The For-Profit Entity's Guide to Doing Business with Nonprofit Organizations

You are deputy general counsel of a Fortune 500 children’s entertainment conglomerate. One day, the vice president of marketing comes into your office and says, “We need to form a tight bond with the Fish Are Friends, Not Food Foundation. They are doing amazing work and getting great press for it. We need their brand to promote our new character, ‘Smiley the Shark.’” You’re excited because your best friend from law school is now the general counsel for the Foundation. You assure your VP that you can get the deal done quickly.

So, you call your buddy Jane, and after catching up on her family and recent career moves, you explain what you would like to do with the Fish Are Friends, Not Food Foundation. “First, we are thinking that we will develop a line of stuffed fish toys under our brand that we will offer you wholesale, provided we are the exclusive provider of all toys for your organization. We’ll handle the toy production, and you will sell the product at a mark-up at all of your Foundation events and on your Foundation’s website. We expect that your Foundation will be responsible for handling distribution, sales and taxes on any profit. Of course, we expect that you will email your 2 million members, encouraging them to buy our line of children’s toys, and also tweet about the promotion and post on your Facebook page.

“We also plan to give you coupons for 20 percent off of the rest of our product line so you can include them in your mailers to your constituents. We’re going to make this campaign big. We are going to take advertisements out everywhere, including print media, television and online, to promote the sale, and your logo is going to be ubiquitous. Our advertising agency has already developed the campaign, and we’re ready to launch tomorrow. We are also going to do a launch event at our flagship store; however, we were hoping, based on our partnership with your Foundation, that your volunteers and employees could staff the event. Finally, of course, we want to be a major sponsor of your annual gala dinner, but we want advertising everywhere in the city promoting our role as your lead sponsor.

“So, what do you think?”

Jane is uncharacteristically quiet, and then her tone is cool. “Bill,” she says, “You’ve given us a lot to think about, but what you’re proposing creates a lot of issues for us. It’s going to take us a while to work through this proposal. I’m not even sure your company or our organization has the capacity to manage this in the short term.”

You, of course, are dumbfounded. You have no idea why the win/win arrangements you proposed could be complicated. Further, you’re going to have to report back to your VP of marketing that the deal will not be finished as quickly as you had promised.

If you better understood the legal restrictions on nonprofits, you may have been able to propose a more realistic deal. Let’s talk about what you might be missing in the proposal.

Download: The For-Profit Entity's Guide to Doing Business with Nonprofit Organizations