Business concessions and contracts

The fast food and general store concessions in the Myakka River State Park near Sarasota, Florida

I expect you have seen so-called concession businesses within big stores. They are businesses within other businesses and they sell specialist items such as costume jewellery, scarfs, ties or food. Those sorts of concessions are usually themselves owned by large companies, but small businesses can run concession enterprises as well.

Probably most small businesses who own concessions are in catering, but they may also run confectionery or sweet shops, sell souvenirs to tourists or other staples and essentials. It really is a question of what the particular environment requires.

The idea of having a concession is very attractive. For example you might run the cafe-restaurant in a golf club. Having a constant stream of captive customers would make any catering business owner excited. As always it is important to have a plan and a budget, and to fit your idea to the particular venue.

There will be questions you will want to ask yourself:

  • How much is the rent?
  • How many potential customers will there be? Is there other competition outside or inside the venue?
  • With the level of rent and any extra costs in the contract such as utilities plus my own costs, can I set my prices to be attractive and still make a good profit?
  • Is the length of the contract enough and do I get adequate compensation if it is terminated, for example due to redevelopment of part or all of the site?
  • Should my business rely entirely on the concession or should I have other irons in the fire?

The advantage to the site owner in offering concessions to outside businesses is that they don’t have to worry about being distracted from their own core businesses. A golf club is concerned with making the members comfortable and especially with ensuring that the course is maintained to a high standard. They care more about the state of the greens than about frying eggs for breakfast. However if you are frying those eggs it is up to you to ensure that they are perfect in the customer’s eyes or more especially their mouth.

Similarly, a main railway station’s managers care more about their infrastructure, the tracks and signals and moving the passengers through smoothly. A country park owner cares about the wildlife and the maintenance and does not need to worry about the selling of sodas, food and souvenirs unless there are complaints or litter and trash issues.

So if you are keen on running a concession, make sure your sums add up and the length of your lease is satisfactory. Decide whether you should have all your eggs in one basket. Maybe you should run several concessions in different places, or perhaps you shouldn’t just rely on concessions.

It ‘s all up to you, but as with any business, have a plan. Then go for it if it makes sense.

 

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