Input on Brewery Incubator Business Plan

[BrewIncubator]

Hi, I'm hoping to get some input from this forum on a business plan I am developing to open a brewery "incubator". I suspect many of you are exactly my target market so appreciate your input.

I am looking to build a working microbrewery and offer leases to aspiring commercial brewers. Up to 4 individuals would operate an independent startup brewery on the premises under an "alternating proprietorship" model. In addition to access to the facilities, each brewery owner would be given consulting services to help navigate the brewer's licensing process and bring their business to reality. At this time I'm not planning to open a taproom but would have space for special events and retail sales at the discretion of the brewers. Each brewer would be responsible for their own distribution (self distribution is allowed in my area).

Benefits for the brewers:
-drastically reduced startup costs (likely <$10K)
-reduced overhead expense
-consulting services, community support of other brewers
-prove product in the marketplace with low commitment, easy access to capital when ready to expand into own space

Costs:
-responsible for costs of marketing and production
-monthly lease rate in the $2-3K range

The brewery would likely feature a 5 barrel system and enough fermenters to allow each brewer to brew up to twice per week, producing up to 500 barrels/year. There would also be a small experimental system (1/2 barrel) to test new recipes.

How attractive do you guys think this arrangement is for a potential brewer? If you were considering making the jump to commercial brewing how interested would you be? FYI, I'm located in NC.

 

[zchwlsn]

This is an interesting concept. would it be a similar concept like renting a hair stylist booth? Is that kinda your idea?

 

[BrewIncubator]

That's a pretty good analogy.

There are a few of these businesses that have popped up around the country. I think in most cases it has been initiative by an individual interested in starting their own brewery but wanting to reduce startup costs. In my case I'd just be an investor/facilitator (and of course consumer).

 

[broadbill]

Off the top of my head: Where is the money coming from to startup the incubator? CapEx is going to be high, what is the value to the investor?

Assuming you can fund the equipment purchases, will the incubator generate sufficient cash flow from the lease to cover operating costs and profit for the investor (otherwise, who would invest in that?).

Who is the brewing professional and how will they be compensated for their consulting work? Brewing is more that just making beer, will you have business planning, finance, supply chain management people also consult? Who is going to serve as the project manager, coordinating the operations of 4 independent breweries all trying to do their own thing?

What happens when one brewer pulls out/folds, the incubator cannot maintain operations, sabotaging the other 3 brewers (ouch!-that is alot of risk to take on). Conversely, what happens when one brewer is widely successful and wants to kick out the other 3 operations to have the space to themselves?

Great idea in theory, but I don't see an operations plan nor a way to buy all of that equipment (which is expensive to start with, not to mention you are scaling for 4x the capacity of your typical startup brewery).

 

[zchwlsn]

Off the top of my head: Where is the money coming from to startup the incubator? CapEx is going to be high, what is the value to the investor?

Assuming you can fund the equipment purchases, will the incubator generate sufficient cash flow from the lease to cover operating costs and profit for the investor (otherwise, who would invest in that?).

Who is the brewing professional and how will they be compensated for their consulting work? Brewing is more that just making beer, will you have business planning, finance, supply chain management people also consult? Who is going to serve as the project manager, coordinating the operations of 4 independent breweries all trying to do their own thing?

What happens when one brewer pulls out/folds, the incubator cannot maintain operations, sabotaging the other 3 brewers (ouch!-that is alot of risk to take on). Conversely, what happens when one brewer is widely successful and wants to kick out the other 3 operations to have the space to themselves?

Great idea in theory, but I don't see an operations plan nor a way to buy all of that equipment (which is expensive to start with, not to mention you are scaling for 4x the capacity of your typical startup brewery).

Exactly my thoughts and concerns too

 

[BrewIncubator]

I appreciate the candid reply.

Where is the money coming from? I would be the investor. Funds would come from my savings and partially supplemented by each of the brewers who would have a modest outlay requirement. Once up and running my costs would be maintaining the equipment and the lease and I would pocket the balance between the monthly leases I charge for using the space. There may also be an opportunity to get a cut of the beer sales but I'm sensitive to also ensuring the brewers have enough margin to be viable.

I probably oversold the consulting services in my initial post. The model would really rely on the brewers being cooperative and sharing information with each other to help facilitate the success of one another. This would require the right personalities...they are partners in one respect but competitors at the same time.

Brewers pulling out is certainly a risk. The flipside of a successful one wanting to kickout the others would be something prohibited in the contract.

The logistics are admittedly tricky. There would be a contract in place that would dictate the particular day someone would have access to the brew day equipment. Fermentation vessels would be segregated.

If you could get past the above, what level of capacity feels right to you? Again, I'm sensitive to each brewer having enough capacity to scale their individual business to a reasonable level. The equipment would crank out more volume for the given capacity than a typical brewery because the division of labor would allow for more total brew days.

