How I Go About Opening A Brewpub
A Fun Exercise
I thought it would be interesting to show how I go about finding a location and opening a brewpub. Some say that the U.S. is getting saturated with breweries, but I only see a vast ocean of opportunities for the right concepts.
To start, I looked at a map and picked out a town in the middle. I found Springfield, MO. I’ve never been there, but have biked the Katy Trail along the Missouri River and I’m a fan.
First off I looked on Craigslist under Housing - Office/Commercial. Then I narrowed the search to restaurants. Lucky me, one popped up, however it is a bit expensive but an excellent choice (I would have to spend time there to get a feel for the neighborhood night and day).
While the space is large, it already has a huge kitchen, which will make fitting a brewery in it a cinch. Lots of floor drains, walk in coolers, hoods, grease traps, kitchen equipment, single story (for venting), a bar, restrooms up to code, office, sound system, parking, signage, high traffic counts, heating and air conditioning already installed. And finally, it is zoned for alcohol so a brewpub should be fine in that location (I would have to confirm this with Missouri, but I’m pretty sure it would be ok). This makes the transition and existing use, so it shouldn’t trigger any special rules to bring it up to code. It should be no different than changing from one restaurant to another, compared to turning a gas station into a brewery.
Also, I’m not going to do anything structural to it. I may change a few non-load bearing walls, but I shouldn’t need an engineer (assuming it is on a slab, most likely at 6 inches) and I won’t need an engineer.
What I do need is a kick-ass concept. I love Neapolitan pizza, but looking at this place I would be inspired to turn it into a street taco brewery also serving salads and the like. All good food cost items, and the kitchen is already set up for it. I would give it a real Yucatan feel too. So I might be brewing more lagers than ales. I might also make it really funky with mix and match china, silverware, big plastic cups for drinks, even furniture. Maybe some colored light bulbs and lots of LED twinkly lights.
One of my past partners used to be an owner of Chuys, in Austin, Texas. They made so much money from an old fashioned Photo Booth in the waiting area, I think I would steal that idea and include that as well. It should have a good Carribean vibe to it.
One thing I would want to do is be able to close off some areas during the slow months. That way what customers we have would fill the space available. One thing I’ve learned is people want to be around other people when they go out. It should feel crowded.
The rent is steep at $6,500 triple net, so guessing that taxes and insurance will add another $1,000 for a total $7,500 in rent. Using my rule of thumb that rent shouldn’t be more than 7% of your gross, my sales need to be $107,000 per month. I would have to feel comfortable that we could do that. Maybe I can negotiate that down a bit for the first term. And speaking of that, I like at least a 3 year lease, with two 5 year options. If that rent wasn’t so high I would go 5, 5, 5.
One thing going for me with this concept is it doesn’t take a very big kitchen staff, so my labor should be in control. Also, I would be selling beer I make and Mexican food, so my Gross Profit should be around 80%. That should more than make up for the rent.
At least a 7 BBL system, but perhaps a 10 BBL. Let’s put that together.
Direct Fire Kettle - New, Bennet Forgeworks $13,000
Mash Tun -250 Gallons, Dairy Engineering $1,150
Hot Liq. Tank - Letina, St. Pats of Texas $2,000
3 Fermenters - Letina, St. Pats of Texas $11,685
Pump on cart - CPE Systems $2,200
5 Serving Tanks Unjacketed - Used, ProBrewer $9,000
Glycol System - Foxx Dist. UBC 3/4 HP $1,900
Small Parts $10,000
Shipping $10,000
Total Brewing Equipment $60,935 est.
Now what would it cost to get this thing open? I use a spreadsheet and plug numbers in on my best guess. The real savings come into play with an existing restaurant in architectural, engineering, plumbing, electrical and heating and air conditioning. Most of the general construction will be small, and most of the kitchen equipment is in place for what I want to do.
To fund this brewery, I have available about $120,000 I can pull from home equity, CD’s, a Vanguard account, and other small places. I will pull a group of five friends to lend me $20,000 each. This will be almost 100% secured just by the brewing equipment. They will not be investors, but rather loan givers. I, in return will pay them 10% on their money, which will only cost the brewery $833 per month. They will each get a check every month, but wait there’s more! I will also give them a certain amount of free beer each month, tee shirts and other swag, and a small share in any profits. As soon as cash flow looks decent I will start paying them principal and interest, and if any of them become a hassle, I will pay them off first to get them off my back. There’s always one!
Will this work? The chances are as good as any other project. I haven’t touched on all the things that could go wrong, and there is ALWAYS something that goes wrong. I’ve found in any project I have ever done, a government agency, usually local, will throw something at me that makes absolutely no sense, but it’s just part of the deal.
Finally, because I am essentially a lazy guy, I will, using my excellent business system, train a General Manager, instead of me taking that position. If things go well and all the lenders are paid off, within five years I will sell the brewery to the General Manager and the Brewer. I will spread the payments over five to ten years. Until it is paid off I can still audit the books and make sure they are following my systems.
This way I win because I have turned a $120,000 (my money) investment into something worth at least $750,000. I will now have a really nice income stream for the next ten years.
The General Manager and Brewer will win because they get to own the brewery for nothing down, and when they pay me off, they can turn around and sell it themselves, and hopefully by then it will be worth more. They should sell it to their Assistant Manager and Assistant Brewer, thereby giving those folks the same opportunity.
They could also instead of selling, expand their operation by opening satellite locations, or whatever they want.
I have found that what is more important to keep key people, is not salaries, but rather a chance to own.
And there you have it. This is basically the way I go about it. Now this is not a complete list, because as it stands you could shoot plenty of holes in it. But it is an outline of what I do. I’d love to hear about your projects.
