Hacking Small Business Expansion
- by Alan Gluck
So, you’re an entrepreneur. You have a great idea for a restaurant, a bookstore or a technology store. Maybe you’ve had retail success on Main Street, perhaps at a local mall. Now you are wondering: Where’s the best location for your next expansion?
How about your nearby airport? Airports attract a lot of people who often have a lot of time on their hands and also who have high levels of disposable income.
So you call your local airport, and that’s where things come to a screeching halt. You can’t lease space in an airport like you do in the regional mall. What’s the deal?
You have just run into one of the major issues that creates barriers to entry for small business owners looking to get into U.S. airports. With a few exceptions, airports are not run like businesses. U.S. airports are managed by governmental or quasi-governmental agencies and are generally compelled to acquire food service and retail tenants in the same manner in which they procure office supplies and consultant services. That means most airports are required to conduct competitive solicitations for every single concession space.
The reasons behind this may have merit. A competitive solicitation should prevent concessions from turning into patronage mills by the governmental agency which controls the airport. In practice, however, there are a number of things broken within this system:
• The cost, time and abilities required of a small business to respond to a competitive solicitation may create a significant barrier to entry.
• Airports often lack sufficient staff to effectively manage dozens of individual contracts, so concession opportunities are often packaged together in groups too large for an individual operator to effectively manage.
• Patronage endures, as firms with political ties or firms that make significant donations are awarded concession contracts. At many airports, lobbyists with little or no knowledge of airport concessions, but with great political contacts, sway decisions away from what might be best for the airport, for small businesses and for consumers.
• Airports often favor incumbents due to existing relationships and/or the difficulty in managing a changeover.
All is not lost, however. There are still ways for you to get your business into airports.
First, as a small-business person, if you want to pursue opportunities in locations such as San Francisco; Seattle; or Portland, Oregon, for example, you may be in luck. SFO, SEA and PDX have outstanding concession programs that encourage local participation. There are many food service and retail locations at each of these airports that are run by the actual brand owner. These airports also have sufficient professional staff to assist small businesses in adjusting to airport life. Other airports, such as Denver and Phoenix, are making great strides to reach out to small businesses.
The second option would be to pursue opportunities at airports that have contracts with developers, which are private firms acting in a manner similar to a retail mall manager. Generally, developers are not required to do competitive solicitations for available space. They have the opportunity, if they so choose, to bring a variety of operators into the airport with a minimum of bureaucratic interference. Airport developers also have a staff of experienced retail managers to support operators.
The third option applies to most U.S. airports, which create large packages of shop locations, targeting a few experienced concession operators. The only way for a small entrepreneur to get into an airport of this sort is to make an arrangement with the large operator. If your business is well known, the large operator may license your brand. You get a license fee, but you also lose control of your business to some extent. The product and staff may not be of the same quality as those in your street locations, and they may not have the same training and dedication to the brand. Alternately, you may also attempt to sublease space from a large operator.
Some airports will do separate solicitations for packages of one or two locations, but there are a great many challenges to writing a successful response to such a competitive solicitation. There are consultants who specialize in assisting small businesses to write successful proposals, but they often are not cheap to retain and, as in any competitive situation, success in winning a competitive solicitation is not guaranteed.
If you’re an entrepreneur, getting into the airport business is a challenge. Sometimes even the best idea and significant persistence will not get you through the wall that separates entrepreneurs from opportunity. But it’s worth trying. Airports can offer great opportunities for revenue development and help with expanding the visibility of your brand, which can contribute to expansion and future success—and the need to look for the next location for your business expansion.