PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA             Item No.      6c 
Date of Meeting     March 6, 2012 
DATE:    February 27, 2012 
TO:     Tay Yoshitani, Chief Executive Officer 
FROM:    James R. Schone, Director, Aviation Business Development 
Deanna Zachrisson, Manager, Aviation Concessions Business 
SUBJECT: Lease and Concession Agreement with McDonald's Corporation for a restaurant 
at Seattle-Tacoma International Airport (Airport) 
ACTION REQUESTED:
Authorization for the Chief Executive Officer to negotiate and execute a lease and concession
agreement with McDonald's Corporation (McDonald's) to operate a restaurant in a currently
vacant location on Concourse B for a term of 12 years. The draft lease (Exhibit C) is not
necessarily the final version and is subject to negotiation with the stated parameters provided in
this memorandum. 
SYNOPSIS: 
Staff requests approval to lease a vacant concessions unit on Concourse B, in close proximity to
the Airport's children's play area, for a McDonald's restaurant. The proposed agreement with
McDonald's represents a unique opportunity to bring a highly desired concept to the traveling
public; generate new non-aeronautical revenue; upgrade a concessions unit in very poor
condition at no cost to the Port; promote a new small business opportunity with a local
franchisee; and create approximately 60 new full- and part-time jobs. The net present value
(NPV) of Port revenue generated over the life of the lease is approximately $3 million. 
Recently, the Port Commission adopted program goals for the future concessions program. Staff
anticipates completing a draft concessions master plan by early 2013. The plan will guide the
selection of new tenants in the 2015-2017 timeframe. Staff will present the draft plan to the
Commission and seek policy guidance prior to initiating implementation. This proposal for a
locally operated small business franchise of a strong national brand concept is consistent with the
goals articulated in the Commission motion adopted on February 14, 2012, and at the same time
allows the Airport to meet immediate passenger needs. 
The concessions program in the Airport's main terminal offers a total of 12 quick-serve
restaurants, with concepts varying from pizza to fish and chips to bagel sandwiches to teriyaki.
Among these concepts, the main terminal has been served by only one branded hamburger
concept since the closure of a Burger King in 2009. Quick-serve hamburgers, and McDonald's

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
February 27, 2012 
Page 2 of 8 

in particular, is one of the most sought-after restaurant concepts by travelers, in part because of a 
lower price point, and appeal to families. The remaining hamburger concept in the Central
Terminal is the highest volume producing quick-serve restaurant in the entire Airport. 
Consistent with the Port's policy of encouraging concessionaires to use local themes,
McDonald's intends to develop a design consistent with a Northwest look and feel. McDonald's
also will use locally-sourced products in the restaurant, which expands the economic benefit
derived from this lease. 
BACKGROUND: 
Since 2009, with the closure of Burger King on Concourse D, the main terminal has been served
by only one branded quick-serve hamburger concept. Since that time staff has sought to add an
additional burger concept to the main terminal. McDonald's is the most frequently requested
quick-serve concept by Airport passengers. McDonald's has been interested for many years in a 
location at the Airport. However, McDonald's is conservative when considering expansion, and
the Airport has not previously had the ability to provide a business opportunity with appeal to the
company. Today, with the growing passenger demand and a location well-suited for the concept,
McDonald's now is prepared to make the investment at the Airport. 
Unmet Traveler Demand 
The current hamburger concept in the Central Terminal is achieving sales of over $3,000 per
square foot  far in excess of typical airport benchmarks for sales per square foot in food and
beverage, which range from $1,250 to $2,200 per square foot. The high sales per square foot of
the existing hamburger concept is consistent with staff observations of peak time lines and loss
of sales due to insufficient capacity. In fact, the existing hamburger concept has achieved nearly
110% of projected sales for its 10-year lease in seven years of operation. This Central Terminal
location has 40 employees and operates a 24-hour operation in 1,212 square feet. It cannot
increase its capacity further.
The space available for seating in the Central Terminal atrium cannot accommodate the
passenger demand. At times, it is nearly impossible to find a place to sit. On the positive side,
strangers do share tables with each other. On the negative side, passengers often take trays with
food from one of these restaurants into other restaurants with more seating and into gate areas
where they leave behind trays and garbage. In the past two years, the Airport has purchased 
more furniture for the atrium area, but it is not possible to add more furniture to the space. The
new McDonald's location will offer seating for 40 patrons and relieve pressure on the Central
Terminal. 
Costly Facility Improvements 
The specific intended location for this franchise is a 2,900 square foot unit at the front of
Concourse B, which was vacated by a food and beverage tenant in 2005. The condition of the
unit is very poor and the infrastructure systems supporting the unit do not meet current building

