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DPBISME

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So I have worked for myself but never started a complex business and I was wondering what you folks out there thought about this idea to open a 7-10 Barrel Brewery…


  • Find a location.
  • Find some people who want to play
  • Anybody who play buys equipment for the brewery and leases to the company
  • The brewery opens and we hope; makes money to pay for itself and a little profit.
  • Should the thing go “Tits-Up”, “down the tube”, “all to hell”… at least most of the original investment for the participants is protected…

I mean if everything is leased they cannot take it away…

Simple idea?

Practical idea?


I am short the money I need to do this alone so I was trying to figure out ways around the deficit and protect peoples hard earned money…

I would like to do this somewhere between Washington DC and Winchester VA and I would eventually like to work there… I have been doing this crap for 20 years and I am about done with it...

Hell,,, I am bored at work so I figured I'd ask the question...
 
The higher the capacity you can get on the outset, the better your chances of turning a profit.
 
Sounds like a recipe for disaster. Do some more research and talk to a lawyer. Brewing beer is the easy part....selling it is the hard part.
 
This is sort of a version of a common business structure. The business operates the business and all the property is owned separately by the owners as an LLC and leases it to the operational business. Usually, at least at the small business level, the owners of the operating business also own the LLC so it's almost impossible to have a conflict. In your situation, you certainly get the benefit of leasing the equipment but you also run the risk that somebody wants to impose a sharp increase on the lease payments and could, no pun intended, hold you over a barrel. E.g. the lessor of the boil kettle might negotiate a higher lease payment on a lease renewal than you want to pay. What are you going to do? Not have a kettle? Lose production while you try to source another one? You're going to pay. You also run into all sorts of problems where you need to modify equipment, make repairs, etc. Who pays for that? Can the lessor stop you from making alterations to the equipment? What happens when equipment breaks, wears out or needs to be replaced for expanded production? Are you giving your friends back used fermentation tanks? If you go belly up, what are they going to do with the equipment? Sell at auction?

An alternate idea is to let your investors come together and form a brewery and operate it as a 100% contract brewery and lease all the production capacity to your separately owned brewery. At least then if you go belly up they could lease out to other brewers or sell off a whole functional brewery.
 
Sounds like a recipe for disaster. Do some more research and talk to a lawyer. Brewing beer is the easy part....selling it is the hard part.

Well then just opening a brewery with multiple or investors would also be a bad idea I guess?

I know a little about buying equipment and then selling it to a leasing company so you can lease it back from them... it gives you operating capital... I just figured that instead of a leasing company I could do the same thing with investors/partners and at least partially protect everyones investment...

...and well the goal is to sell it and have a successful business, that is why I put "Location" first.

Thanks,

DPB
 
Sounds like a recipe for disaster. Do some more research and talk to a lawyer. Brewing beer is the easy part....selling it is the hard part.

^^^^^^^WISE WORDS SPOKEN

To quote on of our own: I can make a darn fine cheeseburger, but I'm not about to take on McD's. Ain't about the beer.


...selling it to a leasing company so you can lease it back from them... it gives you operating capital...
Pretty sure you'd still have to capitalize it.

And the thing about protection, as RAM said, if everyone is a separate entity, conflicts of interest compound. Gets real messy, real quick. Denny didn't say not to do it, he just said to do more research and talk to a lawyer.
 
This is sort of a version of a common business structure. The business operates the business and all the property is owned separately by the owners as an LLC and leases it to the operational business. Usually, at least at the small business level, the owners of the operating business also own the LLC so it's almost impossible to have a conflict. In your situation, you certainly get the benefit of leasing the equipment but you also run the risk that somebody wants to impose a sharp increase on the lease payments and could, no pun intended, hold you over a barrel. E.g. the lessor of the boil kettle might negotiate a higher lease payment on a lease renewal than you want to pay. What are you going to do? Not have a kettle? Lose production while you try to source another one? You're going to pay. You also run into all sorts of problems where you need to modify equipment, make repairs, etc. Who pays for that? Can the lessor stop you from making alterations to the equipment? What happens when equipment breaks, wears out or needs to be replaced for expanded production? Are you giving your friends back used fermentation tanks? If you go belly up, what are they going to do with the equipment? Sell at auction?

