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1976/01/1576-32 City Hall~ ~naheim; California - COUNCIL MINUTES - Janqary 15~ 19~,6~ l:3T0 P.M. The City Council of the City of Anaheim met in Adjourned Regular Session for the purpose of hearing proposals from five (5) selected firms for the Anaheim Stadium Food and Beverage Concession Contract. PRESENT: COUNCIL MEMBERS: Kaywood, Seymour, Pebley, Sneegas and Thom. ABSENT: COUNCIL MEMBERS: None PRESENT: ASSISTANT CITY MANAGER: William O. Talley ASSISTANT CITY ATTORNEY: William Hopkins DEPUTY CITY CLERK: Linda D. Roberts STADIUM CONVENTION CENTER-GOLF COURSE DIRECTOR: Tom Liegler Mayor Thom called the meeting to order at 1:45 P.M. and reviewed the schedule which would be adhered to for the Council session, specifi- cally that each firm would be allowed 30 minutes for their presentation, excluding any questions from the Council; Mr. Liegler would introduce each firm giving a brief overview of the company; that they would be called in alphabetical order. The list of judgmental criteria sug- gested for utilization in evaluating the firms was available for Council Members and other interested parties. !. ARASERVE: Recreation Division of ARA Services, headquartered in Philadelphia, Pennsylvania, represented by Mr. Joseph Scarmuzzi, President. A brief slideshow was presented highlighting the various types of accounts held by Araserve including in-flight food service, stadiums, convention centers and gourmet restaurants throughout the United States. They emphasized a diversified menu in their stadium operations and demonstrated the abilities of their facility design department to produce an appropriate atmosphere including redesign of the fast food concessions for more efficient service. California operations currently include food service at the ARCO Towers in Los Angeles. Executive offices are located in Westwood. If selected, they would provide a Regional General Manager with office at the Anaheim Stadium. Final decision on this Manager would be subject to approval by the Stadium Committee. He would be moved to the Anaheim area at the expense of Araserve. This Manager would have full-time supervision of 5 to 6 persons during the surmmer, which would be reduced to 2½ in the wintertime, relieving the City of additional payroll costs, by transferring these individuals to heavier winter operations in Los Angeles. Marketing proposals were summarized by a representative from the ARA Trans- portation Group, which operates Associated Charter Bus Company. This firm special- izes in tours, the convention market and school and industrial transportation. They would be able to provide special packages for these groups to Angels games and other events at the Stadium; permit greater accessibility to the Stadium through the use of the buses; and could also recommend the Anaheim Stadium to their many tour clients both in the United States and Mexico, Canada and Japan. Financial proposals from Araserve were as follows: Option 1 - profit and loss basis. Araserve would pay a percentage of gross sales after sales tax up to the first 2.6 million dollars as follows: 38.5% of gross on concession food and beverages; 38.5% on beer; 45% liquor at the Stadium; 20% novelties; 8% restaurant and club sales. Under this option no Stadium Club dues would come to Araserve, but would re- main with the Club. The above percentages would be increased as follows with gross sales reaching 2.8 and 3 million dollars. 2.8 Million 3 Million Food & Beverage concession 40.0% 41,5% Beer 40.0% 40,0% Liquor 46,5% 47.5% Novelties 21.5% 23.0% Restaurant & Club Sales 9,5% 11.0% In addition, Araserve will grant $100~000 for equipment and renovations at no cost to the City, This sum would be amort/zed by their firm over the five-year period. , 76-33 City .Ha.!l~ .Anaheim~ California - COUNCIL MINUTES - Januar~ 152 .1976, 1;30 P,M. Option 2 - management fee basis; Under this proposal there would be a 4% fee and 3% administrative cost. A $100,000 loan would be advanced the City for equipment and renovation, said notes to be non-interest bearing for the first year. Option 3 - limited fee/limited profit and loss basis: Araserve would re- ceive a 4% management fee and a 7% profit after the fee is deducted as an ex- pense. Under this option the $100,000 advance would be considered a loan on the same terms as above. Option 4 - combined fee and profit and loss basis: Essentially the same proposal as Option 1, the difference being that the Stadium Club would be operated on a 10% management fee basis. At the conclusion of this presentation Council Members questioned who deter- mines the selling price of various products at the Stadium and were informed by Araserve that in all cases Mr. Liegler and his Staff, together with the Angels representative, have the right to determine selling prices. With respect to the $100,000 to be advanced to the City under the various options, Mr. Scarmuzzi advised that this money is available for the City to use at their discretion, and could purchase equipment from outside sources, however they would recommend these funds for renovation be utilized through their facilities planning department. 