This time in the Brewery Start-up Series, we’re discussing the Brewery Business Plan. I frequently hear from brewery start-ups who know they should have a business plan together, but aren’t sure why or what to include in it. It might be that calling it a “business plan” makes it seem like something fancier than it has to be. I think of a brewery business plan as a roadmap. And, it can be as sexy or as simple as you want. After all, it’s just a personalized tool for your budding business.
If you wanted to take a year to travel around the world, you likely wouldn’t get in your car and start tomorrow. You’d make sure you had enough gas in the tank, and a plan to have enough funds to fuel all the things you wanted and needed to do. You might sketch out the different places you’d head along the way, and how you’d plan to get there. Your brewery’s business plan isn’t much different. You don’t necessarily need to overthink, tracking down every turn, side trip, and adventure. Life happens, things change. However, your business plan helps make sure your planned venture is feasible, profitable, possible—and worth doing. For those thinking about starting a brewery, you’ve likely already put a rough plan together in your head. Now’s the time to put pen to paper (or fingers to keys), and formally think through all the important pieces.
If you’re raising funds, your business plan becomes a pitch. A well-thought-through business plan might be the difference between reaching your fundraising goal and coming short. It could be that the plan itself sells the investor. Or, it’s your ability to readily answer a potential investor’s question, because you’ve already thought it through and have a smart plan in place.
Even if you’ve already got the funds, your business plan can keep you on track. It’s there for morale at times, proving that what you’re doing is possible, and pointing you to the goal—one that may not always feel immediately in sight.
So, what should you include in your brewery business plan? Like most business start-up questions, the answer will be unique to your start-up business, including its financial needs, goals, and objectives. However, these are good starting points:
- Numbers. Math. How much money do you need to open the doors? How much to keep the business open? Consider equipment needs, real estate and overhead, costs of production, staff costs, tax liability, pricing your beer, etc. As you formally consider these things, you’ll inevitably reweigh and consider other essential questions, such as the size you want to be, how big of a taproom you want to have, whether having product for distribution is important to you, etc. Is your project realistic, or might contract brewing be a way to get started more quickly?
- What’s your timeline?
- How will you raise funds?
- What kind of personnel/skill-sets/expertise do you need to run the business? And, who do you have on your team to meet those needs? To that, some background on the founders and the start-up team is important in a fundraise scenario.
- What’s your brewery identity?
- Where are you going to open your brewery, and why there?
- What’s your approach to growth?
These are big, sometimes-nebulous questions, and it’s not always easy to track down an answer. However, ultimately, whether your business plan stays internal or is something you use to launch the business itself through investment, it’s an important process that every new venture is well-advised to work through. We’re here to help review your plan, be your sounding board, and make sure you’re ready to present the pitch to investors. More than that, if you’ve set a deadline for your launch date, we’re here to help with the legal end, ensuring you’re licensed up, compliant, and fully ready to kick off your new adventure (and, I hope, ride off into the sunset with beer-in-hand).
Next time on the Brewery Start-up Series we’ll be discussing the timeline of opening a brewery. What comes first? When should you be thinking about licensing? Do you need real estate before you seek a brewing license? More soon.
Here’s the skinny on why proactive brewery trademark practices are a must. This is as brief-yet-thorough of an overview on brewery trademark law (and why it’s important) as I can muster. The takeaway is the same: (1) clear early and often; (2) file immediately; (3) regularly monitor. Here goes:
Brewery Trademark Law Explained
Federal trademarks are a first-to-file game and they give nationwide rights. If brewery #1 sells branded beer without a registration, brewery #2 (or winery, distillery, meadery…you get it) can register the same or similar name at any time, even if brewery #2 picked the name solely because they saw brewery #1 using it and liked it. Very technically, brewery #2 would take those trademark rights subject to the trading territory brewery #1 had established on the date brewery #2 filed. Realistically, it costs a lot for brewery #1 to enforce even that limited territory it would have priority to—and brewery #1 could never expand beyond that limited territory without risking a cease and desist / litigation / name change, so those so-called priority rights become less attractive. Looking at it another way, even if no one officially registers brewery #1’s beer or brewery name, other breweries would be free to adopt that unregistered name and establish similar limited rights in their respective territories, with no issues unless those territories cross. Brewery #1 couldn’t do anything about that.