An alternate idea is to let your investors come together and form a brewery and operate it as a 100% contract brewery and lease all the production capacity to your separately owned brewery. At least then if you go belly up they could lease out to other brewers or sell off a whole functional brewery.

I was looking for potential flaws in my design and was not seeing them…
Getting with a lawyer and tax man might not be a bad idea as things have probably changed in the 20 years since I ran manufacturing companies…
 
Oh one mere note: If I ubnderstand the law in Virginia,,, like North Carolina.... you can basically have a Brewpub (a brewery) with out service food so you can have a "bar"...

The capital expense of a kitchen is gone.

DPB
 
Sounds like a recipe for disaster. Do some more research and talk to a lawyer. Brewing beer is the easy part....selling it is the hard part.

"recipe for disaster" I have that recipe... and we drank it anyway...
 
Hahaha...but would you PAY to drink it? That's the question at hand.

Funny you should ask.... everyone in a while I make a beer I will not/cannot drink...

I never throw it away:

Twice I served them at a big party and at each party some came up to me and told me it was the best beer they ever had... I offered them GROWLERS of it (I have about 75 of them)

Recently I got three full Corney Kegs from the guy I bought my Keezer from...

Three kegs of this syrupy sweet Ale that I could not even dry out by mixing it with BUD…

Well I just took that to a party last week and now I have a place to put my KOLSCH that is in the Fermentation Chamber…

Now I understand when WE open OUR brewery I will have to quit playing around but until then…. What ever is in the Pantry,,, what ever malts are in the house, and What ever yeast we have laying around... goes into the beer...
 
I've said this before, and I'll say it again. Small businesses, no matter what they are selling or what service they are providing, statistically fail about 68% of the time when they are financed. I would venture to say that the same stat for breweries is even higher.

Small businesses that ARE NOT financed only fail at about a 31% rate.

The reason is simple - if your brewery is finanaced, you have to make 10-15% more profit to compete with the ones that are not, to pay your interest payments. A new business is hard enough without having to be in that kinda hole.

I would urge you to either start small and cash flow the whole thing, or work in another industry and save up enough money to open your brewery with cash. I would also urge you to volunteer at a functioning brewery for at least a year before you even start to put together your brewery's business plan.

It is nice and romantic to think that you could open a brewery and make enough money to meet or exceed your current lifestyle, but the reality just doesn't bear out the dream. Don't get yourself into a nightmare, PREPARE properly to open a brewery. Don't just do it because you *THINK* it will work, have a detailed plan and roadmap that gives you confidence that the numbers *WILL* work. Go to a local brewery and offer to work for free if they'll rotate you around to learn all aspects of brewery operation - ESPECIALLY the business end. An MBA that has no experience in brewing probably has a better chance of making it in the industry than a great brewer who has no business experience, and that is NOT an exageration!

PREPARE PREPARE PREPARE, DON'T FINANACE, and pay super attention to the most minute detail in your business plan. That's the formula for success!

Good luck!
 
Well then just opening a brewery with multiple or investors would also be a bad idea I guess?

I know a little about buying equipment and then selling it to a leasing company so you can lease it back from them... it gives you operating capital... I just figured that instead of a leasing company I could do the same thing with investors/partners and at least partially protect everyones investment...

...and well the goal is to sell it and have a successful business, that is why I put "Location" first.

Thanks,

DPB

My point is that you haven't thought this through. You need to do a lot more research. You have a great "go get 'em" attitude, but you need a lot more than that to be a successful brewer/brewery.
 
