In this three-part series, we examine the necessary steps to transforming your homebrewing hobby into your own local brewery, with advice from the owner of Pennsylvania-based Hop Hill Brewing Company and financial insight from our friends over at My Numbers Guy.
Last time around, we looked at laying the groundwork of a brewery, including focusing on how to grow a potential partnership, what sort of financial amounts are required and where to find the perfect location. With the grunt work for the business well on its way towards completion, there are some less fun, but completely necessary, requirements before you can brew beer and sell it on site to patrons.
One of the most challenging hurdles to overcome can be permits. For Greg Smith, the owner of Hop Hill Brewing Company, it took about three months to get it all taken care of, from the brewing license to building permits to the health permit from the Food and Drug Administration. Much of it, Smith admits, depends on where you live and the rules under your specific township, especially when it comes to building permits. Permits are required if any building construction is being done – and if there’s a lot of fit outs, or making the interior suitable for occupation, there’s a lot of permits.
In order to sell beer, a health permit is required. The FDA must come out and inspect the facility, while the Liquor Control Board comes out during that interviewing process. And let’s not forget the most important permit: the brewing license. So, how much should you anticipate shelling out to get everything needed to please both the local and state government?
“I’m not sure exactly where the cost is at this point – it’s going to be a couple thousand at least to do the permit for the brewing license,” Smith estimated. “And then if you get a lawyer, and whatnot, to help you out with that, then it’s going to be more. In talking with other people in the industry, the biggest hold up is township licensing – anything you need for construction and the building, because they don’t meet all of the time. It could be six months, it could be a year until they meet to discuss the issue that that you need a license for. If it’s interior stuff, it’s usually pretty quick but if you’re doing substantial building, it could take time to get approvals.”
It’s best to allot sufficient time for obtaining permits, so you’re not under the wire with the grand opening approaching. While the process has sped up in recent years, there could be COVID-19 effects right now.
“I’m sure a lot of the interview process right now will be like Zoom calls instead of doing face-to-face but [the FDA and LCB] still need to come out and look at your space – so, I’m really not sure what they’re doing at the moment,” Smith recalled.
Once the building is modified and up to code, with the proper construction permits, it’s time to start getting the necessary equipment for bringing your recipes to life. There are plenty of things you’ll need, depending on your business model: refrigeration equipment, kettles, boilers, cooling systems, fermentation tanks, storage tanks, bottling and canning lines and cleaning equipment. That’s enough to make your head spin, if you’re not well-versed in brewing on a larger scale.
There can be a wealth of used equipment floating around out there but just because it has a cheap price tag doesn’t mean it is necessarily a good fit for you and your brewery. Although it might be more cost effective, if it’s used then the installation falls primarily on the buyer. Buying new equipment from reputable dealers means they’re going to send someone out to install it and run it several times to make sure everything is in proper working order. That can be beneficial too because you’re adding some training and experience from the start. If used equipment is purchased locally, maybe the seller will transport it, though there’s really no guarantee, and if it’s coming from a significant distance across the country, shipping fees can add up very quickly.
The most important thing is to never do something clearly above your level of expertise.
“If you don’t know what you’re doing, you don’t know what you’re doing,” said Remington Trolli, the founder of My Numbers Guy. “Having worked with breweries in the past, I’ve seen just what can happen when things are worked on in-house and the financial burdens it can lead to.”
With several companies out there selling new brewing equipment, Smith recommends Kinnek, which essentially acts like a middle person in finding exactly what you’re looking for. Put in the specs, what size and all of that, and they’ll put out a bid with multiple places – then you’ll get quotes from the dealers. That way, there’s not as much time wasted scouring various websites and, when it comes to owning a business, time can be just as valuable as the bottom dollar.
“It helps [save time] and it helps with money, because when we got our keg washer, we ordered it and the company messed up and sent it to the wrong brewery and then came back and found us an automated one – it was supposed to be manual – that was the same configuration, like number of keg washing, at the same price,” said Smith. “So they didn’t charge us more and we went from buying a $6,000 keg washer to getting a $12,000 keg washer – they’re really good at helping you out, especially if things go wrong – as we all know things sometimes do.”
With housing expensive and sometimes dangerous equipment and the potential of new employees as your business plants roots and begins to grow, finding the right insurance for your brewery might not be as sexy as your latest lager but it’s an important step of the process. It’s smart to always shop around. There’s several big names known in the industry and, as Smith explains, those companies will do the legwork, much like Kinnek.
At that point it just comes down to pricing and needs – and there’s different paying options.
“You can pay lump it if you want. You can go on a monthly plan or you can go on a partial plan – which is what I do. I do a 10-month plan instead of a 12-month, so my first two months are a little bit higher but then I have two months where I don’t pay anything. It helps me during my slower times of the year to not have those extra fees coming out,” Smith admitted.
Liability goes against total sales, it also goes against your equipment. If you’re leasing your property, the landlord might explain what you need to insure to cover certain things. And then both unemployment and worker’s compensation are based off of the company’s payroll. Since there’s a lot of information and moving parts, it’s best to work closely with the insurance company.
Stay tuned for the last part, where we focus on advertising and the potential of distribution.