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NASCAR Race Weekend Central

Digging into the Charter System: Has it Been Good for NASCAR?

Prior to the 2016 season, NASCAR implemented a charter system for its Cup Series. The concept was a way to stabilize a wobbly financial outlook for teams after a series of layoffs and closures. Designed to cut costs, this system guaranteed that the top organizations in the sport would be a part of the field every week.

In Feb. 2016, NASCAR CEO Brian France met with team owners to discuss the long-term agreement. In the end, they settled on a nine-year deal in which 36 medallions were issued (four spots on the grid remain open for unchartered teams).

A charter mandates that the respective car does not have to qualify on time. Their spot is secure for every race over a full, 36-race season provided the team simply shows up. The idea behind that was for sponsors of major programs to know for certain they’d have the car on track each week rather than a potential DNQ.

Charter owners may transfer their charter to another team, for one full season, once over the first five years of the agreement.  If a charter team finishes in the bottom three of the owner standings among all 36 charter teams for three consecutive years, NASCAR has the right to remove its charter. Companies can sell their charter on the open market, although a limit of four cars per owner is strictly enforced.

At the time, NASCAR reduced the Cup Series field from 43 entries down to 40, though the sport has rarely seen a full field in 2017. In the 71 Cup Series races since the beginning of 2016, 21 of them have run less than 40 cars. 17 of those events have come this season.

That makes it all but a guarantee if a team brings an open car to the racetrack, they are all-but-in the race. There are, of course, certain times where the field will see more than 40 cars attempt to qualify — the Daytona 500, Coca-Cola 600, Brickyard 400, and a few others. A higher race purse typically brings out the stragglers at the back end of the garage.

But for teams that run an open car, what is there to win? What if 41 cars show up? Where can they find speed running on a low budget?

Typically, Jay Robinson, Rick Ware, and Ron Devine are the team owners that run at least one open car on a weekly basis. Carl Long has brought the No. 66 car to the track 11 times this year as well. Frontstretch polled them to find out the answer to a simple question: two years in, does this charter system work?

“I think that it’s an area that we’re addressing and looking at really, really hard,” said Devine, owner of BK Racing when addressing how these four “open” spots affect charter value. “I think it’s something that takes a lot of thought. It’s the heritage of NASCAR, the openness of it, so it has a lot of positives. I think that a closed system probably is more valuable, but I also think there is a lot more to it than just yes and no. In general, I think it’s an area that a lot of people are looking at and it needs to be addressed.”

Devine owns the Nos. 23 and 83 race teams. Both cars have had a plethora of drivers behind the wheel over its six-year existence. However, the No. 23 has a charter and is among the bottom three in owner points. Though NASCAR can’t do anything about the charter this season, as it’s among the bottom three in points for the first time, the team has the option of selling it.

Looking ahead to 2018, though Devine admitted he’s looking to purchase another charter. The security of having a spot on the grid still means enough to him to buy a medallion.

Heading into the season finale at Homestead-Miami Speedway, the No. 83 car is leading the open teams in points while missing a trio of races at Sonoma, the Brickyard and, most recently, last weekend at Phoenix. Competing in 32 events, the No. 83 group is 36th in the owner standings, 111 markers ahead of the No. 55 team, which is owned by Jay Robinson, the second highest open team.

“I think it’s harder to run a part-time team, to be honest with you,” Devine said. “It’s start-and-stop and that’s one of the reasons why we want to keep it going. It’s very disruptive to shut it down and then fire it back up.”

Of course, there is more money involved when finishing a position up in points, even if it’s down in the mid-30s. Devine wants to be ahead of the Nos. 7 and 55, owned by Robinson, so he can have bragging rights, as well as hope to acquire a second charter for 2018.

When asked about changes to the system, Devine was hesitant to recommend any.

“NASCAR is evolving,” he said. “I think that part of that evolution is to continue doing stuff, whatever makes sense along the way. I think you’re going to see a lot more positive change coming.”

