Exhibit A
Port Commission Peg);
leeling of
Ag!" 15.21331
'G
CONCOURSE
Apri|3,2012 concessions~uc
Port of Seattle - Pier 69
2711 Alaskan Way
Seattle. WA 98121
Attn: Commissioner Tarleton, President
Commissioner Albro
Commissioner Bryant
Commissioner Creighton
Commissioner Holland
Subject: Proposed Port Commission Resolution - ACDBE Lease Terms
Reference: (A) Revised Resolution to Port Commission
(Attachments) (B) Concourse A Sales Trends & Comparison
(C) CC vs. New Concessions (Beechers) Chart
(0) CC vs. New Concessions (McDonalds) Chart
Dear Honorable Port of Seattle Commissioners:
On behalf of the small business, food & beverage concessionaires at the Seattle-Tacoma International Airport,
I am writing to underscore our support for the Resolution proposed by Jerry Whitsett of the SeaTac Bar Group.
Attachment A is a modified draft of that Resolution. With help from counsel we revised the draft Resolution
to correct a few minor errors pointed out by Port counsel. The spirit of the proposed Resolution is consistent
in this revised version. which we urge you to approve.
The factual support for the policy directive we are asking you to approve by the proposed Resolution is easy
to prove. Specifically, the airport food & beverage lF & B) concession industry is a specialized field. where it
is difficult for small business operators to access opportunities for participation. In the past, it was necessary
for small businesses to undergo the DBE (Disadvantaged Business Enterprise) certification process to be
considered for F & B concession opportunities at Sea-Tac Airport. Currently, all small business F & B operators
- with the possible exception of a few in the Central Terminal
- are ACDBE (Airport Concession Disadvantaged
Business Enterprise) certified companies under the Federal Government 49 CFR Part 23 regulations.
In addition to the paperwork intensive ACDBE certification process, small businesses face the industry specific
obstacles of high capital requirements, high operating costs, high quality requirements, price controls and other
facility specific guidelines such as security and delivery logistics.
At SeaTac Airport, small business F & B operators have also faced the challenge of generally being placed in
the locations with the lowest traffic or highest build out costs, or both. This has created an environment at
SeaTac where those who can least afford it are bearing the largest relative burden, to round out the fringe areas
in our award winning airport concession Program.
As a result, the small business F & B operators have struggled since opening our doors at SeaTac, due to no
fault of our own. With design guidelines that were not finalized prior to our development and construction,
moving of enplanements away from Concourse A and disparate terms and
treatments - the small business operators are facing the reality of a negative
22518 Marine View Drive S.
return on our investments and not being able to pay off our construction
Des Molnes. Washington 98198
loans by the scheduled expiration of our sublease agreements.
t 206.824.6300 . t 205.824.1195
www.concoursevusacom
O
In the 2007-08 timeframe, the DBE companies met with the Port to request lease term and rent relief, based
on the circumstances faced at that time. Since then, our collective circumstances have worsened to the point
where we have no chance to recover our initial inves'anents under our existing terms - while the Central Terminal
and the Satellites have enjoyed unprecedented success.
Although numerous examples of small business F & B disadvantages exist, especially when considering the
circumstances of the Central Terminal, here are just a few specific examples of disadvantaged circumstances
using both historical and current information:
1) Disparity in Sales - Odoba vs. La Pisa Cafe
Concourse Concessions (CC) opened the La Pisa Cafe in June 2004 toward the end of Concourse A with
a construction cost of approximately $725,000. Odoba opened in the Central Terminal in June 2005 with
a construction cost of approximately $770,000.
In 2011, La Pisa earned around $1.2 million in sales while Odoba earned around $3.9 million in sales. Similar
build out costs - yet Odoba had over 3x's the sales - and this huge gap in sales is completely due to the
disparity in trafc based on the placement of each concession, as trafc was being removed from Concourse
A while being consistently funneled toward the CTE.
In 2008, La Pisa's sales peaked at $1.4 million before sharply declining. Even at our peak, Oboda had nearly
3x's the sales of La Pisa, yet both had comparable build out costs.
