The franchise tag is a designation in the National Football League (NFL) that a team can apply to a player who is set to become an unrestricted free agent. If certain conditions are met, the tag binds the player to the team for one year. Each year, each team receives one franchise tag (either exclusive or non-exclusive) and one transition tag.
The transition tag can only be used if the team does not use a franchise tag; however, Article 10 of the Collective Bargaining Agreement (CBA) signed in 2011 states that teams are allowed to use both the franchise tag and the transition tag in the Final League Year for the 2020 NFL season.
The tag option allows NFL teams to keep a “franchise player” who is valuable to the team. The player is offered a one-year, guaranteed contract with a fixed, non-negotiable salary. If a designated player does not sign the offer and is unable or unwilling to negotiate an alternative contract before week 10 of the designated season, the player will be unable to sign or negotiate a contract in the NFL for the rest of the season.
The franchise label provides general managers and owners with a strategic way to manage salary costs while limiting exposure to the financial risks associated with a long-term contract. Many designated players, predictably, have criticized teams’ use of the franchise tag when it limits their perceived ability to negotiate a more lucrative contract.
The franchise tag was first used by the National Football League in 1993. The exclusive rights franchise tag and the non-exclusive rights franchise tag are the two types of franchise tag designations:
An “exclusive” franchise player must be offered a one-year contract worth at least the average of the top five salaries at the player’s position as of April 1 of the current year, or 120 percent of the player’s previous year’s salary whichever is greater. Exclusive franchise players are not allowed to negotiate with other teams. The player’s team has complete negotiating authority over the exclusive player.
A “non-exclusive” franchise player must be offered a one-year contract worth no less than the average of the previous five years’ top five cap hits at the player’s position applied to the current salary cap, or 120 percent of the player’s previous year’s salary, whichever is greater. A non-exclusive franchise player may negotiate with other NFL teams, but if the player accepts an offer from another team, the original team has the right to match the terms of that offer, or, if it does not match the offer and thus loses the player, the original team is entitled to two first-round draught picks as compensation.
A team may designate one additional player with a transition tag during the capped years. A transition player must be paid at least the average of the previous season’s top ten salaries at the player’s position, or 120 percent of the player’s prior year’s salary, whichever is greater. A transition player designation grants the club the right of first refusal to match an offer sheet made to the player by another club after his contract expires within seven days. If the club wins, the player is retained. It receives no compensation if it does not match.
Consecutive franchise tags are permitted; however, if a player is tagged for the second time in two years, the team must pay 120 percent of the player’s previous salary. If a player is tagged three years in a row, the team must pay him 144 percent of his previous salary, or an average of the top five salaries at the highest-paid position (likely QB), whichever is greater.