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

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52 Glossary ACDBE—Airport Concessions Disadvantaged Business Enterprise, as defined in 49 CFR Part 23. Builder’s or contractor insurance—A special type of property insurance that indemnifies against damage to the terminal areas while they are under construction. Business interruption insurance—A type of insurance that covers the loss of income that a busi- ness suffers because of a disaster or emergency-related closing of the business facility or the rebuilding process after a disaster or emergency. Capital improvements—The initial improvements made to the leased premises by the concession- aires. Generally in new space, part of the negotiations will include the detail the improvements will be made in the leased premises. Common area maintenance (CAM) fees—Common-area maintenance fees are paid to the airport or another party as reimbursement for the maintenance of common (shared) areas, such as food courts. Comprehensive auto liability insurance—A type of insurance that covers vehicle encounters with unpredictable elements or incidents apart from collision. Comprehensive general liability insurance—A policy that offers broad coverage for the airport if it is faced with a third-party lawsuit alleging bodily injury or property damage. It protects against claims brought the airport as a whole, as well as claims brought against individuals who are a part of airport. Concession management structures—This defines the type of structure in which the airport manages and leases the concessions program. There are four basic types of concession management struc- tures: prime operator, direct lease, third party (developer or manager), and master concessionaire. Cost per enplaned passenger (CPE)—CPE is the average passenger airline payments per enplaned passenger at a given airport. A majority of U.S. airports provide CPE data, which are considered a key metric to evaluate the financial operations Developer—Company that subleases all of the concession space at an airport and to concessionaires on behalf of the airport. Revenue is shared between the developer and the airport operator. Direct leasing—Concession management approach where the airport leases out concession space to multiple concessionaires. Employer’s Liability Insurance—A type of insurance policy for employers that protects them from major financial loss if a worker experiences a job-related injury or illness that worker’s compensa- tion doesn’t cover. Environmental insurance—A form of business insurance that covers companies and protects them from uninsured environmental liabilities they may face. Hybrid model—A concessions operating model that consists of one or more management structures: direct lease, prime concessionaire, and/or third party developer or manager. Large-hub airport—FAA defines primary hub airports by the percentage of annual passenger enplane- ments. Large hubs are airports that enplane 1% or more of annual passenger enplanements in the United States.

53 Living wage—A wage rate set by some cities and counties that is higher than the federal or state minimum wage and is intended to approximate the actual minimum cost of living in a jurisdiction. Where enacted by an airport sponsor, living wage rates will apply to concessionaires and others that do business with the airport. MAG or minimum annual guarantee—Minimum yearly amount of rent to be paid to the airport by a concessionaire or, in some cases, a developer. Medium-hub airport—FAA defines primary hub airports by the percentage of annual passenger enplanements. Medium hubs enplane at least 0.25%, but less than 1%. Mid-term refurbishment requirement—This represents the minimum amount of improvements to be made to the leased premises by the concessionaire to refresh the facility, which generally takes place at the midway point of a lease term. Operating costs—The actual costs associated with operating a leased area, including but not limited to maintenance, repairs, management, utilities, taxes, and insurance. Outreach meeting—This is an open meeting where the public is invited to hear about opportunities or the latest developments at an airport. Performance bond—A surety bond posted by a tenant, guaranteeing full performance of a lease agreement terms, with the proceeds to be used to complete the terms of the lease agreement or compensate for the airport’s loss in the event of nonperformance. Pre-proposal conference—A meeting that will be held after a Request for Proposal (RFP) is issued and prior to the deadline for submission of questions for the purpose of presenting the solicitation and receiving interested respondent’s questions. Prime concessionaire—A single firm operating approximately one-half or more of the concession space in a category of concession, such as food and beverage or retail. There are usually no more than two prime concessionaires operating in a single category. Pro forma—A financial projection based on assumptions such as projected sales and expenses. Revenue—As used in this resource manual, the amounts paid by concessionaires to the airport. (The term “sales” refers to the gross income of the concessionaires.) RFP or request for proposals—Competitive solicitation approach whereby criteria are established and proposals are evaluated against the criteria, with the proposal receiving the highest score declared the winner. Sales—Gross income of the concessionaire. Sales per enplaned passenger—Average amount spent by each enplaned (departing) passenger. Selected respondent—The selected respondent is the company or individual entity that is selected for the concession opportunity described in the RFP. Small-hub airport—FAA defines primary hub airports by the percentage of annual passenger enplanements. Small hubs enplane at least 0.05% but less than 0.25%; and non-hubs enplane more than 10,000 passengers but less than 0.5% of the annual total. Solicitation—Competitive process whereby criteria are established and proposals are requested and evaluated against the criteria, with the proposal receiving the highest score declared the selected respondent.

54 Street pricing—When set by the airport, a policy requiring concessionaires to price goods and services at levels no greater than the prices for similar goods and services outside the airport. When set by a concessionaire or a developer, a strategy for encouraging sales. Umbrella or Excess Liability Insurance—Umbrella insurance refers to liability insurance that is in excess of specified other policies and also potentially primary insurance for losses not covered by the other policies. Worker’s compensation insurance—Workers’ compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment. Worker retention—Program, policy, or requirement to consider hiring the employees of the outgoing concessionaire. Worker retention programs can range from voluntary efforts such as job fairs, to mandatory contractual requirements.