Food and Beverage and Retail Operators: The Costs of Doing Business at Airports (2017)

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16 For this synthesis report, authors reviewed current literature and available airport documentation regarding the topic of operating costs at airports. The purpose was to illustrate how the various initial and ongoing costs of running a food and beverage or retail operation at airports are currently communicated within the various types of literature available; and to highlight examples of effective literature and use by airports. The literature review used Internet search engines, including TRID; and documents provided by airport management teams; other applicable ACRP reports and their bibliographies; and resources suggested by the study topic panel in the final scope for this project. This chapter identifies some of the current literature (both airport-specific studies and general arti- cles) that references the topic of the costs of doing business for concessionaires at airports. A more detailed review of airport documents provides an overview of what costs are communicated in the vari- ous documentation that airports currently provide to potential concessionaires during the RFP solicita- tion process, as well as to actual concessionaires in the operational stage. This chapter also provides a compilation of the major airport concession costs listed in RFPs and in lease agreements, along with an analysis of which other types of airport documentation may be useful tools in communicating costs to concessionaires. General literature resources for operators There are countless books, articles, and resources to assist prospective retail and food and beverage operators in identifying startup costs and forecasting ongoing operating costs of doing businesses in the general marketplace. These resources provide retail and restaurant operators with tips to help them avoid common mistakes in cost planning. In some cases, this information is transferable to the airport environment. The blog post 10 Unexpected Costs New Restaurants Face (Restaurant Engine. com 2016) included the following specific tips for operators that apply to the airport environment: • Avoid remodeling overages • Acquire insurance • Address permit costs • Plan for utility installment • Add credit card processing fees to budgeted expenses • Inspect previous reports including health inspections and maintenance reports RestaurantOwner.com features a filterable survey of more than 700 restaurants of various sizes and categories in markets across the country, which deliver averages for statistics including startup costs, cost overruns, construction costs, etc. This type of online resource can assist prospective air- port concession operators in understanding general market differences in construction costs, along with other demographics or statistics that can impact costs of goods and services that a prospective concessionaire should weigh in its general business planning. airport industry articles and resources When evaluating potential operators for their concessions program, airport managers assume pro- spective concessionaires’ qualifications include some level of knowledge concerning operating costs; the vast majority of RFPs require applicants to demonstrate a minimum level of experience chapter three literature review

17 to bid on concessions packages. In its 2016 Request for Proposals to Operate and Manage Airport Dining and Retail Locations: Package Food Large 1, Seattle–Tacoma International Airport (SEA) included the following minimum qualifications, which generally conform to the industry standard: To be considered qualified, a proposer must have three (3) years of prior experience in the development, manage- ment, and operation of restaurants and/or retail at airports, other transportation facilities, shopping centers, or in business districts within the immediately prior five (5) years. Such prior experience should be with operations comparable in size and scope to that being proposed in terms of square footage and sales volume. Proposers must demonstrate the financial ability to sustain operations for the entire term of the Agreement. Based on this type of minimum qualifications, essentially any airport concessionaire will have extensive knowledge of general startup and operating costs. However, it is the specific nuances of operating in the airport environment, and the resulting increased or additional costs that accompany it, that prospective concessionaires may not account for in their business planning; and unfortunately, the resources mentioned in the previous section do not include any specific information about operating costs in airports. Therefore, it is incumbent upon the airport industry and airport operators to provide concessionaires with specific startup and operating cost details that may drive operating costs higher. ACRP Report 33: Guidebook for Developing and Managing Airport Contracts Few industry articles or resources discuss how cost information is to be communicated to con- cessionaires or what these additional and/or unexpected airport-specific costs are. In 2011, ACRP released ACRP Report 33: Guidebook for Developing and Managing Airport Contracts (Vanden Oever et al. 2011). outlining: [B]est practices for developing, soliciting, and managing airport agreements and contracts for use by a variety of airports. This report responds to the need for a single resource for examples of current airport best practices in preparing and administering agreements. The agreements referenced in this guidebook range from airline- related agreements to communication and utility service as well as common-use, ground transportation, and concessions agreements. The guidebook contains numerous references to cost information that concession leases should con- tain. Although the primary audience for this reference guide is airport administrators, prospective concessionaires can use it as a tool to familiarize themselves with some of the specific nuances of airport agreements. Chapter 2 of this guidebook specifically addresses concessions agreements, with sub-sections devoted to financial terms (2.1), service and operational terms (2.2), food and beverage concessions (2.3), and specialty retail/news and gift concessions (2.4). Sub-sections feature examples of cost responsibilities that should be addressed in concessions agreements; for example, Section 2.2.7, which concerns materials handling, discusses responsibility for services such as trash removal and product delivery: “It should be specified whether the concessionaire or the airport is responsible for arranging for these services and which party will pay for them.” Chapter 8, which addresses bid proposals, contains guidelines and best practice for airport admin- istrators in the development of solicitation documents and execution of the solicitation process. Sub- section 8.1.7 addresses the importance of outlining utility responsibilities, maintenance costs, and shared communication services costs in the RFP: Solicitation documents should, to the extent possible, detail all operational issues and requirements that are of importance to the airport. For example, when considering terminal concessions, the following operational issues typically are important to the airport and can affect the potential respondent’s evaluation of the opportunity. • Responsibilities for the payment and installation of utilities and the method for allocation of utility costs (if spaces will be metered individually or utility costs allocated according to the utility loads of a tenant’s equipment, or one that allocates according to sales levels). • In addition to utilities, a sponsor should be very clear in describing the communication systems to be provided. • The sponsor should also clearly describe the responsibilities for maintenance. In particular, the responsibilities for janitorial services in tenant spaces and common area spaces should be clearly delineated (Vanden Oever et al. 2011).

