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Why Does the NASCAR Charter System Exist?

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Joshua Lipowski

Joshua Lipowski

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What’s Happening?

One of the major talking points of the 2024 NASCAR season is the ongoing charter negotiations between NASCAR and the race teams. This raises the question, why does NASCAR use the charter system? Today, we take a look at the reasons why NASCAR has gone to this type of system in recent years, as it will be helpful to keep in mind as the negotiations – both private and in the press – take place over the coming months.

  • NASCAR implemented the charter system in the Cup Series in 2016, which is similar to a franchise model used in other sports. Any race team that buys one of 36 charters for any of their cars commits to running the full schedule, and they are guaranteed a starting spot for every race they enter. They are also guaranteed a certain amount of the prize pool after each race.
  • Currently, NASCAR and the team owners are negotiating extending the charter deal. The current deal expires at the end of the year.
  • Fans are eagerly anticipating this deal to be finished. If it is not done, then there is a possibility of a split between NASCAR and the team owners.

Stability

In the original press release when NASCAR announced the charter system in 2016, both Brian France and Chip Ganassi Racing co-owner Rob Kauffman used the same word, stability. Now, what does “stability” mean? Stability means different things to different people.

From NASCAR’s perspective, they have a deal with the race teams that keeps them partnered for an extended period. Think about the franchise model in other sports. Every year, a sports league can count on certain franchises competing in the league during the coming season with the ability for teams to move or be sold through a process as every party involved sees fit. NASCAR can count on their chartered teams competing in every race, and the charters can be sold and maneuvered as the teams and NASCAR see fit.

From the team owner’s perspective, they get financial stability. Those who buy charters are guaranteed a certain part of the prize pool at the end of every race. It also gives them some stability with sponsors because they can sell to potential customers that a certain brand will be on the track during a race or multiple races throughout the season. There is no risk of losing prize money because of either not qualifying for the race or losing a sponsor because of failing to qualify.

From the fans’ perspective, they know which drivers and teams will be on the track every week. They won’t tune in to a race with their favorite driver, provided it’s a chartered entry, potentially not qualifying for the race.

Enterprise Value

Another benefit a charter has for a race team is how it increases their enterprise value. Previously, the only value a race team had was their cars, equipment, and their race shop. A race team having a charter gives them something else of value.

For example, Spire Motorsports bought Live Fast Motorsport’s charter last fall for $40 million. Live Fast had previously bought their charter from Go Fas for an estimated $10 million according to Deb Williams of Autoweek.

Because of the charter system, race teams now have an additional enterprise value. They now have a charter that is worth $10s of millions as opposed to just relying on parts, pieces, and buildings which may lose value over time. The value of charters continues to skyrocket as time goes on.

The Charter System Keeps Both Parties Together

For all parties involved, the charter agreement is something that keeps them bound together. NASCAR and the race teams both need each other to thrive. The team owners need NASCAR to sanction races and hold events, and NASCAR needs the teams to keep the current stars in the sport.

Both parties coexist to make each other stronger, and it’s the exact same story in other sports. The NFL is not the same without the teams and players that make it up. NASCAR is not the same without Hendrick Motorsports or Chase Elliott.

When motorsports or sports in general become fractured, it does not end well. IndyCar went through a major split in the mid-1990s as Tony George formed the Indy Racing League to split from CART. The entire story is very complicated, but, the point is that IndyCar has never fully recovered from that split. It still fails to pull in the TV ratings that NASCAR or even Formula One has in some instances.

The charter system keeps everyone involved with NASCAR aligned with each other. If both sides split from each other, it would likely not end well for either party.

The charter system has plenty of benefits for NASCAR and the team owners. If a deal were not to be reached, then the potential ramifications could be disastrous.

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Joshua Lipowski

Joshua Lipowski

All Posts