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SR 01-25-2022 3A City Council Report City Council Meeting: January 25, 2022 Agenda Item: 3.A 1 of 5 To: Mayor and City Council From: Andy Agle, Director, Community Services Department, Cultural Affairs Subject: Award Request for Proposal and enter into Agreement with Back on the Beach Food Co., Inc. for Concessions at the Annenberg Community Beach House Recommended Action Staff recommends that the City Council: 1. Award RFP# 291 to Back on the Beach Food Co., Inc., a California-based company, for food and beach equipment rental services at the Annenberg Community Beach House at Santa Monica State Beach; and 2. Authorize the City Manager to negotiate and execute an agreement with Back on the Beach Food Co., Inc. for an initial term of ten (10) years with one (1) option for renewal of five (5) years. The annual minimum rent is $200,000 or 8 percent of gross sales, whichever is higher. Summary Back on the Beach Food Co., Inc. (Back on the Beach) has operated Back on the Beach Café since January 1989. In 2008, Back on the Beach was awarded a ten-year lease through a competitive process. Since that time, Back on the Beach has been responsible for developing, operating, and providing food and beach equipment rental services to visitors of the Annenberg Community Beach House. Since 2018, Back on the Beach has operated under the hold-over terms of the lease agreement until a new Request for Proposals (RFP) process could be completed. Due to the delay in receiving State authorization and then by the COVID pandemic, the RFP process was completed in 2021. 3.A Packet Pg. 14 2 of 5 Staff recommends Back on the Beach as the best qualified firm for beach café and equipment rental concession beginning in March 2022 through February 2032, with an option to extend for an additional five years. The minimum total revenue for ten years with a three percent annual Consumer Price Index (CPI) increase is estimated at $2,515,579. Discussion Since 1989, the existing restaurant at 445 Pacific Coast Highway, known as Back on the Beach Café, has provided year-round, daily indoor and outdoor food service. In addition, Back on the Beach equips and maintains beach-related equipment for rent such as chairs, umbrellas, boogie boards, and various sundries that provide for the health, enjoyment, and convenience of Annenberg Community Beach House (Beach House) visitors. The proposed ten (10) year concession agreement with one (1) option to renew the agreement for five (5) years would provide for the operation of food and beach- equipment rental services at the Beach House. The intent of the concession agreement is to provide the public with high-quality, reasonably priced food service, as well as the sale or rental of beach-related equipment and items in a manner and atmosphere that enhances the visitor’s experience at Santa Monica State Beach. Managed by the original owners, Frederick Deni and James Christel, the restaurant is fully licensed and approved by the Los Angeles County Health Department, City of Santa Monica, and California Alcoholic Beverage Control Board (ABC). Through a permit approved by ABC and the Planning Commission in 2012, Back on the Beach was able to expand its ability to serve beer and wine in its existing outdoor dining area. To meet ABC requirements, a custom-designed 42-inch fence was added to delineate the perimeter of the outdoor dining area. The City’s current agreement with Back on the Beach to operate Beach House concessions expired on December 1, 2018. Under the terms of the Operating Agreement, State Parks must approve the issuance of a Request for Proposal (RFP), which was initially delayed by the State’s extended process and then by the pandemic. 3.A Packet Pg. 15 3 of 5 Back on the Beach has been on a month-to-month lease pursuant to the holdover provision of the agreement, pending the completion of the RFP process. The RFP was released in September 2021 and closed in October 2021. Two proposals were received. Vendor Selection Bidder Recommendation Best Qualified Person or Firm Back on the Beach Food Co., Inc. Evaluation Criteria Training, credentials and experience of the person or firm; demonstrated competence, ability, capacity and skill of the person or firm to perform the contract or provide the service promptly, within the time specified, and without delay; capacity of the person or firm to perform the contract or provide the service promptly, within the time specified, and without delay; sufficiency of the person’s or firm’s financial and other resources; character, integrity, reputation and judgment of the person or firm; price which the person or firm proposes to charge, including whether the price is fair, reasonable and competitive. Municipal Code SMMC 2.24.190 Bid Data Date Posted Posted On Advertise In (City Charter & SMMC) Vendors Downloaded Date Publicly Opened 09/20/2021 City's Online Bidding Site Santa Monica Daily Press 18 10/18/2021 Best Qualified Person or Firm Justification Staff from the Community Services and Community Development Departments reviewed both proposals and evaluated them based on experience with projects of comparable complexity, qualifications of key personnel, financial resources and ability to finance tenant improvements and operations as proposed, project understanding and approach, compatibility of proposed operations with surrounding uses and local community, rental bid, and overall quality and thoroughness of proposal. The evaluation committee unanimously recommended Back on the Beach as the best fit for the Beach House in Submittals Received Back on the Beach Food Co., Inc. Made by Meg Catering 3.A Packet Pg. 16 4 of 5 terms of experience, stability and familiarity with the Santa Monica market. The other proposer, Made by Meg Catering, is an enterprise relatively new as a full-service operator, with their experience focusing mainly on catering private events. Back on the Beach demonstrated its continued ability to provide concessionaire services at the Beach House. Their years of extensive experience in the industry, working successfully as partners with the City and Beach House staff, are clearly conveyed in the thoroughness of their proposal and operations plan. Their management is actively engaged in the Santa Monica community and supports a large number of nonprofits and community organizations involved in environmental stewardship, youth development, and human rights. Their proposal included all the RFP required documents and included positive references from various community members they have worked with over the years, highlighting their hospitality and service to the visitors of Santa Monica, and their contributions to the Santa Monica community. They continuously adopted new technology to improve customer service and rose to the challenges and new protocols brought about by the pandemic. Lease Terms Staff recommends award to Back on the Beach for a ten-year (10) term with one (1) five-year option. The annual rent requirement is the greater of eight percent of gross sales or $200,000 base rent, with the base rent subject to an annual Consumer Price Index (CPI) escalation. The proposed new rent requirement is different from the current lease terms of ten percent of gross sales with a minimum annual rent of $100,000. In preparing the RFP, staff sought the services of financial consultants Allan D. Kotin & Associates (ADK&A) regarding appropriate financial terms, particularly given changes in the restaurant market, including significant increases in labor costs. On behalf of the City, ADK&A completed an evaluation of lease terms for beach-adjacent food and related services in Southern California. ADK&A concluded that reducing the percentage rent by two percentage points would make the opportunity competitive for prospective restaurants, while doubling the guaranteed base rent would ensure that the City is appropriately compensated. 3.A Packet Pg. 17 5 of 5 If awarded the new ten-year lease, Back on the Beach would invest $300,000 to include replacement of the roof, exhaust fans and coolers, exterior doors and windows, and walk-in cooler; addition of a retractable fabric canopy; and renovation of the dining room floors. The improvements would be scheduled over a three-year period with minimal impact on café and Beach House operations, and in compliance with applicable permits and approvals. Financial Impacts and Budget Actions Staff seeks authority to award a contract with Back on the Beach Food Co. Inc. for operation of food and beach equipment rental services at the Annenberg Community Beach House, with a minimum annual rent of $200,000 or eight percent (8%) of gross sales, whichever is greater. The FY 2021-23 Budget includes $200,000 each year in revenue from the lease. Prepared By: Joyce Perez, Sr. Administrative Analyst Approved Forwarded to Council Attachments: A. Back on the Beach Oaks-111821 3.A Packet Pg. 18 3.A.aPacket Pg. 19Attachment: Back on the Beach Oaks-111821 (4863 : ACBH Concessions Award)