A concession agreement is a kind of contract in which a company or business entity is allowed to conduct business. On a large scale, it may refer to the rights a government grants to a company, allowing it to do business within its territory. It could also refer to the arrangement which allows a business to conduct operations within a certain area, often exclusively.
This arrangement involves set provisions and conditions. In this situation, the business granted permission to operate is known as the concessionaire.
The concession agreement contains the terms agreed on by both the concessionaire and the authorizing entity. These may benefit the concessionaire, especially if the authority is enthusiastic about the partnership.
In such situations, incentives may be granted to the concessionaire. In the case of the government, for instance, tax breaks and other benefits can be given in order to encourage the concessionaire to continue doing business within the territory.
In regular business, on the other hand, the concessionaire may be given exclusive rights to operate within a certain area for a set period of time, but usually in exchange for a certain fee or percentage of profit.
Airports or large offices may find it useful to enter into deals with concessionaires, particularly cafe or restaurant operators. By doing so, they will no longer be burdened with handling operations for mean provisions.
In such situations, the company is usually not held liable for any untoward incidents that may occur as a result of transactions between employees or customers and the concessionaire. It is also free from the burden of including certain tasks which are unrelated to its primary business in its planning and operations.