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
February 27, 2012 
Page 3 of 8 

codes and Port requirements for operation of a food and beverage location. In 2007, Port staff
estimated that the unit would require approximately $350,000 in Port investment in order to
make the unit leasable for a new food and beverage tenant. While design was completed in
2008, staff did not request final construction authorization because the location did not have
broad market appeal due to its relatively poor sight line at the bottom of a ramp, and large square
footage that would require significant investment to build out even after Port improvements. For
these reasons, it is highly unlikely any other tenant will be interested in this location.
McDonald's is willing to invest in the Port infrastructure systems outside of the tenant lease line
waste lines, HVAC, increased electrical service  in lieu of the Port upgrading these systems.
Additionally, McDonald's understands the interest of the Airport to maintain a Pacific Northwest
character to all of its concessions, even if the brand name is a national concept. The company is
committed to developing a design in accordance with the Airport's aesthetic standards and
design its storefront look to reflect a Northwest look and feel. 
McDonald's is one of very few Airport concepts that does not require a "perfect" location
because travelers will seek it out. This concept can be placed on a concourse and thrive if it has
adequate directory and wayfinding signage. The proposed Airport location is in proximity to the
children's play area, but not in the immediate vicinity of another quick-serve restaurant. The
closest food and beverage concession is a restaurant/bar (with alcohol service) which should not
suffer any loss of patronage to a family-themed restaurant such as McDonald's. 
Investment and Lease Terms 
McDonald's has committed to a design and construction investment of $2 million. This
investment would become the largest amount ever invested at the Airport for a quick-serve food
location, and second only to the $4.2 million investment in Anthony's Restaurant in 2005.
The lease term proposed for this McDonald's franchise is 12 years. This term length is
consistent with the term of the four current food and beverage prime concessionaires (which
were granted two year term extensions in 2005). However, it is two years longer than an
industry-typical airport food and beverage lease. The justification for this specific term length is
that it enables the Airport to receive a comparable rent to other operators despite the unusually
high initial investment. The McDonald's agreement would reflect a tiered rent structure, which
has proven to be successful with the Central Terminal leases. With the achievement of higher
sales levels, McDonald's will pay higher rent to the Port (see Financial Implications). 
The investment model used by McDonald's has great advantages for the Port. McDonald's, a
multi-billion dollar company, will be responsible for funding the investment and the construction
of the unit. McDonald's also will hold the lease agreement. McDonald's has conducted an
internal competitive selection process and has selected a local franchisee that currently operates
another McDonald's in the local community near the Airport. The franchisee is a small business
that meets the Small Business Administration standard for "limited service" fast food.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
February 27, 2012 
Page 4 of 8 

Anticipated Customer Behaviors and Sales Growth 
The traveler demographic of the Airport is dominated by 'origination and destination'
passengers, with a large share as residents of the Puget Sound area. Airport staff believes that a
McDonald's in the Airport is a long-awaited addition and will be much appreciated by many
travelers. Particularly with its location near the children's play area, staff anticipates that
McDonald's will be a very strong draw. Many travelers will want to eat at the Airport
McDonald's because it is an opportunity they did not have before. While McDonald's initially
will experience very high sales volumes and likely will result in some sales loss at nearby quickserve
alternatives in a similar price category, staff is confident that the Airport will experience an
overall increase in food and beverage sales. In addition, the planned airline realignment is
anticipated to add another 100,000 annual enplanements to the Concourse A and B areas. The
Airport also stands to gain sales among the 25% of Sea-Tac travelers who make no purchases at
all when traveling due its strong brand recognition and appeal to price-sensitive travelers. 
PROJECT JUSTIFICATION: 
There is demonstrated capacity for another quick-serve hamburger concept in the main
terminal without risk of a decline in concessions sales. 
The Port has the opportunity to avoid costly expenditure to upgrade a concessions unit with
limited market appeal, but is very appropriate for McDonald's. 
The Port has the opportunity to increase non-airline revenues by an estimated $323,000 in the
first year. Over the life of the lease, Port revenues would likely exceed $3 million (net
present value). 
McDonald's is a proven success in airports, such as Denver International, Salt Lake City
International, Los Angeles International and John Wayne/Orange County Airport.
The business structure of this proposed lease offers the Airport the financial stability and
secure backing of McDonald's, while creating a small business franchise opportunity for a
local operator. 
This lease will create new jobs in the community both directly and through the local sourcing
of products for the restaurant. 
PROJECT STATEMENT AND OBJECTIVES: 
Project Statement: 
Open a new food and beverage concept, McDonald's, in the Concourse B unit known as CB-07
by October 31, 2012.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
February 27, 2012 
Page 5 of 8 

Project Objectives: 
Provide local business and employment opportunity 
Meet the needs of the traveling public 
Increase revenues to the Port 
Eliminate financial burden on the Port to renovate a unit in poor condition. 
Project schedule: 
Execution of agreement               March 2012 
Design approvals                   May 2012 
Construction                      June-October 2012 
Open for business                   October 31, 2012 
PROPOSED LEASE TERMS 
Standard lease term lengths and rent levels are well-established in the airport concessions
industry. Lease term lengths are directly connected to the level of required investment and
anticipated volumes for different types of businesses. Specialty retail requires the least initial
investment, and lease term lengths typically range between 5-7 years. The longest lease term
lengths are granted for quick-serve and full-service restaurants, which require significantly more
investment than any other type of concept, and such terms are typically 10 years. The extremely
poor condition of the proposed space justifies the additional term in light of high investment
requirements. 
Also, the 12-year lease term places the term expiration in 2024, well beyond the major
redevelopment phase in 2015-17. A greater staggering of lease term expirations is a goal for the
concessions program. The tiered percentage rent proposed between 9-13% is consistent with
typical rent terms in the Central Terminal for this type of concept.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
February 27, 2012 
Page 6 of 8 

