CASE STUDY: GUARANTEES, CLAUSES, AND LOSSESCONTRACTS AND THE BOTTOM LINE

In September 2017, Hurricane Irma was churning in the Atlantic Ocean while schools like the University of Louisiana at Monroe (ULM), the University of Connecticut (UConn), and Northern Colorado were making plans to travel to Florida State, South Florida, and Florida, respectively, for out-of-conference matchups. These teams, not considered football powerhouses, frequently travel to play the more notable teams during September. The driving force behind these cupcake games, as they have come to be called, is the guarantee, or appearance payment. As the business of college sports continues to grow, guarantees to schools like ULM and UConn have become the norm. These guarantees represent a contractual obligation that the host school agrees to pay the visiting school for traveling and playing. These monies augment the already rigid budgets of traveling teams. For example, in week 1 of the 2017 collegiate football season, more than $70 million in payouts were recorded (Berkowitz, 2017a).

As meteorologists from the Weather Channel and the National Hurricane Center, located in Miami, attempted to project Irma's path and strength, they kept a close eye on the Tropics. Local authorities' decision-making depended on the information shared from these trusted weather authorities. Since football is mainly played outdoors, once the path was projected, plans began unfolding to move, postpone, or cancel many events that were to take place over the weekend, which was the predicted time of Irma's landfall (Chavez 2017; Culpepper 2017).

To set the tone of what was at stake, ULM was to be paid $1.35 million by Florida State (Hunsucker 2017) and Florida promised Northern Colorado $625,000 (Berkowitz 2017b). These figures were negotiated between the schools and put into the game contracts. It is customary for guarantee games to "routinely include a provision saying that if any of a variety of circumstances including a hurricanemake it impossible to play the game, the contract is voided" (Berkowitz 2017a). In legal terms, this clause is called a force majeure clause. Once the force majeure clause is enacted, it releases the payer from financial obligation to the payee.

An interesting caveat to these guarantee games is the coach's employment contract, which may include a bonus clause directly impacted by the loss of the guarantee monies. Many schools offer a bonus to a coach if they travel to the guarantee game and upset the home team or even just schedule a Power Five team. "Wyoming's Craig Bohl gets a $100,000 bonus for each regular-season win the Cowboys record against a Power Five team. Appalachian State coach Scott Satterfield gets a $10,000 bonus if his squad plays a Power Five team at that team's stadium" (Berkowitz 2017b).

Case Study Application

1. In the sport and entertainment industry, contracts are the backbone of every partnership that we form: employment, concessions, games, and vendors. All of these examples can be linked to a single event like a football game. If you were the head coach and athletic director for Bussell University, a Division I school located in the foothills of the Smoky Mountains in Tennessee, what schools would you look to negotiate with for a guarantee game contract? Would you include any bonus for the coach? Why or why not?

2. Develop a spreadsheet that outlines how you would distribute the monies earned from the guarantee among the six men's and eight women's teams in your athletic department.

3. How would you "sell" this cupcake game to your president, your board, your alumni, and your fans? Discuss the benefits and drawbacks to scheduling such a game.

4. Finally, assume you have been guaranteed $1 million to play a game and the force majeure clause is enforced because of a hurricane. Do you attempt to schedule a new game or just play 11 games that season? How do you recoup those anticipated funds?

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