Attachment A_Business Description.pdf

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ATTACHMENT A

BUSINESS DESCRIPTION

1. BACKGROUND

The Frenchglen Hotel and Drovers Inn is located in Harney County in Eastern Oregon, Harney County is well known for “The 7 Wonders of Harney County, Oregon” which includes the following natural areas:

The Steens Mountains, The Alvord Desert, Malheur Wildlife Refuge, Malheur National Forest, Hot Springs at Crystal Crane Hot Springs, Alvord Hot Springs, and Mickey Hot Springs, Diamond Craters “The Geologic Gem of Oregon”, and Star Gazing events.

The Frenchglen Hotel is listed on the National Register of Historic Places and is owned by Agency but operated under concession contract.

In December 2022, Agency purchased the adjacent four acres which includes a private residence and detached garage for concessionaire’s residential use, as well as a separate building having been operated under the name Drover’s Inn, and containing four rental units, each with queen beds and private ¾ baths. These buildings are modern, having been constructed in 2001. The residence and Drover’s Inn border the Frenchglen Hotel, and have been occupied/managed as a seamless companion business by the retiring concessionaire.

The Business Opportunity includes the concessionaire residence w/garage, Frenchglen Hotel and Drover’s Inn as a single operation within the Concession area. It is the intention of the Agency that the new concession stay in the concessionaire residence. However, Agency may waive that requirement if new concession resides within a 15-mile radius of Frenchglen Oregon.

2. LOCATION

The Frenchglen Hotel, located 60 miles south of Burns, Oregon is a historic hotel situated on a 2.36-acre lot within the small town of Frenchglen, Oregon. The Frenchglen Hotel is open from March 15 through October 31. The Hotel has eight rentable rooms and a commercial kitchen with family style indoor seating for up to 24 persons.

The concession residence, garage, and Drover’s Inn are on 4 acres, adjacent to the Hotel, and accessible via Artisima Road. The residence has three bedrooms, and 1.5 bathrooms. Drover’s Inn has four short-term rental rooms, each with three-quarter bathroom.

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Exhibit 1- Frenchglen Hotel State Heritage Site

Source: Google Maps

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Source: OPRD

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3. OREGON TOURISM

In 2021, the Oregon travel economy recovered much of what was lost in 2020. Strong demand for overnight accommodations and increased commodity prices led to large gains in visitor spending. Oregon is split into 7 Tourism Regions and the Frenchglen Hotel State Park is located in the Eastern Tourism Region.

Based on the U.S. Travel estimated impacts, Oregon is faring better than the U.S. recovering to 85% of 2019 travel spend compared to 78% for the U.S. (U.S. Travel). Oregon continues to outpace the U.S. in visitation and spending for both international and overseas travel. All in all, tourism spending in Oregon saw its ninth consecutive year of strong growth.

Exhibit 2- Oregon Tourism Data

Source: Oregon Tourism Commission, 2019-2021 Strategic Plan

Exhibit 3- 2021 Share of Overnight Visitor Spending- Eastern Oregon Region

Source: The Economic Impact of Travel in Oregon/2021p/Prepared by Dean Runyan Associates

4. FRENCHGLEN HOTEL STATE PARK

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4.1. Frenchglen Hotel State Park Inventory

A wide array of recreational activities are available to visitors to the Frenchglen Hotel State Heritage Site. The following exhibit outlines the primary recreational services within Harney County and their season of availability.

Exhibit 4- The Frenchglen Hotel State Heritage Site Recreational Inventory

Inventory Quantity Season Frenchglen Hotel Day Use Area Hotel Parking 20 aggregate spaces March to October Hotel Restaurant Seats up to 24 persons March to October

Overnight Accommodations Frenchglen Hotel Drover’s Inn

12 rentable rooms March to October

Harney County Events Harney County Migratory Bird Festival Annual April event Skull Gravel Grinder 120-60-30 in Burns Annual 3rd weekend of June Obsidian Days in Hines Annual June event Steens Rim Run in Frenchglen Annual August event Frenchglen Jamboree in Frenchglen Annual August event

Source: OPRD

4.2. Frenchglen Hotel Occupancy

As seen in the exhibit below, visitation at the Frenchglen Hotel State Heritage Site is highly seasonal, with high overnight stays occurring in the months of May, June, and September.

