Tom Hennessy Method For Opening A Brewery

A Different School Of Thought

There are many excellent schools that teach how to open a business. I don’t knock any of them. They include lots of paperwork, cash-flow forecasts, how to write a business plan and approach a bank. Typically saying things like, “Expect to spend at least one million to get your doors open.” or “Don’t expect to even break-even for six months to a year, or even pay yourself for the first two years.”

That’s not how I do it, nor is it how I teach others to do it.

I thought I should explain my method to clarify why I do it the way I do it. I’ll just list what I think is important and how I go about it. It’s not for everyone, that’s for sure, but I’ve opened 14 businesses this way and never had a failure. Maybe I was just lucky.

FIRE

Man, you gotta have fire in the belly for brewing beer. It’s what gets you out of bed and down to the brewery, even when you don’t need to. True, you shouldn’t go into this business to make buckets of money, but that’s not saying you won’t. It’s the motivation that matters, and you HAVE to love what you do. I always have. There is just something about making beer that people enjoy and that makes me happy.

MONEY

Not as much as you think, but you still need a chunk. You need to sell what you don’t need, tap retirement funds, a second mortgage is OK too. That will get you part of the way there. You want $50,000 to $100,000. For the rest, you are going to borrow it from your friends and family. Most of this will be secured with your brewing equipment (to me a nice 7 BBL system complete is 50k to 75k), so the exposure for those folks is almost zero. You on the other hand are on the hook, and you can bet that is a pretty swell motivator.

LOCATION

Once you have at least your money organized you really need to find a space that is super easy to convert into a brewery/tap room or a brewpub. I prefer restaurants, coffeehouses, bakeries, something that was already licensed for food, and better yet had a liquor license. I can’t stress enough how much money and time this will save you. Let alone the local government hassles you’ll avoid. Because in most cases you aren’t changing the use, which can trigger a whole pandora’s box of problems. You are simply adding a brewing operation to the kitchen. Think of it as adding a big soup kettle to the kitchen (you tell your town).

FORGET CASH FLOW SPREADSHEETS

Once you know what your rent or mortgage will be, and how much you owe your lenders, you can figure out all the associated costs in running your operation. It’s in one of the books below, I don’t remember which, probably the Brewery Operations Manual.

Anyway, what you want instead is to know your breakeven. Shoot me an email and I can send you one of these. If you know what it costs to break even, then you can look objectively at those numbers and ask yourself “Can I do enough sales in this location?” If the answer is yes, you will make those numbers happen, even if you have to do every event under the sun to get the word out. Even if you have to work most of the jobs to save on labor, just so you can survive. You will make this work!

YOU NEED A KICK ASS BUSINESS SYSTEM

Oh how I rant on this subject. The business system is non-negotiable. Without it you will fail sooner or later. With it, you will grow and thrive and all your dreams will come true.

AND MY EXPERIENCE?

Well, I’ve done everyone of my businesses this way. The first ones were the most difficult because we had no track record. Especially our first. An existing restaurant. We (my two partners and I) each came up with $10,000. Then we borrowed another $25,000 from the bank with our parents co-signatures. I think we could have done it just on our $30,000 but we wouldn’t have made it look as nice.

After we opened, we had to survive. Everything depended on it and we worked long hours and did whatever it took to make it happen. But we broke even that first month and started making some money after that. We didn’t have to wait six months to a year to break even, because we wouldn’t afford to.

With the second restaurant we had a reputation and it was easier to secure funding, and it became even easier after each one. The first brewpub (IL Vicino, 1993) we just added a brewery to our existing wood oven pizzeria (remember big soup pot? We didn’t need a bank, we already had been in business and could do the addition out of csh we had. And the reason they survived? You guessed it, we had a kick ass business system.

So that’s how I teach others to do it. Have the fire, come up with some money, Frankenbrew your equipment, follow a good business system and start in an existing restaurant that is for lease or for sale. Then be prepared to work like you life depends on it - and you will for at least a year - then magically it starts to get easier, and pretty soon you are looking at other opportunities. When our students succeed, my ego gets a big boost. That’s pretty good reward for me.