AN EXAMINATION OF BEST PRACTICES
FOR THE  FAIR – EXHIBITOR – CONCESSIONAIRE RELATIONSHIP

2008 Edition

A JOINT PROJECT OF THE
INTERNATIONAL ASSOCIATION OF FAIRS & EXPOSITIONS
and
THE NATIONAL INDEPENDENT CONCESSIONAIRES ASSOCIATION, INC.

Best Practices

Introduction & History

            Around the turn of the last century, fairs literally owned and often operated their own food and beverage outlets. The word “concession” was not in the lexicon of a fair secretary who, if lucky, had a couple of church stands serving hot plate dinners, coffee and apple pie. Before there were contracts, leases or licenses, there was “privilege.” Now considered a pejorative, the use of this term made it clear that fairs were extending a defined benefit to certain operators, while remaining in total control of the process.

            Not too long ago commercial exhibits at fairs were considered “space fillers” with little promotional value, when food and merchandise concessions were appreciated for marginal income, but given no credit for drawing an audience. These privilege-holders, however, gave the fairgrounds a “busy” look. They filled indoor and outdoor space; they could be put anywhere with little concern for poor traffic or the saturation of similar products.

            Over time, the quality of both the products and presentation offered by commercial exhibitors and concessionaires improved exponentially. Very few in the outdoor business anticipated the explosion of interest in concessions, but the “quality formula” worked; good product, good appearance, good health standards, good prices and good attitude raised the bar making the promotional value of commercial exhibits and concessions an important resource in marketing the fair.

            Today, fairs continue to exercise a firm hand over the concession environment. That grip has softened with time, but still manifests a regulatory structure of assessment, selection, placement, limitation and oversight. Each of these control mechanisms is necessary to the guarantee of good presentation, quality control, product variety, geographic balance and customer satisfaction.

            Concessionaires often bridle at what they see as rigid and inflexible policies or decisions they consider arbitrary, erratic and unreasoned. On balance, however, operators who understand the rules of good business also understand and agree that control and balance are needed if they are to experience success.

Challenge & Opportunity

            An evolution is underway; change agents are everywhere. The concession environment has taken on a new and exciting dimension. Exhibitors and concessionaires are important contributors to the bottom line, visual appeal and the community reputation of fairs. Their quality (or lack thereof) sends a graphic message to the public about the strength and value of the fair’s overall presentation.

            This evolution cannot constrain economic reality. The cost of conducting business – especially for an operation exposed to the vagaries of weather – is predictably high, while the odds of success are long and not predictable.

            A fair, with all its physical attributes, is encumbered by extensive capital costs and infrastructure maintenance. The ongoing investment in facilities, plus higher program and labor expenses, requires access to new profit centers as well as greater reliance on established sources of revenue. 

            Although less in total, the proportionate impact of escalating costs bears on a concessionaire in like manner. Mobile operators must deal with rising fuel and other over-the-road costs. They must regularly upgrade their appearance and market standards to satisfy the public, and their safety standards to satisfy regulators. 

            For fairs and concessionaires, viability and profitability will continue only with the advancement of mutual understanding and cooperation. A “win-lose” formula is inherently unstable; narrow self-interest will only serve to compound this instability. Leaders within our industry know this; they must work to raise the level of discourse and move on to collaboration and commitment.

            To these common ends, a joint committee representing IAFE fairs and NICA concessionaires met for the first time in December, 2007 and opened for consideration the following question: What steps should be taken to improve and make more productive the business relationship between fairs and concessionaires?

            Note: For purposes of this study, the term “concessionaire” will be used to describe a composite of independent, commercial operators who are regularly licensed or contracted to do business at fairs and expositions including food and beverage sellers, retail and straight-sales vendors, commercial exhibitors, as well as attraction and game operators.

