Item 6-H

This report recommends that the City Council authorize the City Manager to negotiate and execute a Lease and Concession Agreement with Chaos Enterprises d.b.a. Perry=s Beach Café and Rentals (Perry=s) for operation of four beach concessions at Santa Monica State Beach.

The City of Santa Monica leases a number of concessions on the State Beach under the City=s Operating Agreement with the State of California. The Concession Agreement with the current operator, Perry=s Beach Café and Rentals, expired in 1993. Operation continued on a month to month basis.

The City received only one proposal, from the current operator, Chaos Enterprises d.b.a. Perry=s Beach Café and Rentals. Staff followed up with prospective proposers and learned that the 20% rent requirement set by the State Legislature was seen as prohibitive for businesses that would need time to establish at the beach. While 20% is at the high end of the rent scale for this type of beach concession, the current concessionaire has been paying this amount of rent since 1990. Staff recommends awarding the Concession Agreement to Perry=s Beach Café and Rentals based on the proposal submission which satisfies the criteria outlined in the proposal: ability to finance, strong credit record, similar business experience, ability to perform, sound management and operation plan, and meeting the percentage rent requirement. Perry=s has been operating the beach concessions since 1987. The success of their efforts to improve the quality and variety of food concessions and services is seen in the continued growth in gross sales each year.

The proposed lease term is five years, effective July 1, 1999. Perry=s proposal includes a minimum annual fixed rent of $200,000 or 20% of gross sales for the four existing concessions, whichever is higher. The permitted uses include food and non-alcoholic beverage sales, and rental and sales of beach equipment such as two-wheeled bicycles and skates. The lease requires that 1.5% of annual gross receipts be used for repair and renovation of the concessions. The State Department of Recreation and Parks has approved the proposed award of the Lease and Concession Agreement to Perry=s Beach Café and Rentals.

There are currently five concession locations. Since 1993, only four have been in operation. These four stands sell fast food such as hamburgers, hot dogs, and pizza, and rent and sell skates and bicycles. The fifth, located at 1100 Pacific Coast Highway, has not been viable economically primarily because of its close proximity to the concession stand at 1200 Pacific Coast Highway. However, given its location adjacent to the bike path and within walking distance from the Santa Monica Pier, the site has potential as a casual sit-down café. This use is permitted under Proposition S. Perry=s proposal also responded to the longer-term possibility of renovating the 1100 Pacific Coast Highway location as a casual restaurant/café. Since this concept was included in the competitive proposal process, staff will pursue negotiations with Perry=s for the rehabilitation and operation of this location subject to all State and local regulatory approvals, including City Council approval.

A concession amenity not contemplated in the RFP is the installation of two vending machines and lockers at each of the four locations. The vending machines will be installed by Coca Cola which will provide a bank of 35 lockers for day use by the public. The lockers will be housed between the two vending machines in an enclosure consisting of a surfboard shaped roof and two sides. The vending machines will have a beach activity graphic and the Coca Cola name only. The lockers will be secured by a roll-up metal door during the hours the concessions are closed. The key operated lockers will be available for hourly or daily rental during Perry=s business hours; the procedures will be the same as those used for skate and bike rentals which require a license or passport be left as security until the patron returns. The locker program will help meet the many requests received over the years from the public for a place to store valuables and shoes while enjoying beach activities. Staff is recommending that the vending machine and locker program be implemented on a pilot basis.

Staff recommends that the City Council authorize the City Manager to negotiate and execute a Lease and Concession Agreement with Chaos Enterprises d.b.a. Perry=s Beach Café and Rentals for four beach concessions, limited food service carts, and a pilot vending machine and locker program.