Concessions at SFOmedia.flysfo.com.s3.amazonaws.com/media/sfo/... · Terminology • ACDBE –Airport Concession Disadvantaged Business Enterprise • Revenue Development & Management

Concessions at SFO

Pathways to Entry for Small Businesses

Learning Objectives

• Understand Options for Operating at SFO

• Understand Concessions Timelines and Processes

• Understand Requirements for Operating at SFO

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SFO Concessions Program FY 2016-2017

Passengers

• Total Airport Passengers 53,000,000 (approx.)

• Passengers Per Day 145,205

Concessions Program

• Gross Sales (w/o duty free) $368.3 million

• Food & Beverage Sales $241.4 million

• Retail Sales (w/o duty free) $126.9 million

• Duty Free Sales $110.8 million

• Average spending per enplaned passenger $13.71

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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

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.

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Three Twins Ice Cream

Green Beans Coffee

1300 Fillmore

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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

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

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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

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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

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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

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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

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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 Demand13

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

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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

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Basic Differences

Average

Lease Term

Average

Initial Investment

Direct Lease – Sole

Proprietor

Food & Bev. (F&B): 10-12 Years

Retail: 5-7 Years

F & B: $1,000 sq. ft.

Retail: $750 sq. ft.

Direct Lease – Joint

Venture with Others

F & B: 10-12 Years

Retail: 5-7 Years

F & B: $1,000 sq. ft.

Retail: $750 sq. ft.

Typically divided as a percentage

of ownership

Direct Lease – Joint

Venture with Prime

F & B: 10-12 Years

Retail: 5-7 Years

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

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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

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Path to Prepare for Opportunities

• Register with RDM/Concessions to Receive Updates

http://www.flysfo.com/request-business-opportunity-notifications

• 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

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 non-

discrimination 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

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)

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Useful Links:

Register for SFO Concessions Interested Parties List

http://www.flysfo.com/request-business-opportunity-notifications

View Current Opportunities at SFO

http://www.flysfo.com/business-at-sfo/current-opportunities

Download ACDBE/DBE Application

ACDBE Application and Supplemental Questionnaire: http://www.caltrans.ca.gov/hq/bep/business_forms.htm

ACDBE/DBE Certification Contacts and Instructions

http://californiaucp.org/ or contact Kamal Hubbard at SFO, [email protected] or (650) 821-5142.

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Questions and Comments

Thank You!

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