Study Group participants included:

Bob Batista, CFE, Western Idaho Fair, Boise, Idaho

Rick Busse, CCE, Dr. Vegetable, Valparaiso, Indiana

Rick Frenette, CFE, Utah State Fair, Salt Lake City, Utah

Mike Heffron, CFE, Facilitator, Roseville, Minnesota

Mark Hill, CCE, Gold Mark Concessions, Upland, California

Jim Hodson, CCE, Hodson Concessions, Kokomo, Indiana

Tom Hodson, CCE, The Thomas Hodson Co., Kissimmee, Florida

Kent Hojem, Western Washington Fair, Puyallup, Washington

Renee Korslein, CFE, North Dakota State Fair, Minot, North Dakota

Kevin Koski, CCE, Hollman Specialty Co., Inc., Sturgis, Michigan

Rollie McCubbin, CFE, Iowa State Fair, Des Moines, Iowa

Bill McKinney, CCE, McKinney Food Services, Hughes Springs, Texas

Pat Moroney, CFE, Miami-Dade County Fair, Miami, Florida

Tim O’Brien, CCE, O’Brien’s Food Service, Apollo Beach, Florida

Bill Ogg, CFE, Montana State Fair, Great Falls, Montana

Luis Perez, Ohio State Fair, Columbus, Ohio

Dave Schlabach, CFE, NICA, Inc., Tampa, Florida

Jim Sinclair, CFE, Minnesota State Fair, St. Paul, Minnesota

Denny Stoecklein, CFE, Kansas State Fair, Hutchinson, Kansas

Jim Tucker, IAFE, Springfield, Missouri

            The committee agreed to adopt the concept of “best practices” as a means of creating focus on industry business relationships. Its goal: to develop a model that fairs, exhibitors and concessionaires might use to structure new business alliances or make positive changes to those already in place. 

            Each member was asked to submit a “vital issues list.” Submissions were distilled and organized into an agenda for a second meeting of the study group in June, 2008. During this day-long session, problems were openly discussed after which the group agreed two steps were needed to move the process forward: (1) identify the vital issues of critical concern and conflict which serve to impede good business outcomes and (2) generate a catalog of clear and definitive action steps to create understanding, advance cooperation, ameliorate conflict and reform conventional wisdom.

            While the limitations of time available to the study group caused certain issues to receive less than full consideration, this study process is expected to continue into a second phase, during which these and other unexplored issues will be examined in greater depth.
            The list of “best practices” that follows is neither universal nor all-inclusive. It identifies several subjects of potential tension and disagreement, and it poses fundamental questions about how these issues might be resolved. More to the point, this enumeration demonstrates a consensus, punctuated by a spirit of collaboration. At their core, these agreed upon practices sound a positive note and move the process towards transparent, foundational change.

VITAL ISSUE #1: COMMUNICATIONS

Fundamental Questions: How do we communicate? Are we open and forthcoming? Do we share information fully to convey understanding? Do we listen and learn?

Collaboration

• Fairs and concessionaires should understand the basic truth that a close, working collaboration is necessary to the success of each party.
• Communications should be candid and open. Saying what the other party wishes to hear instead of the truth will serve no benefit to either.
• Certain subjects such as long-term contracts, exclusives, deposits, transfer of locations and sale of concession businesses come up often, but are just as often put aside without discussion or resolution. While a uniform, industry-wide position on such matters is unlikely, sensitive issues such as these should not be ignored; they should be explored openly.

Communication Committees

• A communication committee can serve to provide a conduit between fair management and concessionaires; it opens a conversation about relevant issues, imparts critical information and sheds light on misunderstanding. In so doing it can help create an environment conducive to open communication.
• A communication committee should be structured to represent the views of fair management and the diverse mix of concessionaires, commercial exhibitors and purveyors on the fairgrounds.
• The agenda and conduct of communication committee meetings should not be managed or controlled by either the fair or the concessionaires; these functions should be open and include input pertinent to the concerns of all parties.
• Communication committee membership should be modified from year to year with selections staggered to represent the diverse perspectives of inside and outside concessionaires.
• Communication committees should include NICA members in the mix so as to reflect broader industry views.

