TITLE
Recommendation to authorize City Manager to enter into a concession agreement with Creative Host Services, Inc., for provision of food and beverage services at the Long Beach Airport. (District 5)
DISCUSSION
The Long Beach Airport Terminal facilities currently have 10,542 square feet utilized for
concession service and sales, including food, beverage, gift, news, and convenience items.
The current concession operator, El Dorado Services, has operated the Airport concessions
since January 30, 1994 under a IO-year (five-year plus five-year option) lease agreement,
and for the past year-and-one-half has been operating under a month-to-month holdover
agreement.
In May 2004, Airport staff, working with Airport Concession Consultants (ACC), a nationally
known airport concessions consultant group, began the process of selecting a concession
operator(s) in order to upgrade product offerings, enhance revenue to the Airport Fund,
encourage investmenthpgrade in facilities, and maximize the potential to blend the
concession area theming with the Airport's rich history. A wide outreach was conducted
including local, regional, and national exposure.
Initially, interested food/beverage and giftlnewslretail operators were required to submit
background and financial statements, in order to be pre-qualified to continue in the process.
As is common in the industry, interested parties were allowed to provide the prequalification
information for the food/beverage, giftshewdretail, or both concession
opportunities.
In April 2005, requests for proposals (RFPs) were given to the prequalified companies, and
a pre-bid meeting was held at SkyLinks Golf Course on April 18. Attendees were briefed on
the Airport's concession program selection criteria, which were developed from customer
feedback, Long Beach Airline input, consultant's industry benchmarks, and consideration of
the Terminal's historical context. These criteria include the following:
Proposed concepts, theming, product offerings, pricing, marketing plans
Facility design, quality of improvements, capital commitment, on-going
maintenance
Experience, references
Financial return to the Airport Fund
Management/operations plan
Minimum bid requirements for food/beverage, based on industry standards, were:
MINIMUM capital investment: $2,000,000
MINIMUM annual guarantee (for year 1 ) $450,000
MINIMUM annual guarantee (after year 1) 85% of previous year % rent
MINIMUM percentages: 10% food and non-alcoholic
beverages
15% alcoholic beverages
10% vending machine sales
5% in-flight catering
TERM: 10 years
The RFP and proposed concession agreements are for existing concession areas in and
around the Airport Terminal. The food/beverage agreement includes a provision that if
additional facilities are made available, the selected concession operators will have "first
negotiating rights" with the City for such space.
Two food/beverage proposals were submitted on May 23.
El Dorado Services, the current Airport concessionaire, chose not to submit a proposal and
has notified the Airport of their willingness to work with the new concessionaire to ensure a
smooth transition.
The two food/beverage proposals, both very responsive to the RFP, were reviewed by a
team made up of:
1. One principal of ACC
2. The Acting Long Beach Historic Preservation Officer
3. A City of Long Beach marketinghranding consultant
4. A recently retired deputy airport director, who was in charge of terminal
concessions at an area airport
5. Public Works Project Manager
A member of the City Attorney's staff participated in an advisory role, regarding the
selection process.
Based on the unanimous findings of the evaluation team, Creative Host Services, Inc., was
selected as the strongest and most responsive candidate for food/beverage concession
services at the Long Beach Airport.
Creative Host Services operates over 170 concessions at 40 United States airports, with
revenues of approximately $150 million. In addition to offering the highest capital
investment ($3.5 million) for the initial five-year term, and an additional $500,000 for the
second five-year period, they also offered the highest percentage rent of 15 percent for
foodhon-alcoholic beverages, and 20 percent for alcoholic beverages. Also, Creative Host
Services, Inc., was very responsive to local and historical theming opportunities, including
proposed licensing agreements with local operators Legends Restaurant & Sports Bar,
Rubio's Fresh Mexican Grill, Sweet Jill's, and Polly's (see attached excerpts from Creative
Host Services' proposal).
This matter was reviewed by Deputy City Attorney Everett Gfenn and Budget
Management Officer David Wodynski on July 1,2005.
TIMING CONSIDERATIONS
Authorization to proceed at this time should permit commencement of new, upgraded
food/beverage concession operations at the Long Beach Airport within the
AugusVSeptember timeframe.
FISCAL IMPACT
Implementation of the new food/beverage concession agreement, in addition to the
incremental investment in food service facilities and enhanced offerings to the public, will
provide a minimum first-year revenue stream of $450,000 to the Airport Enterprise Fund
(EF320) in the Department of Public Works (PW), compared to estimated Fiscal Year 2005
food/beverage revenue of $420,000.
SUGGESTED ACTION
Approve recommendation.
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Respectfully Submitted,
[Respectfully Submitted,]