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Thread: Help Brewing Family!

  1. #1
    Join Date
    Jul 2006
    Posts
    105

    Help Brewing Family!

    hey everyone,

    I just got off the phone with a lawyer, and He scared the shit out of me.

    He told me my plan (based on FFF's business plan) goes into the securities world and would lead to all kinds of fun crap. Like, if someone owns 10% of an establishment with a liquor license in Colorado needs to be fingerprinted.

    I need to raise $500,000 and it would appear if I do it with "shares" idea, I have to deal with Big Brother.

    Can anyone help me figure out how to get monies raised without all the hassle. I know that if any of the angel investors I know, would want to help me out, they don't want to be inked by the man.

    HELP PLEASE

    Thanks for you insight,

    John

  2. #2
    Join Date
    Jun 2003
    Location
    Louisville, KY
    Posts
    993
    The short answer: Don't let anyone scared of the man buy more than 9%
    Cheers & I'm out!
    David R. Pierce
    NABC & Bank Street Brewhouse
    POB 343
    New Albany, IN 47151

  3. #3
    Join Date
    Jul 2006
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    105
    I guess that would be one way of going!


    John

  4. #4
    Join Date
    Nov 2002
    Location
    Polson, Montana, USA
    Posts
    1,101
    Hi John,
    Are you doing a private placement or a public stock offering?
    Dave

  5. #5
    Join Date
    Oct 2002
    Location
    Richmond, VA
    Posts
    226
    I'm surprised that Colorado asks for fingerprints. I suppose that has to do with criminal background checks and that doesn't surprise me. Here in Pennsylvania, all of our limited partners had to go through criminal background checks - regardless of their level of ownership.

    You might as well get used to this kind of intrusion by "the man."

    Ask your attorney about a Limited Partnership structure. I really doubt there's anything you can do if you plan to raise money with investors/partners, but there may be a way to structure a Limited Partnership wherein the General Partner (you) own 60% of the company while you sell 40% to Limited Partners in a private offering. If you limit each Limited Partner to 5% ownership, then you'll need eight Limited Partners. That will excuse each of your partners from inky fingers.

    Of course, you'll need to figure out how much of the $500,000 you want to raise from investors/partners and how much you can secure in financing. From there, you'll have to figure out how much each Limited Partnership unit is going to cost and weigh that against what you think potential investors/partners would be willing to shell out.

    "He told me my plan (based on FFF's business plan) goes into the securities world and would lead to all kinds of fun crap."

    I think at some point, during the Great Three Floyds Business Plan Rush of '07, I warned people against copying or basing their business plan on Three Floyds or anyone else's business plan. Their business plans worked for them, but it doesn't automatically mean it's going to work for anyone else. If I were you, I'd seriously re-examine every point of the business plan that is "based" on Three Floyds. Ask your own questions and come up with your own answers.
    Mike Hiller, Head Brewer
    Strangeways Brewing
    2277-A Dabney Road
    Richmond, VA 23230
    804-303-4336
    www.strangewaysbrewing.com

  6. #6
    Join Date
    Sep 2006
    Location
    Montrose, CO
    Posts
    147
    Good Morning John--

    I am thinking get another lawyer!

    Not knowing exactly your structure it still sounds like he has Colorado local liquor laws and state regulation and federal requirements confused. But you should never end up like you need a change of pants after talking to your paid for advisor.

    If he does not know enough or communicate clearly enough to make the steps comprehensible and "doable" to you-- he is not going to be an asset in your quest.

    I don't know everything but I know enough to trust folks that don't make me feel stupid and not the ones who inspired fear or confusion

    Enjoying the snow?
    Andrea

  7. #7
    Join Date
    Aug 2006
    Posts
    28
    Even small investors (less than 10%) are subject to some investigation here in Michigan. They do not need to be fingerprinted, and I honestly do not know the extent of the investigation (background and criminal history I would assume at the very least) done on them, but there is some. The other possibility is to have your lawyer draft promissory notes for those who do not wish to undergo as extensive of an investigation.

    Of course, promissory notes unlike stock, need to be paid back at a certain time at a certain interest rate, so that depends on how profitable you think your venture will be and what you can offer investors.

  8. #8
    Join Date
    Jun 2006
    Location
    San Antonio, TX
    Posts
    132

    Securities Law

    Unless there is some Colorado securities law, my understanding is that you can make an offering of investment to up to 35 people before you need to register with the SEC (which a big hassel requiring even bigger dollars).

    It is important to understand what constitutes an offering of investment. You talking about your project to someone who happens to have a lot of money is not an offer. You talking to them about returns on investment should they put in, uses of funds, how much equity in exchange for $XXX, etc... that is an offer. So... be careful who you offer to. I hope this doesn't come off as rude, but if you haven't rounded up the money you need by the time you've offered to 35 people, then either your business plan or your pitch isn't good enough and needs some work.