Contract Structure

• Promises or guarantees made by either party to the other in correspondence, applications or proposals should be honored or the reason for not doing so should be explained in writing before agreement execution for the event.
• Both parties should see that mailing addresses, cell and fax telephone numbers and e-mail addresses are kept correct and current, and that changes are quickly communicated to the other party. Concessionaires, who spend much of their time on the road, should provide easy access for business associates.
• The effective, timely exchange of information depends on all parties being able to utilize e-mail.
  Financial terms, deposit requirements and settlement arrangements should be put forward on a timely basis; contract requirements, such as deadlines, should be definitive and clearly communicated. Changes should be highlighted, especially if they change from one year to the next.

Policies and Procedures

• Unusual or unique policies, rules or procedures should be highlighted for all parties and carefully explained to new associates before the fact.
• Rule or procedural changes from the previous year should be communicated early in the process. This might be done by way of a cover sheet sent with contract renewal forms.
• Neither party should be caught unaware by changes that bear on the relationship. Changes of a critical nature should be communicated in a timely fashion and highlighted for clarity. If they are likely to cause conflict, they should be discussed by the parties in advance.
• Experienced or veteran concessionaires can help disseminate information regarding changes. Communication committees can also act as a conduit for information related to changes.

Sponsor and Supplier Links

• Information and issues related to sponsorship arrangements, especially those that create pouring rights or product exclusivity, should be shared, discussed and resolved by the affected parties, preferably before such arrangements are finalized.
• Circulate a fair sponsor list to concessionaires so they might purchase products or services from those who support the event. This signifies concessionaire support for the community.
• Suppliers can be a resource for vendors. Contact information regarding these purveyors should be included in the information packets mailed to concessionaires and exhibitors.

Education and Training

• Fair employees can access training opportunities through the IAFE, but the basics of the concession business are best learned by getting out, visiting and observing in the field, as well as by networking with experienced concessionaires. These tactics will help build a better understanding of fair and concessionaire operations.

VITAL ISSUE #2: FINANCIAL FORMULA

Fundamental Questions: How are financial formulas established? Do we consider financial equity important to the relationship? Is economic health and balance of reward evaluated in the contractual process? 

Considerations

• Financial arrangements should be fair to both parties, consider risk, investment and expertise. Both parties should have a basic understanding of the cost factors that influence the process and understand that some profit must accrue to each if the relationship is to prosper.
• Concessionaires need to appreciate the basic mission of the fair.
• Transparency is an important element in producing understanding.

Formula(s)

• A formula based on outside gate per capita may be a useful management tool, but it is generally found objectionable because of the questionable accuracy of attendance calculations, plus the wide variance in grounds-wide pedestrian traffic.
• A percentage formula should be specific as to whether it is a guarantee plus percentage, guarantee against percentage or straight percentage.
• Menu and wholesale cost of products should be considered in setting a fixed or product-based graduated percentage schedule.
• Factors to be considered in establishing either a fixed or graduated percentage should be made clear, including the fair’s desire to hold public prices at a certain level, product type, quality and portion expectations, product-brand pricing, service charges to concessionaires, type of concession operation (e.g. labor intensive), pedestrian traffic, capital investment, fuel costs, etc.
• The particular operational expense categories included in or excluded from a percentage formula should be outlined, e.g. gate admissions, utilities and other chargeable costs.
• There is a wide variance of rates in the application of a footage or flat-rate system; which are typically considered to be arbitrary. Concessionaires typically convert these figures into a percentage of their operational expenses before deciding whether they will participate in an event.
• The same factors used to establish a percentage formula should be applied when establishing both footage and flat rate formulas.
• The method used to calculate a footage formula should be clearly defined; i.e. per square foot, per front foot, based on one long side or one long plus one short side, or whatever other approach is applied.
• A key question of concern is the rationale for charging off-midway concessions one rate and midway vendors another. This is answered in part by the fact that most carnival companies charge independent operators a certain amount of rent for the privilege of working on the midway over and above what the carnival pays the fair.
• Fairs should control the number, type and placement of food and straight-sales merchandise concessions on the carnival midway, just as they do elsewhere on the fairgrounds, apply the same standards of balance, product quality and aesthetics, and, under the best of arrangements, apply the same rental rates to both. Fairs should communicate with their carnival operator about these issues.