Exhibit 5- The Frenchglen Hotel Monthly Occupancy

5. THE FRENCHGLEN HOTEL STATE HERITAGE SITE PROFILE

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

March April May June July August September October

2022 Frenchglen Hotel Occupancy

Rooms Rented % Occupancy

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5.1. Current Contractor Facilities and Services

The current and retiring Contractor for The Frenchglen Hotel is J.M. Ross Enterprises.

During the term of the Contract, the Contractor purchased and built the Drovers Inn plus a residence. In November 2022, Agency purchased the Drover’s Inn and residence from J.M.

Ross Enterprises. The new Concession contract will have both the Frenchglen Hotel & Restaurant and Drover’s Inn for room accommodations plus an additional home for the Contractor’s residential use.

Exhibit 6- Scope of Facilities and Required Services

Facility Capacity Service Season Hotel and

Restaurant (Building)

2,849 Sq. Ft.

Food & Beverage for Breakfast, Lunch and Dinner, Hotel- 8 rooms 3 1/2 baths

March 15 to October 31

Drover’s Inn (Building)

1,378 Sq. Ft.

Inn- 4 first floor rooms;

each room has ¾ bath

March 15 to October 31

Contractor’s Residence (Building)

1,722 Sq. Ft.

3 bedrooms, 1 bath, 1 half bath

Maintenance Ongoing

Garage 784 Sq. Ft.

2 car garage Laundry area for Drover’s Inn

Ongoing

Land 6.27 acres total (3 lots)

Grounds Maintenance Ongoing

Frenchglen Hotel

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DROVER’S INN

5.2. Site Utilities

Utilities are provided by several sources at the Frenchglen Hotel State Heritage Site.

OPRD Responsibility: OPRD will provide the following utilities at no cost:

• Well water, monthly well water testing and Sewer.

Proposer Responsibility: Proposer shall provide the following utilities:

• Refuse Hauling: Frenchglen Disposal Site is approximately 3 miles from Site.

• Electricity: Harney Electric Coop

• Propane: Ed Staub & Sons

• Phone: Century Link

• Wifi: MiWave

5.3. Operating Costs:

The following exhibit provides average costs of utility service charges:

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Exhibit 7- The Frenchglen Resort and Drover’s Inn Utility Costs

Services Average Costs

Refuse Hauling $ 250 annually

Electricity $6,500 annually

Propane $1,500 annually

Phone $ 2,500 annually

5.4. Historical Revenue

The following exhibit provides historical revenue for the Frenchglen Hotel and Drover’s Inn.

Exhibit 8- The Frenchglen Resort and Drover’s Inn 2018 through 2022

Frenchglen Hotel Drover’s Inn 2018 $297,289 $119,056 2019 $294,282 $123,200 2020 $ 16,304 $108,795 2021 $200,249 $137,799 2022 $ 277,841 $140,929

Source: OPRD and J.M. Ross Enterprises

6. COMPETITIVE MARKET

The Frenchglen Hotel and Drover’s Inn competes in varying degrees with entities in the direct market and those that are considered alternative destinations. These include other companies offering services in and around Frenchglen, other accommodations located in Harney County, Oregon.

Lodging and Location Service Season Steens Mountain Wilderness Resort in Frenchglen, OR

9 rentable units, 38 RV hookups, and 14 tent sites.

Contact Resort

Best Western Rory & Ryan Inn in Hines, OR

Multiple rentable suites and rooms.

All Seasons

Hotel Diamond in Diamond, OR 9 rentable rooms total, one bunkhouse and one house.

Contact Hotel

Cowboy Cabin in Diamond, OR

1 bedroom with porch Contact airbnb.com

The Fields Station in Fields, OR Rooms, RV parking, house and old hotel.

Contact Station

The following exhibit provides a map of the competitive set and comparative listing for similar hotel accommodations.

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Exhibit 9- Competitive Set Map, Local and Regional Market

Source: Google

7. STATE AND LOCAL FACTORS IMPACTING OPERATING COSTS

7.1. Oregon Minimum Wage

In 2016, Oregon passed a law phasing in minimum wage increases through 2022. Harney County is considered a Non-Urban county and within this category, the minimum wage will

SP- Attachment A-Frenchglen Hotel State Heritage Site Page 11 of 17 is currently $12.50. After July 1, 2023, the non-urban wage will be $1.00 less than that of the Standard minimum wage. The Standard minimum wage will be increasing annually after 2023 at the Consumer Price Index rate (“CPI”).