18 As is the case with other literature referenced throughout the chapter, the primary focus of the guide, despite its helpful general information, limits its use in informing airport managers about what broader costs to communicate to concessionaires (and the best methods of doing so). ACRP Report 47: Guidebook for Developing and Leasing Airport Property ACRP Report 47 (Crider et al. 2011) is a resource guide designed to “provide documented research for airport management and other relevant stakeholders to use in formulating airport leasing and develop- ment policies” (p. 5). The report provides detailed information about the formulation of leases and focuses on general terminology and clauses that airport property leases should include. The guidebook includes some amount of information specific to allocation of cost responsibility between lessor and lessee; for example, Section 2.2.8 states that: The responsibility of general operation costs, with items such as utilities, janitorial, and landscaping costs, may also be assigned within the operation and maintenance element of the lease agreement. These may also be addressed in an individual subsection of the lease agreement, depending upon the complexity of the arrangement . . . Typically, for stand-alone leaseholds, the lessee will assume all utility and operational costs (Crider et al. 2011). Once again, however, information relating to costs that airports would communicate to prospective or current concessionaires is limited to general references, rather than providing a comprehensive source of information on this study’s focus topic. ACRP Report 54: Resource Manual for Airport In-Terminal Concessions ACRP Report 54: Resource Manual for Airport In-Terminal Concessions (LeighFisher 2011) is a comprehensive volume developed to “provide airport concession managers and other stakeholders, such as airport senior management, board members, concessionaires, and airlines, with an easy-to- use reference for understanding, planning, evaluating, managing, and developing airport in-terminal concession programs” (p. 2). Encompassing all aspects of developing and managing concession programs, ACRP Report 54 touches on numerous cost-related elements throughout the manual. As the report was published in 2011, some cost data contained within it is likely outdated. Still, this report is the only airport industry resource guide that provides airport managers and concessionaires with any specific cost figures, so it remains a useful approach to collecting point data. Examples include: • Chapter 11, Section 5.4 (Costs of Centralized Logistics) cites specific cost tabulations for logis- tics charges in table form as well as in narrative form: “While each airport is unique in terms of volume, layout, and costs, Minneapolis–St. Paul International Airport provides a good indicator of costs. Food and beverage concessionaires are charged 0.50% of sales, and retail tenants are charged 0.33% of sales (specific figures may be out of date).” • Chapter 12 (Capital Investment) provides significant detail regarding calculating buildout costs, appropriate initial capital investment, and mid-term refurbishment investment amounts. Section 12.1 (Cost of Building on the Airport) states: For airports of all sizes, the cost of building out a full-service restaurant at an airport averaged $421 per square foot, with quick-serve units averaging slightly less, at $408 per square foot. Building out con- venience retail and specialty retail units averaged $307 and $320 per square foot, respectively (specific figures may be out of date) (LeighFisher 2011). Section 12.3 (Midterm Investment) states: The range of requirements reported by airport operators was $50 to $300 per square foot. Some agree- ments incorporate a cost of living escalator in the calculation. . . . Requirements are typically 15% to 20% of the initial capital investment (specific figures may be out of date). Chapter 12 also includes figures showing average build-out costs by concession category and by hub size.

