NASCAR overhauls its business model
CHARLOTTE, N.C. — NASCAR announced a dramatic overhaul of its business model Tuesday, shifting to a franchise-like system that is intended to provide actual value and financial stability to team owners after decades of heavy reliance on sponsors.
The change gets away from the independent contractor model that had been used since NASCAR's 1948 inception. A car owner was responsible for all the financial obligations to race each week, depending on sponsorship to help foot the bills. When a sponsor pulled its funding, a car owner could go broke and be left with nothing but racing equipment.
"This is a very complicated agreement, to sort out, with 60 years of history doing business in a certain way,"NASCAR chairman Brian France said. "To restructure things in the manner that we did was a very tall order to accomplish."
Michael Waltrip Racing had nothing but old cars, used equipment and a building to sell when it closed its doors in November. Now MWR has two of the 36 coveted "charters" and the ability to sell them to the highest bidder. A charter guarantees revenue and a position in what will now be a 40-car Sprint Cup field, down from 43.
MWR co-owner Rob Kauffman, the architect of the Race Team Alliance group that brokered the deal withNASCAR, indicated his two charters will be sold before the Feb. 21 season-opening Daytona 500. One is expected to go to Joe Gibbs Racing for Carl Edwards' car, the other to Stewart-Haas Racing for Kurt Busch.
"I think what we've done here is now we've put the teams on a more stable footing," Kauffman said. "I think it really allows the teams to invest for the future. If you're living year to year, you can't really think about the long-term. Here what you're able to do is say, 'OK, I'm going to take this risk on this young driver, see how they work out, develop this crew chief, this crew member, even some of the technical sides, even your basic business infrastructure. It's a step in the right direction."
Every organization is allowed a maximum of four charters. But in order to get one of the 36, a car had to attempt every race since 2013. Busch and Edwards both drive for recently added teams.
Kauffman estimated the current worth of a charter is "single digit millions," or under $10 million. The charters are good for nine years and there is a performance clause tied to them. Selling or transferring a charter is only allowed once in a five-year period.
"This is an important day in the history of our sport that will benefit all constituents, immediately and in the long term," said SHR co-owner Gene Haas, who formed Busch's team out of pocket in 2014. "As someone who has heavily invested in motorsports for many years, I'm very pleased with the industry's commitment to sustainability, collaboration and long-term value."
Potential new team owners must be vetted by NASCAR before a sale for a new charter can be completed, andNASCAR will collect an administrative fee in the process. Each team owner can set their own sales price for a charter.
The charters went to Richard Petty Motorsports (2); Richard Childress Racing (3); Team Penske (2); Hendrick Motorsports (4); Roush Fenway Racing (3); Chip Ganassi Racing (2); Joe Gibbs Racing (3); Michael Waltrip Racing (2); Stewart-Haas Racing (3); Furniture Row Racing (1); Front Row Motorsports (2); JTG Daugherty Racing (1); Tommy Baldwin Racing (1); Germain Racing (1); Go Fas Racing (1); BK Racing (2); Premium Motorsports (1); Circle Sport Racing (1); and HScott Motorsports (1).
Among the teams that did not receive a charter was The Wood Brothers, which will field a full-time entry this year for Ryan Blaney. He will now have to qualify every week for one of the four open slots in the field.