My point is that you haven't thought this through. You need to do a lot more research. You have a great "go get 'em" attitude, but you need a lot more than that to be a successful brewer/brewery.

Amen to that.

You have just barely scratched the surface. Have you worked in a micro yet? If you have not that should be the first thing you do . Explain your situaiton to a local micro and get some hand on experience. As was stated, the brewing is the easy part. It is the rest of it that wears you down. We always say around these parts if you want to make some money operating a micro, make certain that you have a ton of money going in...
 
Interesting idea for sure. Here in Wa there is a co-op brewery you can buy into ans become a stake holder in the company and contribute as much as you like. Im thinking about hopping(pun intended) on
 
what is the largest quantity of beer one person could reasonably make in a day?

Well, no one makes beer in one day, but with enough equipment and automation, one person can make a metric sh**-ton of wort in one day. Thousands of barrels. But you aren't going to start a brewery with no employees, so what's the point of the question?
 
TopherM said:
Well, no one makes beer in one day, but with enough equipment and automation, one person can make a metric sh**-ton of wort in one day. Thousands of barrels. But you aren't going to start a brewery with no employees, so what's the point of the question?

Salsa
 
Me to then i end up wondering how many leg kicks i can take when im drunk
 
To find out how much beer one person can brew in a day. Nothing more. I'm not considering opening a brewery. I ponder things I don't know.

It would really depend on the equipment... how much work is don manually... I saw someone on the form talking about his new LARGE brewing system... but I don't think he upgraded his Grain Mill because he was complaining about crushing grain for six 6 hours with the one he had...

So like anything the more automation and if all the compenents of the system are sized correctly I would think it would not take much more than brewing at home... but if the systems parts are not sized correctly you will have a bottleneck in production....

This may be ok if the cost for the correct equipment is out of your price range and the bottleneck is minimal...

So using the grain example: lests assume that if your system was sized correctly you could crush the grain in an hour... but you have a smaller grain mull and it takes you two hours.... that may be ok if for some reason you can't afford a lager one,,, or the larger one will not fit in you brewery...
 
So many questions... so little time...

SO after years of working my ass off I finally am at a point in my life I can make a change.

I have not done anything to further this "plan" besides this post...

I have assisted in starting a company one and understand that there is a lot to it.

BUT: LIKE I SAID it the original post... I was "bored" at work and thought I would toss something out... (I am contractor on a government job on a Friday working alone because all the government people called in sick:::: Happens every Friday... Monday also... when government workers need time off they burn their generouse sick leave:::: YOUR TAX DOLLARS AT WORK!)

you all have been very helpful;;;
 
Don't try to do it yourself. Get a management team together that includes at least one business mind, one legal mind, and one process/mechanical mind. You have to be willing to cede business decisions to the business mind, legal decisions to the legal mind, and processes to the process mind (all with ultimate veto, however). You can certainly be one of the minds, but you need the other two (at least) to make sound judgments. But you have to know what you don't know. Doesn't hurt to have someone with a background in bio-chemistry at your disposal, either. Most successful businesses I've seen (brewing or otherwise) have a management team with varied backgrounds and strengths.

If you want to do the model you outlined in the OP, make sure that the people leasing the equipment to you have substantial skin in the company as well. That'll make them less likely to hold you over a barrel for a kettle lease.
 
Don't try to do it yourself. Get a management team together that includes at least one business mind, one legal mind, and one process/mechanical mind. You have to be willing to cede business decisions to the business mind, legal decisions to the legal mind, and processes to the process mind (all with ultimate veto, however). You can certainly be one of the minds, but you need the other two (at least) to make sound judgments. But you have to know what you don't know. Doesn't hurt to have someone with a background in bio-chemistry at your disposal, either. Most successful businesses I've seen (brewing or otherwise) have a management team with varied backgrounds and strengths.

If you want to do the model you outlined in the OP, make sure that the people leasing the equipment to you have substantial skin in the company as well. That'll make them less likely to hold you over a barrel for a kettle lease.