19 ACRP Report 54 also includes various references to general cost considerations for airport managers and concessionaires. Chapter 9 provides general information and guidance about responsibility of various costs, several of which would be considered specialized airport costs. Section 9.3.4 (Additional Fees and Charges) lists several additional fees and charges, including storage and delivery fees, employee parking fees, security badging fees, and marketing fund contributions. • Chapter 10 (Procurement) describes the general practice of airports asking prospective conces- sionaires to furnish proposal bonds: The proposal bond, guarantee, or surety is an amount of money, or a promise to pay money from a third party, that is forfeited if the proposer fails to execute the concession agreement. The proposal bond should be set in an amount that would compensate the airport operator for its costs resulting from delay in the award of the agreement (LeighFisher 2011). Although ACRP Report 54 is an extremely useful document, it is not a comprehensive guide for detailing all potential business costs that could be incurred by concessionaires and should be commu- nicated by airport operators. In addition, as the concessions industry and the associated cost markets around it have evolved, and continue to change, the age of this report diminishes its usefulness. At a minimum, an update to ACRP Report 54 would provide airport management and concessionaires with current data. A more robust approach would be to commission a study that produces a parallel report to ACRP Report 54, creating a resource manual written primarily for use by, and from the perspective of, concessions operators (or prospective operators). airport documents, resources, and tools General literature sources and airport industry articles and resources failed to provide details on either the types of costs that airport operators need to communicate to concessionaires or figures and ranges of costs. The next phase of the literature review focused on airport-supplied and Internet-acquired doc- umentation that is typically (or in some cases uniquely) provided by airports to concession operators. The objectives of this phase of the review were to determine which airport documentation pro- vides concessionaires with the most information regarding costs that will be incurred; to determine which cost types are communicated more frequently in RFP documents rather than lease agreements; to determine the extent to which details regarding costs figures are communicated; and to uncover any gaps in regard to costs not readily communicated in airport documentation. review process Sixty-six (66) airport documents were reviewed for this synthesis: • RFP documents (14) • RFP addenda (6) • Concession lease agreements (15) • Concessionaire outreach meeting presentations (13) • Airport concessions management documents (as listed here) (18): – Concession tenant handbooks – Concession tenant operational manuals – Concessions tenant design criteria manuals – Concession tenant meeting presentations – Airport rates and charges lists – Airport policy manuals. The airport documents and resources were acquired by several different methods. Representatives from airports that are either part of the ACRP Synthesis panel that commissioned this study, and/or participated in the online survey, supplied several RFPs, lease examples, and management docu- ments for review. Internet searches led to other RFPs, airport management documents, and resources

20 that are publicly available from airport websites. In addition, previously released RFP documents and other airport management documents in the possession of the consultants were reviewed. Table 2 lists some of the publicly available RFP documents reviewed that provided significant cost references for prospective concession operators. rfp/lease agreement comparison Using the categories and list of costs developed in the survey instrument as a baseline, each RFP and lease was reviewed to determine whether or not each specific cost from the survey was addressed in the document. They were not all associated with airports participating in the survey; other airport RFPs and leases were reviewed as well. Thus, costs and fees found in the RFPs and lease agreements that were not part of the original set of costs/fees listed in the survey instrument were tabulated and included in the comparison. Tabulation tables were created to track the frequency with which each cost was addressed (Tables 3–10). Not only do these tables show the degree to which the reviewed RFPs and lease agreements can serve as useful tools in the cost communication process, but they can also provide both airport managers and concessionaires with a checklist of cost considerations that were mentioned or defined in some capacity in these industry documents. For the purposes of this synthesis, the RFP review tabulation focused on the main section of the document (typically featuring solicitation instructions and general information about the airport and concessions opportunity), and did not include exhibits or attachments. Documents including lease agreements, tenant handbooks, and tenant policy manuals that are often included as exhibits or attach- ments to RFPs warranted their own review. TABLE 2 SAMPLE OF PUBLICLy AVAILABLE RFP DOCUMENTS WITH SIGNIFICANT COST REFERENCES Document URL Notes Request For Proposals—SFO Terminal 3 Pop Up Retail Program Sept. 1, 2016 http://mission.sfgov.org/OCA_BID_ATTACHMENTS/FA46410.pdf Offered two 12-month term pop-up retail opportunities Food & Beverage, News, Duty Free & Specialty Retail Concessions Program at Boston Logan International Airport July 18, 2016 http://www.massport.com/business-with-massport/goods-and-services/ rfps/detail/request/?id=351&attidx=3 Solicitation for Concessions Program Developer/Manager/Operator. DEN Common Use Lounge—RFP No. 201629296 July 15, 2016 http://business.flydenver.com/bizpdf/diapd_3942.pdf Operator manages a passenger common use lounge and a DEN-controlled lounge for airport guestss Retail Concessions at Phoenix Sky Harbor International Airport Terminal 4 July 1, 2015 https://www.phoenix.gov/financesite/SolicitationAttachments/T4%20Retail%20RCS%20Packet%2007.01.15.pdf Offered 15 separate retail concessions packages in two phases. Included Date Published TABLE 3 TABULATION OF COSTS MENTIONED IN RFPS AND LEASE AGREEMENTS— PRIMARy COSTS Total Mentions in RFPs Total Mentions in Lease Agreements Overall Total Mentions Primary Costs n = 14 n = 15 n = 29 Minimum Annual Guarantee Rent 14 15 29 Percentage Rent 14 15 29 Minimum Capital Investment 12 15 27 Source: Unison Consulting (2016). Cost terminology varied based on the particular airport’s nomenclature; results were aggregated based on cost definition.