Like BK Racing, Premium Motorsports, which fields the Nos. 7, 15 and 55, has had its fair share of drivers strap into one the team cars this season. Michael Waltrip kicked off the year with a bang, finishing eighth, the organization’s first top-10 result in its four years of existence.

That’s what used to be called a good points day. Driving the No. 15 car, the team got off to a solid start, but the No. 55 has missed eight races since, electing not to show up at the racetrack. Heading to Homestead, it sits 38th in the owner standings, only ahead of Rick Ware Racing’s No. 51 open team that has run on a consistent basis.

However, Robinson is in favor of the system and labels it as “stable,” not believing that open cars bring down the value of the charters.

“That’s probably debatable depending on how you want to look at it,” Robinson said. “I think there are many other things that have much more of an effect. Certainly, income streams at lots of levels, exposures through the variety of media outlets have a greater effect than running an open car.”

Prior to the 36-car charter system at the Cup level, the top 35 in owner points were locked into each race.

“There have been so many systems throughout the years,” he said. “I’ve been going to races since the mid-1960s and I remember when it was a 40-car field and two alternates. That actually worked pretty well for the folks back then.

“Then, of course, it was a 43-car field and now we’re down to 40. There has been the seven provisional system and then the five provisional system. Then, the lock-in system. All of that has evolved over the years, all of which have pluses and minuses. Certainly, where we are today has added stability and I think it’s been positive.”

Meanwhile, not being locked into every race can be a hassle for a race team. Why make the trip out west and possibly miss the race? For some, it doesn’t make sense.

Robinson’s motto has always been that he races to make a profit, despite where his teams rank in the finishing order. Since owning any type of team in 2000 (XFINITY Series), he has made money each season.

Because of that, Robinson elects to pull his race teams (No. 55) out of certain events either because it doesn’t have the funding or the purse total won’t cover the expenses. Though he wouldn’t admit what track has the worst earnings, he did mention it was a marquee event on the circuit.

“Whether you’re racing a charter team or an open team, and you only have purse money to rely on, you’re going to be very limited,” Robinson said. “Your upside, for the most part, is going to be through your funding, whether that would be a driver with funding or a group of sponsors to make up your total revenue. Then it’s down to what it costs.

“It costs very differently to race at Richmond [International Raceway] versus Phoenix [International Raceway]. The individual race that you’re going to makes a big difference. Then, the racetracks pay different purse amounts.”

You be the judge: The No. 55 team failed to qualify for the Daytona 500 and elected not to run at Martinsville and Richmond in April, Dover and Michigan in June and Watkins Glen in August. They most recently elected to skip the second Martinsville, Texas, and Phoenix events.

Meanwhile, Ware, owner of Rick Ware Racing has a bit of a different philosophy on the charter system. In fact, he’s the only owner in the sport that solely runs an open car close to full-time.

Ware made the hop to the Cup Series prior to the 2017 season. In his first year as a team owner at the top level, the No. 51 car sits 41st in owner points, qualifying for 28 events. The team has cracked the top 30 on three occasions (Kansas twice and Charlotte in the spring) with Timmy Hill and B.J. McLeod.

When it comes to purchasing a charter, they sell for an undisclosed amount of money. Some contain more value than others, but competing without one at all has been difficult for RWR.

“I don’t know how it (charter) could be valued in my opinion,” Ware said of the system. “I know the argument is that if somebody has a deal, they have to go to a charter team and the only way to get yourself in is to buy your way in.

“The difference between this and other sports is you still have to have funding on a race-to-race basis. Just because you have a charter doesn’t mean all of the problems are solved. On the open deal, you can’t make it work all year long unless you do have some funding. We’ve struggled to make it work and make sense. If you’re a couple of the other teams who have a charter and run an open team, it kind of makes sense because you have a guaranteed income. As far as actually how it affects the charter costs, I’m not convinced that it hurts it or helps it at this point. ”

Ware has chosen not to bring the No. 51 car to six events this season, also failing to race into the Daytona 500 during the Can-Am Duels. The first-year Cup team has not made trips to Talladega in May, Michigan in June, Daytona in July, and Pocono and Watkins Glen in August as well as the fall Talladega race.