Over a 10 year period, Odoba can be expected to earn $39,000,000 in sales. Over a 12 year period, La Pisa
can be expected to earn $15,600,000 in sales. For La Pisa to earn a comparable total sales amount,
Concourse Concessions would need to operate La Pisa for an additional 18 years at current traffic and sales
figures. (See the reference Attachment B - Odoba Comparison & Sales Trend for Concourse A.)
2) Disparity in Build Out Costs - Waji's vs. Beechers
CC opened Waji's toward the end of Concourse C in June of 2007. Due to the delay in opening, our operating
term is only 9 years. Last month, in March of 2012, the Port approved Beechers to be constructed at the
beginning of Concourse C, with a term of 7 years.
Both Waji's and Beechers are projected to earn around $2,000,000 in sales per year. However in terms of
construction, Waji's cost over $1,000,000 to build, while Beechers is estimated to cost only $200,000 to
build. Waji's build out cost is 5x's that of Beechers - for the same annual sales. Furthermore, Beechers has
been awarded a flat 12% rent while Waji's rent ranges from 13.5% - 17.5%. (See the reference Attachment
C Comparison.)
Although placing a $2,000,000 F & B concession at the front of Concourse C may dilute our sales, CC is
not afraid of competition and we did not oppose the Beechers concept. However, the comparative disparity
in terms must be noted since, even with relatively good sales, Waji's will certainly not pay off our initial
investment within our current lease term.
Disparity in Rents - Concourse Concessions vs. McDonalds
CC has opened three restaurants at SeaTac Airport at a total construction cost of $2,632,932 across 2,980
sq. ft. Since opening all 3 restaurants, they have averaged an annual total of around $3,800,000 in sales.
Our stores pay rents starting from 11.5% for Tully's up to 13.5% for La Pisa and Waji's. For alcohol sales,
the percentage increases up to 17.5%.
The Port has proposed to bring in McDonalds, with a construction cost of $2,000,000 for a 2,900 sq. ft.
facility and projected sales of $3,500,000 per year. Yet, the Port has granted a tiered rent structure for
McDonalds starting at 9%, with justification being that McDonalds will invest a large build out cost.
Collectively, CC has invested more than the McDonalds proiect yet what explanation is there for the wide
disparity in rent percentages? (See the reference Attachment D.)
0
Furthermore. an even larger disparity exists with Anthony's in the Central Terminal, who has been granted a
flat rent structure of 8% and, we understand, potentially a 20 year lease term.
In summary, ever since the inauguration of Concourse A, the small business F & B concessionaires have
struggled under the weight of high capital costs, high operating costs, high rents and low trafc. We have
played a critical role in providing high quality customer services in the least desirable concession spaces, at
the least desirable terms. Through it all, we have paid every penny of rent due and have consistently exceeded
the high standards required by the Port of Seattle, in serving the traveling public.
The Port has verbally assured the concessionaires on Concourse A that airline moves will result in an increase
of traffic, sometime next year. We have seen this airline move pushed out for a few years now. It seems, just
when the opportunity to earn increased sales may appear, our subleases will soon expire.
Therefore, we are asking the Commission to approve this Resolution during your upcoming Commission Meeting
on April 10, 2012. while also directing that the ACDBE companies be afforded a lease extension comparable
to other concessionaires or at least an additional eight (8) years on par with the Anthony's lease. In addition,
we are requesting a rent percentage comparable to the tiered structure offered to the McDonalds project.
The Port Commission sets policy for the Port of Seattle. The Port has a number of policies and directives that
acclaim the virtues of small business participation. However in practice, at least at SeaTac Airport, the Port has
not adequately responded to the circumstances of the small business food & beverage concessionaires -
specifically regarding the worsening circumstances for the small business concessionaires on Concourse A.