    The 10% thing with your state alcohol board isn't anything out of the norm. We don't require fingerprints in Texas, but there is still a background check for owners over 10%. So long as you don't have any ax-murderers or terrorists funding your project, you should be fine.

    I also second being careful about "basing" your plan on someone else's. I read tons of business plans while writing mine - but your plan should be based on the vision for your place, and nothing else. It is great to get ideas from other plans, and to bounce your ideas off this message board (a thread a started a few years ago was key in my development) - but don't fall into the trap of copy and pasting someone else's, and thinking a few minor tweaks can make it your own. If nothing else, the process of building your plan from the ground up will arm you with the understanding you need to eventually be successful.

    Scott
    Scott Metzger
    Freetail Brewing Co.
    San Antonio, TX

  9. #9
    Join Date
    Jan 2006
    Posts
    91
    actually the lawyer is right.

    1. As I recall it, anyway, the FFF documents I saw could definitely be determined by the feds to be an offer of securities requiring registration with the SEC. Might also be doable as a Private Placement but you have to toe some tricky lines, and pay good lawyers real money, to do it right. [ butcher scott is right as to 35 offerees being the magic number I believe, his post wasn't up when I posted mine, when I say "the lawyer is right" I'm not disagreeing with Butcher Scott]

    side note--I may be remembering it wrong, but I remember the Three Floyd's plan as being something to raise capital for a brewpub only, they having already built and operated successfully a decent sized production brewery. While it was interesting I didn't see how their business model would be of much use to somebody building a brewpub (or a production brewery) from scratch...they already had production, and a hell of a reputation. But as I said maybe I remember wrong...

    2. Colorado law does indeed require criminal background check of everyone owning, directly or indirectly, 10% or more of any liquor licensed enterprise. This includes a tavern license, a hotel and restaurant license, a brewpub license, a liquor store, a manufacturer's license--any Coors family member who owns 10% has his or her fingerprints on file over at the Department of Revenue at 18th and Pierce in Lakewood, [parenthetically the same building and agency (but different office) where the scion lost his driver's license a couple years back under Colorado's Express Consent law]--and even a grocery store's 3.2% beer license.

    Historically this comes from the fact that the liquor laws came in with the end of prohibition which, under the Law of Unintended Consequences coincided with organized crime's enormous inroads into the alcohol business, something the individual states were very concerned with when they tackled the issue post-Repeal.

    Of course as Andrea pointed out, the Colorado STATE legislation as to backgrounding 10% owners has nothing to do with whether or not registration of the offering as a security is required under federal or state law, but they were both proper topics for a competent attorney to raise in the meeting. It may not be the lawyers fault that ncnw2001 has them conflated in his post.

    This IS a highly regulated industry....
    Last edited by uptown brothers; 06-05-2008 at 09:47 AM.

  10. #10
    Join Date
    Sep 2007
    Location
    McCall, Idaho
    Posts
    337
    Idaho ABC requires prints for any beer, wine or liquor license applicant, retail or wholesale. As you may know TTB F 5000.9 asks some personal questions that could be uncomfortable for some people.
    Your not alone but that doesn't help U....sorry.

    If you are in a real bind and Mike's suggestions are not feasible maybe Alexis is on the right track with a second opinion from a different lawyer.
    Good luck!
    matt g

  11. #11
    Join Date
    Jul 2006
    Posts
    105
    Quote Originally Posted by GlacierBrewing
    Hi John,
    Are you doing a private placement or a public stock offering?
    Dave
    I was planning a private placement.

    Quote Originally Posted by Butcher Scott
    I also second being careful about "basing" your plan on someone else's. I read tons of business plans while writing mine - but your plan should be based on the vision for your place, and nothing else.
    I just used the investment payout schedule as a footprint for mine. My business plan is based on an assload of research, and some pretty helpful business plan software.

    Quote Originally Posted by AlexisScarlett

    If he does not know enough or communicate clearly enough to make the steps comprehensible and "doable" to you-- he is not going to be an asset in your quest.
    That is what I was thinking after I got off the phone with him. This was a interview phone call. He hasn't seen my BP or anything. But if what he says is true about the investors, thing then I need to go a different direction.

    Enjoying the snow?
    Hell down here it's been gone for about a month or so! now we are dodging hail and tornadoes!

    Quote Originally Posted by practicalpants
    Of course, promissory notes unlike stock, need to be paid back at a certain time at a certain interest rate, so that depends on how profitable you think your venture will be and what you can offer investors.
    I was thinking very hard about this. I think this is the way around all that crap. But I want people to see this as a legitimate business venture and not just a personal loan for me.

    Quote Originally Posted by uptown brothers
    This IS a highly regulated industry....
    I realize this, and accept it, but I don't want to have family and friends have to jump through hoops because they believe in me and what I am doing.

    Thanks family,

    John

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