The real reason franchising won't happen in NASCAR
By David Caraviello, NASCAR.COM
When Texas businessman Red McCombs bought the NFL's Minnesota Vikings in 1998, he paid $246 million -- a relatively modest sum for a franchise in the nation's premier sports league. Two years ago, after being unable to broker a deal for a new stadium, he sold the team. He walked away with $600 million, a profit of $354 million on his original investment.
That's the big upside to franchising, a system of ownership prevalent in most major North American sports leagues, and a practice that has yet to find a place in NASCAR. Yes, team owners have to pay big to get in; Charlotte food-service mogul Jerry Richardson paid a $140 million franchise fee to land the Carolina Panthers in 1993. But that investment offers a certain level of protection, an asset that can be traded in when times are tough. When Quebec Nordiques principal owner Marcel Aubut found himself strapped for cash in one of the NHL's smallest markets in 1994, he still walked away with $103 million after selling to a group of Denver investors.
Owners in NASCAR have no such safety net. They risk losing everything if sponsorship dries up, which is exactly what happened to legendary car owner Bud Moore. The Spartanburg native, who stormed the beach at Normandy in World War II, won a pair of championships in NASCAR's premier division. But when the sponsors went away in the late 1990s, so did Bud Moore Engineering, and all its history. The assets of a team that had fielded cars for Joe Weatherly, Bobby Allison, David Pearson and Dale Earnhardt were sold for pennies on the dollar at auction.
No wonder Nextel Cup teams are clamoring to align with business partners, or one another. Roush Racing merges its engine-building operation with Robert Yates Racing, and then sells half its business to the parent company of the Boston Red Sox. Dale Earnhardt Inc. and Richard Childress Racing build engines under the same roof. Evernham Motorsports courts the owner of the Montreal Canadiens. DEI discusses merging with the Yates organization, and now reportedly holds similar discussions with Ginn Racing. In NASCAR as in the wild, there's safety in numbers.
It's a brutally expensive, money-draining exercise. The way to make $1 million in racing, or so the story goes, is to start with $2 million. The company owned by Florida developer Bobby Ginn did $2.5 billion worth of business in 2005. The man sold $325 million worth of real estate in one day. Yet his race team, which nearly won the Daytona 500 and once added people and resources at an explosive rate, has been forced to shut down its Busch car, part with some employees, and drop from three cars to two. All because sponsorship didn't materialize as the organization had hoped.
If the bottom fell out of the real estate business tomorrow and Ginn was forced to shut down his entire operation, what would he be left with? Unlike owners in most other major-league team sports, his organization has no inherent value. He didn't pay a fee to get in, and won't cash a check to get out. He'd have to sell off his equipment, like the two jet aircraft and the seven-post shaker rig, at the best price he could get. And that price likely wouldn't be very high.
But if had Ginn paid a franchise fee, and if competition in NASCAR were limited to owners who had been awarded a franchise by the sanctioning body, he'd have an asset to sell. People within the sport look with sympathy at entities like the Wood Brothers, faithful to their sport for decades, but hopelessly swamped by larger and better-funded organizations. Without a franchise, even one of NASCAR's more historic organizations risks being left with very little if sponsorship and the backing evaporates.
Beyond the natural questions -- how many franchises do you award? What's the franchising fee? Are existing teams grandfathered in? -- there's the natural resistance from NASCAR, which doesn't want to limit who can compete in its sport. Had franchising been in effect, the sanctioning body argues, men like Joe Gibbs might never have had the opportunity to own race teams. Never mind that Gibbs, now that he's part of the sport, is all for franchising. And never mind that directives like the top 35 rule and the impending four-car cap are even more exclusionary than franchising would be.
The recent passing of former chairman Bill France Jr., the staunchest opponent of franchising within the sport, have led to whispers that implementation of the ownership system may be on its way in NASCAR. Don't bet on it. What will keep franchising from becoming a reality isn't a desire for open competition. What will keep it from happening is the fact that franchising would alter the power structure within the sport, providing owners with much more leverage than they have now, and diluting the influence of the brass in Daytona Beach.
Look at sports leagues that have franchising, and you'll also find ownership boards and policy groups. You'll find offseason owners' meetings where rules changes are discussed and approved. You'll find that owners who pay millions of dollars for the right to compete also want a degree of authority on how their sport is run, authority that NASCAR is unlikely to give them. And that's not necessarily a bad thing.
We've seen owners take control of a racing series before, and the disastrous financial and competitive consequences. Championship Auto Racing Teams, the open-wheel series now known as Champ Car, had noble beginnings. Owners in the U.S Auto Club didn't like the size of purses or the scope of promotion, and wanted to take control of their series. For a little while, it worked. But car owners, it was discovered, often have divergent agendas. Mismanagement and the 1996 formation of the Indy Racing League took their toll, and today Champ Car is but a blip on the American motorsports radar screen.
For whatever reason, the two most successful auto racing circuits on the planet -- NASCAR and Formula One -- are run similarly, with a single, strong figure making all the decisions at the top. They don't allow a lot of room for compromise. Sometimes, they come across as unfair. But both series have been printing money for decades, under the theory that what's good for the sport as a whole is good for everybody in it. For teams that win, the system works. For teams that don't, existence can be a financial struggle seemingly without end.
So they look for partners and alliances and people who can help pay the bills. That's the new reality in NASCAR, a sport with no safety net, where the only protection is what you make for yourself.
