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Cape Brewing 02-01-2013 03:12 PM

I went "pro" - What it actually takes to do so
 
There are always threads floating around by folks who are thinking about the same dream 98% of us have... starting a brewery. I have been responding here and there and figured I would just start a thread.

I am super lazy so I lifted (and slightly edited) a response I gave on another thread below.

I don't remotely consider myself some sort of "expert". I am not remotely saying you will need to 1) do it how we did it or 2) run into the same issues we did. I am simply trying to show what it took for us so folks can go into the situation with as much knowledge as possible.

Two partners and I just opened a nano and are holding our initial release parties in about two weeks at two different bars... so... I just went through this.

You're going to need to file for and obtain a Brewer's Notice through the TTB. Part of that application process includes documenting the commercial space you've OBTAINED (not "are looking at"... they want a copy of either the deed to the property or the executed lease agreement with the landlord.) They'll also want proof of insurance (the landlord will want that too), six months of financial records, evidence of where the funding for the brewery is coming from... among other things. We were able to get all of that paperwork filled out and submitted in about two weeks. We got approval in about 45 days after that (which was lightning fast from what other breweries have told us).

There is a lot of talk about the TTB allowing a brewery to operate on privite propery (or a residential property). MY understanding (which could be 100% incorrect) is that it is very rare that the TTB will allow a commercial brewery to operate on a residential property and when they do allow it, the brewery needs to operate in a completely separate building from the residence.

Once you have your Brewer's Notice, then you have to get your state license... the state is typically dependant on getting the TTB license first. State licenses vary dramatically from state to state in terms of rights to self-distribute, tasting rooms, ABV limits, fees, etc. I can't really help you there other than to say that I can't fathom the state not having a detailed (and painful) process for all of that. That process here in Mass took us another 75 days or so.

(all the while paying rent on the commercial space we had to take)

While you are going through the licensing process, you get the pleasure of dealing with local/town building/fire/electrical/plumbing inspectors as well as the Board of Health.

They're going to want to take a look at every single nut and bolt of the brewing operation. We were originally going to use banjo burners.... NOPE... "not UL or any other industry safety commission certified. Sorry". (trust me, I know how ridiculous that sentence is). We had to replace our stand, our burners, everything but the pots. "oh...well... the natural gas line in this building isn't rated for the volume of gas you need so you need to run new gas line"... $2,600 to run black pipe across an entire building.

And it just keeps on coming. ADA-compliant bathrooms... "sorry, you need a new toilet, sink and this door isn't wide enough". CO monitors and automatic gas shutoffs. Water backflow preventers so you don't backflow into the town water supple (again... ridiculous but we had to do it). Make sure the septic tank is rated appropriately. If it is sewer, make sure the town is Ok with "brewing chemicals" being dumped into the sewer. Occupancy permits, business permits, LLC registration... don't forget you ge the pleasure of now filing corp. taxes too as well as your state and federal excise tax pre-payments!!

My experience in talking with other nanos in Massachusetts is that local building codes or what an inspector will accept will vary dramatically from town to town.

We're on a 1.5 bbl system and while we ABSOLUTELY knew this going in, at that scale, it is impossible to make any money. We can work around the clock if we want and sell every drop and at the end of the year, each one of us would make a couple grand. If you are brewing on a 15 gallon rig, take that tiny profit and erase it completely.

Distribution: This varies from state to state as well. We're lucky that here in Massachusetts, under our Farmer-Brewer License, we're allowed to self-distribute. We needed to "officially" license each of our individual vehicles (down to the VIN numbers) and pay a fee, so that each of our trucks could legally carry the beer from the brewery directly to our customers. Again, what you can and can't do will vary from state to state and you need to know what you're facing.

Once up and running, you need to file all sorts of regular reports with the TTB and supporting agencies... excise taxes, operations reports, label approvals (not just for bottles but for kegs as well), recipe and process documentation and approvals, etc.

Start to finish... it took us about 14-15 months to get from "let's find some space and do this" to "Our beers are going on tap in two weeks!"

Like I was saying at the beginning... I'm not an "expert" and if someone thinks any of this is wrong, great... that's one of the reasons I wanted to post this. It is something my two partners and I are taking very seriously (although having a ton of fun) but if we can learn something here as well... awesome... I'm all for that!

