The selling of charity cards by card companies is usually a very beneficial partnership for both parties. However the card company must appreciate that this arrangement must be accompanied by a legal agreement (see Charities Act 1998 Pt 2 commercial participators) and that the contribution to the charity is not a donation but a payment for the use of its brand name and logo.
The charity's name and reputation is a valuable asset that should never be undersold and must be protected in the same way as Disney or Coca Cola look after theirs.
However, charities do very much appreciate the work done on their behalf by the card companies. The income they receive is very important, whatever the size of the charity. Therefore they are keen to have a good working relationship with a card company and will do whatever they can to assist the sale of the cards.
Below are a few notes on how a card company may set up a Royalty Agreement with a charity:
- Decide which charity/charities you wish to support.
- Contact the charity/ies with your proposal - no. of designs, packs and the commission per pack (or per card for overprinted cards).
- Some of the public are under the impression that all of the retail price will be paid to the charity. We all know this is impossible but the charities believe a commission level equivalent to around 10% (ex VAT) of the retail price is generally regarded by the public as being an acceptable return for charities - or 1/xth if shared by a number of charities. Equally the charity trading manager is aware that the income is usually paid by the card publisher rather than the retailer and so may be willing to discuss a lower percentage especially if there is a reasonable possibility of it being increased in future years.
- It is very easy for the retailer, the charity and the card company to receive bad publicity if the commission is perceived as too low.
- The Royalty Agreement should be agreed prior to the artwork being approved etc. However in reality so long as the charity has agreed to a partnership the card production and Agreement discussions will run in parallel.
- Many of the larger charities will have their own Royalty Agreement template but if the charity doesn't, the card company will need to get one drawn up.
- The card designs should be shown to the charity for approval or it should be confirmed in writing that none of the images are in opposition to the charity's mission. E.g. Snowman with pipe for a cancer charity.
- The charity will supply a mission statement if required and it should be checked on a yearly basis that the statement is the same.
- All artwork containing the charity name & logo must be approved by the charity. This includes the company's website.
- The charity's registered number must be printed on all artwork.
- The contribution statement must meet the requirements of the Charities Act and it is the responsibility of the card company to ensure it is correct. However the charity usually wishes to see the wording and will advise if they believe it is inaccurate. The statement must be printed either in the brochure (B2B) or on the card pack/box (retail) and on the relevant website page.
- Many of the charities have their own trading companies. The contribution should be paid to the trading company because it will incur VAT. This fact should be included in the contribution statement.
- The charity will most probably wish to issue an invoice for the contribution to satisfy the VAT requirement, so the card company should inform it of the amount so the invoice can be raised.
Finally remember that it is the responsibility of the card company to meet the requirements of the Charities Act and is liable to a fine of £5,000 if they fail to do so.
© Cancer Research UK July 2004. Used by kind permission of Cancer Research UK
The Charity Licensing Agreement is available for download in the GCA Members' resources area.