Oftentimes the quiet name changes we see aren’t because a brewery failed to be first to market, but first to the register, so brewery #1 changes the name because they’re no longer interested in a brand name if it means they can only sell under the brand in one state, or one pocket of one state.
The takeaway is that, today, if a brewery cares about rights to a beer name, brewery name, series name, what-have-you, best practice is to:
- Proactively seek a trademark clearance report for each and every beer or brand name (and, of course, the overarching brewery name) the brewery plans to launch. We run these daily at a low flat fee.
- If the results are clear, file immediately. A brewery need not be using the mark to file.
- Regularly monitor to make sure no one is using the same or similar mark.
That’s that—brewery trademark law in a nutshell.
Brewery Start-up Series: Checklist for Planning a Brewery #3 (Choosing a Brewery Business Structure)
Our last Brewery Start-up Series posts (here and here) have covered aspects of brewery business planning and putting together a Brewery Operating Agreement. This time, we’re discussing brewery entity selection. In other words, what formal business structure should your brewery choose?
Choosing a Brewery Business Structure
Like most matters during the start-up process, your decision on the brewery business structure will be specific to your brewery and its owners. There is an abundance of helpful information out there directly on this topic. And, this is a good opportunity to note a couple of resources every brewery owner will want to familiarize herself or himself with. First, it’s worth bookmarking the U.S. Small Business Administration (SBA) website, which provides an abundance of information to business owners, including information on loan programs you might find helpful. Next, and even more importantly, whenever facing decisions with tax implications, it’s advisable to find a tax advisor who can help steer your brewery business through tax obstacles and into brewery-specific tax savings in the future. Indeed, no matter how much DIY work and research the brewery start-up team conducts on its own, it’s helpful to have an experienced brewery attorney and brewery-savvy CPA on your side early in the process, so you can shoot over quick questions and get trusted answers whenever issues do come up.
Speaking very generally on the topic of brewery entity selection, we’ll note that for many of the sorts of brewery start-ups we’re seeing these days, the flexibility and tax framework of the LLC fits the bill, and forming an LLC for the brewery is a lot easier than you might think. In fact, we typically direct our clients to the proper online steps to officially create the business entity to get the beverage business formally rolling. Those documents are ones you can handle yourself, quite quickly, which translates to cost savings for the brewery start-up, which we’re always mindful about. However, we’re always here to help as you bump into questions throughout the process.
Next time, the Brewery Start-up Series will be covering another aspect of business planning, drafting the actual Business Plan. You might have formed a skeleton of a plan or run some basic numbers before deciding to open a business, but many entrepreneurs lead with their hearts and haven’t necessarily cranked numbers or put pen to paper about all of the details that will not only make the business profitable but poised to grow in the direction the brewery founders want.
Last time in the Brewery Start-up Series, we touched on different brewery start-up sizes, including some creative business planning that might help a brewery get off the ground without forcing its founders to quit their primary jobs just yet. Check out that post here, if you haven’t already. Once you’ve thought through preliminary start-up brewery size questions, then it’s typically time to consider the next step, which is today’s topic:
How Will You Structure Your Start-up Brewery Business?
Every start-up brewery has a different story that led them to the decision to go pro, so every new brewery will have a different answer to this question. How you structure your brewery business itself will turn on your brewery size, how many owners you have, how many managers, how many investors, and how well everyone knows each other. It will also turn on your business goals, the rate you want to pay back investors, and where you see your brewery going in the future. Different founders may have different thoughts on these basic issues, so a good starting point to find some answers to these questions is to begin putting together a solid Brewery Operating Agreement.
What is a Brewery Operating Agreement?
Essentially, it’s an official document among owners (that frequently contemplates investors) that sets forth how decisions will get made, addresses how profits/losses will be distributed, and lays out all the nuances of ownership interests. Whether you’re a family-owned operation, a start-up brewery among best friends, or you’re planning a massive fundraise, it’s essential to get a Brewery Operating Agreement in place so your business can efficiently function and so that everyone’s on the same page.
