Hello everyone. I have been reading through the forums for a while now and first off I need to say thank you all for the education so far! Between this forum and my local homebrewer’s club, my knowledge base has grown exponentially. I’ve been homebrewing with my father for about 2.5 years and we’ve both read several of the typical books, but nothing beats hearing it from people who have done it.
The reason for my post is to float my idea for a brewpub (yes… another Brewpub startup post… but please bear with me!) and get feedback… kind of a smell test so to speak. If anyone would ever been willing to discuss things further in a sort of an informal “pre-consultant” type of way, I’d be more than appreciative.
So here we go…
Market Information
The Brewpub would be located in a southern/southwestern major metropolitan area (over 1.5 mil residents). The immediate market is currently served by two brewpubs. One is located in the art district, which is generally less affluent and demographically speaking would have a higher propensity towards American lager beers than my target location. I don’t know their production, but they have large (30 bbl) serving tanks behind the bar and what appears to be a large brewhouse. The other brewpub is located approximately 15-20 miles outside of the city in a suburb. This second brewpub uses a 10 bbl Bavarian system and from conversations with the manager only produces about 300-500 bbls per year (but they make very good brews).
Also in the city, and in my target location, is a major beer bar franchise that carries ~75 beers on tap and another 150 or so in bottles at any given time. This would probably be my main competitor (although I’d like to think that we would be partners one another in the fight in getting people to drink good beer). I know the General Manager of this establishment, and they do VERY good business.
My target location would be what could be considered the hub of major business locations (in my city, most major companies are located along a NW corridor rather than downtown) and where the upper-middle class population resides. Also in this area is a major university (enrollment of about 30k students), although most students do not live on campus (large commuter student population).
Personnel Background
Aside from homebrewing, I have no brewing industry experience – nor do I have any restaurant or bar experience. I’m an Economist working for a major oil refining company (which in terms of production processes isn’t that far from brewing – but I don’t count this experience as a plus). I have some exposure and working knowledge of chemical engineering – but not enough to dare to presume I know it. I have a good friend who is a chef with several years of experience in restaurant management who would have total control over the menu and restaurant operations. My role would be as President/General Manager. I would plan on hiring an experienced Brewmaster and a Bar Manager. My father (who would be a 50% owner along with myself) would serve as an “assistant” Brewmaster of sorts, as part of this idea came from our love of homebrewing and wanting to brew for a living. Appropriate control would be given to the head Brewmaster though. These 5 people would make up the brewpub’s management team.
Business Plan/Projections
My initial estimate was for $500k in start-up costs based on information from the Sound Brewing Systems website and the 2nd Edition of the Brewery Planner book by IBS. Based on what I’ve read in these forums, this may not be sufficient. Sound Brewing seems to always have a steady supply of used equipment, and my plan would be to source as much equipment from there as possible to get the highest initial capital efficiency. We had planned on an initial capital/debt ratio of 25% based on minimum SBA guidelines (meaning we’d borrow 80% of total startup). This also seems to go against the recommendation of people in this forum. Currently we have approximately $80k in capital raised, which is currently invested in the stock market and subject to those ups and downs. In the time frame I was considering (Fall 2008 start up was the “goal”), I’m not sure that raising any more than $150k is possible. Ideally, we would like to avoid giving up ownership of the brewpub and finance through debt, but that seems to go against the wisdom of this forum. Thoughts?
My initial projections (which I’ve tried to be conservative on, but I could be daydreaming… this will be a good smell test) are for ~1000 bbls of sales in year one, eventually ramping up to 2,000 bbls in year ten. (I’ve assumed an inverted U growth curve, with the peak (20%) in years 3-4 with years 7-10 growth of only 2%). I have beer sales accounting for 60% of my total revenue, with ~20% of revenue from liquor sales (which would be priced high as to guide people towards drinking the house brews) and ~20% from food sales. It appears that my food sales volume is much lower than suggested on this board. Does 1000 bbls of sales in year 1 sound too optimistic for facility in a market of this size? Ideally I would build for capacity of 175-250 persons (bar, indoor and outdoor seating).
Based on these volume predictions (1000 bbl in year 1 ramping up to 2000 in year 10), I would initially invest in a 15 bbl brewhouse based on brewery sizing recommendations from Specific Mechanical Systems. (2250 bbl annual capacity based on 3 brews per week).
On the expense side, my single largest expense is of course for personnel, which I have at ~ 33% of total revenue. In my initial budget projection, I have modest salaries for the brewmaster and chef (~$30k) but include a graduated profit sharing plan. Since this is a start-up operation, that is the most logical compensation set up I could think of – but I’m not sure if a brewmaster would necessarily go for it. For part time staff, I have budgeted 5 bartenders, 20 servers, and 6 kitchen staff at appropriate hourly rates.
My cost of goods sold for beer comes out to 4.8% which seems low given what I’ve read. I’m assuming that one barrel is 235 pints after accounting for loss, and that a bbl takes $40.00 to produce (in materials, not labor or energy). Selling pints at $3.50 a pop.
What has me most concerned is that I show a rather healthy profit in year 1, which to me indicates that I may be overstating something, or missing a key cost component. From what I understand, profitability is most likely in year 2.
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If you have made it this far… thank you! I would appreciate any comment about what I’ve written above be it potential problems I may have, ideas to improve upon the idea, financing concerns, my projections, etc. I am an admitted novice… my experience is in business/project development for a large corporation – so the basic business aspect of this I think I can handle… it is the brewery/bar/restaurant operations that I’m new at!