21 TABLE 4 TABULATION OF COSTS MENTIONED IN RFPS AND LEASE AGREEMENTS— EMPLOyEE RELATED COSTS Total Mentions in RFPs Total Mentions in Lease Agreements Overall Total Mentions Employee Costs n = 14 n = 15 n = 29 Employee Parking 1 8 9 Transportation Fee 2 0 2 Fingerprinting Application 3 3 6 Badge Fee 4 4 8 Replacement Badge Fee 0 3 3 Renewal Badge Fee 0 1 1 Health Care Accountability Ordinance 0 2 2 Source: Unison Consulting (2016). Cost terminology varied based on the particular airport’s nomenclature; results were aggregated based on cost definition. TABLE 5 TABULATION OF COSTS MENTIONED IN RFPS AND LEASE AGREEMENTS— UTILITy COSTS Utility Costs Total Mentions in RFPs Total Mentions in Lease Agreements Overall Total Mentions n = 14 n = 15 n = 29 Electricity 6 13 19 Gas 6 13 19 Water 6 13 19 Trash and Waste 5 8 13 Plumbing 1 0 1 Grease Removal 3 3 6 Recycling 1 2 3 IT/Internet 3 3 6 Phone 1 6 7 Grease Interceptor Capital Recovery 0 1 1 Grease Interceptor Pumping Label 0 1 1 Source: Unison Consulting (2016). Cost terminology varied based on the particular airport’s nomenclature; results were aggregated based on cost definition. TABLE 6 TABULATION OF COSTS MENTIONED IN RFPS AND LEASE AGREEMENTS— FACILITy MAINTENANCE COSTS Facility Maintenance Total Mentions in RFPs Total Mentions in Lease Agreements Overall Total Mentions n = 14 n = 15 n = 29 Janitorial/Daily Cleaning 6 6 12 Common Area Maintenance 3 5 8 Pest Management 3 5 8 Exhaust Cleaning and Vent Screen Replacement 1 2 3 Annual Refurbishment 2 3 5 Mid-Term Refurbishment 8 7 15 Routine and Preventive Maintenance 5 11 16 Tenant Improvement Reimbursement Fee 1 0 1 Food Court Infrastructure Fee 0 1 1 Source: Unison Consulting (2016). Cost terminology varied based on the particular airport’s nomenclature; results were aggregated based on cost definition.

22 TABLE 7 TABULATION OF COSTS MENTIONED IN RFPS AND LEASE AGREEMENTS— CUSTOMER SERVICE COSTS Customer Service Costs Total Mentions in RFPs Total Mentions in Lease Agreements Overall Total Mentions n = 14 n = 15 n = 29 Marketing Fee 6 4 10 Pricing Comparison Surveys 2 4 6 Customer Service Training 1 0 1 Compliance Violation Fees/Penalties 3 14 17 Source: Unison Consulting (2016). Cost terminology varied based on the particular airport’s nomenclature; results were aggregated based on cost definition. TABLE 8 TABULATION OF COSTS MENTIONED IN RFPS AND LEASE AGREEMENTS— REGULATORy COSTS Regulatory Costs Total Mentions in RFPs Total Mentions in Lease Agreements Overall Total Mentions n = 14 n = 15 n = 29 Living Wage ($ above minimum wage) 3 4 7 Health Inspections 3 2 5 Local Business Taxes 5 9 14 Permits 3 7 10 Source: Unison Consulting (2016). Cost terminology varied based on the particular airport’s nomenclature; results were aggregated based on cost definition. TABLE 9 TABULATION OF COSTS MENTIONED IN RFPS AND LEASE AGREEMENTS— INSURANCE REqUIREMENTS Insurance Requirements Total Mentions in RFPs Total Mentions in Lease Agreements Overall Total Mentions n = 14 n = 15 n = 29 Worker's Compensation Insurance 5 12 17 Comprehensive General Liability 5 14 19 Comprehensive Auto Liability 5 13 18 Builder's or Contractor Insurance 2 4 6 Liquor Liability Coverage 2 1 3 Commercial Crime Insurance 2 1 3 Business Interruption 1 5 6 Employer's Liability 2 2 4 Property 2 4 6 Completed Operations Liability 0 1 1 Umbrella Excess Liability 0 1 1 Fire/Hazard Liability 0 1 1 Source: Unison Consulting (2016). Cost terminology varied based on the particular airport’s nomenclature; results were aggregated based on cost definition.