Some elements of a good Brewery Operating Agreement may not be obvious but are nevertheless essential, such as including a requirement that any new member (owner) of the business pass TTB / local reg background muster, so the brewery won’t jeopardize its licensure. Here at Reiser Legal, we help make sure Operating Agreements have these essential provisions all the time. Outside of that, though, how you structure your business is truly your call. We frequently make suggestions, especially if the business is planning to raise funds, as certain provisions are more likely to drive investor confidence. Nevertheless, it’s ultimately up to you. Often, it’s most helpful if you create a basic framework for the Brewery Operating Agreement before bringing it to us, or your local lawyer, for us to review and offer suggestions.
Here are just a few points you’ll want to think through in building out your Brewery Operating Agreement, depending on your concerns and business plan, you may have many others, and your beer attorney can help you drive that discussion based on your unique needs and concerns:
- How much money will each owner put in, if any?
- Will some individuals be investors, while others will be managers?
- If you’re seeking investors, what’s the maximum amount of the company you’d want to give up?
- What value would you consider the company to know how much you’d need to raise to reach that value and maximum investor percentage?
- Do investors have any first rights to distribution (profit payouts), before managers start earning profits according to their ownership share?
- How do you want decisions to get made?
- What decisions do you want to require a Supermajority to make, versus a simple majority?
- Do you want unanimous decision-making for certain decisions?
- Are members allowed to sell their shares, or do existing members have the right to buy them if they want first?
- What happens if something happens to a founder such that he or she can no longer pull the anticipated share of management duties? Who gets shares upon a member’s death?
- What happens if a founder is doing things the other members disagree with, can a founder be kicked out or what steps must happen first?
The best time to make these decisions, and think through a Brewery Operating Agreement, is when everyone’s getting along and building the dream, rather than when something comes up down the line. It’s your business, and you can structure it how you want. However, by agreeing on certain basic terms, a start-up brewery is poised for more efficient decision-making and, by hammering out a professional Brewery Operating Agreement in collaboration with an experienced beer attorney, a brewery is ready to open up shop and potentially take on investors, too.
Next time in the Brewery Start-up Series, we’ll discuss the step of brewery entity selection, an important piece of any brewery’s overall start-up plan. Is the best choice an LLC? Or, should you think about a different business structure? Stay tuned.
Planning a successful start-up brewery may seem like a quite the feat, but getting through your first brew day probably felt that way too. Like most things, it helps to break the project down into smaller steps (and RDWHAHB). In this Brewery Start-up Series, I’m covering some items and questions every future brewery owner will want to consider when planning a brewing business. The list will be by no means exhaustive, but should help get the process rolling—and, as always, Doug and I at Reiser Legal are here as a resource when you’re ready to take that next step or have questions along the way. Today’s topic:
How Will You Handle Brewery Start-up Costs?
Hate to lead with cold hard cash, but the reality of opening a business is that it takes some seed money to get things going. Just how much money you’ll need depends on the kind of brewery you want to open.
Creative Ways to Open a Brewery With Low Start-up Costs.
Are you okay with starting small and growing from there? If so, you might consider getting started without sinking cash into equipment by ordering contract brews, or getting licensed up and becoming a tenant brewer at an existing brewery. More on contract brewing and alternating proprietorships here.
Start as a Nanobrewery.
If you want to dive in and get your own equipment, but are reluctant to amass debt or take on too many investors, opening a nanobrewery is also a viable route that’s proven successful for a number of breweries. You can start with a small system, build a fanbase, and grow at your own rate. What’s more, as you generate interest in the community, you might find that you can generate an even more substantial fundraise for a bigger facility down the line, versus had you raised funds before ever proving yourself as a brewery and business owner. We’ll note that if you have some funds, but need a bit more to build out at the level you want, light fundraises through outlets like Kickstarter have also proven quite successful, and are a great way to garner attention in your community.
Dive in and Open a Packaging or Production Brewery.
So long as you have the funds, aren’t afraid of going big from the start, or don’t mind giving a piece of your future business away, a start-up brewery can go from 0-60 quite quickly. The key to a successful fundraise is a rock-solid business plan. It’s your pitch.
In the end, start-up costs are unavoidable, but through some basic business planning and sometimes creative choices, a start-up brewery need not feel daunted.
Next time, we’ll walk through some business planning strategies, including items you’ll want to address in your brewery’s Operating Agreement.