll want to clearly define and agree on what benefits you are offering in real terms. What does that look like? You should agree on the number of promotional social posts, how many of their trade shows or open days you’ll attend, what images and reports they’ll receive after each race, and so on.

When you open up end-of-season discussions, you can then prove that you’ve delivered what they said they wanted. This avoids any miscommunication on what was agreed in the beginning. It’s important to take time now to find out what success looks like to them and put it in a contract so you have something to look back at later on.

You should also use these discussions to identify what is absolutely not available, this will help manage expectations of the relationship.

Additional resource: What should sponsors expect?

Understand what happens if things go wrong

So many things are out of your control (see: all of 2020). Planning for how you and your sponsor will react is a must. Critical or unexpected changes to you, your car, your sponsor, or your series — including force majeure and unfulfilled agreements — all need to be taken into consideration. You should agree in writing where payment penalties, liabilities, and compensation limits apply.

What about the preventable things that go wrong?

This is unlikely, but it’s worth protecting yourself and showing you have your sponsor’s best interests at heart. Sometimes we make mistakes and this can turn into a true shitstorm if internet trolls take it and run with it. You might even be capable of self-sabotaging with no help whatsoever. What if you start, or are involved in, a fight at the kart track for instance?

Equally, your sponsor might be involved in some shady behaviour that you absolutely do not want to be associated with. Morality clauses, if written correctly and unilaterally, protect both parties from any associative behaviour that can damage your brand and/or the sponsor’s reputation.

Clauses unique to motorsport

Are there clauses or conflicts of interest in your series? Check the regulations, as a championship’s sponsorship clauses may affect your ability to deliver your own activation. For example, a series may have an agreement with a tyre sponsor that prohibits any competitor brands from being advertised in the paddock. They may be sponsored by a soft drink that prohibits your beverage sponsor from displaying any merchandise or even attending race days in any official capacity. Find out before you agree to and sign a contract.

These conflicts don’t always mean you can’t work with that sponsor but you’ll need to outline what can and can’t be done as part of the partnership. For example; you might run a track day with your beverage sponsor and invite them to your hospitality, but you might not be able to give away samples of their drinks due to a championship conflict.

What if it’s not quite sponsorship?

There are huge benefits to other synergistic partnerships — for example, product endorsements can be helpful and lucrative (they also require a specific endorsement contract). In fact, any goods and services you receive in lieu of direct financial sponsoring should be treated as a contract-worthy exchange. Becoming a brand ambassador can open many new doors for you as a driver but it’s important to agree in writing what both parties get from the deal. A morality clause here, for example, would be essential.

Additional resource: Should you go after product sponsorship or cash?

Image rights

Appearing in your sponsor’s advertising materials, or attending publicity events and launches means you are a featured attraction that brings excitement and interest. Making it clear what a sponsor can and can’t use, and for how long (your face/image/race car/signature/likeness/social media handles and any other specific image rights related to you as a person) saves you from any misunderstanding, embarrassment, or loss of other opportunities further down the line — even after the deal has finished.

Protecting your image ensures you make the final decisions on how you are portrayed and what you are associated with.

To protect yourself

Doesn’t this go without saying? We still think it needs to be said. You deserve peace of mind so you can focus on your driving and delivering all those benefits you’ve agreed on. Imagine for a moment that the sponsorship money suddenly stops coming in and you have to suddenly hustle hard or borrow to complete the season? Or pull out entirely.

A contract ensures you have a legally binding agreement to protect you. When something is this fun, it doesn’t feel like business. But be in no doubt that this is business, and plan accordingly.

The basis of any great sponsor partnership is understanding the deal you’ve agreed on, enjoying the mutual benefits, and respecting the other party with your commitment and effort. A contract says you are serious about doing just that.

We’re not lawyers, but our expert partner Tactic Connect is. They’ve put together some contract templates you can use time and time again to protect yourself and your interests when agreeing to sponsorship, endorsements, or image rights. Take a look at the templates here.