 

[SMPress]

We have one here in VA, and it is the basic idea, they opened specifically to do something similar. My understanding is they do two different options, and the second may not be anything you are interested in. One, the lease like you are talking about, and the second is that they do the brewing for you on a contract basis, your recipe, marketing, labeling, whatever, but they brew it, qand pass it off to you once bottled. It seems to be a very viable business, not that I know their books, but they have been around for a couple of years now...

I say go for it, you cant win if you don't try...

 

[broadbill]

I appreciate the candid reply.

Where is the money coming from? I would be the investor. Funds would come from my savings and partially supplemented by each of the brewers who would have a modest outlay requirement. Once up and running my costs would be maintaining the equipment and the lease and I would pocket the balance between the monthly leases I charge for using the space. There may also be an opportunity to get a cut of the beer sales but I'm sensitive to also ensuring the brewers have enough margin to be viable.

I probably oversold the consulting services in my initial post. The model would really rely on the brewers being cooperative and sharing information with each other to help facilitate the success of one another. This would require the right personalities...they are partners in one respect but competitors at the same time.

Brewers pulling out is certainly a risk. The flipside of a successful one wanting to kickout the others would be something prohibited in the contract.

The logistics are admittedly tricky. There would be a contract in place that would dictate the particular day someone would have access to the brew day equipment. Fermentation vessels would be segregated.

If you could get past the above, what level of capacity feels right to you? Again, I'm sensitive to each brewer having enough capacity to scale their individual business to a reasonable level. The equipment would crank out more volume for the given capacity than a typical brewery because the division of labor would allow for more total brew days.

So basically you are going to take on all of the risk of starting a brewery (e.g. buy the equipment, maintain the equipment, manage the operations of the facility, etc.), and offer it to brewers who have to make no such investment. They basically get to "pay to play" and operate as a microbrewery for the cost of a monthly lease, which they can (and will!) break at any point in time, leaving you with empty brewing capacity that will take, what...1-4 months to fill?

The idea will be that you need to keep enough capacity for long enough (from folks who don't have enough money to start a brewery in the first place) to break even on the equipment where you can then make money on the leases. How long will that be?

Sounds too complicated to me. Why not just invest in a start-up microbrewery that has a solid business plan and revenues? That would be a risky enough play in itself...

 

[brewcat]

What are your startup costs?

Who is in charge of grain ordering?

Who is in charge of cleaning?

Why pay $2k on a lease I could use towards my own building and equipment? At least then I have something I can resell. Also when I out grow your place I will still have to pay for all that to expand.

Seems the idea needs kicked around more.

 

[madscientist451]

The plan is a little thin. What is the total investment? How much is borrowed? What is the cash flow needed to cover all the bills including the taxes and insurance? How much is the reserve fund? Will you have additional credit available in case there are problems? How many fermenter tanks? How many brite tanks? I would think each brewer would have to have their own designated tanks, otherwise, the scheduling problems would be severe. Are you going to have 4 separate loading docks? 4 forklifts? How are you going to handle having 4 semi trucks pull in at once, and the dock is blocked with one of the tenants loading out kegs of finished beer?
Each tenant will have to keep track of their own grain purchases and how much beer goes into the brite tank for tax purposes so how will that be handled? What will you do if one of the brewers doesn't pay their tax and the government moves to shut you down? What is your exposure if someone gets injured on the job? How about if someone says they got sick from beer w/bacteria? You going to test all the beer leaving the brewery for quality control? How will scheduling conflicts be resolved? What if one brewer infects the brewery with Brett/Pedio? Who will pay for a security arrangement to make sure one of the tenants isn't ripping off the others?
This whole thing would make a lot more sense with a tap room/bistro with like 20-24 taps and the customers would always be assured of something new. Also, the tap room would be a place for you to make some money for yourself.
I've had my own business before (not beer) and learned many lessons the hard way.
I've thought about the small brewery business concept on and off for several years and I'm pretty sure I would not want to be a part of what you have proposed. Its just too risky and there are many better ways that I could open a brewery without all the hassles listed above.
.

 

[MaxxKat]

Have you checked out Rocky Mount Mills (in Rocky Mount)? They've started an incubator program. Might be a source of info. Good luck!

 

[Xernex]

Have you checked out Rocky Mount Mills (in Rocky Mount)? They've started an incubator program. Might be a source of info. Good luck!

There's an incubator in Rocky Mount??? hrmm guess I know what I'm checking out next time I go home.

 

[oceanic_brew]

If I were to do this in my area of Halifax NS, I would be concerned that this business could only operate up until the current market boom plateaued. From the standpoint of the potential Brewers, the idea would be to operate at your facility only long enough to eventually build the reputation big enough to acquire their own space and expand. When this place gets to point where opening up another brewery isn't an option in a such a saturated market than the incubator will have no worth.


That's my only thoughts and only applies to here and my zero experience