7.2. Oregon Corporate Activity Tax

An Oregon Corporate Activity Tax (CAT) was imposed in 2020. The CAT is not a transactional tax, such as a retail sales tax, which can be passed on to the consumer, nor it is recognized as an income tax. Oregon’s CAT is measured on a business’s commercial activity, specifically, the total amount a business realizes from transactions and activity in Oregon. Certain items are excluded from the definition of commercial activity and, therefore, will not be subject to the CAT. In addition, Oregon’s CAT allows a 35% subtraction for certain business expenses.

The CAT is applied to Oregon taxable commercial activity in excess of $1 million. The tax is computed as $250 plus 0.57 percent of Oregon commercial activity of more than $1 million.

Only taxpayers with more than $1 million of taxable Oregon commercial activity will have a payment obligation. For more information on this tax, interested proposers should contact the Oregon Department of Revenue.

7.3. Harney County Real and Personal Property Tax

Harney County levies real property taxes on the concession operation at the Frenchglen Hotel State Park. The subject property lies in valuation District 16. Harney County property taxes are based real market value of the 3 properties. According to Harney County, taxes will increase by 3% in 2023.

Exhibit 10- Summary of Tax Accounts

Drover’s Inn and Residence:

Storage (previous hen house):

Frenchglen Hotel:

Source: Harney County Tax & Assessment Department

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8. FUTURE CONCESSION OPPORTUNITY

The following are the Required (must provide) and Authorized (may provide) visitor services identified for this opportunity.

Exhibit 11- Future Required Services

Location Type of Required Service Season Hotel Operations

Frenchglen Hotel Hotel Overnight Accommodations Food and Beverage Services

March 15 to October 31

Drover’s Inn Hotel Overnight Accommodations March 15 to October 31

Exhibit 12- Future Authorized Services

Location Type of Authorized Service Season Retail

Frenchglen Hotel Liquor Sales March 15 to October 31 Frenchglen Hotel Gift Merchandise Sales March 15 to October 31

Other Services

Any Areas Additional services that support and are in line Agency’s mission may be proposed for example a shuttle service to trailheads, or other points of interest.

To be proposed

9. AGENCY INVESTMENTS

All Real Property and improvements at Frenchglen Hotel State Heritage Site Park is owned by Agency. Components of the Personal Property within the operation are also owned by Agency. Business Opportunity Exhibits 1 and 2 identifies the Agency Personal Property and Real Property available for use under the contract and lease.

Agency will invest in the following item under the timeline outlined below. Details of the timing are considered a best-case estimate and should be used for developing proposals. The timing of the flooring replacement will provide an opportunity for input from the Contractor.

Agency will work to ensure that Real Property and Personal Property investments are installed during off season periods.

Exhibit 13- State Real Property and Personal Property Investments and Timing

Location Investment Real/Personal Property

Timing

Drover’s Inn Replace carpet or install engineered flooring with throw rugs.

Real Property May 2023

10. CONTRACTOR INVESTMENT

The prior section identifies additional Real Property and Personal Property that will be provided by Agency. All other Real Property and Personal Property investments that are needed to fulfill the Required Services under the contract are the responsibility of the selected Contractor.

10.1. Real Property

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Agency requests investment in Personal Property as part of the Required Services. If a Proposer also intends to provide Authorized Services that involve additional Real Property Improvements, this should be stated in the proposal along with estimates of investments and timing. All Real Property Improvement investments shall be fully amortized at the end of the contract term and will become property of Agency at the end of the contract.

Exhibit 14- Contractor Real and Personal Property Investments and Timing

Location Investment Real/Personal Property

Timing

Frenchglen Hotel

Linens-blankets and quilts, dishware, and added decorations (not permanently attached to structures).

Personal Property

Drover’s Inn

Frenchglen Hotel

Mattress replacement.

Personal Property

2026-

Drover’s Inn Frenchglen Restaurant

Kitchen utensils and pans. Personal Property

As needed

Concession Site Lawn Mower, garden hoses, and other yard maintenance tools.

Personal Property

10.2. Working Capital, Inventory and Pre-Opening Costs

Agency assumes that the selected Contractor shall secure startup costs prior to commencing operations. Agency has assumed that these expenses shall cover:

● Working capital: The selected Contractor will maintain adequate working capital to cover merchandise inventory, accounts receivable, and accounts payable.

● Production of collateral materials: The selected Contractor shall require the production of collateral materials i.e. brochures, advertising, and web-based promotional pieces. Branding is the responsibility of OPRD and the OPRD logo is trademarked. OPRD must review all materials for sale and approve via the OPRD Communications Section prior to release to public.

