You've read about the "franchise tag" before, but what is it? For the answer, we turn to the Collective Bargaining Agreement - a pact between the National Football League and the Player's Association that sets the rules between clubs and players. You can read the full document here.
The franchise tag is essentially a one-year, fully-guaranteed contract in which the team agrees to pay the player the average of the five largest Prior Year Salaries for players at the position, or 120% of his prior year's salary, whichever is greater.
A club can designate one "franchise" player or one "transition" player among its veteran free agents between February 17 and March 3. After that, the two sides have until July 15 to negotiate and agree to a multi-year contract.
The Bills designated S Jairus Byrd as the franchise player in 2013, and currently have six unrestricted free agents for 2014 in Byrd, Dan Carpenter, Alex Carrington, Scott Chandler, Jim Leonhard, and Arthur Moats.
The salary offer by a player's club determines whether the franchise player designation is exclusive or non-exclusive.
An "exclusive" franchise player – not free to sign with another club – is offered the greater of (i) the average of the top five salaries at the player's position for the current year as of the end of the Restricted Free Agent Signing Period on April 19; or (ii) the amount of the Required Tender for a "non-exclusive" franchise player, as explained below.
Article 10, Section 2(a)(i) of the CBA sets forth the methodology, known as the "Cap Percentage Average," for calculating the Required Tender for such a player:
The Nonexclusive Franchise Tender shall be a one year NFL Player Contract for (A) the average of the five largest Prior Year Salaries for players at the position ... at which the Franchise Player participated in the most plays during the prior League Year, which average shall be calculated by: (1) summing the amounts of the Franchise Tags for players at that position for the five preceding League Years; (2) dividing the resulting amount by the sum of the Salary Caps for the five preceding League Years ...; and (3) multiplying the resulting percentage by the Salary Cap for the upcoming League Year ... (the "Cap Percentage Average") ... ; or (B) 120% of his Prior Year Salary, whichever is greater ...
If a club extends a Required Tender to a non-exclusive franchise player pursuant to this section, the player shall be permitted to negotiate a player contract with any club, except that draft choice compensation of two first round draft selections shall be made in the event he signs with a new club.