We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is a Concession Agreement?

Mary McMahon
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

The term “concession agreement” is used in two slightly different ways in the business world. Both refer to a type of negotiated contract which gives a company the right to do business, with some specific requirements. In one sense, it refers to a contract between a foreign company and a government, in which the company signs a concession agreement so that it can do business in that government's country. In a second sense, this type of agreement is one which grants the concessionaire the exclusive right to do business in a particular area or venue in exchange for some carefully negotiated terms.

When people talk about contracts with foreign companies, a concession agreement is worked out between the company and the government of the nation where it wishes to do business. The government may want to incentivize the company by lowering taxes, relaxing restrictions, or providing other incentives. In cases where the government is not as enthusiastic, the company may need to make some concessions such as ceding some of the profits to the government or paying a special tax rate which may be higher than that of domestic businesses. Once the agreement is negotiated and signed, the company has the right to do business locally under the terms of the agreement.

Governments may use this type of concession agreement to provide services which they cannot or will not provide. For example, a concession agreement might be signed with a foreign company to allow it to manage the ports or the borders.

In terms of an operating concession, the agreement gives the company an exclusive right to operate in a venue like a sports stadium, a cruise ship, or a government building. In this case, the company operates a concession which may sell food, accessories, and a wide variety of other products. It must pay an annual fee for the right to operate, or give up a percentage of its income to the venue. In exchange for this, the venue agrees not to sign concession contracts with other companies offering similar products or services.

This type of concession agreement is often used when a venue or company wants to make a product or service available, but does not want to be directly involved. On a cruise ship, for example, the line might operate concessions with restaurants and cafes so that it is not responsible for food service. This means that the cruise ship is deprived of some of the potential profits, but also of the problems such as legal liability for tainted food, securing staffing, and organizing supplies.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments
By Monika — On May 02, 2012

I can see why a government might sign a concession agreement to get a company to operate in their country when no domestic company can offer the services. However, I cannot imagine a country hiring a foreign company to manage its borders!

It seems like a country might be more likely to sign a concession agreement with a company to sell some kind of cutting edge technology in their country. Or a concession agreement with a company that sells medical supplies or provides a medical service. But to manage the ports and borders? I'm not sure that makes any sense!

By JaneAir — On May 01, 2012

@starrynight - I agree, the term concession agreement does make me thing of the concession business. Although the term makes a lot of sense when used the other way too. One party is making a concession to the other party so they can do business together.

When I was reading through the article, I was kind of wondering why a company would do something like this. However, I can understand why a government would make some concessions if they really needed to do business with the other party.

So it seems like a concession agreement is probably used the most when one party is at a disadvantage and the other party then has more bargaining power.

By starrynight — On Apr 30, 2012

It's interesting that the term "concession agreement" has two different meanings as far as business contracts go. I personally think that business is confusing enough as it is, each term should only mean one thing!

I know when I think concession agreement, I definitely think of the legal agreement between a company and a venue for the company to provide food. Or maybe I'm just a little hungry right now.

Anyway, it stands to reason there should be some type of contract between the two companies. As the article said, the concession company might want the exclusive right to sell concessions at the venue, and of course there are other issues to work out too.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.