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I have a question about food court services leasing space in recreation centers. Do you lease space per square foot? Or do you take a percentage of the profits? If so, what amount of the profits?

Concessions contracts have assumed greater complexity, and flexibility, as the purveyors of local and national food brands seek to carve their own slice out of the profitability pie. "There's a lot of nuance in these agreements," says consultant John DePaola, principal-in-charge of Foodservice Resources in Fredericksburg, Va., "and every one is different."

DePaola, who helped develop RFP specifications for the concessions contracts to be in place at the Minnesota Twins' new ballpark beginning in 2010, compares the overarching model in place at many sports venues to that of a mall food court. A national concessionaire — such as Centerplate, Aramark, Sportservice or Levy Restaurants — holds the lease for the concessions space within the entire stadium or arena, then sublets to third-party providers for a cut of their take. These often include companies with which the concessionaire may already partner on a national level, but to an increasing extent they take the form of regionally recognizable restaurants.

— From "Fan Fare" by Paul Steinbach, Athletic Business, August 2008

Find more related articles in the AB Article Archive: Concessions

Having been involved in several venues, my thoughts would be you could go at this in several ways. 1) Rent space by the square foot (meaning either counter space for a specific product as in retail grocers or convenience stores) check with local market for rates Or by the total square footage of space as in malls/outlets - check with local malls but you have to compare traffic flow and create a percentage. 2) Easiest way is to take a % of gross sales - usually between 20-35%. 3) One music venue I work with requires an annual $24,000 buy-in for the year plus 50% of NET Profit, but that is extremely high. However, having said that a buy in of maybe $5,000 and 25% of Net Profit may be considered reasonable. Again, this is based on foot traffic and total volume of sales. I might suggest you talk to concessionaire at local college on what they do for local guidance and balance against their daily traffic vs. yours. If you find your traffic is so small compared to others then a straight percentage is most likely your best bet and just start negotiating the best deal you can get. Chris

You have asked an excellent question Angela, one that a lot of people struggle with. From my experience with % of sale, % of profit, set rental rate and combinations of each, the set rental rate is by far the preferable method for the building owner to use. Establishing a set rental rate allows you to know how much revenue you will get each year and avoids the possibility and the perception that the contractor is manipulating the financial records for their personal gain. Using a percentage of sales or profit is preferred by contractors who do not know what to expect from your specific market situation and/or they are uneasy about gambling on their ability to succeed. A percentage system allows a contractor to take risk with your facility revenue and it can possibly be a de-motivator for good organization, efficiency and effort. All that said, if you are establishing a new service, offering a percentage payment may be the only way to get started, but I suggest you switch to a set rental fee as soon as possible.