First, a note about the option to print the Team Color inside a block of the Team's color.... this will only show in the header information when grouping by Club Name, Team Color. It does not apply to each person's team color in the column of the report.
The blank lines are displayed when there is no Team Color assigned. I ran your report for all clubs grouped by Club Name. The first page is Cubbies and the blank line is showing under the team color because none of the Cubbies have a team color assigned. When I look at the page for Sparks, the team colors do show in the column.
Could it be that you just didn't realize that first page was showing Cubbies who didn't have a Team Color? If you also aren't seeing them for the other clubs, then there is something else going on with your selection options. In that case, please send an email to support and we will work with you directly.