Advice on what to do with my 7BBL microbrewery.

[blueoakbrewing]

Looking for advice on what to do with my business.

Background: I started this business will a full head of steam, having won an award for my business plan and many homebrewing awards. I have worked in biotech manufacturing for over two decades and volunteered at breweries around the area to get a sense of what I was getting int. I had a couple of friends starting a cider house who offered to split the space and the tap room, so I decided to convince my wife to dump our life savings into this investment. I signed on to split the lease with the cider company and build out the back half as a brewery.

The build out was long and tumultuous with me doing a lot of the work myself, but I helped my buddies with their side and they helped with mine (to varying degrees). It was an arrangement I thought sounded promising when I got into it - they run and staff the tap room, and we'd split profits on beer sales 50/50.

Fast forward to today. There are 12 taps in the tasting room - not all full, but they got all weird and standoffish on me when I had product to sell. They will only give me two taps... I personally believe this is because they think it's cutting into their sales. I can't even do a flight with two beers and I can't promote any kind of event or launch with such a small offering.

In January, one of my beers was the top seller of all varieties on tap, and yet they still refuse to let me put more beers on. People who have been following my business are confused as hell, complaining about lack of variety and writing on my facebook business page that it's not really a brewery with only two beers. They're right.

I have all my kegs full of high quality beer, and all my tanks are empty. It's a pain to run these all around the area by myself as I work 9-5 M-F at a day gig (that's paying for the brewery). Especially since you all know how flaky bars can be about paying for kegs. And especially since I'm brand new it's hard to chase people down for payment and return of my kegs.

I've been thinking about just picking up and moving to a new location, but it would mean weaseling out of the lease (five years left on it, they stated they would be OK with me leaving if I had to, even though I don't trust them), and finding a new location.

It's going to be tough to break even just selling kegs. I have thought about a growler fill station in the back, but that means I would have to be on site the entire time or set up and staff that... and I already only have 1300 sq ft. to work with and no place to hang out. I've also thought about a 'beer trailer' that I could set up and staff on Fridays and Saturdays in the parking lot, but I would need landlord permission and that's another capital investment along with staffing.

Any advice on what you would do in this situation would help me sleep a lot better at night.

[ckr]

Advice on what to do with my 7BBL microbrewery.

Get a lawyer. Who holds the lease you or is it 50-50. If you want it to work you really need to have the heart to heart talk. But keep it to business only and never lose your cool. It could be fine, but these things can turn emotional. You need to stay clear of that at all times and stick to business facts and figures.


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[blueoakbrewing]

Thanks for the response. I should have gotten a lawyer involved much earlier on. But yes, I will have a talk with them in hopes that we can re-negotiate.

The lease is split 50-50.

[ckr]

Thanks for the response. I should have gotten a lawyer involved much earlier on. But yes, I will have a talk with them in hopes that we can re-negotiate.

The lease is split 50-50.

Come with the idea your equals and that both can help the other profit more together. Beer can help bring in customers just as cider can. If you leave there costs go up too. And there is always a way to add more taps. Maybe they don't think you'll take your equipment with you.

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[feinbera]

It sounds like your deal with the cider dudes needs to be re-jiggered, as the current one gives each side financial motivation to work at cross-purposes to the other.

From your perspective, you want to sell more beer out of more tap handles, and more volume is more money for everybody, right? But from their perspective, they're paying rent on the taproom, staff salary, etc, either way, which are they gonna prefer on their limited number of taps, a beer where they get to keep half the profit, or a cider where they get to keep all of it? Sure, the beer moves – but it has to move twice as many pints just to break even with cider from where they're sitting, and that's not even counting the opportunity cost of a beer drinker's butt in a seat getting a beer poured, when that seat and that bartender's time could've been taken up by a cider drinker.

