Considerations when starting a craft brewery
Understanding three-tier system is vital to business
Have you ever considered starting your own craft brewery? If you have, knowing a few tips about the common legal issues that many breweries face can help you start your business on the right foot.
Starting a brewery can be an expensive and time-consuming process, and brewers know that you never really stop spending money in order to grow the business. Here are a few things to consider as well as some insights about the potential pitfalls of starting your own brewery from experts that have “learned on the fly.”
Location and incentives
Location, location, location; the old real estate adage is equally applicable when it comes to starting a brewery.
Zoning requirements can be of major importance when starting a brewery. For example, breweries might be restricted to light industry zones in some areas. Depending on local regulations or state laws, some locations might permit a brewery, but will cap the amount of beer that can be produced there.
Additionally, proximity to schools, churches or other institutions might prohibit on- and off-premise sales. Therefore, it is vitally important to consider all of these potential restrictions before signing a lease or contract to purchase the land and building.
Also, depending on the city, county or state, incentives of tax abatements might be available.
Spend the time needed to prepare a good business plan. This can be beneficial as your company grows and also can make a great impression on banks or investors that might be needed to get the brewery up and running.
Consider what you would want to see before you invest in a new business venture, try to be as detailed as possible and know your vision.
Licensing can be a challenge and might require legal help. Look into getting relevant licenses and know what is required before starting the process because, typically, a strategy is required when applying for governmental approvals.
Opening a new brewery always requires state and federal alcohol licenses, and some municipalities also could require alcohol licenses as well as retail licenses.
Applying for these licenses often can be a time-consuming and arduous process — it’s a good idea to get started well before you plan to open. Remember things like insurance, types of equipment and barrel size; these systems can take a significant amount of time to get installed and have significant up-front costs. Also, it is prudent to condition your lease or purchase upon receipt of all applicable licenses, when possible.
Types of breweries
As you start to determine the requirements for a brewery, you also must consider whether you want to be a production brewery or a brewpub, and whether you want to sell craft beer.
These decisions can determine the location and amount of land the business will need. It also can determine whether the business has ample enough space to grow production and handle distribution.
Read up on the three-tier system in your state. The three-tier system requires that producers sell their products to distributers, who, in turn, distribute the products to retailers.
Often, brewery owners are prohibited from being involved in more than one tier, which means distribution is handled by a third party. Although some exceptions apply to the three-tier system (like brewpubs), they occur on a state-by-state basis.
The brand and legal entity
Be proactive about protecting your brand. When it comes to trademark protection, an ounce of prevention is worth a pound of cure.
Also create a business entity. This could be in the form of a limited-liability company, a corporation or a limited partnership. Creating a business entity helps to market your brand, allows for certain tax benefits and protects your personal assets.
Hiring and professional guidance
If you’re hiring employees, learn about potential human resources issues ahead of time.
Certain phrases, words and requirements should be avoided when preparing a job description and while conducting an interview. This certainly is when the advice of experienced employment legal counsel can help you avoid costly mistakes. Workers’ compensation claims, American with Disabilities Act (ADA) issues and the correct classification of employees all are common human resources issues that brewery owners and other small-business owners face.
Owners also should hire an attorney and an accountant who specialize in the specific areas relevant to opening a brewery. Some of the issues involved can be complex, and the assistance of a legal professional and an accountant can be invaluable