Deposits

• Deposits are necessary to guarantee the appearance and performance of a concessionaire. For many fairs deposits also secure cash flow.
• The timing and the amount of a deposit should consider the concessionaire’s circumstances and seasonal cash flow; additional consideration might be given to their longevity at the event.
• A deposit fee of 20 to 25 percent of base rent would seem reasonable. New concessionaires might be asked to pay more until they are established; however, this next generation of concession operators should not be discouraged by onerous deposits.
• Several deposit schedules might be considered: e.g. ten percent of the rent six months in advance with the balance on a credit card 30 days before the event; 25 percent six months in advance, the balance after the first weekend of the fair; 50 percent three months before the fair, the balance before setup; a discount for paying full rent six months before the event; or lower deposits based on years of service.
• Some fairs accept credit card deposits, but do not submit them for payment until the concessionaire arrives at the fair or, if non-refundable, cancels their participation.
• Other deposit options might include an escrow deposit, irrevocable letter of credit or a performance bond. These devices will guarantee appearance, but will not assist with fair cash flow protection.
• Timing is critical; the time value of money should be considered when deciding how far in advance of the fair deposits must be made.
• Early deposits should not incorporate utility or other fees.

Audits, Checks and Balances

• Some measure of auditing is justified to verify, track and control revenue, however, most auditing practices used in the industry impede the delivery of services and the flow of business while failing to provide accurate information. Better methods should be developed.
• Current methods used to audit concession operators are seen as a heavy-handed; they do not help to build trust. Moreover, no one seems able to establish a “fail-safe” audit system that is accurate, non-intrusive and not expensive or burdensome to the parties.
• Historical data can be a useful tool in the auditing process. A simple device that seems to work better than most other auditing schemes is that of tracking the history of gross revenue by concession or product type based on fair attendance, product price changes, weather and traffic flow near the concession site.
• Cash registers can have both a positive and a negative impact on sales and performance. They do provide good inventory control and a system of “checks & balances” on employees. At the same time, subject to the technology and operator’s capability, they can slow down business, may not provide accurate audit information and are not necessarily a fail-safe audit mechanism.
• The use of credit cards works well to foster impulse buying at concessions; however, there are overhead expenses and technology issues connected to the process which should be considered at reconcilement.

Reconcilement

• Any system of reconcilement that involves fair payouts to concessionaires should consider how the timeliness of such payouts bears on the concessionaire’s flow of cash and expenses.

VITAL ISSUE #3 – PROMOTION

Fundamental Questions: Can marketing and promotion campaigns be integrated? Are efforts to provide customer satisfaction coordinated? Do we share responsibility for creating value and a positive experience? 

Participation

• Fairs should create opportunities for concessionaires to participate in promotions.
• As a means of improving revenue per capita ratios, concessionaires might be asked to participate in promotional programs that seek to drive traffic and encourage longer stays and return visits by fair guests.
• Promotion program participation should be optional, but, given their upside potential, concessionaires should consider participating in coupon and discount programs if they are able. This becomes a collaborative effort to the benefit of both parties.
• Promotion results should be measurable and should be shared between the parties.

Advertising

• Most fairs have a thorough knowledge of their marketplace. A number of innovative techniques have been introduced by fairs that offer concessionaires the opportunity to participate and advertise; e.g. food guides and coupon books. These programs most often offer a better use of the concessionaire’s advertising dollars than do direct ad placement by the concessionaire.