Ya, Funny... the "redd"... "seemed like a good idea at the time" at the bottom of his post... sort-a like this conversation
 
There are approximately 2,100 breweries in the USA. There are approximately 1,200 breweries in planning right now.
 
There are approximately 2,100 breweries in the USA. There are approximately 1,200 breweries in planning right now.

Lots of talk of a "bubble" in the pro brewing world. I follow quite a few nanobreweries and they are successful in the short term. The big question is where will they be 3-5 years from now? A few will be forever nano's since it is more of a hobby but I see many closing because they can't move forward due to lack of capital. It has been proven that you can start a nano for 10-20K but then what?? Hope that you can get a loan from a bank? Don't get me wrong..I love the nano concept as a side business. I just wonder what is going to happen when breweries can't get raw materials (hops) and/or financing for expansion?
 
I wish the price of beer would come down. The distribution seems to set the prices.The brewery near me sells their beer in the market across the street for the same price of a six-pack that got shipped across the globe.
 
I wish the price of beer would come down. The distribution seems to set the prices.The brewery near me sells their beer in the market across the street for the same price of a six-pack that got shipped across the globe.

If it makes you feel any better there is a local brewery that makes mostly very mediocre beers that sells six packs for more than beer shipped across the globe.
 
I wish the price of beer would come down. The distribution seems to set the prices.The brewery near me sells their beer in the market across the street for the same price of a six-pack that got shipped across the globe.

Here in CA breweries can self distribute but craft beer is still expensive. Roughly 10 bucks for a sixer, plus CRV, plus sales tax. I wouldn't blame the breweries though...very few make a lot of money. Must admit though that since I have been homebrewing I rarely, and I mean rarely buy commercial beer. Maybe a six pack and a few bombers in the last six months..? Too expensive!!
 
Here in CA breweries can self distribute but craft beer is still expensive. Roughly 10 bucks for a sixer, plus CRV, plus sales tax. I wouldn't blame the breweries though...very few make a lot of money. Must admit though that since I have been homebrewing I rarely, and I mean rarely buy commercial beer. Maybe a six pack and a few bombers in the last six months..? Too expensive!!

I started my visiting of the 300 breweries in the US in California,,, I used to go to Gordon Biersch when there was just "ONE"... Always had a Celebrator (like the Southern, Northern, Midwest, Mid-Atlantic Brewing, etc., News) in the car… Later I moved East and started traveling and I visited most of these breweries on business trips so someone else paid for the beer… (a guy has got to eat ya know)…

BUT I might have to disagree with you a little… I mean sure a 11 gallon batch (what I brew) is cheaper than buying it (now that I do All-Grain) but we night also want to add in the $4000 I have spent on TOYS to brew and serve this beer… I mean I need a garage to put the 6 tap Keezer, brewstand, 20 Corny Kegs, bottles and all the other C$#P…..

Now… after you have spent this kind of money on your hobby YES,,, it is a bit silly to buy special beers when you can now make them yourself… HA!!!!

Hell! I have confused myself,, I am not sure I agree or disagree with you… I need a beer!
 
Here in CA breweries can self distribute but craft beer is still expensive. Roughly 10 bucks for a sixer, plus CRV, plus sales tax. I wouldn't blame the breweries though...very few make a lot of money. Must admit though that since I have been homebrewing I rarely, and I mean rarely buy commercial beer. Maybe a six pack and a few bombers in the last six months..? Too expensive!!

10 bucks for a sixer seems excessive. I hate to feel taken advantage of. Perhaps if they charged a fair price they would have more sales and make a lot of money? As a homebrewer I am always scrutinizing prices.

One thing I noticed the other day is how breweries (or perhaps its the distributor or retail) likes to set the same price for all of a breweries beers. You can have one ipa with massive abv and tons of hops, sitting next to a light pilsner (from the same brewery) with the same outrageous price for both. Obviously something is wrong here.
 
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