FINANCIAL IMPLICATIONS: 
Financial Analysis Summary: 
This location is not currently generating any revenue for the Port. The summary below outlines
the financial return expected from the operation. 
Terms          McDonald's franchise (Food) 
Store Open         October 31, 2012 
Investment from     $2 million 
Lessee 
Term Length       12 years (late 2012-24) 
Est. 2013 Sales      $3.5 million 
% Rent           9% of gross sales from 0 to $2,780,000 
11% of gross sales from $2,780,001 to $3,630,000 
13% of gross sales exceeding $3,630,001 
Minimum Annual   $280,000 in Year 1, thereafter 85% of the previous year's rent
Guarantee (MAG)    payments to the Port 
Marketing         0.5% of gross sales to joint concessions marketing fund not to exceed
$24,000 annually. 
Storage           400 square feet of storage at $7.75 per square foot 
Year One Port Rev.   $323,000 
ECONOMIC IMPACTS AND BUSINESS PLAN OBJECTIVES: 
This lease and concession agreement will contribute to achievement of the Airport's business
plan objective of "maximizing non-aeronautical net operating income" by generating increased
non-aeronautical revenues of $3 million for a term of 12 years. 
STRATEGIC OBJECTIVES: 
The approval of this lease and concession agreement meets the following Port strategic
objectives: 
Maximizes financial performance by meeting customer demand. 
Provides compelling customer and community value by bringing a locally-franchised and
internationally known brand concept into the Airport. 
Develops a new business opportunity for a proven local small business restaurant operator to
be successful in a new venue. 
Provides additional opportunities for new employees and suppliers to this business.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
February 27, 2012 
Page 7 of 8 

ENVIRONMENTAL SUSTAINABILITY AND COMMUNITY BENEFITS: 
The location for this concession is in very poor condition. Materials are not likely to be
appropriate for reuse. However, the new construction in the space will bring the
infrastructure systems up to the latest standards for efficiency as well as use materials
(lighting, paint, floor and wall surfaces) that live up to the highest standards in environmental
sustainability. 
McDonald's is known for its practice of using locally sourced products for their restaurants.
From bread and produce to meat and potatoes, this McDonald's will source most of its
purchases in the local area. 
McDonald's at Sea-Tac will employ approximately 60 full- and part-time employees. These
will be completely new jobs created at the Airport. Initially, many of these employees will
be experienced McDonald's employees who currently work for the franchisee at another
local location.
McDonald's holds high standards for employee compensation and training. Employee
benefits include medical and dental insurance, paid vacation, 401K retirement plans and
college tuition assistance. McDonald's is known world-wide for its "McDonald's
University" where the company cultivates employees for advancement in the company.
Most McDonald's franchisees began their careers as front line staff. 
TRIPLE BOTTOM LINE: 
The recently completed concessions stakeholder process examined the concessions program
from a triple-bottom-line perspective. Stakeholders reinforced the value of a concurrent pursuit
of positive economic, social equity and environmental stewardship outcomes in the selection of
concessionaires. The proposed concessionaire selection is a choice consistent with these
priorities. 
ALTERNATIVES CONSIDERED AND THEIR IMPLICATIONS: 
Alternative 1: Approve the proposed lease and concession agreement. For the reasons stated
above, this is the recommended alternative. 
Alternative 2: Allow the concessions unit to remain vacant. This is the likely outcome if
McDonald's is not selected as a tenant. The investment needed is too high for other
operators. Few other concepts have the same ability as McDonald's to make a less than
perfect location profitable. Staff does not see any likely interest in this space by another
operator in the foreseeable future, even with investment made by the Port in its infrastructure.
This is not the recommended alternative. 
Alternative 3: Invest Port funds to prepare the unit for a future tenant to be determined by
the concessions program leasing agent. Staff could return to the Commission for
authorization of the funding for previously designed upgrades to the space. These costs

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
February 27, 2012 
Page 8 of 8 

would likely be higher today than the $350,000 budgeted initially in 2007; perhaps as much
as $400,000-450,000. Even in this event, it is unlikely that the concessions program leasing
agent will be able to find a tenant other than McDonald's with interest in the space. This is
not the recommended alternative. 
OTHER DOCUMENTS ASSOCIATED WITH THIS REQUEST: 
Exhibit A: Power Point 
Exhibit B: Map of Location 
Exhibit C: Draft Lease Agreement 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS: 
None.