2. CANTEEN CORPORATION: Headquarters in Chicago, Illinois, represented by Mr. Jim Dillon, Vice President. Canteen Corporation is a national multi-division company with operations in Europe and Japan, which has accounts in all facets of the food service industry. The firm was organized in 1929 and has been in the concessions business since ~964. Mr. Dillon stressed that the City has had a large firm working for them for the past 10 years and that they have enjoyed the relationship and would like to con- tinue it. Mr. Dillon pointed out that the City's past local manager for Canteen Corpor- ation at the Stadium, Mr. Ed Songrath, who was equipped with the ability to make decisions without recourse to top management would be promoted to area manager, and they have a young man experienced in stadium operations primed to take his place. In connection with marketing abilities, Mr. Dillon advised that Canteen Corporation is a wholly-owned subsidiary of Trans World Airlines. This places them in the position of being able to set up tours to the Stadium from airline tour groups, They could have this plan in effect this summer. The financial proposal from Canteen Corporation is as follows: (a) the management fee under which they would request 9% of profits after all costs, including the cost of amortization of investment on a straight-line basis; (b) a commission rate of 42% of net sales less amortization of investment on a straight-line basis, less losses should there be any on the Clubhouse operation; tobacco products would be exempt. Clubhouse sales would be covered by a commis, sion rate of 5%. The term would be five years with investment payable up to $200,000. The design concept of the facilities to be done by their facilities and design' group at their cost and to the satisfaction of all concerned within 15 days after award and following consultation with the City, Under the management fee arrangement they would supply an annual budget and business plan each November for the succeeding year, a monthly forecast for that month and renminder of the year on a cumulative basis, computer print outs for month just completed and year to date. These management reports will illustrate the Canteen Corporation's performance compared to prior year and should provide tight control of the business. The Canteen Corporation's books will be supplied to the City Auditor who has advised that he wishes to perform an audit of the years 1974 and 1975. However, Mr. Dillon remarked he had urged that they wait until completion of the contract period in April 1976 and then perform an audit to the close of contract. 76-34 City Hall~ Anaheim~ California - COUNCIL MINUTES - January 15, 1976, 1:30 P.M. Councilman Seymour offered Mr. Dillon an opportunity to comment on the Angels' lack of approval of their firm for the award of the succeeding contract, and Mr. Dillon remarked that he would prefer to discuss that matter with Mr. Red Patterson privately. Mr. Liegler clarified, in response to the statement in Canteen Corporation's letter, that their proposal is based on the guidelines received from the City, that all other firms received the same set of guidelines. Councilwoman Kaywood pointed out that there is a discrepancy in the figures quoted on the summary of financial proposals given the Council and the quotations given by Mr. Dillon at this meeting. Mr. Dillon advised that the latter is their firm bid, whereas the former figures were used only in discussion describing what would be reasonable for the City to expect in view of ttle fact that they now own the equipment. 3. INTERSTATE UNITED VOLUME SERVICES: Headquarters in Chicago, Illinois, represented by Mr. Vince Pantuso, Vice President. Mr. Pantuso, with the aid of a flip chart, described his firm's experience in the volume food industry, giving the names of several of their larger clients in- cluding Lion Country Safari, Los Angeles Convention Center and the Tower Restaurant in the Occidental Building. He advised that they have developed a customized plan for the Anaheim Stadium which includes graphic designs for renovation of the con- cession stands, clubhouse and restaurants by Ben Mayer. Cited in favor of their proposal is the fact that they have national buying power, but purchase locally so that 95% of their purchasing dollars would remain in Orange County; that their employees' salary range is better than average in the industry and they have one of the best employee benefit programs; that it is company policy, with the exception of the Food and Beverage General Manager, all employees would be recruited locally, any Canteen Corporation employees would be given a fair opportunity for employment and would be trained in their methods, so that the payroll, dollars would also remain in the community. The corporate structure down to the proposed local Anaheim staff was described. There are presently 3 candidates for Food and Beverage General Manager awaiting approval by the City if their firm is chosen. This local Manager would have complete operating authority with the exception of decisions on capital expenditures and changes in the contractual agreement. The food services system designed by Interstate United which allows them to serve twice as many people in a given period of time was described. They offer completely color-coordinated decor, equipment and costumes; a costume sample was displayed. Several marketing ideas were outlined including a box lunch program, package tours involving their other clients, the Los Angeles Convention Center and Lion Country Safari. It was stressed that they would be ready to open by April 1, 1976 if awarded the contract. Mr. Clark Aiken