Marketing

• Fairs and concessionaires should join forces to explore pricing and product strategies and make market-driven decisions on how to raise perceived value and find methods to increase attendance.
• Concessionaires need to be sensitive to local markets with respect to establishing reasonable pricing and value.
• Fairs and concessionaires should share ideas on how to get patrons through the gates, encourage them to stay longer and get them to return another day by ensuring that they have a positive experience and acquire a positive attitude about the event.
• A possible strategy to build and strengthen gate attendance might be to couple lower concession rent with a requirement that savings be passed along to customers.
• Fairs and concessionaires should share ideas on new markets and new consumer groups, and work to develop creative promotions focused on same.
• The various promotions that involve concessionaires should be listed and featured.
• Create the perception that the fair is an affordable experience by drawing comparisons to other events and activities; emphasizing the things that are “free” and the value offered by both the fair and its concessionaires.
• Fairs and concessionaires should share responsibility for building on the tradition that the venue is “family friendly.” Make sure fair guests walk away feeling happy about their time and money spent.

VITAL ISSUE #4 – SPONSORSHIP

Fundamental Questions: Sponsorships have become critically important. Do we seek to avoid sponsorship arrangements that limit creativity and good product management? Can sponsorships be structured so they strengthen, rather than weaken, parallel business relationships?

Marketplace Access

Sponsorships are sometimes used as a device to access commercial space for promotional purposes or retail sales. This may be acceptable if certain controls are applied to use of the space. Product duplication, geographic product placement, portion size of any samples and the number of sites requested should be considered. Furthermore, the fair’s general rules and procedures related to concession selection and placement should not be compromised in order to gain a sponsor, nor should healthy competition and good product balance be ignored.

Exclusivity

Sponsors often request and receive exclusive product rights in return for cash or other considerations. It is not unusual that such agreements lead to higher product costs for concessionaires and ultimately higher retail prices to the public. This phenomenon can prove counter-productive and, as such, its negative impacts on the parties should be considered during the negotiation process between fairs and sponsors.

·         As a part of the negotiation process, fairs and beverage sponsors should directly address the question of 20-ounce plastic bottles as a replacement for fountain service. At a minimum, concessionaires should be offered an option to handle 20-ounce bottles or fountain drinks.

·         Such negotiations should include consideration of environmental and exclusivity issues, how they will be viewed by the public and how they might affect the operating efficiency of a concessionaire.

National Pricing Relationships

·            Fair sponsorship agreements should not contradict or negate national pricing discounts offered to IAFE or NICA members.

VITAL ISSUE #5 – OPERATING ENVIRONMENT

Fundamental Questions: Firm control of the fair’s operating environment is the touch-stone of success for all participants. Is it possible that over-reaching rules and procedures sometime limit the effective conduct of business? Do some operators ignore good rules in order to gain advantage? How important is “booking balance?” How can the delivery of utilities, logistical support and physical accommodations impact success?

Product Balance

• Overbooking or the lack of variety that results from booking too many of the same products will damage the operating environment. Aim for a good variety of products; try to anticipate the changing tastes of the public.
• Avoid the “variety store” approach with cluttered menus offering a plethora of food, beverage and other items. A linkage between menu items is preferable and if an item is added, perhaps one should be subtracted from the menu.

Consortium Buying

• Creative methods of dealing with rising operational or fixed costs should be explored, including the establishment of buying groups.

Deliveries; Move In & Move Out

• Move in and move out procedures should be convenient and workable for both concessionaires and the fair.
• Specify a convenient location for each day’s delivery of merchandise. Designate a central and accessible location for suppliers and purveyors. Design a method for accessing and moving stock during operating hours.

Physical Accommodations

• Camping and motor home accommodations are necessary as they often represent home, office, bank and laundry all rolled into one. Sites should provide reasonable services and amenities such as electricity, water, sewer or sanitary dump station, showers, laundry and security.
• Fairs should consider that concessionaires need parking for and reasonable access to their supply/service vehicles.
• All users of fair facilities should demonstrate respect and care for the fair’s property, utilities and the personal property of one another.