If you have any interest... there is a blog on our breweries website (below) that talk about some more of the specifics of what we went through.

Darwin18 02-01-2013 03:16 PM

Congrats! Yeah the paperwork and bureaucracy is a major deterrent for me, not to mention paying rent on a property for months without being able to operate. Good luck!

mcbaumannerb 02-01-2013 03:23 PM

Thanks for sharing - interesting information. Where in this process were you actually able to start brewing beer for sale? I'm guessing after you got your health dept. food service certification? Before that could you at least brew for personal consumption - so you could get the process down with the changes you had to make and feel like you were getting some use out of that space?

Cape Brewing 02-01-2013 03:30 PM

Quote:

Originally Posted by mcbaumannerb (Post 4852513)
Thanks for sharing - interesting information. Where in this process were you actually able to start brewing beer for sale? I'm guessing after you got your health dept. food service certification? Before that could you at least brew for personal consumption - so you could get the process down with the changes you had to make and feel like you were getting some use out of that space?

You're pretty much correct. We couldn't start brewing for sale until every approval from everyone had been obtained. TTB and state licenses are a given... but the real BTCH was the local Occupancy Permit which is your "approval" to operate in your space. For that, each and every inspector (building, Board of Health, electrical, plumbing, zoning board, conservancy board, fire Dept)... all have to sign the permit. Once you have that, you can open for business.

We spent that down time scaling and testing recipes but were leary about doing too much IN the brewery so a lot of that was done on our home rigs which aren't much smaller than the rig at the brewery.

hoppyhoppyhippo 02-01-2013 03:43 PM

Awesome writeup. My brother and I are considering in 5-10 years starting up a nano, by then we should have a strong enough business plan and personal backing to start it up.

In NJ as I understand it it's much harder getting your municipality to sign off than to get the state. But the states limits made it harder for start ups to distribute as I understand but now you can sell more beer on premise than you used to. In theory with the right beer and a dedicated base you can build a functioning nano.

Right now the operation we're gonna try to keep the founders as brewers. I don't want someone there just for money but who knows we may need that. What I'd like is 2 more partners in the end but we've got plenty of time to look. That way everyone can keep their regular jobs, and just alternate when we brew and bottle so we can run it 7 days a week.

JeepDiver 02-01-2013 03:46 PM

Quote:

Originally Posted by Cape Brewing (Post 4852468)
We're on a 1.5 bbl system and while we ABSOLUTELY knew this going in, at that scale, it is impossible to make any money.

So do you think at some near point you will be turning a profit? Guessing you may already know this, but if you don't make a profit, in 3 of the next 5 years, then the IRS will consider the brewery as a hobby, so any deductions you make for equipment, etc will be disallowed.

I've seen some people run into this issue before (well they actually expected to make a profit) then get blindsided with a big tax bill when they don't make it. Not trying to be a downer, but just giving you a heads up.

broadbill 02-01-2013 03:53 PM

To add to what JeepDiver asked:

What is your plan for making a profit? By your own admission or system isn't big enough to brew profitably, therefore there isn't a way for you to boot-strap yourselves to a larger system in the future?

Will the idea for the partners to keep infusing capital to keep the operation afloat and moving towards profitability, venture capital, bank loans to upgrade? Just wondering.

Brewfist 02-01-2013 04:19 PM

Thank you for sharing the joy and pain of following your dream. I understand the logic of starting with a 1.5 bbl nano to test the market, even though your "test" includes almost 2 years of battling the federal, state and local governments. Investing in larger production equipment from the beginning is an unnecessary risk!

I'll visit your website in a minute, thanks for sharing the address. I notice you did not mention much your marketing plan. I've found that small brewers are guys who just love brewing, and assume the great taste will make the brewery successful. Mega brewers of beer like Bud, Coors and Miller have proven financial success in brewing has nothing to do with taste, rather it's effective marketing.

Good luck and thanks again!

NewJersey 02-01-2013 04:35 PM

great thread and thanks for sharing!
pics of setup?

plans to move to a bigger setup??

KeyWestBrewing 02-01-2013 05:04 PM

Great thread. Interested to here more.


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