Concession Program for the New Terminal P ROVI DI NG S ENSE OF P LACE AND O PPORTUNI TI ES
Concession Timeline • KCAD is starting early to allow consultation with the City Council on important issues, time to carefully consider proposals and time for the vendors to properly plan and execute their visions • Allows time to do things right, without time pressure National Store Outreach Selection development, Store Solicitation Terminal (2/19)/ -- Process planning, Construction Issued Opening Completed permitting, Local (1/2020) (early 2023) (2022) etc. Outreach (12/2020) begins 4/19 (2021)
Why is the concession program important? We all know the building will be beautiful But it is the concessions that make the airport truly “Kansas City” The concession program will make an important statement by representing the best of the City and the region in brand, product and design National brands will be encouraged to make their locations unique through design and use of locally produced merchandise and ingredients , as well as local partners and operators
Concessions: Food
Concessions: Retail
Concessions: Other 6
KCAD proposes this vision for the consideration of the Council A CONCESSION PROGRAM THAT IS CUSTOMER- CENTRIC , PROVIDING A SENSE OF PLACE , WHICH ENGAGES USEFUL TECHNOLOGY AND INTEGRATES A TRUE SPIRIT OF KANSAS CITY .
KCAD used the vision to develop eight goals for Council consideration and comment 1. Opportunities for real local participation through a variety of means 2. No limits on how local operators participate in the concession program 3. Competition between concession locations 4. Prices for concession products must be reasonable 5. The concession program should be regionally inspired 6. The highest levels of customer service must be offered 7. The concession program should make use of cutting edge, useful technology 8. The concession program should be unique
A key decision, following the adoption of vision and goals, is how to manage the concession program The choice of the right management methodology is a key to the success of an airport’s concession program. The right methodology is unique to both an airport and to the airport’s situation at the time of the decision. Master Developer Operator/ Concessionaire Manager Multiple Fee Direct Primes/ Manager Leasing Packages In addition, many airports use hybrids of these management methodologies
Master Concessionaire Characteristics of the Master Concessionaire model • All concessions (or all of one type) are in a single contract with an operator • Master concessionaires tend to be large, experienced, national firms • Airports that have operated under the Master Concessionaire model have tended to have little or no local participation and limited actual ACDBE participation • Among the easiest for an airport to manage because they only need to deal with a single (or maybe two) contract(s) • Master concessionaires are focused on driving their profits while the airport is more interested in driving sales…sometimes these conflict Airports which currently use a Master Concessionaire • Charlotte • Las Vegas • Kansas City (current) • St. Louis • Ft. Myers 10
Developer Characteristics of the Developer model • The airport leases all space to a single company, which then subleases all spaces out and manages the subleases • The developer keeps a portion of the rents that it collects and remits the majority of the funds to the airport • Easy to manage from an airport’s perspective • If spaces are subleased to individual operators, there is significant competition • Developer, like the airport, is focused on driving sales, while allowing operators to make a reasonable profit • Airports that have utilized the developer model have had great success in achieving both ACDBE and local participation • Large operators often fight when an airport wants to utilize a developer model • Developers make an investment in the airport Airports which currently use a Developer • Pittsburgh • Cleveland • Nashville (starting 2019) • BWI Marshall • Los Angeles • Chicago O'Hare (T5) 11
Multiple Primes (aka Packages) Characteristics of the Multiple Primes/Packages model • This methodology is the one most commonly used in the US • Methodology can lead to competition between vendors • Takes advantage of national operators brand portfolios • Depending on the sizes of the packages, this methodology can provide opportunities for small and large operators • Success in obtaining local and ACDBE participation varies depending on how strict the airport is in enforcing its rules • Most local participation is through brand licenses, not direct participation, unless there are 1-store or 2-store packages Airports which currently use Multiple Primes/Packages • Raleigh-Durham • Austin • Dallas-Love • Houston-Hobby • Indianapolis • San Diego • San Jose • Tampa • Minneapolis St. Paul 12
Fee Manager Characteristics of the Fee Manager model • The fee manager is responsible for leasing and managing the leases, with no financial stake in the program • Fee managers share the airport’s goal of increasing sales • The agreement with the fee manager tends to be shorter than most concession contracts (usually 5-7 years) • Tenant leases my last longer than the fee manager’s • By adding a fee manager, an extra “middle man” is added, which may lead to higher rents • Fee managers tend to have good contacts in the airport and mall industries • Fee mangers can provide both expertise and staff so that the airport doesn’t need to add staff Airports which currently use the Fee Manager methodology • Boston Logan • Washington Reagan National • Washington Dulles 13
Operator/ Manager Understanding the Operator/Manager model • This is a new model in airports • Claims to offer the best of the Master Concessionaire and Developer methodologies • Supplies infrastructure investments in addition to store build-outs • The operator seeks to directly control and operate the majority of concessions • They key factor in such a contract is the percentage of concessions that the operator/manager is permitted to operate • This appears to be a different label on the Master Concessionaire model • Supporters of this model utilize many of the arguments that they had previously used to attack the developer model Airports which currently use an Operator/Manager • Chicago Midway 14
The big national food service operators you may have heard of…or be hearing from
The largest airport retailers…some also do food service
Smaller national operators which also may want to be considered
Airport concession developer/managers which have expressed interest in the New Terminal
Local Outreach • 10 local outreach sessions • Organized by Carrie Stapleton of Phillips-West Communications • Spring/Summer 2019 • Will be done throughout the Kansas City area • We have identified over 80 organizations that represent the various types of people and business owners in the community • Each group will be invited to one of the ten sessions • But anybody can attend any meeting • What will we be doing? • Share information and create excitement • Explain about ACDBE certification (more about that shortly) • Review the ways that people can participate in the concession program • Carrie will be handling public relations prior to the meetings to ensure that the word gets out to as many people as possible • Council assistance in publicizing these outreach events through email blasts or at other meetings would be very much appreciated
Getting local and national firms together • One or two meet and greets for national/local partnerships • Just before the issuance of the RFP(s) (late 2019) • Allow national and local firms to meet • Exclusive agreements are frowned upon • If a local company signs an exclusive contract, and their partner fails to win a contract, the local company will be shut out of participation • We know that national firms have already started doing outreach in the local community. We encourage this but they are here to promote themselves, their business and their vision of what is best • Their vision of what is best is not necessarily the same as the vision that we adopt
How can local firms be involved in the New Terminal concession program • Operate concessions individually as a tenant or subtenant • Joint venture • With larger operator • Multiple smaller firms working together • Supplier of merchandise • “Made in KC” • Suppliers of food products • Supplier of services • Store design • Store construction
Airport Concession Disadvantaged Business Enterprise (ACDBE) Program • The ACDBE program • Federally-mandated program • Create opportunities for business owners who have historically been under-represented in airport concession programs • A failure to properly follow the FAA ACDBE guidelines can endanger airport federal funding • Goals are set by each airport • Based on the number of operators who are “ready, willing, and able” to operate an airport concession • Goal study currently being completed • Bob Silvas, of the Silvy Group, is completing the study • 30+ years of experience • Ran the entire inclusion program for San Diego Int’l Airport • MWBE certification does not apply to concession operations
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