What would it take to make it worthwhile for them to put more of your beers on? Probably installing more tap handles to start with, so you're not asking them to take any of their stuff off (they don't get to put ciders on those new taps, or the two you already have, of course). Probably also offering to shoulder some of the taproom costs, maybe based on volume of beer vs. cider sold? Do away with the 50/50 thing altogether, and you get all the profit from the beer – after you've paid the beer's share of taproom costs. Get them thinking "our rent and payroll just went down, sweet!" instead of "our revenue per seat just went down, dang!" every time they see a beer geek come in the door, and they'll be happy to pour your stuff all day.

Of course, maybe they're just d!cks, in which case, you'll be glad your lawyer got them to agree to all of this in writing.

[blueoakbrewing]

It sounds like your deal with the cider dudes needs to be re-jiggered, as the current one gives each side financial motivation to work at cross-purposes to the other.

From your perspective, you want to sell more beer out of more tap handles, and more volume is more money for everybody, right? But from their perspective, they're paying rent on the taproom, staff salary, etc, either way, which are they gonna prefer on their limited number of taps, a beer where they get to keep half the profit, or a cider where they get to keep all of it? Sure, the beer moves – but it has to move twice as many pints just to break even with cider from where they're sitting, and that's not even counting the opportunity cost of a beer drinker's butt in a seat getting a beer poured, when that seat and that bartender's time could've been taken up by a cider drinker.

What would it take to make it worthwhile for them to put more of your beers on? Probably installing more tap handles to start with, so you're not asking them to take any of their stuff off (they don't get to put ciders on those new taps, or the two you already have, of course). Probably also offering to shoulder some of the taproom costs, maybe based on volume of beer vs. cider sold? Do away with the 50/50 thing altogether, and you get all the profit from the beer – after you've paid the beer's share of taproom costs. Get them thinking "our rent and payroll just went down, sweet!" instead of "our revenue per seat just went down, dang!" every time they see a beer geek come in the door, and they'll be happy to pour your stuff all day.

Of course, maybe they're just d!cks, in which case, you'll be glad your lawyer got them to agree to all of this in writing.

This is great advice - problem is, I'm already paying 50/50 lease cost on the tap room as well. I'm sure they'd be willing to offer more taps -if I paid for half the payroll of bartenders - but I doubt they would ever let me keep the profits from beer. They've got me in a bad position, and they really seem intent on that not changing.

[46th]

Sell the restaurant side kegs. Set a reasonable price, and sell them kegs. It's a cut and dry adventure at that point. Either that or invest in each others area to make the overall ownership enticing enough.

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[BreweryLabs]

Looking for advice on what to do with my business.

Background: I started this business will a full head of steam, having won an award for my business plan and many homebrewing awards. I have worked in biotech manufacturing for over two decades and volunteered at breweries around the area to get a sense of what I was getting int. I had a couple of friends starting a cider house who offered to split the space and the tap room, so I decided to convince my wife to dump our life savings into this investment. I signed on to split the lease with the cider company and build out the back half as a brewery.

The build out was long and tumultuous with me doing a lot of the work myself, but I helped my buddies with their side and they helped with mine (to varying degrees). It was an arrangement I thought sounded promising when I got into it - they run and staff the tap room, and we'd split profits on beer sales 50/50.

Fast forward to today. There are 12 taps in the tasting room - not all full, but they got all weird and standoffish on me when I had product to sell. They will only give me two taps... I personally believe this is because they think it's cutting into their sales. I can't even do a flight with two beers and I can't promote any kind of event or launch with such a small offering.

In January, one of my beers was the top seller of all varieties on tap, and yet they still refuse to let me put more beers on. People who have been following my business are confused as hell, complaining about lack of variety and writing on my facebook business page that it's not really a brewery with only two beers. They're right.

I have all my kegs full of high quality beer, and all my tanks are empty. It's a pain to run these all around the area by myself as I work 9-5 M-F at a day gig (that's paying for the brewery). Especially since you all know how flaky bars can be about paying for kegs. And especially since I'm brand new it's hard to chase people down for payment and return of my kegs.

I've been thinking about just picking up and moving to a new location, but it would mean weaseling out of the lease (five years left on it, they stated they would be OK with me leaving if I had to, even though I don't trust them), and finding a new location.