The opinions expressed are solely those of the writer.
By David Caraviello, NASCAR.COM
When Texas businessman Red McCombs bought the NFL's Minnesota Vikings in 1998, he paid $246 million -- a relatively modest sum for a franchise in the nation's premier sports league. Two years ago, after being unable to broker a deal for a new stadium, he sold the team. He walked away with $600 million, a profit of $354 million on his original investment.
That's the big upside to franchising, a system of ownership prevalent in most major North American sports leagues, and a practice that has yet to find a place in NASCAR. Yes, team owners have to pay big to get in; Charlotte food-service mogul Jerry Richardson paid a $140 million franchise fee to land the Carolina Panthers in 1993. But that investment offers a certain level of protection, an asset that can be traded in when times are tough. When Quebec Nordiques principal owner Marcel Aubut found himself strapped for cash in one of the NHL's smallest markets in 1994, he still walked away with $103 million after selling to a group of Denver investors.
Owners in NASCAR have no such safety net. They risk losing everything if sponsorship dries up, which is exactly what happened to legendary car owner Bud Moore. The Spartanburg native, who stormed the beach at Normandy in World War II, won a pair of championships in NASCAR's premier division. But when the sponsors went away in the late 1990s, so did Bud Moore Engineering, and all its history. The assets of a team that had fielded cars for Joe Weatherly, Bobby Allison, David Pearson and Dale Earnhardt were sold for pennies on the dollar at auction.
No wonder Nextel Cup teams are clamoring to align with business partners, or one another. Roush Racing merges its engine-building operation with Robert Yates Racing, and then sells half its business to the parent company of the Boston Red Sox. Dale Earnhardt Inc. and Richard Childress Racing build engines under the same roof. Evernham Motorsports courts the owner of the Montreal Canadiens. DEI discusses merging with the Yates organization, and now reportedly holds similar discussions with Ginn Racing. In NASCAR as in the wild, there's safety in numbers.
It's a brutally expensive, money-draining exercise. The way to make $1 million in racing, or so the story goes, is to start with $2 million. The company owned by Florida developer Bobby Ginn did $2.5 billion worth of business in 2005. The man sold $325 million worth of real estate in one day. Yet his race team, which nearly won the Daytona 500 and once added people and resources at an explosive rate, has been forced to shut down its Busch car, part with some employees, and drop from three cars to two. All because sponsorship didn't materialize as the organization had hoped.
If the bottom fell out of the real estate business tomorrow and Ginn was forced to shut down his entire operation, what would he be left with? Unlike owners in most other major-league team sports, his organization has no inherent value. He didn't pay a fee to get in, and won't cash a check to get out. He'd have to sell off his equipment, like the two jet aircraft and the seven-post shaker rig, at the best price he could get. And that price likely wouldn't be very high.
But if had Ginn paid a franchise fee, and if competition in NASCAR were limited to owners who had been awarded a franchise by the sanctioning body, he'd have an asset to sell. People within the sport look with sympathy at entities like the Wood Brothers, faithful to their sport for decades, but hopelessly swamped by larger and better-funded organizations. Without a franchise, even one of NASCAR's more historic organizations risks being left with very little if sponsorship and the backing evaporates.
Beyond the natural questions -- how many franchises do you award? What's the franchising fee? Are existing teams grandfathered in? -- there's the natural resistance from NASCAR, which doesn't want to limit who can compete in its sport. Had franchising been in effect, the sanctioning body argues, men like Joe Gibbs might never have had the opportunity to own race teams. Never mind that Gibbs, now that he's part of the sport, is all for franchising. And never mind that directives like the top 35 rule and the impending four-car cap are even more exclusionary than franchising would be.
The recent passing of former chairman Bill France Jr., the staunchest opponent of franchising within the sport, have led to whispers that implementation of the ownership system may be on its way in NASCAR. Don't bet on it. What will keep franchising from becoming a reality isn't a desire for open competition. What will keep it from happening is the fact that franchising would alter the power structure within the sport, providing owners with much more leverage than they have now, and diluting the influence of the brass in Daytona Beach.
Look at sports leagues that have franchising, and you'll also find ownership boards and policy groups. You'll find offseason owners' meetings where rules changes are discussed and approved. You'll find that owners who pay millions of dollars for the right to compete also want a degree of authority on how their sport is run, authority that NASCAR is unlikely to give them. And that's not necessarily a bad thing.
We've seen owners take control of a racing series before, and the disastrous financial and competitive consequences. Championship Auto Racing Teams, the open-wheel series now known as Champ Car, had noble beginnings. Owners in the U.S Auto Club didn't like the size of purses or the scope of promotion, and wanted to take control of their series. For a little while, it worked. But car owners, it was discovered, often have divergent agendas. Mismanagement and the 1996 formation of the Indy Racing League took their toll, and today Champ Car is but a blip on the American motorsports radar screen.
For whatever reason, the two most successful auto racing circuits on the planet -- NASCAR and Formula One -- are run similarly, with a single, strong figure making all the decisions at the top. They don't allow a lot of room for compromise. Sometimes, they come across as unfair. But both series have been printing money for decades, under the theory that what's good for the sport as a whole is good for everybody in it. For teams that win, the system works. For teams that don't, existence can be a financial struggle seemingly without end.
So they look for partners and alliances and people who can help pay the bills. That's the new reality in NASCAR, a sport with no safety net, where the only protection is what you make for yourself.
The opinions expressed are solely those of the writer.
