Etai’s Café Concessions Contract

A customer pays at the Etai's café checkout

Objective

To evaluate whether Denver International Airport’s Concessions Division provides adequate oversight of the Etai’s Café concessions contract, including whether the café is accurately reporting all revenue earned and paying the appropriate rent it owes the city based on its sales.

Background

The airport’s Concessions Division is responsible for choosing and overseeing 170 airport concessionaires. One of those vendors is Etai’s Café — which is owned by Mission Yogurt Inc. and has leased space at the airport since 2012. It sells food and drink items.

The airport’s contract requires Etai’s Café to pay rent based on two factors: a “minimum annual guaranteed amount” plus a percentage fee based on sales volume. The café submits financial statements to the airport on a monthly and annual basis to report sales and determine the amount of rent it owes.

Why this matters

Although the airport operates like a business, it is owned by the city and therefore has a duty to be a prudent steward of public dollars. If the airport fails to ensure contract oversight and do its own due diligence to verify concessionaires’ self-reported revenue, it does not hold vendors accountable to their contract terms and risks the city losing out on money it is owed.

Finding

Finding - Denver International Airport’s Limited Oversight Prevents It from Knowing whether Etai’s Café’s Self-Reported Revenue Is Accurate
 

The airport lacks sufficient contract-monitoring procedures for its concessions program and instead relies on Etai’s Café to self-report its revenue. Because of this, the airport cannot know whether the sales revenue the café reports — and the resulting rent amount the café owes — is accurate. We could not independently verify the sales Etai’s reported to the airport.

Recommendations

1.1 Enforce Proper Submission of Monthly and Annual Revenue Reports – Denver International Airport’s Concessions Division should review the revenue submissions from Etai’s Café to ensure the reports clearly detail all deductions subtracted from gross revenue for the period, as required by the contract terms.

Agency Response: Agree, Implementation Date – March 1, 2023

 

1.2 Implement a Universal or Shadow Point-of Sale System – Denver International Airport’s Concessions Division should conduct a cost-benefit analysis to determine whether using either a universal or shadow point-of-sale system to enhance its oversight and ongoing monitoring of concessionaires’ revenues is feasible. Such a system should allow the airport to have real-time access to vendors’ sales data and to conduct internal audits.

Agency Response: Agree, Implementation Date – Jan. 31, 2023

 

1.3 Determine an Accurate Utility Fee – Denver International Airport’s Concessions Division should determine an accurate formula to calculate utilities for Etai’s Café and adjust billing as necessary.

Agency Response: Agree, Implementation Date – Feb. 1, 2023

 

1.4 Requires a Certified Public Accountant to Certify Annual Statements – Denver International Airport’s Concessions Division should consider reinstating contract requirements to have certified public accountants prepare and certify concessionaires’ annual statements, which would provide the airport with better assurance that vendors’ submitted statements are accurate. This requirement should either apply to all airport concessionaires or be based on revenue thresholds or other factors as determined by concessions management.

Agency Response: Disagree

 

1.5 Develop Criteria for Allowable Discounts – Denver International Airport’s Concessions Division should develop criteria for what are allowable discounts and include this in concessions contracts and its Concessions Handbook. While the airport could allow concessionaires to give any amount of discount, the airport should make clear that vendors can deduct from their revenue and rent paid to the city only an amount up to the allowable limit.

Agency Response: Agree, Implementation Date – Nov. 1, 2022

 

1.6 Conduct Regular Audits to Monitor Revenue – Denver International Airport’s Concessions Division should work with the airport’s Internal Audit Division to develop a risk assessment and determine steps to regularly monitor concessionaires’ revenues. The two divisions should partner to create a plan to conduct regular audits of vendors’ self-reported revenues.

Agency Response: Agree, Implementation Date – Jan. 31, 2023

 

1.7 Ensure Etai’s Café Pays on Time – Denver International Airport’s Concessions Division should work with the airport’s Finance Division to ensure Etai’s Café’s monthly payments are paid according to the due dates in the contract.

Agency Response: Agree, Implementation Date – Oct. 1, 2022

 

1.8 Review Etai’s Contract – Denver International Airport’s Concessions Division should work with the airport’s contracts director to review the contract for Etai’s Café and assess opportunities for competitive bidding or negotiating a new contract, in accordance with Executive Order No. 8, before the contract extension expires on Sept. 1, 2024.

Agency Response: Agree, Implementation Date – Oct. 24, 2022 

Auditor's Letter

November 17, 2022

We audited Denver International Airport’s oversight of its concessions contract for Etai’s Café to assess whether the café is accurately reporting all revenue earned and paying the appropriate rent it owes the city based on its sales. I now present the results of this audit.

Consistent with our broader audit of airport concessions management earlier this year, this audit found the airport’s Concessions Division is not adequately overseeing how it monitors concessions contracts. In this case, the airport cannot be assured Etai’s Café’s self-reported revenue is accurate. It does not do its own due diligence to hold the café accountable and ensure the vendor complies with its contract terms. Meanwhile, the airport has also allowed the Etai’s Café contract to remain in place for 10 years without reevaluating the terms.

By implementing recommendations for stronger contract monitoring, the airport will be better able to ensure the revenue Etai’s Café reports is reliable, accurate, reported in a timely manner, and calculated in compliance with its contract. In addition, reevaluating the contract before its extension expires in 2024 will allow the airport to uphold the purpose and spirit of the city’s competitive selection requirements.

This performance audit is authorized pursuant to the City and County of Denver Charter, Article V, Part 2, Section 1, “General Powers and Duties of Auditor.” We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

We appreciate the leaders and team members at Denver International Airport who shared their time and knowledge with us during the audit. Please contact me at 720-913-5000 with any questions.

Denver Auditor's Office

Auditor's Signature
Timothy O'Brien, CPA
Denver Auditor


Tim_mug.png

AUDITOR TIMOTHY O'BRIEN, CPA
Denver Auditor



Denver Auditor´s Office

201 W. Colfax Ave. #705 Denver, CO 80202
Emailauditor@denvergov.org
Call: 720-913-5000
Follow us on Facebook     Connect with us on Twitter
Read our social media policy

Auditor´s Office Logos for Footer