23 RFPs proved to be extremely varied in regard to the types of business cost information docu- mented within them. Of the 14 RFPs reviewed, the highest frequency with which any potential conces- sionaire cost was listed was eight (mid-term refurbishment). Six other business costs were documented six times (electric, gas, and water utilities charges; marketing fund contributions, janitorial/daily cleaning services, and performance bonds). The remainder of concessionaire costs, either originally discovered during the survey or documented during the review phase (44 additional costs, for a total of 51 costs recorded), were found no more than five times. Originally surveyed costs that were documented only two times or fewer in the RFPs reviewed included employee parking, badge replacement and renewal fees, plumbing, recycling, telephone service, annual refurbishment, customer service training, privilege fees, and office space, among others. The RFPs reviewed contained no significant amount of cost information overall. One RFP from Tampa International Airport (TPA), Food & Beverage Concessions RFP 2014, referenced 31 of the 51 total costs tracked through the survey instrument or recorded during the review phase: The next highest amount of costs documented in an RFP was 16 [Request for Proposals: Food & Beverage, News, Duty Free & Specialty Retail Concessions Program at Boston-Logan International Airport (BOS) 2016]. Seven of the 14 RFPs reviewed had fewer than 10 costs documented. Lease Agreements Lease agreements proved to be much more reliable as sources of cost information for concession- aires. As outlined above, previous ACRP reports showed that significant attention has been given to TABLE 10 TABULATION OF COSTS MENTIONED IN RFPS AND LEASE AGREEMENTS— OTHER COSTS AND FEES Total Mentions in RFPs Total Mentions in Lease Agreements Overall Total Mentions n = 14 n = 15 n = 29 Other costs/fees: Central Distribution and Delivery Fee 3 5 8 Privilege Fee (not MAG or % rent) 2 1 3 Office Space 1 2 3 Support/ Storage Space 5 3 8 Performance Bond 6 10 16 Security Surcharge 0 2 2 Bottled water 1 0 1 Late payment surcharge fees 0 6 6 Proposal Deposit 4 0 4 Vehicle Permit Fee 1 0 1 Additional Rent and Charges 0 1 1 Removal of Improvements 0 1 1 Fees levied by Security Agencies 0 1 1 Space Acquisition Charge (potential) 0 1 1 Space Infrastructure Charge (potential) 0 1 1 POS System Costs (if airport mandates certain system) 0 1 1 Annual POS System Audit 0 1 1 Airport Retail Architect Consultant Fee 0 1 1 Premium Value Concession Program 0 1 1 Environmental Remediation Costs 0 1 1 Source: Unison Consulting (2016). Cost terminology varied based on the particular airport’s nomenclature; results were aggregated based on cost definition.