The primary goal for the race team is to purchase a charter, but that’s easier said than done. New teams are being entered into the Cup Series in 2018 (like the No. 12 Penske team) that have the resources to outspend Ware.

However, the car owner believes that NASCAR does all it can to help the smaller teams, at least in terms of making it to the track.

“We’ve done many different forms of road racing, and even at the open level NASCAR still provides teams with a substantial purse and the tools to make it a viable business,” he mentioned. “I’m not going to say it’s easy by any means, but compared to every single form of professional motorsports, NASCAR at least gives you the tools to fight and do that. You can’t say that about any other form of motorsports.”

This system, of course, was designed for financial gain. Obviously, that’s what NASCAR is run for but take, for instance, any business. Own a pizza joint? Say you make $3 million the first year you’re in business and repeat that for the next nine years. That will thoroughly cover the costs of the dough, sauce, and extra ingredients — meaning the business has value.

Ultimately, that’s what these smaller teams are trying to do by working towards one of these medallions. The charter system has cut down the costs to a degree, but there is still more that Ware, specifically, would like to see done.

“The option of taking the charter away after three years — that’s not a guarantee that they would do that if you’re in the bottom three, so teams have to go lease them around,” he said. “I don’t think they ever thought that’s what would happen. I don’t think there was really any way to plan that. People have done it, so it’s this round robin of making sure no team is in the bottom three spots for three years in a row.

“I think it was implemented, and I don’t want to speak out of turn, but it was really implemented because they were worried about people starting and parking. Nobody is doing that anymore at this level. That would be the only change that I would like to see. Really, one of the biggest sports in the world, definitely the biggest motorsport in the world, you have the opportunity to be here. A common person like myself, I don’t think we have any opportunity to be in other sports at this level. It’s really hard, but at the end of the day, NASCAR does give you the platform to make it a viable business.”

If it were economically feasible, Ware believes there would be upward of 80 cars attempting to qualify for each race. But it’s not that easy, and it seems to only be getting more expensive for the small teams.

At Leavine Family Racing, the situation is a little different. The No. 95 team has been guaranteed a spot in each race since the beginning of the 2016 season due to its charter. However, at the end of 2016, team owner Bob Leavine had to purchase a charter from Tommy Baldwin Racing heading into this weekend one year ago to have it for 2017.

LFR had been aligned with Circle Sport Racing in 2016. But with Jeffrey Earnhardt committed to the full schedule in the No. 33 car for 2017, Leavine needed to spend additional cash.

What the No. 95 team got was a guaranteed spot in every race. However, looking back Leavine questions whether it was even necessary.

“It helped us spend a lot of money,” Leavine said of the charter system. “Outside of that, there was a lot of proponents of it. But to me, it’s like what has it really done for our sport?

“I can remember two years ago, we walked out of the owner’s meeting knowing that it was going to come and we knew we weren’t going to have one. So, it’s like what do we do now? The next year, we planned on going full-time, but there was such a disconnect between the purse of the open teams versus charter teams, you’ve got to have almost twice as much sponsorship [to survive as an open car].”

Leavine admits he thinks he knows why the system was implemented. However, he refuses to share the reasons with the public. But the owner did know that, with limited funding, acquiring a charter became a necessary evil or that sponsor wasn’t going to stick around.

“At the end of last year, one of our main sponsors that had been with us had in their contract they required us to have a charter so that we were guaranteed to be into all of the races,” Leavine continued. “I’m sitting here thinking I spent a lot of money and I don’t know why except it was there and put in place.”

2017 has been an improvement on the track for the team, as Michael McDowell sits 26th in the championship standings with an opportunity to crack into the top 25 at Homestead. He sits 18 points behind Chris Buescher and scored a top-10 finish in south Florida last season.

But would McDowell have ever failed to qualify this season without a charter? It seems unlikely considering the size of the fields this season. You can understand why Leavine and other owners in the middle-tier class are a little frustrated. And do those medallions really have long-term value? They’ve been selling in the $2-$4 million range since the system came into place. That’s not enough to cover debts, most likely, for a top-tier race team going under.