was introduced who would have charge of the Stadium Club operations. He briefed some of his ideas for service and menu in this operation as well as the promotion of same. They would propose both table service and a buffet menu. Further, they propose that a portion of the Club receipts be de- ducted for advertising and promotion of the Club facility. The financial proposal submitted by Interstate United was as follows: A term of 5 years~ they would provide $250,000 for improvements in the form of a no-interest loan payable from the receipts at a rate of $50,000 per year for 5 years. The management fee proposal is 3.5% of gross sales. From this management fee the General Manager's salary and fringe benefits, his incentive bonus and cost of all regional and corporate overhead costs would be allocated. They propose to share profits on the basis of 85% to the City, 15% to Interstate United. The term "profits" was defined as, all gross sales and gross receipts less all direct operating costs including payroll, fringe benefits, taxes including possessory interest tax if levied, licenses including alcoholic beverage license, insurance and supplies. From this,they recommend a deduction be taken to provide a $50,000 reserve for repair and maintenance of equipment; and the $50,000 annual payback on the $250,000 note. Mr. Pantuso advised that this proposal is valid if the award is for both con- cessions, Stadium and Stadium Club and is also valid if the award is for the Stadium concessions only. 76-35 City Hall~ Anaheim~ California - COUNCIL MINUTES - January 15, 1976, 1:30 P.M. At the conclusion of his presentation, in response to Councilman Seymour, Mr. Pantuso advised that the costs for renovation they feel necessary to increase efficiency at the concession stands would be taken out of the $250,000 investment. RECESS: By general consent the City Council recessed for 10 minutes. (3:15 P.M.) AFTER RECESS: Mayor Thom called the meeting to order, all Council Members being present. (3:25 P.M.) 4. SERVOMATION DUCHESS: Headquarters in San Diego, California, represented by Mr. Earl Rana, President. Servomation Duchess has many accounts in Southern California such as the San Diego Stadium and Sports Arena, the Forum in Inglewood, and is primarily based, and operates, on the west coast. Mr. Bob Kreilman, Operations Manager, exhibited graphic renderings of their ideas for a new approach to decoration and signing at the concession stands, bars and Stadium Club. Described were regrouping and redesign at the stands themselves for greater efficiency; a station arrangement whereby one attendant would see to it that all menu items are completely stocked at all times; use of temporarybeer stands and specialty popcorn stands; the uniform concept planned for vendors. Stressed were the company's capabilities in quality control, storage and ware- housing. Designs for the Club Restaurant were displayed which depicted a buffet island arrangement and increased use of booth seating The two financial proposals offered the City by Servomation Duchess were as follows: (1) a management fee proposal - with a 5% management fee and 3½% adminis- trative charge for general administrative expenses directly attributable to Stadium operations. To accomplish the improvements they feel necessary in order to create the new attitude and approach at the Stadium, they will provide a fund of $230,000, of which $115,000 would be a loan to the City of Anaheim at 1% per annum above the prime rate of interest repayable in a 5-year period. The other $115,000 would be an investment by Servomation Duchess in equipment and lease-hold improvements to be amortized by them over a 10-year period and will not be charged to the City of Anaheim but completely absorbed by Servomation Duchess. In the event this firm is not retained for the second 5-year period of the loan, the City of Anaheim would purchase, or cause to be purchased by their successor, the unamortized portion of the investment. (2) The alternate financial proposal is a profit sharing plan wherein the City would receive 81% of profits and Servomation Duchess retains 19%. Under this plan they will provide an operating fund of $250,000 of which $125,000 would be a loan to the City with interest at 1% per annum above the prime rate of interest, repayable over a 5-year period. The remaining $125,000 to be an investment by Servomation Duchess on the same basis as described above. With this plan all normal costs would be charged against the operation and in addition 3½% would be charged for general administrative expense. Mr. Earl Rana gave some background on the firm and their policy. He stressed that they believe success in the concession business is derived through a close personal relationship with their clients. He felt that his firm has a definite geographical advantage, being within 2½ hours driving time of Anaheim Stadium and has good knowledge of customer preference in this area as well as a heavy purchasing volume in Southern California which gives them good position in the field with purveyors. He described some marketing proposals which have proven successful at the San Diego Stadium which they would implement in Anaheim. He stressed the per- sonal relationship of their firm which extends to his personal reply to any letters received by the Ball Club or Stadium Management regarding concession service, and to his requirement, that the local manager become