Concessions at SFO. Pathways to Entry for Small Businesses

Transcription

1 Concessions at SFO Pathways to Entry for Small Businesses

2 Learning Objectives Understand Options for Operating at SFO Understand Concessions Timelines and Processes Understand Requirements for Operating at SFO 2

3 SFO Concessions Program FY Passengers Total Airport Passengers 53,000,000 (approx.) Passengers Per Day 145,205 Concessions Program Gross Sales (w/o duty free) Food & Beverage Sales Retail Sales (w/o duty free) Duty Free Sales $368.3 million $241.4 million $126.9 million $110.8 million Average spending per enplaned passenger $

4 Terminology ACDBE Airport Concession Disadvantaged Business Enterprise Revenue Development & Management (RDM) The office that manages the use and leasing activities of concessionaires and related businesses at SFO. Concession Lease premises at the Airport for retail, food and beverage, and service operations. Joint Venture Partner (JV) Partnership agreement where partners share in the capital contribution, control, management and profits based on ownership interest. Minimum Investment Amount Minimum amount of construction costs that a business must invest prior to beginning operations. Minimum Qualification Requirements Minimum qualifications that a business must meet in order for its proposal to be responsive. Primes Companies that coordinate concessions through direct leases, partnerships and licensing agreements with others. 4

5 Baseline Questions 1. Some leases require no previous operating experience, therefore SFO is a good place to start your business. 2. After signing a lease agreement, it can take 12 months or more to begin operating in the concession space. 3. Businesses may submit unsolicited lease proposals at any time throughout the year. 5

6 Three Twins Ice Cream Green Beans Coffee 1300 Fillmore 6

7 Leases & Other Options for Small Businesses 1. Direct Lease Sole Proprietor 2. Direct Lease Joint Venture with Others 3. Direct Lease Joint Venture with Primes 4. Sub-lease with Primes 5. License Agreements 6. Supplier to Concessions 7. Pop-Ups 1 Year Term 8. Permit Six Month Trial

8 1. Direct Lease - Sole Proprietor BENEFITS Greatest Return Maximum Control CHALLENGES Responsible for 100% of the Initial Investment Individual Business Must Meet All Minimum Qualifications Responsible for 100% of the Operational Costs 8

9 2. Direct Lease Joint Venture with Others BENEFITS Shared Control Shared Initial Investment Shared Operational Costs Accounting, Payroll, Bonding CHALLENGES Shared Control Shared Initial Investment Shared Operational Costs Accounting, Payroll, Bonding 9

10 3. Direct Lease Joint Venture with Prime BENEFITS Primes Contribute Capital, Reducing Small Business Investment Primes Contribute Knowledge of Airport Operations Primes Assist Business to Meet Minimum Qualifications CHALLENGES Agreements May Tie Business to Prime for an Extended Period Less Control Over Business 10

11 4. Sub-lease with Prime BENEFITS Greater Control Over Business Sub-lease May be More Affordable/Manageable CHALLENGES Prime Holds the Lease: Therefore Read Agreements Very Carefully Sub-lessee Likely Responsible for Build-out and Operational Costs 11

12 5. License Agreements BENEFITS Income Without Directly Operating Facility Low (or No) Up Front Cost Allows Licensee Greater Visibility CHALLENGES Percentage Fee Varies May Not be Negative If Parties Agree Business Should Monitor Implementation of Concept 12

13 6. Supplier to Concessions BENEFITS Income Without Costs Associated with Operating a Concession Increased Brand Awareness CHALLENGES Tenants Have Control Over Orders Revenue Fluctuations Tenants Control Placement and Visual Merchandising Tenants Control Pricing High Price May Reduce Demand 13

14 7. Pop Ups 1 Year Term BENEFITS Turn Key Operation - Low Start Up Cost Less Expensive to Operate Ability to Test Concept in Airport Environment Lower Minimum Qualifications Exposure May Lead to Future Opportunities In & Outside of SFO CHALLENGES Very Short Term (1 Year) Space May Limit Concept and Design Limited Pop-Up Locations at SFO 14

15 8. Permits - 6 Month Pilot Projects BENEFITS Lower Upfront Investment Less Expensive to Operate Ability to Test New Concept in Airport Environment Tenant May Terminate Contract with 30-Day Notice CHALLENGES Very Short Term Testing Phase at SFO Inability to Predict Outcome No Guarantee There Will Be a Long Term Lease at the End Space Limits Concept, Design and Income Limited Opportunity Tests Conducted for Untried Concepts Only 15

16 Basic Differences Direct Lease Sole Proprietor Direct Lease Joint Venture with Others Direct Lease Joint Venture with Prime Average Lease Term Food & Bev. (F&B): Years Retail: 5-7 Years F & B: Years Retail: 5-7 Years F & B: Years Retail: 5-7 Years Average Initial Investment F & B: $1,000 sq. ft. Retail: $750 sq. ft. F & B: $1,000 sq. ft. Retail: $750 sq. ft. Typically divided as a percentage of ownership F & B: $1,000 sq. ft. Retail: $750 sq. ft. Typically divided as a percentage of ownership, however sometimes the JV portion will be financed by Prime Operator Pop Up 1 2 Years No Minimum Investment Requirement Permits/6-Month Trials 6 Months but may be extended to 1 Year Dependent on Concept 16

17 Timeline (12 18 Months) Commission Approves Commencement of RFP RFP Released to Public Pre-Proposal Conference and Tour Question/Response Period Commission Approval to Accept Proposals Proposals Submitted by Posted Deadline Evaluation Panel Review Period Commission Approval to Award Contract Board of Supervisors Approval to Award Contract (if required) Design Review and Permit Issued by BICE Build Out and Opening of Operations 17

18 Path to Prepare for Opportunities Register with RDM/Concessions to Receive Updates Pre-proposal Conferences Attend to increase awareness. Evaluate Your Business Determine what can you provide, what investment level your business can afford, what may be lacking. Ensure your business (or team) meets Minimum Qualifications. Do Your Homework Develop your vision and concepts before proposal opportunities arise. ACDBE Certification Increase visibility by becoming certified as Airport Concession Disadvantaged Business Enterprise (ACDBE). 18

19 ACDBE & DBE Certification DEFINITION: A Disadvantaged Business Enterprise is a for profit business concern: 1) That is at least 51 percent owned by one or more individuals who are both socially and economically disadvantaged; 2) Whose management and daily business operations are controlled by one or more socially and economically disadvantaged individuals who own it. PURPOSE: ACDBE and DBE certification is used ensure nondiscrimination in the award/administration of leases and contracts. WHAT: Certification is a review process to ensure a small business is owned, controlled, and operated by the applicants. 19

20 Review of Baseline Questions 1. Some leases require no previous operating experience, therefore SFO is a good place to start your business. (True/False) 2. After signing a lease agreement, it can take 12 months or more to begin operating in the concession space. (True/False) 3. Businesses may submit unsolicited lease proposals at any time throughout the year. (True/False) 20

21 Useful Links: Register for SFO Concessions Interested Parties List View Current Opportunities at SFO Download ACDBE/DBE Application ACDBE Application and Supplemental Questionnaire: ACDBE/DBE Certification Contacts and Instructions or contact Kamal Hubbard at SFO, or (650)

22 Questions and Comments Thank You! 22