Unlike the new concessions coming in to the airport, our companies have already made significant commitments
to the Port of Seattle in terms of capital investment. rent payments, hard work (time) and award winning creative
designs. So, we are asking the Port Commission to consider your commitment to the small business Community
and help us to resolve the longstanding issue of economic disparity burdening small business F & B concessionaires
through the passage of this Resolution. In the interest of fairness and cooperation, please approve this Resolution
so that we may all focus on the rightful, long term business of serving the traveling public at SeaTac Airport.
Sincerely,
z
David Fukuhara
Concourse Concessions LLC
cc: Larry Setchell. Esq; Jerry Whitsett: Dan Eberhardt; Lo Yu Sun; Rob Spitzer, Esq; Deanna Zachrisson
Our mission is
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RESOLUTION No. ,, i
..
A RESOLUTION ofthe Port Commission of the Port ofSeattle regarding renewing and extending
lease agreements at Seattle Tacoma International Airport with existing small
business concessionaires that are designated as disadvantaged business
enterprises; and directing the Port staff to undertake certain related actions.
WHEREAS, as a matter of Federal policy described in the Federal Register at 76 ER. 5095 (January
28, 2011) the Federal Disadvantaged Business Entity ("DBE") regulations, and the statutes authorizing
them, there is a compelling and continuing need to address discrimination and its effects and there is
a
continuing need for race- and gender neutral programs such as the Department of Transportation's Airport
Concessions Disadvantaged Business Entity ("ACDBE")
program.
WHEREAS, the Port of Seattle (the "Port") established a 19.72% overall goal forACDBE participation
in the Port's Aviation Concessions program;
WHEREAS, a signicant number of the ACDBE certied concessionaires at the Seattle Tacoma
International Airport ("Airport") are located on Concourse A, and have incurred economic disadvantage
due to reduced trafc on that Concourse;
WHEREAS, offering existing ACDBE's the opportunity to renew and extend their leases is consistent
with the federal requirement that the Port reach out to small businesses to make it competitively fair,
providing a level playing eld for them, and creating opportunity that will foster the objectives of the
ACDBE program;
WHEREAS, the Commission believes that offering existing ACDBE's the Opportunity to enter into
direct leasing arrangements with the Port is desirable from a policy standpoint and consistent with the
Port's goal of maintaining its ACDBE participation and of implementing the policies of the Federal
Government to encourage fair competition for small businesses, as set forth in 49 CFR Part 23.
NOW, THEREFORE, BE IT RESOLVED, by the Port Commissioners of the Port of Seattle
as follows:
1. Port staff shall develop a proposal whereby the current ACDBE concessionaires at the Airport shall
be offered lease renewals and extensions on terms as reasonably favorable
as those offered to other
concessionaires, prior to those spaces being rebid;
2. Such renewed leases shall be executed directly between the Port and each concessionaire;
3. The Port staff shall continue to manage the Aviation Concessions Program consistent with the Commission
motion adopted _.
a _ , 2012.
,
4. The Port staff shall commence implementation of this Resolution
upon its approval, and shall endeavor
to complete the ACDBE lease transition, renewals, and extensions by the end of scal
year 2012.
Approved:
Port Commission
Concourse Concessions LLC
Sea-Tac Airport - La Pisa Caf Coffee
, Tully's
Concourse A - Annual Sales Trend
$1,600,000.00
$1,400,000.00
$1,200,000.00
t 51.000.000.00
3 sawtomno A "5'75
__
I --Lansa
i $600,000.00
' $400,000.00
I
i $200,000.00
I
i S'
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} zoos zoos 2007 zoos 2009 2010 2011
L.______.._.___________
_
2005 2006 2007 2008 2009 2010 2011
Tullys 5 577,684.45 $ 668,394.82 $ 763,472.42 $ 833,530.09 S 647,458.09 5 614,134.89 $ 686,796.69
LaPlsa $ 890,704.43 $ 1,039,135.25 S 1,315,917.36 $ 1,407,726.06 $ 1,138,970.77 $ 1,049,597.10 $ 1,191,120.30
Qdoba Comparison 5 3,075,477.00 $ 3,939,635.00
Central Terminal
Development Costs:
Tully's $ 856,194.00
La Pisa $ 722,600.00
Qdoha $ 772,675.00
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