Is there any hard rule about how much a club needs to give out as prize money?
I TD at a weekly tournament in Houston, TX where we have been yielding 50% of the entry fees as prize money. We are changing the prize funds to 40% of the entry fees and have advertised this online and in flier form.
There is some vocal distension stating that a minimum of 50% MUST be returned or we get our affiliation revoked. 
The rulebook is not helping much.
I do not believe there is any rule mandating that a certain percentage of entry fees be returned as prizes, because there is no requirement that any prizes be paid at all.
Out of curiosity, how big is the entry fee?
Iâm not aware on any hard and fast rule. Some tournaments give no cash prizes. They may award trophies and the cost of the trophies may be less than 40% of the entry fees. If you cut the prizes too much, you will find that your tournaments will become less desirable to some players.
They may be confusing the fact that 50% of the prize fund must be paid out if the prizes are greater than $501.
EF = $20, prizes usually run a couple of hundred $, we have not paid out as much as $400 during my tenure.
âThey may be confusing the fact that 50% of the prize fund must be paid out if the prizes are greater than $501.â
What constitutes a prize fund? Could I hypothetically say 10% of entry fees?
You should try point-money prizes, as an answer to the dissenting voice(s).
Depends. A tournament thatâs advertised in Chess Life with a prize fund of over $500 must pay at least 50% of each advertised prize. If itâs a local club tournament with no TLA in CL, you can do anything you want. But it you advertise 10% of EF in prizes I doubt youâll get many players.
Actually, the Delegatges in their collective wisdom, voted several years ago that any written tournament advertisement (flyer, postcard, website, etc.) which bases the prize fund over $500 must guarantee at least 50% of the prizes-- not just tournaments with TLAs or ads. I think this was in response to a tournament in Atlanta circa 1997.
It does seem to read that way, depending on the placement of a comma. However, since the penalty is exclusion from advertising in Chess Life, I fail to see why anyone who did not advertise in CL should care. I suppose it could come up if the organizer put something different on the flyer than in the TLA. This looks like the kind of idiotic motion that gets passed late in the session when everyone just wants to leave.
Do you have such extraordinary expenses that you have to put this low limit on prizes? Or are you trying to increase your profit?
As a rule, our club pays out 70+% of entry fees in prizes (Borders Books gift cards) plus donated door prizes at every event. We do it because it is a traditional âbest practiceâ by successful organizers of chess and other games. Our club makes very little off the events, but we are in the business of promoting chess to a wider community audience. If you are planning to give out only 40%, then you deserve âdissenters.â Be prepared to watch atttendance at your events spiral downward. Once an organization gets a bad reputation about low prizes or constantly reducing prizes, it is hard to recover.
The other aspect of this is that one does not have to give out prizes at all. It all depends on the purpose of the tournament.
Weâre running both percentage return tournaments and no-prize tournaments. The latter brings up the club treasury (very modestly!) while providing rated play opportunities for club members.
We hope that building up the club treasury will give us a cushion in order to run tournaments with an advertised prize fund. In the meantime, we do what we can by running the % tourneys.
In our club, a 40% return would be a mixed message at best. Though what determines that, of course, depends on how many players those events attract and what EF is used. (40% of 50 players at $20 EF would be a $400 pool. 40% of 10 players at $5 EF would be a $20 pool⌠Not quite so attractive. 
)
(ETA FYI⌠our quarterly tournaments have used an 80% distribution, 25% 1st, 15% 2nd, 10% 1st A/B/C/D->unrated. Weâve also included book prizes and trophies for U18 players.) And also ETA: I donât think itâs been clearly laid out⌠I think that if youâre running % distribution there is no rule setting what % you have to return, the 50% rule would never apply because you are running a percentage payout. There are just standard conventions of what everyone else does in percentage returns. Now if you actually advertise a $ prize fund, thatâs different.
Iâve been part of a club that ran some âBuild up the Treasuryâ events, I think they returned somewhere around 25% of the entry fees in prizes. But in general there are three kinds of events.
Events that combine aspects of #1 and #2 are commonplace, at least around here.
Being an unabashed capitalist, I believe profit is NOT a four letter word. Organizers should have the right to determine their entry fees, prize structure and payout based on what works(eg, what brings in players as well as what makes it worthwhile to run the events.)
The players who insist that organizers pay out a high percentage of entry fees as prizes never seem to offer to help pay expenses for the events that donât break even.
Depending on the size of the club and available venues, expenses can get âextraordinaryâ pretty fast. Weâre a small club â 20 members. Our largest event drew 19 participants. Our only suitable tournament venue costs $90 for the day. That really takes a bite out of what we can pay in prizes. Weâve fudged it by running a concurrent trophy-only RBO and adding the EFs from it to the open section prize fund, mainly because we felt guilty about running a TLA in which the based-on percentage was less than 75 percent.