REPORT TO STADIUM AUTHORITY BOARD
SUBJECT
Title
Action on Stadium Manager’s Request to Execute a Second Amendment to the Concessions Operating Agreement with Levy Premium Foodservice Limited Partnership
Report
BOARD PILLAR
Ensure Compliance with Measure J and Manage Levi’s Stadium
BACKGROUND
The Forty Niners Stadium Management Company (the “Stadium Manager”) and Levy Premium Foodservice Limited Partnership (the “Concessionaire”) entered into a Concessions Operating Agreement, dated February 20, 2018, as amended by a First Amendment dated June 1, 2021 (collectively the “Agreement”), under which the Stadium Manager granted the Concessionaire the right to provide certain food, beverage and catering services at Levi’s Stadium in Santa Clara, California (the “Stadium”).
The Agreement stipulates the Concessionaire shall provide all Food and Beverage Services in a professional, "First Class" manner. First Class means that Concessionaire's services shall be of the highest quality offered in NFL stadiums, commensurate with the current standards at three (3) top-quality NFL stadiums and in accordance with: 1) the terms of this Agreement; 2) all applicable legal requirements; 3) all reasonable standards established from time to time by the Manager relating to health, safety, quality, design, operating matters, and customer satisfaction (i.e. fans) and; 4) all rules and regulations imposed by the Stadium Manager relating to the use of the Stadium.
The Concessionaire is also required to provide sufficient inventory of Refreshments at the Stadium, and at each point-of-sale within the Stadium operated by Concessionaire, in order to fulfill Concessionaire's obligations to provide the Food and Beverage Services for the entirety of each Event at the Stadium. The Concessionaire acknowledges and agrees that Concessionaire shall maintain inventory (at all times, at each location selling such items) of the top five revenue generating items in each of the Food, Alcoholic Beverages, and Non-Alcoholic Beverages categories, as determined by the previous year's sales for similar event types or as selected by the Stadium Manager in its sole discretion.
The Agreement provides two types of calculations to determine Levy’s payments: one for NFL events, which is calculated based on the Forty Niners SC Stadium Company, LLC’s ("StadCo") Share of Net Receipts; and one for Stadium Authority’s Commissions for Non-NFL Events, which is calculated based on a percentage of the Gross Receipts. The Stadium Manager is requesting the Stadium Authority to amend the agreement to amend the definition of Net Receipts that will result in the shifting of more responsibility of the joint operational costs to StadCo. The new terms have no financial impact on the Stadium Authority and revenues that it receives, nor do the terms impact the Concessionaire’s operational standards.
DISCUSSION
The Stadium Manager is requesting the Stadium Authority to amend the agreement to change the split of the Joint Operating Costs in the “Net Receipts” definition in the Agreement from “Fifty-One Percent (51%) of Joint Operating Costs - a fixed rate - to a pro rata share of Joint Operating Costs - a variable rate - using the percent of Gross Receipts from NFL Events over the total Gross Receipts from both Stadium Authority Events and NFL Events for such Fiscal Year. The pro rata share of Joint Operating Costs shall be 70% for NFL Events, and 30% for Stadium Authority Events for the fiscal year ending March 31, 2024. For all other years, the pro rata share of Joint Operating Costs shall be estimated at the start of each Fiscal Year at 70% for NFL Events, and 30% for Authority Events, and then settled not later than the thirtieth (30th) day after the end of the Fiscal Year. Such modifications shall apply only to the Fiscal Year ending March 31, 2024, and subsequent Fiscal Years.
Below are the Net Receipts and Joint Operating Costs definitions in the Agreement:
Net Receipts: Refer to the total amount of Gross Receipts from NFL Events less StadCo Operating Costs, fifty-one percent (51%) of the Joint Operating Costs, the Annual Preference Payment, the Renewal and Replacement Amount for Gross Receipts from NFL Events, the Annual Management Fee, the Concessionaire Preference Payment, and the Investment Use Fee.
Joint Operating Costs: Refer to, collectively, Concessionaire's (i) non-attributable costs incurred in connection with Concessionaire's operation of the Food and Beverage Services at the Stadium and the Outside Areas in accordance with the terms of this Agreement, including, but not limited to, cost of office supplies, postage, computer software, network connections, information systems infrastructure, telephone service, accounting and reporting, mutually agreed upon background checks of employees and vendors, payroll costs, including reasonable fringe benefits, employee benefits, and training costs; (ii) costs incurred for pest control, trash removal, janitorial service, cleaning expenses, including, but not limited to, the cost of supplies that cannot be attributed to Stadium Authority Events or NFL Events; (iii) cost of Utility Services; (iv) the cost of uniforms if provided by Concessionaire; (v) cost of governmental charges, such as the cost of obtaining and maintaining all necessary or required licenses or permits; (vi) cost of Smallwares and Customer Surveys; (vii) items specifically identified elsewhere in this Agreement as a Joint Operating Cost; and (viii) any other costs actually and reasonably incurred by Concessionaire in connection with the Food and Beverage Services not directly attributable to a Stadium Authority Event or NFL Events, all as replied by Concessionaire to Manager on a monthly basis in substantially the form attached hereto as Exhibit B (as the same may be modified from time to time by mutual agreement).
Staff Analysis: The amendment offers terms that modify how the Net Receipts are calculated, which will result in a shift of more costs to StadCo’s side of the ledger. The Stadium Authority’s payment is based on a percentage of the Gross Receipts, therefore this amendment does not have any financial impact on the Stadium Authority revenues received under this agreement. The result is that StadCo pays a larger portion of the Joint Operating Costs and the Concessionaire pays a smaller portion.
For the reasons outlined above, staff recommends Board approval of the Stadium Manager’s request to execute the Second Amendment to the Concessions Operating Agreement with Levy.
ENVIRONMENTAL REVIEW
The actions being considered do not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(a) as it has no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment or pursuant to CEQA Guidelines section 15378(b)(4) in that it is a fiscal activity that does not involve any commitment to any specific project which may result in a potential significant impact on the environment.
FISCAL IMPACT
There are no direct financial impacts to the Stadium Authority. However, this agreement continues to be of interest to the Stadium Authority as the quality of Levy’ concessions services and their capital investments are important to Levi’s Stadium’s operations and standard of care.
COORDINATION
This report has been coordinated with the Stadium Authority Counsel and Treasurer’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov.
RECOMMENDATION
Recommendation:
Approve the Stadium Manager’s request to execute a Second Amendment to the Concessions Operating Agreement with Levy Premium Foodservice Limited Partnership on the terms presented.
Staff
Reviewed by: Chuck Baker, Assistant Executive Director
Approved by: Jovan D. Grogan, Executive Director
ATTACHMENTS
1. Original Concessions Operating Agreement with Levy
2. First Amendment to the Concessions Operating Agreement with Levy
3. Proposed Second Amendment to the Concessions Operating Agreement with Levy