● Management staff recruitment, relocation, and administrative support: The selected Contractor will ensure appropriate staff is in place.

● Operating supplies: The selected Contractor will have to purchase new operating supplies to support the operation.

10.3. Surety Bond or CD

The Concession Agreement requires that the selected Contractor provide a surety bond to cover first two years of Concession Fees to OPRD. The Surety term is negotiable.

11. TERM AND EFFECTIVE DATE

OPRD has determined that the required Personal Property Investments for this Contract support the need for a contract term of five (5) years.

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12. CONCESSION FEES

12.1. OPRD requires a minimum monthly Concession Fee of no less than $2,400.00 due the 15th of each calendar month.

12.2. OPRD requires a minimum monthly Revenue Share Percentage Fee of no less than five percent (5%) of gross revenue for the first year. This revenue sharing fee is due the 15th of each operational month (March through October).

13. MAINTENANCE

13.1. The Frenchglen Hotel is registered as a historical building. All Frenchglen Hotel maintenance work will be completed by Agency.

13.2. The selected contractor will be responsible for the Annual Repair and Maintenance Expenses for Personal Property and Real Property Assets. Agency requires that the selected Contractor allocate a minimum of $10,000 annually on Agency Real and Personal assets. This amount is separate from any Annual Repair and Maintenance Expenses spent on contractor’s Personal Property.

13.3. Agency will be responsible for Component Renewal expenditures for all real property facilities under the contract and lease.

14. ADDITIONAL INFORMATION

Due to rural location, we have provided the following information:

14.1. Frenchglen Restaurant

• Amazon delivers via Fed Ex.

• Due to rural location, Frenchglen does not receive Cisco delivery services.

• Online Costco orders have been completed in the past.

• Misfits products have been used at the restaurant for hard to find foods in the area.

• Meat purchases are from Erickson’s Thriftway in Burns, OR.

• CHEF’STORE Restaurant Supply located in Bend, OR.

• Costco Warehouse located in Bend, OR.

• Frenchglen Hotel has a large basement; can store up to 6 months of supplies.

• There are 4 freezers onsite.

14.2. Additional Maintenance Information

• Previous concessionaire completed majority of maintenance on property.

• 2022 electrical and sewer pump work is completed by Burns Electric.

• Hardware is available at Parr Lumber in Burns, OR.

14.3. Additional Site Information

• Fire System is installed at Frenchglen Hotel.

• Drover’s Inn and Frenchglen Hotel have separate laundry rooms.

• Due to rural site location, Agency reserves the right to maintain and utilize the room above Drover’s Inn for an Agency office-seasonal staff. All other areas of the property will be maintained by Contractor.

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Business Description

Attachment 1: Personal Property owned by Agency

Frenchglen Site Personal Inventory L

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Attachment 2: Real Property owned by Agency

The following OPRD-owned equipment and facilities:

Name Function Intended Use Frenchglen Hotel Accommodations Rentable Facility Drovers Inn Accommodations Rentable Facility Residence Concessionaire For use by Concessionaire 2 car-garage Concessionaire For use by Concessionaire Vault Toilet-East of Hotel Facility Public Use Pumphouse/Well house Facility Well for Frenchglen Hotel Pumphouse/Well house Facility Well for Residence

Note: Total Replacement Value of Site is $2,436,937.88 assessment completed December 2022.

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Attachment 3: Business Expense Summary

Expenses Concessionaire OPRD Utilities:

• Refuse- concessionaire hauls

• Harney Electric Coop

• Propane for Frenchglen and

Residence Stoves only.

• Phone

• Internet

• Reservation Software/Services

X

X

X

Concession Fee: $2,400 X Concession Operations Fee: (5%) X Consumables X Merchandise- gift shop X Food and Beverage X Business CGL Insurance X Business Staffing X Annual Property Taxes X Surety Bond (Term Negotiable) X Annual Repair and Maintenance Expenses: Up to $10,000 annually

X

State Corporation/LLC Licensing X Restaurant Licensing X Alcohol Licensing (if applicable) X Health Inspection Fees:

• Restaurant fee

• Rentable Room fees

Systems Maintenance Wells and Testing of Water X Fire System-Frenchglen X Electrical Systems X Septic Systems X HVAC- Frenchglen X HVAC Units- Drover’s Inn and Residence