The best sale in the brewing business is now on

You hear from stock market big wigs like Warren Buffet (no relation to Jimmy), that when the stock market is down, it’s like a big sale and that’s when they buy.

Well, that’s what is happening in the brewing business now. In fact I’ve never seen more opportunities, ever, than I am right now. If you are struggling to find a location or coming up with the money to start your own brewery, then read on.

Just for fun, I went to LoopNet, and did a search on breweries for sale. Holy shit, 5 pages of breweries! Yes, there were many that were 1M plus, but there were also a whole lot for 300k or less. Scott, this is for you, I hope you are reading this. In fact I might suggest this gem that just needs to be rented. Of course you would have to move to Colorado and live in a place where recreation is king. Bummer.

If you are willing to relocate, this might be the best, cheapest, and easiest way to break into the brewing business.

First off is the price. Typically when someone is selling their business, they will carry the loan and you just have to put 20% down. That’s not much. Let’s now look at the disadvantages and advantages.

Disadvantages

First, why are they selling? Most likely it could be burnout, or it could be they spent too much to get into the business in the first place. Perhaps their sales aren’t sufficient enough to cover their rent and debt.

You will have to live with their bad business or karma. Or not. I think if taking over from a former business, you make a clean break with the past and give it a face lift and a totally new concept.

They could have been really bad business people. If you are buying their business, like a corporation or LLC, you could be assuming any hidden liabilities. For example, what if they weren’t paying payroll tax for the last 6 months? When the government goes after the business, that could be you. My advice would be to shut it down and start it as a new entity (create a new corporation or LLC). Yes you will have to re-apply for your licenses, but you will be starting clean, and hey, you will be saving yourself a lot of construction headache, because most of the difficult stuff is already done.

Know what your nut is going to be. When I say nut, I mean what you have to pay in rent and in business loans. This amount needs to be paid every month no matter how much business you have. Hopefully you are buying a business on the cheap, and the re-model is just cosmetic, so your loan won’t be too high. Your rent though can be another matter. Use this as a rule (works for me). Your rent shouldn’t be more than 7% of your monthly gross revenues. So when looking at a potential brewery for sale, take the rent figure and divide by .07. The figure it gives you is what you should do in monthly sales. If you feel that this location can provide that, you are good to go. There are exceptions to this rule of course, but I find the closer you are getting to where your rent equals 10% of your sales, you start working for the landlord. Colorado Boy pays about 4%.

Advantages

Most of the hard work has already been done. The floor drains poured. The brewing equipment set up. The dining room (if it has one) is there, the beer taps, POS system, music system, parking lot, restrooms, glycol system - it’s all there.

You are a fresh start to an old business. That energy and enthusiasm, combined with a fresh look to the brewery will make old customers take another look.

As for money, well, purchasing an existing brewery may be cheaper than building one from scratch. Even if you did a Frankenbrew start up, by the time you go through all the leasehold improvements to the space, you could wind up spending a whole lot more than if you simply bought a brewery, paid the down payment, and did a simple re-model

If I was to buy a brewery

I have some experience in this area. Not in breweries, but I have taken over failed restaurant spaces and converted them into successful ones. This would be my approach.

• Create a new and different concept to make a clean break from the one I bought

• Implement my kick-ass business system to run and organize the new brewery

• Create a really great Oyster so that customers feel great when they are enjoying their pints.

That’s it. It’s not too hard to do. For example when we teach a class, I look at where the student wants to do their brewery and then look at the competition. What can we create that is totally different from anything else in the area. For example our students who built MacLeod Ale Brewing in Van Nuys, California. He is Scottish and she is a bagpipe teacher. So we suggested a brewery that focused on cask ales. There was nothing in the L.A. area that offered anything like that. It worked and they have a great niche in a really crowded market.

One of the reasons that the existing brewery might need to sell is they are not running with a business system, so the owner is having to constantly plug all the holes to keep the business running. This is unsustainable, so after four or five years they are totally burned out. I suspect this is the main culprit in a lot of the breweries for sale.

There are so many excellent opportunities right now, I hope that you might at least consider the possibility. Feel free to run any ideas by me. I’d love to hear what you come up with.