involved in the community. At the conclusion of the presentation, in response to Council questions, Mr. Rana advised that he estimates their per capita at San Diego Stadium. for ball games averages at $1.25 to $1.30. He further described that because of their heavy purchasing power in Southern California they are able to either transfer unused portions of stock to other locations or at times purchase on consignment. RECESS: At the request of Councilman Sneegas, by general consent, the City Council recessed for 10 minutes. (4:05 P.M.) AFTER RECESS: Mayor Thom called the meeting to order, all Council Members being present. (4:15 P.M.) 76-36 City Hall~ Anaheim~ California - COUNCIL MINUTES - January_.!5, 1976~ 1:30 P.M. 5. SZABO FOODS, INC: Headquarters in Lyons, Illinois, represented by Mr. Herbert Dates, President. Szabo Foods lists as clients, in addition to the Anaheim Convention Center, the Southern California Gas Company, Raytheon and Boeing Corporation. They currently do not serve a stadium account. Mr. Dates stated that they feel there is a tremendous advantage and effi- ciency of operation in having one firm provide the total food services for the City of Anaheim at both the Stadium and Convention Center; that they pledge to approach this job, if awarded them, with the same spirit and the same type of employee training as used at the Convention Center. He displayed renderings of some suggestions for redecoration of the lounge, Stadium Club and concession stands. Schematics were shown for traffic control to and from the stands which is, in their observation, one of the basic problems at the Stadium. As far as marketing is concerned, Mr. Dates felt that they would have a unique opportunity to promote the Angels to their guests at the Convention Center through novelty desserts, ticket giveaways, etc. In addition, consideration could be given to a package deal of golf at Anaheim Hills and dinner at the Stadium Club, with a ball game to follow. Mr. Dates advised that if given this contract they intend to install a small computer for both the Stadium and Convention Center operations. This would enable them to provide more accurate information and better controls. The financial proposal offered by Szabo Foods, Inc. was as follows: because they have been operating on a profit/incentive plan at the Convention Center for 9 years with a great degree of satisfaction, they propose a similar arrangement at the Stadium with administrative fee costs at 4% of sales on the first million dollars; 3.5% on the second million dollars; 3% on any sales in excess of two million dollars; that the City and Szabo split the profits, 90% to the City and 10% to Szabo. They are willing to make a capital investment as determined necessary when the plans are formalized. They are suggesting a 5-year plan. As an alternative plan, they offer a commission arrangement with rates as per schedule submitted. Although they do not recommend this alternative, they are willing to accept a contract on these terms as well. Mr. Joe Szabo, Chairman of the Board of Szabo Foods, Inc., addressed the Council and pledged that his firm, if awarded the contract, would provide the finest Stadium food and beverage operation in the Country. At the conclusion of the presentat~on, in response to Mr. Talley, Szabo Foods advised that they would not install a computer just for Convention Center operations, but once installed after receivJ~ng the Stadium contract, if they should not receive an extension on the Convention Center operations, they would retain it for the Stadium. It was also clarified that they would be willing to make a capital invest- ment as high as $250,000 if th~s is found necessary, and that this would be on a loan basis, repayable in five years at the prime rate plus ~%. At the conclusion of all presentations, Mayor Thom noted that Interstate United Volume Services, Inc. had taken an additional 5 minutes over their 30-minute presentation period, and therefore 5 additional minutes had been available to the 4th and 5th firms speaking. He offered the first 2 firms who made presentations, Araserve and Canteen Corporation, 5 additional minutes each. Mr. Scarmuzzi of Araserve and Mr. Ed Songrath of Canteen Corporation briefly summarized their firms' proposals. Once all Council questions were answered, Mayor Thom suggested that additional details pertaining to the financial proposals and what would be included in each management fee be resolved on a staff level, since Mr. Talley intends to perform an economic analysis of the proposals for Council to use in making their final decision. Mr. Red Patterson, representing the California Angels, introduced the subject of pricing of the concession items since this had not been heretofore discussed by any of the 5 firms. He stated that this is a very important consideration to the Angels inasmuch as they cannot keep the prices of tickets and other items down and have concession prices going up. 76-37 City Hall~ Anaheim~ California - COUNCIL MINUTES - January 15~ 1976~ 1:30 P.M. Mr. Liegler disclosed that prices are established once a year with the Concessionaire and the Ange~ representative and in any case the City will retain that right. Mayor Thom thanked all those present for their proposals. ADJOURNMENT: Councilman Pebley moved to adjourn. Councilman Seymour seconded the motion. MOTION CARRIED. Adjourned: 4:50 P.M. ALONA M. HOUGARD, CITY CLERK Deputy