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SR-308-002-02 (5) . . II-A APR 2 8 1981 CM:LCB:dvm city council Meeting 4/28/87 Santa Monica, California 3t:/If-OOZ-oz TO: Mayor and City Council FROM: city Staff SUBJECT: Request for Proposals for Beach Concessions stands INTRODUCTION This report presents the city council with information on the status of the City's current agreement wi th McDonald's Corporation for beach food concession service and requests authorization for the City Manager to issue a Request for Proposals and take other necessary actions to insure continuous food service. BACKGROUND On April 10, 1984, the City Council awarded a five year agreement for operation of five beach concession stands to McDonald's corporation. Their proposal included summer season food service with a $200,000 annual rent payment to the city. Several factors over time have led to J.1cDonald' s desire for a reconsideration of their agreement. Most noteworthy are an underestimate on their part of the cost of initial capital improvements to make the stands operable; lower than anticipated gross sales; and restrictions on signage and other operational constraints. - 1 - /I-~ APR 2'J981 e e rent. The city can, and has indicated a willingness to consider, operational changes, to enhance public awareness of the stands. PROPOSAL Staff initiated discussions with state Parks and Recreation Department officials several month ago about alternative solutions to the concerns raised by McDonald's. On February 18, city staff presented the following proposal to McDonald's: The City would agree to rebid the agreement over the next few months in exchange for McDonald's agreeing to provide uninterrupted food service until the new agreement was in place. McDonald's has agreed to this proposal Several factors entered into development of this recommendation: 1) McDonald I s has been a good lessee. In spite of a lack of profitability of these stands, they have consistentlY met their rental obligations and been responsive to city requests for action, such as painting out graffiti on the side of the stands. 2) The history of the beach concession stands has been fraught with instability, lack of consistency in standards and 1m'/" rent generation. In the past few years, with the upgrade of the stands this trend has been altered. It is hoped that the city can continue to have successful pUblic/private partnerships for the these concessions in the long term. 3) It is highly desirable to maintain food service during the upcoming summer months. McDonald's has agreed to open the - 3 - e e stands and continue operations until the transition occurs to a new agreement and possible new concessionaire. It is hoped that any break in service would be limited to one to two days, if at all. 4) The Request for Proposals is being handled as a competitive bid process in accordance with state guidelines. The availability of the RFP will advertised statewide. standard and city be widely REQUEST FOR PROPOSALS The RFP being prepared is generally similar to the 1984 document with the following significant changes: 1. Proposals may be submitted for one or any combination of the stands. 2. The term of the contract may be changed from 5 years without an option to five years with a five-year option which cannot be unreasonably denied by either the state or the city. Respondents would have to justify the necessity of the option based on capital investment made. 3 . Based upon the individual gross income figures for each stand over the last 3 years, the fixed rent minimum payment would be reduced to $125,000 from $200,000. The minimum percentage rental would be 16% of the gross sales. The City would be paid the greater amount of these figures. TIME SCHEDULE AND APPROVALS In conjunction with the State Department of Parks and Recreation, - 4 - e e an expedited time line for bidding has been developed. Upon receipt of council approval, staff will issue the RFP by May 1, 1987. Bids would be due on June 2, 1987. In the meantime, the state Public Works Board will meet on May 22 to review the issue and act on a recommendation to concur with the approach being taken. The state Parks and Recreation Commission will be briefed on June 5. If there are no unforeseen delays, City staff will make recommendations on the proposed concession agreement to the city Recreation and Parks Commission on June 18. The City Council will consider the recommendation on June 23. City action will be subject to approval by the state Attorney General and the state Director of General Services. staff has been advised that those approvals may take up to six weeks. Resolution of the matter is anticipated in early August. RECOMMENDATION staff recommends the City council authorize the city Manager to issue a new Request for Proposals to operate the beach food and beverage concessions and to negotiate and execute any necessary agreement with McDonald's Corporation to insure continuous food service during the summer of 1987. Prepared by: Lynne C. Barrette, Assistant city Manager Donald T. Arnett, Dir. Recreation and Parks (Bchcon) - 5 -