SR-410-001-02 (13)
RMD:EDD:F:\RESOURCE\SHARE\STAFFREPORTS\Provenzano LicenseAgreement.doc
Council Meeting: June 14, 2005 Santa Monica, California
To: Mayor and City Council
From: City Staff
Subject: License Agreement with Provenzano Resources, Inc. for Operation of the
Third Street Promenade Vending Cart Program
INTRODUCTION
This report recommends that the Santa Monica City Council authorize the City Manager
to execute a License Agreement with Provenzano Resources, Inc. (“PRI”) for operation
of the Third Street Promenade Vending Cart Program.
BACKGROUND
The Third Street Promenade is a successful and vibrant shopping, dining and
entertainment areas, drawing visitors from around the world. A Vending Cart Program
has been an integral part of the overall ambiance and unique character of the
Promenade since its inception in 1989, and has been provided by Promenade Services.
Their License Agreement expired in 2003 and has been in effect on a month-to-month
basis since that time.
Consistent with Council guidelines for leasing and operation of the Bayside District, in
2003, staff developed a Request for Proposals (“RFP”) and advertised the Vending Cart
Program opportunity. A review team of representatives from the Resource
Management Department and Bayside District Corporation reviewed the applications,
but determined that additional information was required. The RFP was reissued in
2003, and again the responses were found lacking.
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After conducting additional research about vending cart programs, staff issued a third
RFP in November 2004 and received ten responses (See Attachment A for list of all
proposals received). The review committee evaluated the proposals, interviewed the
most qualified responders, checked references, and recommend Provenzano
Resources, Inc. as the most qualified and responsive proposer.
DISCUSSION
PRI is a full service retail real estate consulting firm specializing in creating, managing,
and leasing common area and short term retail programs for clients. The managing
partners and principals, Ross V. Provenzano and Deborah S. Kravitz, have over 50
years of combined experience in this and related fields, as well as a network of highly
qualified specialists serving in support of these functions. PRI has been in business for
over eight years, and their clients included Fashion Island and Irvine Spectrum Center
in Orange County, The Grove in Los Angeles, Paseo Colorado in Pasadena, and
numerous other clients across the country. PRI offers custom designed carts,
merchant training and development, and programs that reach out to local
entrepreneurs. They also have an extensive network of artisan and handicraft vendors.
They adhere to high standards of quality in terms of merchandise selection, cart design,
and accountability. PRI’s references are outstanding, and their selection is
recommended by staff as well as the BDC.
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PRI will partner with Creations at Dallas to fabricate new carts in accordance with a
design to be approved by the City after consultation with the Bayside District
Corporation. The new carts will reflect quality, contemporary design, use sturdy
materials, include features designed for safety and ease of operation, and will be
practical and attractive for display purposes. PRI’s initial capital investment is expected
to exceed $600,000. The average life expectancy of a cart is five to seven years in
outdoor conditions, and there will be a need for reinvestment of additional capital in
order to maintain a high level of quality over the term of the proposed ten year
Agreement. The purpose of the License Agreement is to set forth roles and
responsibilities of the City and PRI. Terms of the proposed License Agreement include
the following:
Number and Location of Carts: PRI is expected to provide a minimum of 17 retail units,
plus a concierge cart, five food units, and three weekend/artist units for a total of 26
carts, which will be strategically located throughout the three-block length of the
Promenade. Currently, there are approximately 22 carts on the Promenade on most
days; because the artist units are weekend-only, the overall number of carts is about the
same as those currently in use. Due to storage restrictions, the size of the carts is also
expected to be about the same as those currently in use. Cart locations may vary from
the current configuration, depending upon the optimal placement as determined by PRI
and public safety personnel. Street performer spaces as currently assigned will not be
affected by a new cart placement plan and, as is currently the case, carts will not be
placed near in-line retailers selling the same or similar merchandise.