24 the development of airport contracts, which may explain the greater consistency and amount of cost information contained within them. Of the 15 lease agreements reviewed for this synthesis, the highest frequency with which any particular business cost was listed was 14 (general liability insurance requirements and compliance violation fees). Four other business costs were documented 13 times (utilities and vehicle liability insurance requirements). Worker’s compensation insurance was documented 12 times. Of the remain- ing 57 costs, either originally surveyed or documented in lease agreements during the review phase (for a total of 64 costs), five were found in more than half of the lease agreements reviewed (employee parking, trash and waste disposal, local business taxes, routine and preventative maintenance, and performance bonds). Survey responses to lease agreement costs were not unlike those to questions concerning RFPs; listed two times or fewer were employee parking, badge replacement and renewal, plumbing, recycling, health inspections, and hood cleaning and screen replacement, among others. The quantity of costs documented in lease agreements proved to be fairly consistent. The highest amount of originally surveyed or documented costs found in a lease agreement was 28 (RDU’s Ter- minal 2 Concourse D Food & Beverage Concession Lease, April 2016). Five of the 15 leases had 20 or more of the originally surveyed costs and/or costs found during the review process documented within them, and only two of the leases had fewer than 14 costs documented. Cost Details in RFPs and Leases Responsibility for costs to be assumed by the concessionaire, as opposed to general costs to be assumed by the airport, is typically assigned in RFPs and lease agreements. However, the review of the 29 docu- ments determined that such documents communicate few specific details regarding concessionaire cost figures or cost ranges. The most consistently cited specific figures or cost ranges delineated in agreements (outside of MAG and percentage rent) were insurance coverage requirements. These agreements also frequently provided refurbishment cost details (annual or mid-term), either in cost per square foot or minimum dollar amounts. When marketing fund contributions were documented, it was common practice to list the specific contribution amount, usually 0.5% of gross sales. It is important to note that in many cases, sample lease agreements are included in the overall RFP package in the form of exhibits, or are provided by the airport as RFP addenda. It appears that it has become common practice among airport management teams to include sample lease agreements with the RFP because they provide more detail to prospective concessionaires in regard to expectations and procedures. However, whether packaged together or as stand-alone documents, neither RFPs nor lease agreements serve to communicate all actual and potential cost responsibilities to prospective concessionaires. RFP Outreach/Pre-Proposal Presentations As a standard part of the RFP solicitation process, the presentations given by airport management teams at concessionaire outreach meetings and/or pre-proposal conferences are typically available online along with the actual RFP document and addendums, and thus an information source that pro- spective concessionaires can readily access. It is important to note that full transcripts of the meet- ings are typically not available, so the review of these presentations was limited to the slide copies contained within the presentations. Nonetheless, it was possible to form some general observations about the types of business costs communicated by means of these presentations. Twelve of 13 outreach/pre-proposal presentations reviewed contained at least one reference to business costs; however, only one presentation went into any significant level of detail regarding

25 costs that prospective concessionaires might be unaware of as a result of their specificity to the airport environment, San Francisco International Airport’s (SFO) Terminal 3 Retail Marketplace RFP Pre- Proposal Meeting Presentation (2016). The presentation included the following cost information for prospective concessions operators: • Proposal bond amount ($375K) • Minimum investment costs ($450/sq. ft or approximately $2.3 million for the offered space) • Security deposit (subject to annual increase based on CPI) • Insurance requirements • I.D. badging ($75 per badge; $70 for fingerprinting) • Employee parking ($225 per quarter) • Promotional fees ($1 per square foot or approximately $5,200) • Utilities • Local taxes • Commuter benefits program • Minimum compensation ordinance ($13/h) • Healthcare Accountability Ordinance (San Francisco International Airport 2016). Figure 11 shows a slide from the SFO presentation in which the airport provides some insight into the commuter benefits program. Although specific costs are not relayed on the slide, the content illustrates that there will be cost ramifications to the incoming tenant because of this airport-specific program. While the general objective and layout of pre-proposal/outreach presentations was quite con- sistent, content relating to costs shared varied greatly, and outside of SFO’s presentation, pro- vided little detail. RDU’s Terminal 2 Retail Concessions RFP Pre-Proposal Presentation (2016) cited specific minimum investment and mid-term refurbishment rates for each concessions pack- age offered (specific investment amounts did appear in several of the presentations). Otherwise, the presentations included general references to higher build-out fees and costs, utility fees, marketing and CAM fees, with a few specific mentions of proposal bonds and guarantee amounts (including SEA’s Concession Informational Meeting (2016), where a $50,000 proposal guarantee was listed). FIGURE 11 SFO Commuter Benefits Program. Source: SFO Terminal 3 Retail Marketplace RFP Pre-Proposal Meeting Presentation (2016).