Thanks - Scott
The reason for my post is to float my idea for a brewpub (yes… another Brewpub startup post… but please bear with me!) and get feedback… kind of a smell test so to speak. If anyone would ever been willing to discuss things further in a sort of an informal “pre-consultant” type of way, I’d be more than appreciative.
So here we go…
Market Information
The Brewpub would be located in a southern/southwestern major metropolitan area (over 1.5 mil residents). The immediate market is currently served by two brewpubs. One is located in the art district, which is generally less affluent and demographically speaking would have a higher propensity towards American lager beers than my target location. I don’t know their production, but they have large (30 bbl) serving tanks behind the bar and what appears to be a large brewhouse. The other brewpub is located approximately 15-20 miles outside of the city in a suburb. This second brewpub uses a 10 bbl Bavarian system and from conversations with the manager only produces about 300-500 bbls per year (but they make very good brews).
Also in the city, and in my target location, is a major beer bar franchise that carries ~75 beers on tap and another 150 or so in bottles at any given time. This would probably be my main competitor (although I’d like to think that we would be partners one another in the fight in getting people to drink good beer). I know the General Manager of this establishment, and they do VERY good business.
My target location would be what could be considered the hub of major business locations (in my city, most major companies are located along a NW corridor rather than downtown) and where the upper-middle class population resides. Also in this area is a major university (enrollment of about 30k students), although most students do not live on campus (large commuter student population).
Personnel Background
Aside from homebrewing, I have no brewing industry experience – nor do I have any restaurant or bar experience. I’m an Economist working for a major oil refining company (which in terms of production processes isn’t that far from brewing – but I don’t count this experience as a plus). I have some exposure and working knowledge of chemical engineering – but not enough to dare to presume I know it. I have a good friend who is a chef with several years of experience in restaurant management who would have total control over the menu and restaurant operations. My role would be as President/General Manager. I would plan on hiring an experienced Brewmaster and a Bar Manager. My father (who would be a 50% owner along with myself) would serve as an “assistant” Brewmaster of sorts, as part of this idea came from our love of homebrewing and wanting to brew for a living. Appropriate control would be given to the head Brewmaster though. These 5 people would make up the brewpub’s management team.
Business Plan/Projections
My initial estimate was for $500k in start-up costs based on information from the Sound Brewing Systems website and the 2nd Edition of the Brewery Planner book by IBS. Based on what I’ve read in these forums, this may not be sufficient. Sound Brewing seems to always have a steady supply of used equipment, and my plan would be to source as much equipment from there as possible to get the highest initial capital efficiency. We had planned on an initial capital/debt ratio of 25% based on minimum SBA guidelines (meaning we’d borrow 80% of total startup). This also seems to go against the recommendation of people in this forum. Currently we have approximately $80k in capital raised, which is currently invested in the stock market and subject to those ups and downs. In the time frame I was considering (Fall 2008 start up was the “goal”), I’m not sure that raising any more than $150k is possible. Ideally, we would like to avoid giving up ownership of the brewpub and finance through debt, but that seems to go against the wisdom of this forum. Thoughts?
My initial projections (which I’ve tried to be conservative on, but I could be daydreaming… this will be a good smell test) are for ~1000 bbls of sales in year one, eventually ramping up to 2,000 bbls in year ten. (I’ve assumed an inverted U growth curve, with the peak (20%) in years 3-4 with years 7-10 growth of only 2%). I have beer sales accounting for 60% of my total revenue, with ~20% of revenue from liquor sales (which would be priced high as to guide people towards drinking the house brews) and ~20% from food sales. It appears that my food sales volume is much lower than suggested on this board. Does 1000 bbls of sales in year 1 sound too optimistic for facility in a market of this size? Ideally I would build for capacity of 175-250 persons (bar, indoor and outdoor seating).
Based on these volume predictions (1000 bbl in year 1 ramping up to 2000 in year 10), I would initially invest in a 15 bbl brewhouse based on brewery sizing recommendations from Specific Mechanical Systems. (2250 bbl annual capacity based on 3 brews per week).
On the expense side, my single largest expense is of course for personnel, which I have at ~ 33% of total revenue. In my initial budget projection, I have modest salaries for the brewmaster and chef (~$30k) but include a graduated profit sharing plan. Since this is a start-up operation, that is the most logical compensation set up I could think of – but I’m not sure if a brewmaster would necessarily go for it. For part time staff, I have budgeted 5 bartenders, 20 servers, and 6 kitchen staff at appropriate hourly rates.
My cost of goods sold for beer comes out to 4.8% which seems low given what I’ve read. I’m assuming that one barrel is 235 pints after accounting for loss, and that a bbl takes $40.00 to produce (in materials, not labor or energy). Selling pints at $3.50 a pop.
What has me most concerned is that I show a rather healthy profit in year 1, which to me indicates that I may be overstating something, or missing a key cost component. From what I understand, profitability is most likely in year 2.
-----------------
If you have made it this far… thank you! I would appreciate any comment about what I’ve written above be it potential problems I may have, ideas to improve upon the idea, financing concerns, my projections, etc. I am an admitted novice… my experience is in business/project development for a large corporation – so the basic business aspect of this I think I can handle… it is the brewery/bar/restaurant operations that I’m new at!
Thanks - Scott
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