At the same time, the field has not been full for just about half the races this season. So it begs the question, why not more open cars? Devine still has the rights to the No. 93 machine. Robinson typically runs two full-time teams, lately running the No. 7 car over the No. 55. Ware has even discussed internally adding an additional team at some tracks. But that would most definitely take more funding. That would seem to indicate the current charter system really isn’t doing much to cut costs.

But despite the challenges, don’t expect any changes. Ultimately, the charter system is intact for at least seven more years, running through the 2024 season despite its many mixed reviews.

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DoninAjax

Any idea from Brian has one purpose: put money in his pocket instead of some one else’s.

“but there was such a disconnect between the purse of the open teams versus charter teams, you’ve got to have almost twice as much sponsorship [to survive as an open car].”

How much longer do we have to wait until Brian fulfills his promise from years ago to provide the winnings in the event results. There’s a reason he hasn’t. It would probably prove that the rich get richer.

Russ

and thats the desire of the teams as much, if not far more so than BZF. BZF and nascar only care because without the teams they have no series, just a bunch of real estate.

DoninAjax

But we don’t know if the teams are better off now than without the charters. Who gets the money for the charter? It seems the charter price is on top of all the other expenses for the teams. How much extra race earnings do they get compared to the independent teams. It looks like another nail in their coffin because they’re getting even less now.

Russ

I think the idea that the charters are a burden to the megateams is a misconception. Almost certainly the owners of those teams, Hendricks, Gibbs, et al, have a succession plan for the race teams, just as they do for any of their other business units. When they go the business continues as if nothing happened. It happens every day in the corporate world. Remember we aren’t talking about Goober and Barney, but successful business men.
Surely you have noticed that the really successful teams are buying or selling charters. There is a reason for that.

Russ

That next to last sentence should have read “aren’t buying or selling charters”.

Chris

This wasn’t a BZF idea. It was Rob Kauffman’s idea. He knew MWR was going under and wanted a mechanism to recoup a tiny percentage of what he stood to lose. It gives teams something to work with internally to pad their balance sheets by showing an asset worth $2-4 million. Think of it this way, a football team is worthless… without the franchise agreement signed with the NFL. Now it is a Billion dollar entity. Nothing more than Monopoly money to the big guys, and the smaller guys get screwed.

Russ

Nice point about the balance sheet.

Totally off topic. We always hear about how expensive nascar stock cars are. In my business I was negotiating with a mega team say 10 years ago for a car. Lets just say what they are carried on the books for tax purposes is QUITE different from what you may believe they are worth.

Russ

I think the charter system is simply an outgrowth of the top 35 system of a few years previously. In theory its for cost savings, but in reality it is, imho, a mechanism to prevent new teams from entering the sport. The charter system in essence forces anyone who wants to invest in Nascar to do so thru an existing team. This helps them it doesn’t help nascar.
After all the teams don’t want to split the pie any more than they have to.

Greg

I’ve said this before and I will say it again, I believe a big reason for the creation of the Charter System is because the long time owners (Richard Childress, Roger Penske, Jack Roush, Rick Hendrick) kmow that there time to get out is coming and they didn’t want to leave the sport by selling their teams for pennies on the dollar. They have worked hard and been in the sport for a long time and they wanted something they could walk away with after all those years.

Bill B

What if both Hendrick and Penske decided to sell their teams at the same time? Counting the 3rd Penske team next year plus the 4 Hendrick teams, how much would those charters be worth if all of the sudden there were 7 available at the same time? Unless there are a couple of billionaires out there chomping at the bit to become NASCAR owners, those charters might be worth much less than 2 million dollars each. It would seem that if one of the owners was thinking about getting out of the business they would need to think ahead and sell one charter each year over a five years if they wanted to get top dollar for them.
Also, given the falling ratings and attendance that seems to be continuing with each year, those charters are going to start losing value.

J Davis

You stated that some charters have more value than others, please explain why.

Thank you for this was a good article

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