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Old 08-10-2011, 04:04 AM   #1
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Default small brewpub business plan

Disclaimer: I am a homebrewer. I don't have an MBA, I don't have experience running a business, and I'm only a year out of college. I would never intend to try this until 5-10 years down the road. It's a long post, I know, but I'd like to get some helpful feedback. It's not written in business plan format.

I've been kicking an idea around in my head for a brewpub. After looking at pics of the smallest brewpub http://www.homebrewtalk.com/f5/smallest-brewpub-202767/, reading about how Dogfish started, and hearing about Massachusetts nanobrewery laws (farm-brewers license) I got to thinking...

Why can't you start a very small brewpub? Picking a smaller space has some pros and cons, but I think the pros help negate a lot of the risk.

Cons:
-You cannot serve as many customers, so your maximum profit is capped lower.
-Less economy of scale for ingredients, equipment, and licenses
-You cannot produce as much beer.
-You might have to brew more often.
-If you're successful, large crowds could give your brewpub a reputation as being crowded and scare customers away, even if crowds die down. Restaurant-goers are fickle.


Pros:
-Your maximum profit is lower, but so is your risk. You cannot serve as many customers, but you don't need to serve as many because your rent is lower. You might know of some restaurants which have a very small seating area, but are consistently packed. That's the idea.
-Startup costs are much lower. I'll go into that in a little bit.
-You can brew on a small scale. This allows you to have many different beers and limited releases available, and in my opinion, also allows you to make better beer. More on that, too.
-You can fill your seats more easily. A crowded place could build a good reputation/image.

My feeling is that the pros outweigh the cons; decreased risk and start-up costs, coupled with the ability to brew on a small scale, allows you to produce better and more varied beer which you can price higher. I live in the richest county in America, and there are plenty of people willing to pay a high price for beer. I'm talking all the way up to $12 per 12 oz glass for something really special. You could anchor your line with an accessible and cheap beer, and have plenty of really special limited releases: imperial IPAs, barleywines, RIS's, Belgian strong ales.

In terms of cost, if the laws in your state allow it, I don't see why you couldn't use food-safe plastic. It's not as durable as SS, but at a small scale, it's so cheap that you could afford to replace it twice a year. With care not to scratch it, plastic can last double that time. For example, you can buy a 20 gallon plastic bucket fermenter for $50 or less. If you primary for one month, 15 of those can produce 75 twelve ounce servings per night, a lot of beer for a small establishment. Too much/too little? Expanding is easy, because you only spent $750 on your initial fermenter setup.

If I'm way off somewhere, please tell me. I fully understand how difficult it is to come up with a real business plan and I'm sure there are people on this forum who know a lot more in this area.

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Hellfire Black IPA
Summer Night raspberry dark saison

Crooked Run Brewing: Traditional ales, local ingredients

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Old 08-10-2011, 04:31 AM   #2
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If it is successful, you are unequivocally setting yourself up for failure by limiting your original capacity for growth. Eliminating risk = eliminating both bad risk (failure) and the chance of successful growth.

I'd say go for it if you want it to be a hobby in your retirement. But if you want it to be a successful business that can support you and a family (which I assume is what you mean since you're right out of school), you need to plan and think a little bigger. Whether it's big or small, you're going to pay the same amount to advertise to get customers in. Whether it's big or small, you're going to pay for a license and insurance. You're going to need one bartender whether there's 1 or 10 people in there. See where I'm going with this?

I would recommend sitting down and calculating the cost of opening brewpubs of varying sizes, and figuring income based on varied levels of growth and sales. That's what a business strategist would do. If you don't have any experience, and are serious about making this a full-time business, I'd recommend investing in some help to plan it. Do you need detailed strategy and plans to be successful? No. But I guarantee you'll have a much higher chance of surviving than opening up and "winging it."

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Old 08-10-2011, 04:59 AM   #3
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I like the idea of cost cutting with plastic fermenters, but do you have a method of temperature control?

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Old 08-10-2011, 05:11 AM   #4
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Quote:
Originally Posted by pauljmccain View Post
I would recommend sitting down and calculating the cost of opening brewpubs of varying sizes, and figuring income based on varied levels of growth and sales. That's what a business strategist would do. If you don't have any experience, and are serious about making this a full-time business, I'd recommend investing in some help to plan it. Do you need detailed strategy and plans to be successful? No. But I guarantee you'll have a much higher chance of surviving than opening up and "winging it."
I definitely agree with you, there's a lot of research to be done, but like I said this would be 5-10 years down the road, so I have time. There's plenty of books to read, people to talk to, and experience to gain between now and then. I have absolutely no intention of winging it. I think I will most likely still end up considering hiring a lawyer and/or some consultants to help me with the business plan and licensing process when I'm ready to get serious.

