How to Write a Sponsorship Agreement: 5 Things for Every Sponsorship Contract
Sponsorship sales require a clear agreement with defined roles and responsibilities in order to be successful. As a marketing tool, it allows you to connect with the right brands and products to enhance your relationship with your audience while also building a connection with your audience, members, fans or donors. Events get you out into the community to create experiential moments that help raise brand awareness, while sponsorships help provide credibility and much-needed funding.
Together you promote your organization, cause, event or naming right opportunity, gaining more exposure and expanding your reach. Your sponsors gain access to a captive audience that reflects their key targets. It is a win, win situation as long as the right partners are chosen, and the right terms of the sponsorship agreement are met. Because a sponsor relationship requires an investment, there is an expectation that they will be given an opportunity to improve their image, promote their products and leverage your customer relationships to gain exposure for their brand. Therefore, when entering into a sponsorship, a professional sponsorship sales agreement is a must. Here are five things you should include in your sponsorship sales agreement to ensure both parties are protected, and expectations are met.
What is a Sponsorship Agreement?
Sponsorship marketing allows companies to pay to participate in events or access your audience in meaningful ways. This can be through events, database marketing, contests, naming rights and can be charitable or for-profit and allow companies to gain exposure to suitable audiences they wish to target. Sponsorship opportunities offer companies the chance to get involved in activities and different levels of participation to raise brand awareness, create product loyalty and connect to their target market.
Sponsorship agreements include two parties:
- The sponsor that provides funding/products or services
- The rights holder that is providing the sponsorship benefit
To ensure the needs of both parties are met, a sponsorship agreement is drawn up as a contract outlining the details to which each party agrees.
What are the Basics of a Sponsorship Agreement Template?
Although it might be tempting to have a boilerplate agreement, it is always best to customize the details for each sponsor involved to include the specifics. By doing so, there is no room for misunderstanding. The very first thing you should do when creating a sponsorship agreement is to consult a lawyer. This post is meant as information only and is not intended to replace the advice of a lawyer. That said, the basics of a sponsorship agreement often include:
- The date the parties enter into the agreement
- The names and addresses of the sponsor and rights holder/property
- The start and end date the agreement
- Terms regarding the right of renewal/right of first refusal
- The fee to be paid by the sponsor and what rights that fee will include
- How the property will promote the sponsor including where the sponsor’s logo will be included, how many emails or social media posts and related materials
- Logo usage rights of the sponsor’s branding, company name, etc. and how it must appear to adhere to trademark rules
- How the sponsor can promote the event or sponsorship opportunity and use the property’s logo
- The products or services the sponsor will provide and the quantity the sponsor is providing
- Key dates for delivery, approvals and any other details that are time sensitive
- Clear statements that this is a sponsorship agreement and that the parties are independent contractors, not partners, employer-employee, or joint ventures
- How disputes and refunds will be settled
- A noncompete clause that guarantees the sponsor will not be in direct competition with other sponsors who sell the same products/services if part of the negotiations
- Details regarding the applicable laws (state, provincial, national) by which the agreement shall be governed
Be certain to include a statement that the agreement is the entire agreement and that oral representations discussed are not included to avoid possible challenges should a dispute arise. If you make changes to the sponsorship agreement at any time, be sure to amend the contract. Your lawyer will be able to give you advice as to the best ways to amend the contract should something change.
What Else is Included in a Sponsorship Contract?
Further information should then be included that will outline the important terms specific to each individual sponsorship. This is the nitty-gritty of your agreement and provides a comprehensive list of specific terms including the following details:
We have already mentioned the noncompete clause, but this takes exclusivity further. It outlines the specifics of your agreement and exclusive rights a particular sponsor might be entitled to based on the package they have purchased. For example, a sponsor might have the exclusive rights to have their logo appear on the stage for main events, or be the only food vendor allowed to sell food at your event. The exclusivity clause will lay out the agreed upon terms that provide special rights to a particular sponsor. Because of the additional exposure, exclusivity usually comes with a higher price tag for sponsors. Be sure to define clearly the types of companies that your sponsor define as competitors so that there is no confusion as to which companies you can and cannot approach going forward.
To avoid disputes over what payments are expected, which taxes are must be paid and what those fees cover, fees and payments must be listed in clear detail. If you agreed to installments then the dates and amounts should be listed. If you are expecting a lump sum, the amount and date should be included.
Along with a payment schedule, each sponsor will want to have a clear list that outlines what they get for their investment. This would include things such as logo placement, marketing materials, dispersion of goods and services, participation such as keynote speakers, expected number of attendees, media exposure, etc. Be certain the sponsor benefits match the package they have purchased to keep things consistent and include as much detail here as possible.
The last thing you want is for a sponsor to drop out at the last minute. You also want to be able to walk away from a sponsor if you discover something that conflicts with your ethics or your brand. Therefore, you should ensure your agreement details how your relationship can be terminated and what penalties will be incurred by both parties. The most important details for termination would be how much notice is required and how much the termination will cost. Sponsors will usually insist on a clause that explains what will be expected should your event not produce the benefits you advertised or if an event is cancelled, or if you do not deliver on certain benchmarks. Statements that provide a refund are often requested by sponsors to ensure they get what they pay for. This is often a percentage of the funds they paid but depending on the severity of the issue, could include a full refund.
Today, intellectual property is very important. It includes all the inventions, ideas, strategies and marketing plans a company has produced and that they bring to the table. Sponsorships often include the sharing of intellectual property and therefore it is imperative you provide details that outline usage rights on behalf of both the sponsor and the rights holder. You want to ensure you retain ownership and list what intellectual property will be shared and what rights one party has to use the other party’s intellectual property. Limits should be clearly defined as well as a list of what can be shared and under what circumstances.
Why are Sponsorship Agreements Important?
While the packages you provide outline what a sponsor is purchasing, a sponsorship agreement provides something that is legally binding. It is really helpful to ensure that your sponsorship proposals are very clear, as this will allow you to base your agreement on something a little more solid. If your agreements are drawn up using the same list for each sponsor, you can back up your agreements and ensure both parties are comfortable with, and fully understand, what is expected of them.
The level of participation often varies greatly from sponsor to sponsor from a company simply delivering products to an event venue, to a sponsor participating with keynote speakers, entertainment or catering a major sit-down dinner all the way to naming a facility, program or event. The more complicated the level of participation, the more important the sponsorship sales agreement becomes.
Sponsorships provide credibility and financial backing for your events. A well thought out sponsorship sales agreement will provide the legal contract needed to keep both parties happy. You will avoid confusion, build stronger relationships and look forward to continuous support for future events. Properly drawn up agreements are the glue that holds your sponsorships together, allowing both parties to participate without worry.
When creating a sponsorship agreement, it is imperative to consult a lawyer. This post is meant as information only and is not intended as legal advice or to replace the advice of a lawyer.
ABOUT THE AUTHOR
Chris Baylis is the President and CEO of The Sponsorship Collective and a self-confessed sponsorship geek.
After several years as a sponsor (that’s right, the one investing the money!) Chris decided to cross over to the sponsorship sales side where he has personally closed tens of millions of dollars in sponsorship deals. Chris has been on the front lines of multi-million dollar sponsorship agreements and has built and coached teams to do the same.
Chris now spends his time working with clients to value their assets and build strategies that drive sales. An accomplished speaker and international consultant, Chris has helped his clients raise millions in sponsorship dollars.