26 Although these pre-proposal presentations are publicly available, and are theoretically one of the most efficient ways to convey the unique costs of doing business at airports to prospective conces- sionaires, they are typically created by airports as vehicles to encourage participation in the solicita- tion process by local operators [often small business entities or defined by 49 CFR Part 23 as Airport Concessions Disadvantaged Business Enterprises (ACDBEs)]. Anecdotally, it appears this goal of promoting small business participation may deter airport operators from communicating the complete cost picture so as to not discourage local operators from submitting proposals. However, if airports provide as much access as possible to the documents, resources, and tools discussed in further detail here (in addition to conference presentations), prospective concessionaires will be able to gather a more complete estimate of costs picture devoid of emphasis (or de-emphasis) of particular aspects of the business opportunity. Rates and Charges Lists Two airports submitted rates and charges lists for review as part of this synthesis: Dallas/Fort Worth International (DFW) and RDU. DFW’s Fiscal Year 2016 Schedule of Charges (2015) includes spe- cific sections regarding utilities and maintenance services, parking charges, and concessionaire charges, providing prospective concessionaires with specific figures and rates with which to assess business costs. Assuming an airport has this type of document available, but not publicly accessible from the airport’s website, it is recommended that it be provided to prospective concessionaires during the RFP solicitation process. However, rates and charges lists are typically created by airports for use by airlines, and contain few costs specifically relating to the concessions business. Updating these lists to list include as many operating fees applicable to non-airline tenants as possible would make them more useful tools in communicating costs to concessions operators. Tenant Design Guidelines/Criteria Manuals Design guidelines/criteria manuals from three airports (BOS, TPA, and DAL) were reviewed to assess the level of concessionaire cost information contained within them. As a general rule, these manuals provide concession operators with a wealth of tools to navigate the airport’s design and construction process, typically detailing materials that can or cannot be used, approved finishes, guidance regarding style and design aesthetics, and the airport’s “sense of place.” TPA’s Concessions Design Criteria Manual (June 2015) is one of the most recently updated man- uals located in the literature search effort. The manual consists of seven sections covering subjects including building conditions, design criteria, responsibilities and procedures, and design review/ submittals. The manual provides readers with guidance on approved materials, finishes and fixtures, sizing, permitting processes, lighting, life safety requirements, and more; however, there is no infor- mation on specific costs associated with any of these subjects. The most useful characteristic of Tampa’s design criteria manual is that it is easily accessed from the airport’s concessions department webpage, making it readily available to prospective concessionaires; again, however, as the manual is not intended to provide complete cost information, its practical use in accurately determining cost figures is ultimately limited. Tenant Handbooks and Operating Manuals Tenant handbooks and operating manuals from four airports—DAL, RDU, SEA, and TPA—were reviewed. These documents were the most robust source of cost-related information outside of lease agreements. Although their primary purpose is to provide on-site general managers with information needed to conduct day-to-day operations of concession facilities, they often contain general conces- sions obligations and commitments (many of which may be found in a lease agreement) that would be useful to concession owners/finance managers. DAL’s Terminal Tenant Handbook (2016) is an excellent example of how a handbook primarily provides on-site managers with the information needed for successfully conducting business while

27 also providing relevant cost information for prospective owner-operators to consider. DAL’s hand- book contains an entire section devoted to contract compliance and responsibilities, which includes references to cost responsibility for janitorial services, general maintenance and repair, recycling, grease trap receptor maintenance, security badges, insurance, keys, refurbishment, etc. Additional concessionaire cost obligations are interspersed throughout other sections of the handbook, which address airport operations, ground transportation, facilities maintenance, general tenant informa- tion, and environmental services, among others. This mix of ongoing, contractual cost obligations and potential day-to-day costs and fees is the ideal collection of cost information that prospective concessionaires could utilize in developing more complete assessments of airport operating costs. Contractual requirements also imply infringement penalties. Figure 12 shows an example from TPA’s Concessionaire Handbook (April 2016) where the cost breakdown of various performance infractions is outlined. Airports with handbooks of this nature could make them available to prospective concession- aires either as exhibits or as addenda to RFPs, if not consistently available to prospective operators through a concessions business resource web page or portal. Table 11 provides several examples of airport resources found online as part of the literature search for this synthesis report. Concessions Business Resource Pages on Airport Websites As general and industry-specific literature on concessions appears limited, both airport managers and prospective concessionaires could benefit from having the sorts of resources mentioned in this chapter permanently available from airport websites with specific concessions business resource pages: Table 12 lists several examples of airports with such pages. The vast majority of the airport websites searched for this report have sections/pages regarding the availability of business opportunities at the airport, as well as the process involved in apply- ing for them. Many of these airports employ a holistic approach to communicating opportuni- ties, which is effective in relaying the full breadth of all potential airport business information; but most lie outside the narrow focus of this synthesis. The Massachusetts Port Authority website offers an excellent example of this approach, in the section titled “Doing Business with Massport” FIGURE 12 Example of communication of fines in Tenant Handbook. Source: TPA Concessionaire Handbook (April 2016).