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Effective Date of Agreement: The anticipated effective date of the contract will be July
1, 2005, with roll-out of the new carts expected to take place in November 2005, so that
the operational transition is completed in time for the holiday shopping season. The
License Agreement contains a Performance Schedule that will ensure this timeframe is
met. Immediately after execution of the Agreement, PRI will submit cart designs to the
City and, upon approval, fabricate the carts and have them delivered. PRI will also be
working with existing vendors and recruiting new vendors for the program.
Transition: Promenade Services will continue its operations through the summer and
fall; every effort will be made to limit “down time,” so that carts are in constant operation
on the Promenade.
Hours of Operation: As with the existing program, carts will be in operation seven days
per week. Closures are permitted for Easter, Thanksgiving, Christmas, and New Year’s
days. The minimum hours of operation will be 11 a.m. – 9 p.m., Monday through
Thursday, 10 a.m. – 10 p.m., Friday and Saturday, and 11 a.m. – 8 p.m. on Sundays.
This ensures a consistent and visible level of operation at all times.
Existing Individual Cart Operators: PRI will be required to invite all existing individual
cart operators (“ICOs”) to apply to participate in PRI’s program. If the ICOs are willing
and able to comply with PRI’s operating standards regarding license fees, customer
relations, insurance, and merchandise selection, among other issues, they will be
retained.
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License Fees to be charged ICOs: PRI will set individual license fees with each of the
ICOs based on PRI’s knowledge of the product being sold and expected profit margin.
PRI will set a base license fee with the ICOs and a percentage license fee for revenues
generated above the “breakpoint.”
License Fees to be Paid to the City: PRI will pay the City 30% of the revenues collected
or the base license fee, whichever is greater. PRI will be subject to periodic audits, at
the City’s direction.
Term and Termination Without Cause: In recognition of the substantial capital
investment, a term of ten years is proposed, with one option to renew for an additional
five years. The License Agreement provides for the City’s right to terminate the
agreement without cause upon 180 days written notice. Should the City opt to
terminate without cause, the City will be required to repay PRI the unamortized portion
of their capital investment.
Other Downtown Vending Cart Locations: This proposed Vending Cart Program only
applies to vending carts on the Promenade. Currently, there is one other license for a
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vending cart that is located at 5 and Arizona. The license for this cart expires June 30,
2005. Staff will continue to manage vending carts outside the Promenade on an
individual basis.
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BUDGET/FINANCIAL IMPACT
Approval of this License Agreement will result in minimum revenue to the City of
approximately $162,800 per year, for the first five years of the term. This is based on
22 carts at $600/month/cart, plus 3 weekend artist carts prorated at $125/month/cart.
These funds are deposited to General Fund revenue account 01263.400771. This
minimum will increase to $189,300 per year for years five through 10, which is based on
$700/month/cart, plus 3 weekend artist carts prorated at $125/month/cart. If the option
is exercised for an additional five years, annual revenue will increase to a minimum of
$215,700 per year, which is based on $800/month/cart, plus 3 weekend artist carts
prorated at $125/month/cart. Additionally, the aforementioned rents are base rents,
against a consistent percentage of 30% of revenues collected, with the greater of 30%
or the base being paid to the City, and we anticipate some additional revenues from the
percentage rents. There are no additional budget or financial impact on the City.
RECOMMENDATION
Staff recommends that the City Council authorize the City Manager to execute a
License Agreement with Provenzano Resources, Inc. for operation of the Third Street
Promenade Vending Cart Program, as described above.
Prepared by: Jeff Mathieu, Director, Resource Management Department
Miriam Mack, Economic Development Manager
Gretchen Kubacky, Senior Real Estate Analyst
Attachment A: List of firms who responded to the Request for Proposal on January
27, 2005
Reference Contract No. 8480 (CCS).
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ATTACHMENT A
List of Firms Who Responded to the Request for Proposals on January 27, 2005
Coast Carriage Management
Edge One Vending Company
General Growth Properties
L.A. Beach Management
Martin Rodriguez Events
Mukul Ram
Promenade Carts
Promenade Services, Inc.
Provenzano Resources, Inc.
Retail Details
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