Concession Agreement

DEFINITION of 'Concession Agreement'

A negotiated contract between a company and a government that gives the company the right to operate a specific business within the government's jurisdiction, subject to certain conditions. A concession agreement may also refer to an agreement between the owner of a facility and the concession owner or concessionaire that grants the latter exclusive rights to operate a specified business in the facility under specified conditions. Regardless of the type of concession, the concessionaire usually has to pay the party that grants it the concession ongoing fees that may either be a fixed amount or a percentage of revenues.

BREAKING DOWN 'Concession Agreement'

Concession agreements span the gamut, from mining concessions valued in the hundreds of millions, to a small food and beverage concession in a movie hall. The terms of a concession agreement also depend on its desirability. For example, a popular concession in a sports stadium may not offer much to the concessionaire in terms of incentives. On the other hand, a government that is looking to attract mining companies in an impoverished area may offer significant inducements, such as tax breaks and a lower royalty rate.

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