Maybe you are more of a risk-taker than I am. I'd rather grow at a slower pace and not face as much risk; the restaurant business is risky enough. Brewpubs have lower failure rates than normal restaurants, but higher start-up costs. I'd be content with a smaller location initially, then build up a good reputation, and if I were to be successful, expand or open a second location.
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On tap at the brewery:
Logan's Song English pale
Hopsail Belgian single
Hellfire Black IPA
Summer Night raspberry dark saison

Crooked Run Brewing: Traditional ales, local ingredients

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Old 08-10-2011, 06:27 AM   #5
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Quote:
Originally Posted by bwomp313 View Post
I like the idea of cost cutting with plastic fermenters, but do you have a method of temperature control?
Yes. For the Belgian beers I am interested in brewing, the most important time for temperature control is the first 3-5 days of fermentation. You could build a fermentation chamber large enough to contain 1/3 of your fermenters at a time easily with one or two window AC units, a temperature controller, and some insulation. Remember, out of 15 that's only 5 plastic 20 gallon fermenters, not a problem at all. Buy 5 thermowells and 5 $25 thermometers with probes, and you can keep pretty good track of your fermentation temps. Adjust the ambient air temp on the temp controller until you get the best temperature for your beers in the chamber. It would take some tweaking, but you'd catch on. After 1-5 days of being in the chamber rotate the beers out, depending on the temps you want. Take the beers to another room where the ambient air temp is set a bit higher. You can mess around with the temps there, with additional insulation or cooling. Sounds complicated but it just takes some skill and practice...just like brewing. After some time it would become second nature to you.
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Peep my nanobrewery: http://crookedrunbrewing.com

On tap at the brewery:
Logan's Song English pale
Hopsail Belgian single
Hellfire Black IPA
Summer Night raspberry dark saison

Crooked Run Brewing: Traditional ales, local ingredients

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Old 08-10-2011, 07:45 AM   #6
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Best of luck. Definitely appeal to contacts who are educated in the world of business... that's often the difference between success and failure in these sorts of ventures -- there is no limit to the amount of research/planning that can go into these things.

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Old 08-10-2011, 01:24 PM   #7
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One thing you will definitely have to look at is whatever state you want to open shop may have a minimum threshold for how much beer you have to produce on a yearly basis. You have to produce that much beer, even if you do not sell it. So based upon the size of the front of house, you'll need to calculate how busy you will have to be, how many seats you physically can fill at a time, etc. to make sure you can meet the requirements of your license. One thing that may help is to set up in a state where brewpubs are permitted to sell growlers of beer.

I also echo some concerns about your plan to start small. The smaller your front of house the fewer people you can support at any given time (especially the busy times you need to capitalize on) which means you either need customers to spend more per customer, have high turn over during peak times, and/or stay busy all the time. If your business grows and you need to expand, it's going to be preferable to keep your anchor location and expand it or start a new location than completely move and lose your original space where people know how to find you.

You'll definitely have to find out how many people you can realistically expect in a given size of pub and how much they will spend to determine advertising, brewery production capacity requirements, etc.

You don't have to have an MBA to start a business but I would encourage you to sit down at a public library or preferrably a college library and read the marketing and small business books to get some knowledge on starting up.

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Old 08-10-2011, 02:29 PM   #8
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I would actually suggest doing this now instead of waiting 5-10 years. There are a lot of issues that go along with starting a business and having a family, mortgage, 2 dogs and a car payment will definately make a difference in deciding to make a move. I am not advocating being reckless (you need to get your business plan in shape and as someone posted... figure out your fixed and variable costs, marketing plan, etc), but all those things can prevent you from taking that risk in the future. If you do it now, and it fails, you will be hurting for a while... but it will only be you. You will also be able to put that on your resume that you started and ran a business.

I have had plenty of new business ideas, the skills to do it, and even could start a business from my current job.... but you end up saying:
"how am I going to keep insurance for a wife and 3 kids?"
"how will I pay my mortgage for the next year?"
"even if i can scrape by for a period of time, what do I do if it fails (I can scrape by for only so long)?"
"if I take on investors to solve all the above problems, will it still be worth it if I don't own enough of the business?"

I am not saying that being a yound single guy solves all the problems, but it gets more complicated the further along you are in life.

Just something to think about.

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Old 08-10-2011, 08:30 PM   #9
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Well I'm only 23. I just finished college and am still applying for jobs at the moment. There's no way a bank is going to give me a loan, my friends can't invest anything because they are all 20-somethings in entry level jobs, and I don't have the money, experience, or knowledge.

That's a good point about starting soon, but it just isn't possible for me.

As for opening a larger place, you guys are probably right. It's just so complicated and expensive, makes my head spin.

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Peep my nanobrewery: http://crookedrunbrewing.com

On tap at the brewery:
Logan's Song English pale
Hopsail Belgian single
Hellfire Black IPA
Summer Night raspberry dark saison

Crooked Run Brewing: Traditional ales, local ingredients

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Old 09-26-2011, 10:08 AM   #10
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Go taphouse with a larger front than you can carry beers everyone knows they like and augment with your own beers

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