Perry’s stands alone along beach
OCEAN FRONT WALK — Call it karma, a lack of confidence or simply the harsh realities of running a seasonal business. Any one of them could have played a role in Perry’s Beach Café being the only company to compete for, and win, a beach concessions contract with City Hall.
Demands made by city staff for upgrades to the four existing concession stands along the boardwalk were said to be too costly for many small businesses, forcing them to drop out of the running, while others may have been intimidated by Perry’s — a local staple for the past 28 years. While upgrades will be made by Perry’s to the tune of $325,000, City Hall will most likely receive less money in rent because of the lack of competitive bids. While the potential loss of revenue is unknown, in years when sales are slow, the deal with Perry’s could result in a loss of $100,000.
“The way this contract was set up, (city staff) really shot themselves in the foot,” said Richard Chacker, owner of Perry’s, which serves ice cream, pizza, salads and other food while renting out bikes, boogies boards and roller skates. “(City staff) made their demands and tried to nickel and dime us so much that they drove everyone else away.
“I think this is the city’s karma coming back to get them.”
City Hall was hoping a little competition for Perry’s could secure more revenue for the Beach Fund, as well as increased investment in facilities and rental equipment. City Hall was willing to lower the rent it charges for use of the concession stands and offer an additional location to entice more bids.
Letters were sent by city staff to 270 potential candidates informing them of contract, and notices were published in local newspapers and on the city’s Web site. While 19 companies responded, only Perry’s submitted a bid.
The potential loss in revenue has a lot to do with the rent level decrease enacted by City Hall as an incentive for upgrades to facilities. However, the lack of competition was also a factor. Since Perry’s was the lone company to bid, it was able to negotiate the lowest rent possible.
The previous contract with Perry’s required a minimum annual fixed rent of $200,000, or 20 percent of gross sales, whichever was greater. Under the current contract, Perry’s would have to pay an annual fixed rent of $100,000, or 15 percent of gross sales, just 1 percent higher than the minimum rent required by City Hall.
Elaine Polacheck, director of open space management, who has been working with Perry’s on finalizing the contract, said the absence of other bids may have an effect on the amount of revenue City Hall will receive under the contract, however, city officials knew revenue could decrease as a result of lowering the rent. Polacheck said encouraging investment to provide better service to customers is the ultimate goal.
Many factors could have contributed to other companies pulling out of the process, Polacheck said.
“Perhaps businesses did not want to engage in two different kinds of operations, (rentals and food service), or some may have felt the incumbent (Perry’s) had a leg up in having done this for such a long time,” Polacheck said. “Larger companies may not have been interested and smaller companies maybe thought the undertaking was too expensive.”
While competition is always preferred, Polacheck and members of the City Council said they are not disappointed with how the process turned out, considering Perry’s is a great candidate for the job and has been a long-time partner with City Hall.
“They provide a very pleasant beach experience,” Polacheck said of Perry’s.
“They’ve worked hard over the years to improve their menu to include a lot of healthy alternatives to choose from. They’ve made upgrades and investments in the business which we have given them credit for. I think they’ve really shown, over the years, that they can provide excellent service.”
Of the $325,000 in upgrades required under the five-year-operating agreement, Perry’s has invested roughly $141,000, Polacheck said, and will receive credit for that expense.
Requiring a major investment like that upfront, with no guarantee of having the contract extended beyond five years, made many businesses drop out of the running, said Chacker, who also found the application process to be “onerous and pedantic,” which also made businesses not want to deal with City Hall.
“I spoke with a bunch of people … who were potentially going to bid against me and they said they weren’t going to risk it because of the crazy demands made by the city,” Chacker said. “Many said they couldn’t afford the upgrades for a seasonal operation that carries a massive risk.”
Chacker said he had a leg up on the competition because he had already made several of the upgrades required under the contract. However, he feels he should not be forced to pay for the entire amount because that figure was based upon a new business opening up shop, not an existing one that has equipment already in place.
Chacker also said, since he does not own the concession stands, City Hall should help with the upkeep and compliance with the Americans with Disabilities Act.
There was some concern early on in the bidding process that city staff had designed the contract in such a way that it forced many smaller companies to not even consider applying.
Councilman Herb Katz questioned city staff’s methods, questioning whether or not City Hall was paying attention to small businesses.
In an interview last week, Katz said he was pleased Perry’s received the contract because employees there know their customers and the boardwalk the best.
Katz still has some concerns about there being only one company to bid for the contract, as well as the length of time it took for the contract to come before the Council.
A request for bids was submitted in September 2005, according to a city staff report.
“The request for proposals was very demanding on the concessionaire,” Katz said. “Staff wanted a lot of money to be invested, which is important. But in my opinion, it wasn’t totally feasible for many small businesses.”
Polacheck said the bidding process was “very transparent,” and that staff was very clear as to what investments would have to be made and what incentives would be offered to make that feasible.
“We tried to include enough to make this deal more attractive,” Polacheck said.
“I don’t feel it was onerous at all … The city has a responsibility to make sure we understand who is bidding and what their financial capabilities are to make sure we provide the best possible experience to beach visitors. There were a lot of requirements under the (request for bids), but that’s standard.”
While Chacker may have found this round of contract negotiations to be frustrating and cumbersome, he said he does notice a change at City Hall when it comes to city staff interacting with local businesses. He said much of that has to do with new City Manager Lamont Ewell, who Chacker believes has come to Santa Monica to take an objective look at operations and make changes he feels are necessary to bring about a better relationship with city staff and the business community.
“I give Lamont all the credit in the world for this deal coming together,” Chacker said. “He’s not a part of the good old boys club, and to the Council’s credit, they brought in an outsider to shake up the cage, and I think he will do just that. We’re looking for a more friendly collaborative effort.”
Despite the complaints, Chacker said he is pleased with the new contract. Without it, Chacker said his company may have folded, for Santa Monica represents a large chunk of Perry’s business.
“Losing this would have been absolutely devastating,” Chacker said. “Imagine going to work tomorrow and your boss tells you you’re fired. Now imagine you have three kids and 50 employees who rely on your business to feed their families.”
Originally published in the Santa Monica Daily Press print edition on June 26, 2006. Read the original PDF.