The city has issued Optimum Marketing & Management Corp. a five-year lease to operate a restaurant at the Kapiolani Beach Center pavilion and bathroom space near the Waikiki Aquarium.

The company, which was awarded a contract Jan. 4, was the sole bidder late last year for the food concession in the prime oceanfront space in Kapiolani Park. Optimum, which has operated in the space since mid-2011, earned rave neighborhood accolades and a reputation for providing reasonably priced fare in an oceanfront setting as the Queen’s Surf Café & Lanai.

The city and Queen’s Surf fans praised Optimum for turning around a location that was becoming known as a hangout for homeless people, drug dealers and prostitutes. However, complaints surfaced about the middle of last year, when it became known that the city issued the operators a revocable permit with favorable terms without going through a bidding process.

According to the terms of Optimum’s revocable permit, they would pay the city for the upkeep of the public restrooms and the higher of a $350 monthly fee or 5 percent of gross sales. In comparison, the city also issued SSA, the operator of the Waikiki Beachside Bistro, a revocable permit; however, the terms, which run through April, were $5,000 a month and 5 percent of gross sales over $40,000.

"The reason that we put (Optimum) on a revocable permit last year was to gauge the environment of what a concessionaire could do," said Randy Leong, acting director of the city’s Department of Enterprise Services. "Previous to that, we had one concessionaire that failed miserably."

Under the terms of their new contract, Optimum, now operating as the Barefoot Beach Café, will pay the city a $500 monthly fee and 5 percent of gross sales during the first and second years of their lease. In the third year, Optimum’s monthly fee increases to $750, and the percentage of sales increases to 6 percent. That percentage stays the same in the fourth year of the lease; however, the monthly fee rises to $1,000. In the final year of the contract, the monthly fee holds while the percentage of sales rises to 7 percent.

Optimum also has the responsibility of maintaining the public bathrooms, said Charlian Wright, concessions contract specialist at the city Department of Enterprise Services.

"This averages out to $5,000 a month," Wright said.

Optimum could not be reached for comment.

The changes mean that the city is "getting more revenues from this concessionaire while still maintaining the restroom and the cleanliness of the facility," Leong said.

Terms of the new lease should satisfy most critics, said Steph­any Sofos, a Waikiki-based retail analyst.

"It’s a little low for Waikiki, but they are paying the normal standard rent across Hawaii," Sofos said. "Given that the whole idea here is to have a concession that provides a service to Kapiolani Park users, it’s a fair exchange."

Waikiki renters typically pay the higher of a minimum fee or a percentage of gross sales ranging from 5 percent to 15 percent, she said. The city’s higher-priced deal with the Waikiki Beach concessionaire probably is based on the greater volume of traffic there, Sofos said.

"This new deal is substantially higher than what they were paying before," she said. "However, the city isn’t gouging them because they are in Waikiki."