The Success Trap

And one who didn't fall into it

I have seen this movie over and over. No matter if it’s a restaurant or a brewery. And I can think of some famous brewery examples but I won’t name names because I don’t want to embarrass anyone. The movie goes something like this.

Opening scene

A husband and wife, or two college buddies, or bowling buddies have a dream of owning a brewery. At least one of them has been home brewing for a while and is making some pretty good beer. Maybe he/she has even won some medals. Their friends all think it’s a great idea.

So they pool their resources, borrow from their 401k. Borrow from friends and family, and luckily find a location with cheap rent that used to be a Kentucky Fried Chicken decades ago. With some paint and a lot of imagination, they shoehorn a Frankenbrew system in that is not pretty, but makes excellent beer. And so they open with about $1,000 in the bank, but at least on that first day they can put money into the bank rather than take money out.

Honey Moon

People keep telling other people. The beer is great and everyone is rooting for the under-dog, so the owners are surprised that the place is pact. In fact, it’s going so well that they are starting to pay their family and friends back. They have to pinch themselves. Even the local TV station did a story on them, so they must be good, right? And the truth of the matter is - yes, they are. Really.

Mature Brewery

Realtors keep bringing them new opportunities to expand. They won a medal at the World Beer Cup, and they can’t brew enough of that beer that won a silver at the Great American Beer Festival.

It’s so busy they can no longer do everything, so they have to hire more staff. Even a person who will handle their social media. They are seriously now thinking they have to expand. Hell, it makes sense because they can’t keep up and it would also provide some opportunities for their staff to move up in the company as well.

Fork in the road

Here’s where the trap is. A realtor shows them a killer location. The developer will “Build to suit” so all they have to do is finish the space out. The traffic count is great too, especially compared to their cheap out of the way location. And there’s a Whole Foods Store in the same center they will be in. Lots of money there.

So they hire an architect and an engineer. It’s a new building so they have to. The architect recommends an interior designer who specializes in entertainment venues. And a contractor is hired and work begins.

The developer built out the vanilla shell but that was behind schedule, and they turned it over to the new brewery operators and gave them half off on rent for the first 6 month. What a deal. But that goes behind schedule waiting for specialty materials that the architect and designer recommended. The rent is steep but every thing can be serviced out of the large bank loan. The banks had no trouble lending because brewery number one is a cash cow.

Finally the new place is open. It’s larger, a lot larger than the old place. The new owners spend all their time there just managing the huge staff. Sales are good, but still the rent is 10% of the sales. It’s big, but not as big as that huge loan they took out. On a Tuesday night they do good numbers but with such a large space it is only half full. People start to think something’s wrong because it isn’t full.

The owners sit down with their CPA one year later and look at the two breweries. The new shiny one does three times the sales, but just a bit over half the net profit as the old brewery. And truthfully, it’s not as much fun either.

The road less taken

Now I want to bring up a student of ours. I won’t mention his name or the state he is in. I was always impressed with him, because he did the class and though he never made pizza before, he spent the next couple years while putting his small brewery together, making pizza at home and perfecting his recipes. Posting them and their brewery progress every other day. People became excited.

He opened, I can’t remember how many years ago now. But the brewery is VERY successful. So I was happy he wanted to share his expansion with me. He sent me a plan for number 2 location. A separate plan for the brewhouse, which is small, and sits behind the restaurant/tasting room. It’s a small, really small, inexpensive space for a pizzeria with a 7 BBL brewery. The serving tanks are right behind the bar. There is his plan at the top of the page.

It is very similar to our Colorado Boy in Ridgway. It can operate with two people on the floor (bartender/shift manager and a server) and two in the kitchen. That’s it. No matter what day of the week, it will be full. And people will go back to work Wednesday morning and tell their co-workers, “Gee, that new brewery was packed last night. On a Tuesday. They must be doing something right. You should go check it out.”

Here’s my point

If you are lucky enough to have a successful first brewery. keep that beginers’s mind set for your second. Treat it like you did the first, where every penny counts. It’s like my favorite quote by Paul Hawken, “Money follows imagination, imagination doesn’t follow money.” One of your biggest strengths it turns out when you begin is the little amount of money you have.

My friends new brewery is going to be great. I can’t wait to hear more about it.