Venue Access

• Fairs should consider that concessionaires need speedy gate access for regular employees, for emergency service personnel and to meet unanticipated merchandise and equipment maintenance requirements. Such access should be provided at an equitable price. Daily admission for local “spot help” is also needed.
• Concessionaires appreciate an I.D. badge that grants access. These badges also provide a measure of security to verify that individuals seeking entry have legitimate business on the fairgrounds.

Environment

• The fair’s recycling programs and procedures should be clearly set forth and made easy for concessionaires and the public.
• Water fountains at fairs have nearly disappeared, being replaced by bottled water. The proliferation of bottled beverages raises significant environmental and recycling issues; these need to be addressed.

Inspections

• Make it easy for concessionaires to prepare for and access the health and safety inspection processes. Storm and Homeland Security procedures must also be clearly communicated to concessionaires.

VITAL ISSUE #6 – CONTRACTS

Fundamental Questions: Are there legal implications or ownership rights contained in concession and commercial exhibit contracts? If so, do they extend to property rights? Are there fairness issues related to the transfer of operating licenses? Why are multi-year contracts favored by concessionaires and not by fairs? Where does liability begin and end in the relationship between fairs and concessionaires?

Terms and Performance

• The form used to define an agreement between a fair and a concession operator is immaterial. Whether it is a rental contract, lease or license – these and others formats each have merit if applied evenhandedly.
• Determinations regarding single versus multi-year contracts should not be rigid, but, rather, made on a flexible, case by case basis. A concessionaire’s investment in meeting the requirements of the contract should be taken into consideration.
• Rules and contract terms should be specific, clear and speak directly to the critical aspects of the relationship.
• Operating contracts or licenses should be product and service specific and they should be policed to avoid sale of unapproved merchandise.
• Rules should require insurance coverage for all vendors with adequate, but reasonable, limits of liability. Food safety coverage is an absolute in today’s health environment. User policies are typically available and facilitated by fairs.

Ownership Transfer

• Transparency is an important element in ownership transfers; if allowed, they should be open and above board, administered consistently and provide for continuity.
• Allowing for the transfer of concession ownership might best be considered a part of good business planning. Both fairs and concessionaires should examine the importance of quality and productivity, as well as how those conditions are impacted by an orderly transition of ownership.

Employment

• The recruitment, hiring and training practices of both parties should be examined for opportunities to cooperate.
• Fairs and concessionaires should access services and web sites that provide criminal background information, check sites that register sex offenders and hire accordingly.
• Labor shortages have become critical; the IAFE and NICA have been working to advance H2B immigration programs. A higher level of coordination with both fairs and concessionaires participating would serve to strengthen these efforts.

VITAL ISSUE # 7 – ETHICS

Fundamental Questions: Should we try to define ethical conduct? Do we recognize it when we see it? More to the point, do we recognize ethical abuse and act to disallow it? How do standards of conduct and good business standards relate to one another?

Conduct

• We must work to ensure ethical conduct on the part of all parties, extending respect and dignity as basic precepts of good business.
• A fair should provide its own staff and all concessionaires with a simple statement which explains that all dealings between the parties must be at arm’s length and above reproach.
• The IAFE and NICA have adopted “codes of conduct” to set forth their organizational expectations and provide guidance with respect to ethical conduct and maintaining arm’s length relationships.

Standards

• Proposal professionalism, quality of products and equipment, aesthetic appearance of the proposed concession, uniqueness of proposed products, product pricing, sales output capacity, level of product duplication on the fairgrounds, geographic product balance about the fairgrounds and even seniority in the application submission process are all important and need to be clearly prioritized by the fair based on its individual circumstances and local marketplace.
• Standard methods and procedures that are equitable and unbiased should be developed for performing concession selection evaluations.
• Objective criteria should be used to set clear quality parameters and spell out operational expectations for concessionaires.
• Problem operators should be given clear, specific notice of any problem with an equally clear deadline for correcting it.
  
  
  End of Best Practices.