Motorsports Marketing Mentor and Sponsor Attraction Coach, Annamarie Malfitana-Strawhand presents an outline on how a young up and coming talented race car driver can present an investment opportunity to a company or individual to potentially fund their racing program and help them advance their driving career to the top levels of NASCAR. This also shows the potential return on investment for the investor once the driver becomes a professional NASCAR driver.
Note:
2. The objective of this presentation is to outline the value of investing in an up and coming
race car driver that is poised to embark on a professional career in NASCAR.
The sport of NASCAR racing has seen huge growth and success in the last ten years with
the star drivers becoming international celebrities and attracting large driving salaries,
commercial endorsement contracts with fortune 500 companies, as well as high volume
licensed merchandise sales .
Driving talent is only one factor that a NASCAR development team looks at as a perquisite
to hire an up and coming driver. The teams themselves look for the driver to initially bring
their own funding to be „developed‟ in an effort to prove themselves on the track in the
team‟s race car and to the powers that be in the sport. Once they have proved
themselves as race driver that can successfully race in the development programs, the
driver is often hired to drive for the team, or will be hired to drive for another team, and will
begin earning a salary and race winnings.
The reason the up and coming driver needs to find an investor is for the simple reason
that he or she must bring their own funding to the team to get these initial driving
opportunities in an effort to ultimately drive professionally with a salary, percentage of
winnings, performance bonuses, endorsements, sponsorships and merchandise sales.
3. Investor puts up the funding needed for the driver to compete in a
„NASCAR driver development program‟ this could be a 2-5 year
program depending on the age and skill level of the driver, and the
team(s) chosen for development. This is in an effort to prepare the
driver to ultimately compete in NASCAR‟s top division, the Sprint
Cup Series. Development programs can start with NASCAR‟s
touring late model division, then the K&N Series, Camping World
Trucks or Nationwide Series then the final step into the premier
division, the Sprint Cup Series.
The investor will receive a return on the investment once the driver
begins to earn a driving salary and winnings through a NASCAR
team contract; as well as other earnings through sponsorships, paid
endorsements, merchandise sales and licensing. The return on the
investment can be a percentage of all driver income combined and
can be applicable for a number of years as the driver competes
professionally in NASCAR.
4. NASCAR is one of the most viewed professional sports in terms of
television ratings in the United States. In fact, professional football is
the only sport in the United States to hold more viewers than
NASCAR. Internationally, NASCAR races are broadcast in over 150
countries. NASCAR holds 17 of the top 20 attended single-day
sporting events in the world, and claims 75 million fans who
purchase over $3 billion in annual licensed product sales. Fortune
500 companies sponsor NASCAR more than any other motor sport.
NASCAR sponsorships (75% of team revenues are derived from
them), including new companies such as Quicken Loans and 5-Hour
-Energy. Farmers Insurance is currently the biggest, committing
$800,000 per race for 22 races to Kasey Kahne‟s No. 5 car, part of
the Hendrick stable. It is common for contracted drivers earn a
percentage of the team sponsorships, or for the driver to sign a paid
personal services agreement separately with the team sponsor.
Source: http://www.forbes.com/nascar-valuations/
7. Nascar's Highest-Paid Drivers
These drivers earned the most in 2011 from their salaries and personal endorsements,
as well as their share of race winnings and licensing income.
These drivers all compete in NASCAR‟s premier division, the Sprint Cup Series.
#1 Dale Earnhardt Jr. - $28 million #6 Kevin Harvick - $14 million
Hendrick Motorsports Richard Childress Racing
#2 Jeff Gordon - $24 million #7 Kyle Busch - $14 million
Hendrick Motorsports Joe Gibbs Racing
#3 Tony Stewart- $22 million #8 Danica Patrick - $12 million
Stewart-Haas Racing Stewart-Haas Racing
#4 Jimmie Johnson - $21 million #9 Matt Kenseth - $11.5 million
Hendrick Motorsports Roush Fenway Racing
#5 Carl Edwards -$15.5 million #10 Kasey Kahne- $11 million
Roush Fenway Racing Hendrick Motorsports
Source: http://www.forbes.com/sites/kurtbadenhausen/2012/02/22/
nascars-highest-paid-drivers/
8. The return for the amount invested can be based on a percentage paid on the driver‟s
overall income through professionally racing in NASCAR.