28 (http://www.massport.com/business-with-massport). Although the section does have a sub-page dedi- cated to concessions opportunities (http://www.massport.com/business-with-massport/opportunities- at-massport/concession-opportunities), that page ultimately provides a link to the authority’s full list of current airport RFPs. Delving into a current RFP opportunity then links potential concessionaires to RFP exhibits, addenda, and appendices with some of the types of airport documents and resources discussed in this chapter. The website of Denver International Airport (DEN) is one of many featuring a concessions- specific section with information on present and upcoming concessions solicitations. However, its concessions business page includes a link to a sub-page featuring resource materials for proposers (http://business.flydenver.com/bizops/proprfp.asp), which continually posts general information for prospective concessionaires including policy manuals, master plan updates, airport security informa- tion, and airport rules and regulations, among other documents. Tampa (http://www.tampaairport. com/concessions) is another airport that features an easily accessible permanent listing of airport resource documents on its concessions program page. Airport / Document Date Published URL Notes Dallas Fort/Worth International Airport: FY 2016 Schedule of Charges Oct. 1, 2015 https://www.dfwairport.com/cs/groups/webcontent/documents/ webasset/p2_400346.pdf Specific section on concessionaire charges Denver International Airport: Standard Concession Agreement Oct. 26, 2015 http://business.flydenver.com/bizops/documents/ sampleDENconcessionAgreement_Food_Beverage.pdf Provides baseline concessions agreement details Houston Airports System: Concessions Industry Day July 17, 2014 http://system.gocampaign.com/netisd_org/images/imagelibrary/ 620/74/6616/530379-Industry%20Day%20- %20July%2017%202014.pdf Outreach presentation soliciting prospective concessionaires Hartsfield–Jackson Atlanta International Airport: Concessions Compliance Standards Manual Oct. 17, 2016 http://www.atl.com/wp-content/uploads/2016/10/Concessions-Compliance-Standards-Rev-10-17-16.pdf Comprehensive concessions operating resource manual Raleigh–Durham International Airport: Pre-Proposal Conference Terminal 2 Retail Concessions RFP n/a http://www.rdu.com/wp-content/uploads/2014/11/T2-Retail-Concession-Pre-Proposal-Conf-Presentation.pdf Informative presentation including cost figures for prospective operators San Francisco International Airport: Concession Design Guidelines 2012 http://media.flysfo.com.s3.amazonaws.com/default/download/ab out/ reports/pdf/concessions-tenant-guidelines.pdf Comprehensive design specifications included; no specific cost figures Seattle–Tacoma International Airport: Operating a Concession Business at Seattle Tacoma International Airport n/a http://lease.seatacshops.com/assets/Operating-a-Concession-Business-at-Sea-Tac-Airport.pdf Concession Tenant Handbook with cost information relative to on-site team and corporate staff Tampa International Airport: Concessions Handbook July 14, 2016 http://www.tampaairport.com/sites/default/master/files/ Concessions%20Handbook%20Version%204%20FINAL_0.pdf Concession Tenant Handbook with cost information relative to on-site team and corporate staff TABLE 11 ExAMPLES OF AIRPORT DOCUMENTS, RESOURCES, AND TOOLS TABLE 12 AIRPORT WEBSITES WITH CONCESSIONS BUSINESS RESOURCE PAGES/SECTIONS Airport Website URL Notes Denver International Airport http://business.flydenver.com/bizops/proprfp.asp Comprehensive resource page providing access to numerous resource docs Raleigh–Durham International Airport https://www.rdu.com/concessions/ Concessions Redevelopment Microsite San Francisco International Airport http://www.flysfo.com/business-at-sfo/doing-business-sfo Organized as an Frequently Asked Questionspage with links to documents and resources Seattle–Tacoma International Airport http://lease.seatacshops.com/forms/ Sub-page of dedicated concessions leasing website featuring documents and links Tampa International Airport http://www.tampaairport.com/concessions Permanent Concessions Department webpage with numerous links to PDF files

29 RDU is among several airports whose website has extensive information on concessions redevel- opment (https://www.rdu.com/concessions). The section includes a link to a sub-page (https://www. rdu.com/concessions/resources) of resource documents, including outreach presentations, schedules of fees, and design standards. Airport managers have varying amounts of the types of documents, resources, and tools refer- enced in this literature review, with different degrees of business cost information and specificity. Similar to the required proposal submittal checklists often found in RFPs, a checklist of airport docu- mentation available to potential concessionaires posted on the business resources page is an easy method of assisting potential operators. (An example of such a checklist can be found in Appendix B.) If any of these documents contain sensitive airport operating information that would make hous- ing it on an open platform a security risk, a sanitized version for public posting could be created. Alternatively, the full version could be housed on a password-protected section of the website that current and prospective operators could receive permission to access. Although this would add a layer of complexity to what would otherwise be a seamless process, having the information housed in a single, dedicated area would be helpful for both airport managers and concessionaires.