It's going to be tough to break even just selling kegs. I have thought about a growler fill station in the back, but that means I would have to be on site the entire time or set up and staff that... and I already only have 1300 sq ft. to work with and no place to hang out. I've also thought about a 'beer trailer' that I could set up and staff on Fridays and Saturdays in the parking lot, but I would need landlord permission and that's another capital investment along with staffing.

Any advice on what you would do in this situation would help me sleep a lot better at night.

I've learned a lot of business structure lessons over the years, one or two the ha d way. I call it "Stupid tax".

Where you actually stand in this depends mon structure and obligations.

Just to be sure I'm clear:
- You own the brewery equipment
- Your friends own a cider house
- All of the product sold on-premise is either produced by them or by you?
- You have 50% obligation on the lease
- You friends are more motivated to sell their cider than your beer

Questions/assumptions:
- are you licensed as a brew pub or a production Brewery?
- Do you split the taproom profits equally, or based on who's product sells?
- how is the joint business structured? LLC/S-Corp, etc.
- who's name is the lease in?
- do you have a written contract on this structure?

Options:
If you get 50% of the profit even off their product
- use that leverage to negotiate a buy-out that is acceptable to both parties (they pay you to move). You have the upper hand here because they see you as a drain on their business

- ...because you can just enjoy your check and look at relocating (they can always Dick with costs so your "profit" diminishes though

- If you only get profit off of your product and they won't sell it, you probably have to sue them. Just the words are usually enough to start a serious renegotiation.

- stay where you are and find a distributor favorable to craft beer. Your margins are lower, but you don't have to worry about selling kegs.

Good luck!



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[ipaguy]

Just based on what you wrote, it doesn't sound to me like the situation with your "buddies" is going to improve. Unfortunately for a lot of folks, friends and business just don't mix well. People you consider friends who you think you know can become very different very fast when money is involved and things aren't going as expected. I would cut my losses, assuming they're not too too great, and do whatever you can to get out of there and get your own space. I think it would be so much better in the long run. It probably would wind up costing less long term.

This says a lot to me:

<<I'm sure they'd be willing to offer more taps -if I paid for half the payroll of bartenders - but I doubt they would ever let me keep the profits from beer. They've got me in a bad position, and they really seem intent on that not changing.>>

[jebzter]

Its definitely a full time gig to brew and sell beer to make a decent living. That said, you are in CA, the laws are quite favorable for us to get paid by who we sell to. By law, we are COD or Net 30 terms, if they don't pay in that time frame, then they become COD until they are caught up. That is the law, and having been at this for a few years now on the otherside of the bay from you, I can say, getting paid by bars and restaurants is not that difficult, sometimes they are late, sometimes they have money issues, and sometimes you have to call them all the time, but if the beer is good and they want to get more of it, they will pay. We don't let much get out more than 30 days, and usually rarely does it go out more than 40(by law we have to charge 1% interest at this point). So sell your beer, bars are good starts, many of the buyers aren't in there until the afternoon. I know a brewery out here that used to sell the beer and deliver while on his lunch break. It can be done. And if your partners are screwing you over(this is why partners suck, its like being married) get a lawyer and get out of it, or if theres even a possibility, get them out of it and use the space yourself.

[blueoakbrewing]

I've learned a lot of business structure lessons over the years, one or two the ha d way. I call it "Stupid tax".

Where you actually stand in this depends mon structure and obligations.

Just to be sure I'm clear:
- You own the brewery equipment
- Your friends own a cider house
- All of the product sold on-premise is either produced by them or by you?
- You have 50% obligation on the lease
- You friends are more motivated to sell their cider than your beer

Questions/assumptions:
- are you licensed as a brew pub or a production Brewery?
- Do you split the taproom profits equally, or based on who's product sells?
- how is the joint business structured? LLC/S-Corp, etc.
- who's name is the lease in?
- do you have a written contract on this structure?

