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Sample Concession
Lease
Sample Private
Placement
September 11, 2001
World Busiest Airport
Year-to-date
Your concession is
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There are only two-ways to become an airport concessionaire; 1.) You
submit a winning bid/proposal to an airport via an open competitive
bid process. or 2.) You buyout an existing airport concession
business.
Concession Bids and Proposals
The
cost of creating and submitting a "professional
airport concession proposal" can range from
 $5,000 to
$15,000, depending on the concession opportunity. The average
concession bidder
invests about 40 hours to
complete a
concession proposal. In a competitive bid situation, where
you
are competing with 25 to 50 bidders, you don't get to modify your
 proposal; it must be right the first time.
The airport concession proposal
you submit must stand-out in the crowd.
Creating winning proposals, bids, and concept packages are difficult
and requires considerable experience and expertise.
Your local partner at each airport can provide
capital, management
and political support. Local politics always plays a role in
who wins in a "competitive bid process!." A high traffic (3 to
5 million passengers monthly) concession location can generate $1.5
to $5.5 million dollars in annual revenues; hence, the competition
is strong for the $500,000. to $1,000,000. annual profit realized
from such an operation. Bottom line, your bids and
proposals are more likely to be successful with professional
preparation. The process of submitting an airport concession
proposal starts by you deciding what your goals are:
-
Create, develop and build-out a concession location;
-
Become
a minority/women owned certified partner of a major concession
management firm; or
-
Become
a concession management contractor of an airport concession for a
concession owner; which requires a minimum cash investment.
On average
concessionaires invest between $250,000. and $750,000, to develop
and open an airport concession location before any money is made.
Hence, investors must be prudent as they engage in the airport
concession business. Your decision to engage RMD to guide you
through the process of developing what you need to accomplish your
goals will save you time and money.
Concession Acquisitions (Buyouts)
The
acquisition or
buyout of an airport concession is generally a
non-competitive process. It requires a
 transaction between a buyer and
seller; which includes
airport authority
approval of the new owner and submission of a "concession
concept package." No "airport management
office" can legally prevent you from selling your business to a
qualified investor; hence, you can always sell your business. Local
politics does not usually play a role in your effort to acquire an
existing concession location. You might decide to sell 100% or as
little as 10% of your business to an investor, as long as the
investor meets the same requirements you did when the privilege was
granted. Most airports experience a 5 to 8% change in their
concession profile annually. Airport concession ownerships change
hands because of a death, divorce, failed partnership, an
un-successful concept, retirement, poor health, and other reasons.
In some cases airport concessionaries decide to "cash out" of their
concession business and use the cash from the sale of their
concession to invest in another venture. The
economic value of each
concession is determined by the following issues:
-
Lease expiration date;
-
Percentage Rent;
-
Concession Concept;
-
MBE, DBE, or WBE status;
-
Net Cash Flow; and
-
Minimum Monthly Rent.
All
airport concession leases decline in value monthly; hence, each firm
which acquires an existing concession must be able to recover its
investment (acquisition and build out cost) during the remaining
term of the existing lease. In fact, most concessions with less than
24 months before they expire have no value; if no renewal or
extension is secured. The process of acquiring an
airport concession starts by you deciding what your goals are:
-
A full buyout of an existing airport concession business with no
change in concept;
-
A partial (10% to 49%) buyout of an existing airport concession
business with no change in concept;
-
A full buyout of an existing airport concession business with a
complete concept change (food to retail or pizza to burgers);
-
A buyout of a minority/women owned certified partner of a major
concession management firm or
-
A buyout of a concession management contractor of an airport
concession for a concession owner; which requires a minimum cash
investment.
Most
concessionaires want the buyer to pay them the "net present value"
of future net revenues discounted to present value; which could
range from $250,000. and $550,000, for the average airport
concession. As the buyer you must be prudent as you engage in the
airport concession acquisition business. RMD has the experience,
resources, and expertise to guide you through the process of
buying airport concessions worldwide.
A review of our
sample engagement agreement will
provide details about the scope of services offered.
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