This comes from paid endorsements, sponsorships, paid appearances, souvenir
sales, licensing fees, driving salaries, performance bonuses and winnings.
Professional race drivers in NASCAR realistically make their peak salary and winnings
when racing competitively for a top 10 team in the NASCAR Sprint Cup Series.
However, they can begin to earn up to three figures in the NASCAR Nationwide
Series and Camping World Truck Series based on their own self- promotion and
popularity with pulling in their own sponsorships, commercial endorsements, personal
services agreements, souvenir sales and licensing fees.
Investors that finance an up and coming driver who goes through the “development”
phase must understand that typically NASCAR teams do not pay salaries or offer
race winnings to development drivers. Drivers must bring their own funding to do this.
But once the driver makes it to the top three nationally recognized NASCAR divisions,
(NNS, NCWTS, and NSCS) the winnings and salaries vary depending on the level
and competitiveness of the team. A driver must have marketing savvy and a good
personal PR campaign to utilize the position he or she is in and pull in their own
personal endorsement deals, sponsorships and personally grow their fan base to
insure lucrative souvenir sales.
9. The investor and the driver can put together an agreement that bases a return on an
investment early on in his or her NASCAR driving career based on percentage of
sponsorships, endorsements and souvenir sales and not just on salaries and
earnings.
The investor and the driver can also put together an agreement based on a return
after a certain amount is being earned by the driver from all sources of income, such
as starting at a $250,000 mark, with a percentage based once that amount has been
reached yearly by the driver.
The investor and the driver must also understand that the driver could be considered
“under development” for up to 3-5 years depending on his or her starting point, age,
learning curve and quickness to adapt to the cars, tracks and level of competition. So
it is highly suggested that the return on investment must be based also on the driver‟s
ability to sell souvenirs and attract sponsorship, not just on driving potential. A driver
owns the rights to his or her own likeness and also can sell souvenirs and get their
own paid endorsements and sponsors while under development. So, the investor can
start getting returns earlier on, as the driver gets more sponsors and sells more
souvenirs.
Investors can also be granted full licensing rights to the driver they are financing – to
create and sell their own merchandise.
10. Typically, the amount of up front funding from an investor for a
development driver varies, depending on the level and quality
of teams that are developing the driver- and the level that the
driver starts out at for his or her development.
Current Funding Amount Examples Step By Step:
1) Championship caliber regional touring NASCAR late model
program – Approx. $300,000 - $500,000 per year. (1 full
season)
2) Championship caliber NASCAR K&N East Series or ARCA
program– Approx. $1,000,000 - $2,500,000 per year (1 full
season)
3) Championship caliber NASCAR Camping World Truck Series or
NASCAR Nationwide Series program– Approx. $3,000,000 -
$5,000,000 per year (1 full season)
11. Below are current examples of professional race drivers who
are working with investors to develop their careers in
NASCAR, as well as Drivers and Teams that have had
successful development programs:
1) Paul Harraka (Source: ESPN.com/ESPN The Magazine April, 2012
Issue) Read article: “The new investment vehicle --Young drivers can
no longer break into the NASCAR scene on talent alone” Link:
http://espn.go.com/racing/story/_/id/7712993/nascar-young-driver-
paulie-harraka-end-nascar-money-woes-espn-magazine
2) Paul Harraka ( The Duke Chronicle Online) Link:
http://www.dukechronicle.com/article/harraka-starts-company-
fund-his-racing
3) Joey Logano, Denny Hamlin, NASCAR.com – “Development
Success Stories” Link:
http://www.nascar.com/2009/news/features/11/11/enterprise.develo
pment.in.nascar/
12. The driver must have his or her own corporation or LLC set up
before meeting with potential investor
The driver must have teams lined up with letters of intent to develop
the driver based on the amount funding needed
The driver must provide a professionally prepared prospectus with
legalities by his or her attorney for the investor
The prospectus must map out in detail how the funding is to be paid
to the driver, and the responsibilities of the driver to provide the
return on the investment to the financiers
Once the prospectus is agreeable by both the driver and the
investor, an agreement is to be drawn up by the driver‟s attorney and
the financier can have their own attorneys review
Once the agreement is signed and a payment schedule set up with
the investors, the driver must set up his own written agreements with
the team(s) and begin his or her development program