Options:
If you get 50% of the profit even off their product
- use that leverage to negotiate a buy-out that is acceptable to both parties (they pay you to move). You have the upper hand here because they see you as a drain on their business

- ...because you can just enjoy your check and look at relocating (they can always Dick with costs so your "profit" diminishes though

- If you only get profit off of your product and they won't sell it, you probably have to sue them. Just the words are usually enough to start a serious renegotiation.

- stay where you are and find a distributor favorable to craft beer. Your margins are lower, but you don't have to worry about selling kegs.

Good luck!



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I'm definitely paying the stupid tax on top of everything else at this point. I've got a long way to climb up that hill before I'm in the black.

You are correct on your first points.

For your questions:

- Licensed as a Type 23, which includes ability to run a tap room, either on site or offsite in Ca.

- we only split the beer profits, they keep 100% of cider profits - the pay for payroll and worker's comp on staffing the tap room.

- LLC

- The lease was originally in their name, but there were two amendments where we are equal holders of the lease. I make my payments directly to the property manager. They have agreed verbally to 'let me out of the lease' if it's not working out, which I am going to have my lawyer draft this up so that I have this flexibility. There is five years left on the lease.

- we have a written contract that I believe is outdated for the shared space agreement, and they aren't interested in re-writing it. They will sell it, but no more than two taps. I should have been smarter in insisting on more taps, but again, paying the stupid tax.

Just trying to find creative ways to sell my beer. A beer trailer out of the back of the house seems to be my best bet, and hoping to find other venues (street faires, concerts, festivals) that the beer trailer can set up shop and sell from. There don't seem to be many in Ca. with my license, however...

[jebzter]

Check out the lucky 13 beer truck in oakland/alameda.

[rdcpro]

I'm not familiar with the laws in CA, but I know of a fellow in Moses Lake, WA that sells his packaged beer at a farmers market. I see them more and more at farmer's markets now.

Both the market and the brewery or winery are separately licensed, and the beer must be produced in WA.

http://lcb.wa.gov/licensing/farmers-market-authorizationendorsement

Regards,
Mike

Edit: Hey, turns out it's legal in CA too, with an amendment to allow tasting. I'd say let them sell your two taps, but distribute this way:

http://www.latimes.com/food/dailydish/la-dd-free-beer-farmers-markets-20150715-story.html

Still lots of restrictions and evidently you can only sell within your county, or an adjacent one.

[BreweryLabs]

I'm definitely paying the stupid tax on top of everything else at this point. I've got a long way to climb up that hill before I'm in the black.

You are correct on your first points.

For your questions:

- Licensed as a Type 23, which includes ability to run a tap room, either on site or offsite in Ca.

- we only split the beer profits, they keep 100% of cider profits - the pay for payroll and worker's comp on staffing the tap room.

- LLC

- The lease was originally in their name, but there were two amendments where we are equal holders of the lease. I make my payments directly to the property manager. They have agreed verbally to 'let me out of the lease' if it's not working out, which I am going to have my lawyer draft this up so that I have this flexibility. There is five years left on the lease.

- we have a written contract that I believe is outdated for the shared space agreement, and they aren't interested in re-writing it. They will sell it, but no more than two taps. I should have been smarter in insisting on more taps, but again, paying the stupid tax.

Just trying to find creative ways to sell my beer. A beer trailer out of the back of the house seems to be my best bet, and hoping to find other venues (street faires, concerts, festivals) that the beer trailer can set up shop and sell from. There don't seem to be many in Ca. with my license, however...

Have you considered contract brewing for others? We have some local breweries that have more capacity than sales. They typically brew on behalf of other breweries for a fee per barrel. ($200/BBL is what I heard)

The most creative I've seen is a guy who operates "pop-up" beer gardens. He is a retailer that contract brews at a local brewery. The beer is sold to a distributor under the retailer's brand. He then purchases the beer from the distributor to serve at his beer gardens.

I know some home brewers that are restaurant owners that get excited about the idea of having their home brew recipe for sale in their restaurant. That's one slick way to do it. If you know guys like that you might be able to make a couple of taps for your beer part of the deal...

Contract brewing may not be your ideal solution, but it can provide revenue while you develop other channels for your beer...


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